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In this episode of the Faith Driven Investor podcast, hosts Richard Cunningham and John Coleman welcome special guest Ross Roggensack to break down the 2024 U.S. election results and explore their potential impact on the economy and markets. As President Trump begins his second term, the discussion delves into the implications of his policies on various sectors, from venture capital and private equity to foreign conflicts and inflation. The conversation also takes a introspective turn as the hosts reflect on the importance of humility and seeking God’s guidance in both personal and professional life. Join us for a thought-provoking discussion that combines faith, finance, and the ever-changing political landscape. 

Please note that the views expressed by the hosts and guests are their own and do not necessarily represent the opinions of Faith Driven Investor.

Episode Transcript

Richard Cunningham: You’re listening to Faith Driven Investor, a podcast that highlights voices from a growing movement of Christ, following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Speaker 2: Hey everyone. All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosted guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Welcome back, everybody, to another episode of the Faith Driven Investor podcast. It is the end of November 2024. We are talking marks on the markets and given that it’s the end of November, we want to wish you and your loved ones a very happy Thanksgiving.

If you happened to catch this podcast on the other side of the Thanksgiving holiday, then wishing you a blessed start to your advent season. I’ve got John Colman in the podcast studio with me. John, we’re talking markets. We’re talking economy. Not sure if you heard there was an election earlier this month. And so we’re going to kind of look at how things are responded to that. But as overjoyed and thrilled I am is to have you in the studio. We’ve got a very special guest with us today, don’t we?

John Coleman: Yeah. We’ve got a frequent FDI contributor, maybe frequent Ross Roggensack who runs Oak City Consulting, a long time leader in the faith driven investing movement. Brilliant on markets. Just a great friend of mine, great friend of a lot of folks in the movement. And we’re so privileged to have you on today. Ross. Thanks for coming.

Ross Roggensack: Well, thanks for letting me. I’m always glad to be here.

John Coleman: Always glad we knew you would be able to handle a very laid back topic. Like US elections, you know, where there are no emotions at play. So congrats on taking on such an easy podcast with.

Richard Cunningham: The wise sage. Well, guys, great to have you with us. So let’s start there. Let’s hit on that November 5th election. So we’re coming up, we’re recording this on Friday, the 22nd. This podcast will release during the week of Thanksgiving, so it’ll be kind of roughly right around three weeks out.

Post-election, Trump won 76.1 million votes to 74.2 was Kamala Harris to Donald Trump in the popular vote. So he got that one. He won all seven key battleground states, winning the Electoral College. 312 to 226. The Senate race took out to 5347 in favor of the GOP. And while there’s still three uncalled races in the House race, it looks like Republicans have 219 right now to the Democrats to 13.

So, guys, I want to start here is what happened in this election. How did this all kind of transpire and was this the outcome you saw coming? Were you surprised and maybe John will start with you on that.

John Coleman: Yeah. So I’d maybe put the election just in a little bit of historical context, at least on the Republican side. This is probably the biggest electoral victory for a president since George H.W. Bush in 1988.

So if you’ll remember, you know, in 2000, President George W Bush, there was a disputed election for some period of time between he and Al Gore. It was incredibly close, one of the closest in history to that time in 2004, President Bush won in a bit more convincing fashion. He even had a slightly wider popular vote margin than President Trump did, although with 16 million fewer voters. But he had a smaller Electoral College margin.

And then, of course, President Trump’s first victory back in 2016 was quite narrow and he lost the popular vote, won the Electoral College. And so for Republicans, at least, this is a mandate in the way that they interpret it, because this is the biggest electoral victory that a Republican presidential candidate has had since 1988.

What was behind that was a very broad based movement in the electorate. Some of these stats may be a bit outdated. Some of our friends in places like California have not been able to calculate votes entirely yet. And so I’ll be talking from some stats I heard probably a week ago as some of the count on the West Coast was still ongoing, but effectively Trump gained ground versus 2020 in all but two states.

So 48 states moved in favor of President Trump among almost every demographic category. And of course, you can cut those in a variety of ways. Kamala Harris seemed to pick up ground among unmarried women. For example, the President Trump seemed to pick up ground amongst most other categories, including what was surprising to many people amongst minority communities in the US.

So Trump won one of the largest shares of the black male vote of any Republican in quite some time. He got a little more than 20% of the black male vote. He got nearly half of the Hispanic vote in the US, which has been not typical for Republican presidential candidates. And again, he won more margin in 48 states. They kind of moved his direction.

And so this really was an across the board pickup in electoral support for President Trump in almost every category and where he didn’t pick up ground. There were issues at play, I think, like with unmarried women, where abortion was quite a big topic, you know, where there was just momentum for Democrats in that area.

And so I think you could say this was a very wide ranging victory for President Trump. That victory had tails. You know, famously, President Trump, the last few elections, Republicans have not gained ground in the way that they thought they would. The last election, there was supposed to be a red wave. A. Quote that didn’t materialize.

And yet, in this election, President Trump now has a 53 vote majority in the Senate. As you noted, they’ll have control of the House of Representatives by a pretty decent margin. And so this did look like a mandate to bring in a new mode of administration, I think, across the board in the federal government.

And I think there were a number of things that moved that. I think, one, just the economy is not where people want it to be. I think there’s broad based dissatisfaction with inflation, for example, and just the cost of living. I think there were a series of cultural issues that were at play in the Trump campaign hit on those quite a lot with relation to a variety of hot button cultural topics.

Immigration was obviously a huge issue in this election because of the perceived mismanagement of that under the Biden administration and Kamala Harris’s participation in that. And then a series of just desires about the economy generally.

I mean, the Biden administration and later the Harris campaign had endorsed things like an unrealized capital gains tax increase, taxation, etc., that I think a lot of people reacted negatively to. And so I think there were a number of issues working in his favor. And the truth is, when a sitting president is as unpopular as President Biden is, and when an economy is as weak as it is right now under this sitting administration, there’s often a vote for change. And I think that materialized.

Richard Cunningham: Ross, what would you add to that from your vantage point?

Ross Roggensack: A couple of things. Just as a person who believes in God and the Bible. I think that we know that God’s in control and that regardless of who won, even if Kamala had won, he would still be in control. He’d still be on the throne. So everything’s going to be okay whichever side you run for.

I think I wasn’t that surprised. I remember when the assassination attempt happened and he jumped up and did the fight, fight, fight thing. I looked at my wife and said, this election’s over. You can’t beat that. And just kind of thinking about I don’t know if that’s providential. I don’t know if the hand of God was on him. I won’t try to intercede on that.

But I do think that something was happening, and I think that it was. After that you kind of saw neutral, seemingly neutral people. Elon Musk and Joe Rogan and others kind of jumped in just because they saw, I think, what was happening and what needed to happen. And so I’m just really glad that he won the popular vote. That was a good. Wearing the last time when he won the electoral but didn’t win the popular vote. And we you know, I think that’s part of the reason the markets have been so giddy is that they’re able to kind of put that tension behind it and just move on. So it’s a new day. It’s a fun day. And I’m glad.

John Coleman: One, the fact that the election, as you said, Ross, it was over that night. Right. Basically, I mean, if you stayed up late enough, you kind of knew what the presidential outcome was going to be. The House is still a bit up. And I do think that’s been a good thing for the country. And I think it’s been a good thing for markets that there hasn’t been a disputed election at all in this case. And there’s a clarity of the outcome.

And you could feel that. I mean, we’ll look back on this. I can’t wait for the books that are written about it. It’s hard to almost process all that happened in the last three months. I mean, we had a sitting president replaced on the ticket of his own party mid campaign after the first presidential debate and then a new candidate put in place with no. Kind of subsequent primary system, etc.. I mean, there were just a lot of moving pieces at play here and it is nice to have a definitive outcome. I think if nothing else, no matter where you land at it outcome, I think it’s good for the country right now and lets people kind of move forward with clarity.

Richard Cunningham: Yeah. So Trump’s putting together his team and thank you guys for those insights and maybe it might be helpful to have one of you talk about maybe just the Senate confirmation process of Cabinet picks as we get into this.

But there’s some kind of highlight names, like you’ve got this Department of Government Efficiency coming out with advisors like Ellen and Vivek Ramaswamy. Matt Gates was picked to be the attorney general, and now he has stepped aside, as it sounds like it was a distraction to the whole kind of Trump administration. And now it’s Pam Bondi out of Florida, Matt Whitaker for Naito, Tulsi Gabbard for Director of National Intelligence. Marco Rubio is Secretary of State, RFK Jr for Secretary of Health and Human Services.

So you’re starting to see a lot of these names come up and there’s massive responses kind of in both directions as you see on them. But ultimately, what is the a strategy or mandate, John, is the word you used earlier, as you see with who Trump is putting around him to be a part of this administration?

John Coleman: Yeah, you know, it’s not every pick is in place right now. And certainly there are some important picks, I think, remaining to be had. I know there have been some rumors today about the Department of Agriculture, for example, and what that might look like. I think there have been a few signals in the picks that he’s made so far.

One is it does seem like he’s picking folks who will shake up the existing system, which is what he promised during the campaign. I mean, to have Robert F Kennedy at Health and Human Services, Tulsi Gabbard at that DNI. Seth at the Department of Defense. And, you know, a variety of other picks, You can tell this is not an establishment cabinet in many ways and that they are looking to make dramatic changes.

And like you said, the DOJ’s the Department of Government Efficiency with Vivek and Ellen is explicitly intended, I think, to be a signal that they’re shaking things up. And that’s very consistent with President Trump’s campaign. Right. I mean, I think they ran on this and they said we are going to make dramatic and big changes. And I think what you’re seeing is them coming through on that campaign promise to really make dramatically different picks and to do something different.

I think in the foreign policy realm, there have actually been a couple of signals you can pick up. One is my impression is that this is a very pro-Israel cabinet so far. You know, one of the big two conflicts in the world right now is Israel and Lebanon or Iran, however you want to position that conflict. And I think Elise Stefanik at the U.N. is a big defender of Israel. I think Mike Huckabee being ambassador to Israel is a signal. I think Marco Rubio has been a strong supporter of Israel at the State Department, the Ukraine war.

You know, Trump has promised to try and drive that to conclusion. And it strikes me that even apart from his VP pick, J.D. Vance, that the signals are there, that he’ll do that. And yet, if you’re a person who’s worried about disruptions in the international order, I do think, for example, that Marco Rubio and Mike Waltz are extremely mature politicians, thoughtful people who you could expect to navigate those conflicts quite well.

And so I think there is a balance there on the international order front between folks who kind of know how these things are done and those who are intended to shake things up that hopefully portend a really thoughtful approach to the end of those conflicts, which is, you know, Trump has said he’s going to end Ukraine on day one, which I think within the first 30 to 60 days is what he’ll shoot for. I think he’ll look to end the conflict in Israel. And it seems like he’s going to try and make good on those promises.

You know, the other pick that’s outstanding right now is the Treasury Department. At the time of this recording, there’s been some back and forth on that because of Trump’s trade policies. He put Howard Lutnick, who’s a big supporter of his tariff policies in at Commerce. And then there’s still a bit of an ongoing debate around Treasury, at least the last I looked in the news right now. And I think that will be an important signal. But overall, this is a cabinet that is looking to shake things up, I think. And it seems like he’s really going to try and make good on that campaign promise. But Ross, what are you saying?

Ross Roggensack: He’s shaking things up. All right. And I think that here Treasury movies between Kid Rock and Ted Nugent. There you go. You know, I think that who he’s talking about for Treasury sounds really good. And I imagine for markets that will be important as well as whoever he puts at OMB, those are kind of the big things we’re sort of watching. And certainly the names he’s floating for Treasury probably are all good.

Richard Cunningham: Unpack that correlation a little bit, Ross. Why are those two positions in particular so key for kind of economic and market outlooks? Well.

Ross Roggensack: Treasury is just so important as it relates to especially a lot of what Trump talks about in terms of tariffs, etc.. And then just the way the Fed interacts with Treasury, it needs stability. He can’t sort of take a flier on that when he’s got to. I was joking in case anybody wasn’t sure about ten. Nugent It would be fun, though, but I think that somebody like Kevin Warsh would calm markets. Understand that there’s an adult in that seat and nothing crazy is going to happen. So I think that the market’s really at this point probably could well be assured that at least somebody is. And that’s probably maybe a reason for some of the rally the last couple of days as his name came out or the other studies mentioned. So it’s. So far, so good.

Richard Cunningham: So let’s go there, because all of this ties back to kind of underlying outcomes and markets and economy is this is the FDA I pod and Ross the point you’ve kind of made in the month response to the election.

It seems like markets generally are viewing Trump’s policies as stimulatory less regulatory oversight. Prospect of lower taxes. You even saw things or particular kind of segments of the market really jumped. If you know, if the prospect of lower interest rates continues to take place, something like the Russell 2000, which is more of your small cap universe, continues to jump.

So a couple of quick numbers is S&P 500 is up roughly 25% on the year, 2% on the month. If we’re looking at kind of November and just the response, the election, Russell, 2000 is up 18% on the year, 8% on the month. So significant jump. Nasdaq, which is, you know, maybe you’re more tech oriented kind of concentration of 29% of the year. We know a lot of that has to do with the Magnificent Seven and just the way they’ve ripped

So markets and we’re now here in public equities most particularly have seemed to be just positive in response to the election. Is that what you guys are kind of diagnosing as well?

Ross Roggensack: Yeah. I think certainly if you think about the 2016 election when he won and the market at least overnight was straight down and then straight up, and then we had a pretty wildly bullish environment until he was inaugurated. It feels similar. Some differences here and there, but certainly feels a lot like the last time he was elected.

And so I think there’s some confidence in small cap U.S. based companies and probably in private equity and M&A in less regulation and more growth, less taxes. I mean, all those things are positive and especially with the House and the Senate, I think that there’s some confidence that, you know, by the spring we’ll have a tax bill done. I mean, things are going to happen fast, as I think certainly he learned and they all learned they got to get it done now or it won’t get done.

So I think we’ll see a lot of stuff happen and the markets about tomorrow, not today. And the markets are thinking about the summer or the fall when we’re past those tax cuts and we’re maybe thinking about what is the event going to do to cut government and maybe will the war in Russia be over and maybe, you know, all the kind of things that I think are forcing the market up right now?

John Coleman: Yeah, I would say it’s not even a very partizan thing to say that the last administration, it proposed some things that were extremely negative for markets on capital gains taxation, unrealized capital gains tax there. FTC under the Biden administration has been extraordinarily restrictive. The DOJ had been aggressive, the SEC had been aggressive. There were a lot of very negative things for markets embedded in that.

I think I agree with Ross. I mean, a couple of the factors at play right now that markets love deregulation. I think we’ll see a lot of cutting of regulation. I think markets like that, there’s a decent chance the M&A markets open up under a new FTC commissioner, which would be really good for markets.

I think the chances that taxes go up dramatically, corporate taxes or personal income taxes or capital gains taxes have diminished quite a lot, you know, and that would have caused a sell off at the end of the year. I think if people thought that cap gains taxes were going up next year, people would have liquidated this year, which would have caused a sell off. And I think there’s not the urgency around that right now.

And so I think in general, there is a much more business friendly environment at play right now and probably more pro-growth environment deregulation, you know, with hopefully a healthy attitude towards M&A markets, etc..

I think the one thing that might warrant some watching is the continued inflationary pressures in the economy, some of which is obviously outside of President Trump and his administration’s control. The Fed has lowered rates, but that hasn’t impacted a lot of our fixed income markets, mortgage rates, etc., because there is still a fear about inflation, I think in markets right now.

And if rates were to come down more significantly, we’d see more of a bump in small caps and mid-caps, we’d see more economic activity. People are looking for that. If Trump can end the foreign wars that are going on right now in Ukraine with Ukraine and Russia with Israel, I think that’ll be good for markets.

And then the tariff policies, the big question mark probably, I think, you know, he’s proposed a fairly aggressive approach towards tariffs in the United States towards other countries. And we just have to see how that materializes. It’s been quite some time since that was a platform in a presidential election in the United States. And there are potentially some good things that are out there, potentially some challenging things that economically. And I think that’s one area people will potentially be watching in the first few months.

Richard Cunningham: You mentioned a lot to unpack there, John, and want to be sure we kind of go line by line and under almost like the lens of let’s play out the other side of this and kind of what are some of the negatives.

Although there’s been a lot of optimism and positive response like. IPO and M&A markets are just low and have been very slow. And the hunger and the starvation of and the need for distributions is out there. I mean, the last three years have been some of the lowest since the kind of great financial crisis in eight and No. Nine in IPO and M&A markets thinking about like an asset class like VC and 2022 to 2024 combined.

There have been less distributions in the VC asset class than there were in 2019 alone. And you know, you think of these companies like a databricks or a stripe or, you know, plaid camp. All these folks have been waiting on the sidelines for that IPO. They just continue not to kind of come to fruition. So does a Trump administration help activate these markets as or even correlation there? What do you guys see there? Because there’s just a necessity for these markets to pick up.

John Coleman: Yeah, I mean, Richard, just to emphasize one thing, you’ve said, you know, liquidity in private markets has been really challenging. I think, Ross, you’ve probably seen that venture’s probably the most extreme example of that. That’s true in private equity. It’s true in some other categories. We just have not seen distributions coming out of funds. We have not seen companies selling the IPO. Markets have been slow and the M&A markets have been slow.

And again, part of that is just the position of the current FTC commissioner, Lina Khan, who’s been very restrictive, I think, on M&A markets, particularly by larger companies. And so we haven’t had the exits that would typically allow for distributions out of venture and private equity portfolios.

And because we’ve seen a bit of a downturn, at least up until about a year ago in the economy and a rise in interest rates, people have been trying to hold positions in funds for longer to squeeze the return out of them that they could they didn’t want to sell when valuations were compressed or when they were down.

I think we’re starting to see those come back independent even of the Trump election. I think we started to see valuations rise. Venture valuations have certainly started to creep up. And I think at some point you just have to start selling these things. You have to have an opening in M&A and IPOs. You can only sit on these positions for so long.

And so I think in particular, if the FTC’s position towards M&A is a little bit looser next year and if people have a favorable view of the forward looking economy, which would push up valuations which are often predicated on a forward look at earnings in companies, which seems to be happening because of public equity markets, I think we could see much more activity in the new year, liquidating private equity and venture portfolios.

And I think it almost has to pick up at some point. Right. It’s been a pretty anemic three years for liquidity and there’s just so much pent up demand to create liquidity that it’s difficult for me to imagine that continuing through the next year. Ross And what are you seeing?

Ross Roggensack: Yeah, I mean, some of it is just pent up demand, so I don’t want to give Trump too much credit. I do think he might be in a position where it will get better. Some of it will be because of that. But, you know, in terms of negatives, you know, J.D. Vance has been a bit on Lina Khan’s side and the FTC, and maybe there’ll be a little bit of hesitancy, I’m not sure, in terms of wanting to break companies up or slow down that momentum.

But it does feel like the pent up demand and just where we are in the cycle, we should be entering a better season for Venture especially and probably for private just because of the way money flows are starting to go. So it’s probably good timing for Trump, which is a lot of what a good presidency is, is just being in the seat at the right time sometimes or not at the wrong time, you know?

Richard Cunningham: Yeah, Ross, that’s a great point. I think that’s something we need to keep in mind is that markets are exchanging hundreds of billions of dollars of hands a day, and they’re going to do that regardless of who’s in the White House.

So we definitely don’t want to give credit or take away credit to any to full an extent. While this helps kind of set the competitive landscape or the rules of play in a lot of ways, who’s in the administration? Definitely appreciate it.

Ross Roggensack: Don’t worry, we will take credit. Well, that’s so true.

Richard Cunningham: Going on, let’s get into, John, another one of the points that you unpacked and that was fed and rate cuts. You know, one of the things that I think kind of flew under the radar is on November 6th and seventh, there was a second rate cut in this kind of cutting cycle.

There was the massive one back in September. We’ve come down now to a range of 4 or 5 to 4.75. But you mentioned, John, there’s still some inflationary pressures that is taking actions now. They’ve cut rates all the way up to 75 bips and kind of this period, we’re still seeing a really high ten year treasury, though the spread on yields between risk free rates, you know, the US treasuries and what corporations are having to pay to borrow money is at a 17 year low, 26 year low on kind of credit grade bonds.

So where are you at as you look at kind of the Fed’s policy, the inflation picture that we’re looking at and maybe with the optimism that we’re seeing overall, what could possibly break the system? Is there something in play here that we haven’t hit on yet that could be a big sensitivity to all of this kind of forward looking optimism we are feeling?

John Coleman: Yeah, I’ll be brief because I think Ross is more of a fixed income expert than I am. I would say yes. My impression is there is still fear of inflation in the system. There’s a lack of certainty around what government spending is doing, for example, to that environment.

I know several people who believe, for example, that we have been in a mild recession apart from government spending, which is obviously deficit spending consistently right now, and that that’s been kind of artificially inflating our view of how the economy is performing. And we’ve certainly seen that even within some of the businesses that we advise. You know that the last year has been a bit bumpier than it might look at a surface level in markets.

And so there’s a little bit of uncertainty around that. I think people are also worried about the long term financial health of the US federal government, given the debts that we’ve accumulated in the reset of interest rates coming in the new year on those debts, which is going to take our payments, I think above $1 trillion annually in the new year.

And there’s just no signs in the underlying economy that all the areas of inflation haven’t totally come back to normalized rates. You know, I think the Fed, Ross, is still said they’re targeting 2%, although they’ve been a little soft on that number to try and achieve the soft landing. And it doesn’t seem that we are achieving that level right now.

And look, inflation is just notoriously hard to tame, right? Periods of inflation often lasts a little bit longer than you think. You can’t clearly read when they’re over all the time. And so I think markets have a tough time achieving a degree of certainty that those periods are over. And until that happens, and until people are comfortable with the direction of the economy, I think it’s going to be very difficult to get rates in a in a series of places around the economy much lower. But Ross, I’ll defer to your expertise in this area.

Ross Roggensack: Yeah, I’m not an expert. I’m just old. I’m not an expert. But I do think when the Fed cut in September by 50 and then 25 again in November, you know, we’ve seen rates much higher than even when they cut. And so it feels like there’s a tension of maybe a chance that we’re growing faster than what the Fed thinks. And so they’re moving too quickly. So the bond market is trying to tell them to stop it because they’re going to juice the economy too much to where we get inflation back.

Lately, there’s been the bond vigilante kind of threat out there that if the Fed and the government just spends any more money, that we’re just not going to buy bonds anymore. And so there’s always that threat. I’m a little surprised since the election that we haven’t seen the ten year come down in yield. I would have thought it might have just because that sort of bond vigilantes and would be shaken off a bit for a while because there would be some expectation that we would shrink government. Government is just so large. It’s twice the size it was 15 years ago.

And I know John spends way too much time in Washington, and it gets bigger and richer every time you go, I’m sure. And we know where that money comes from. It comes from us. So it’ll be interesting. I would expect the biggest risk in the market is that that if we see the ten year go to five or somewhere near there, that that would not be handled very well by the stock market, I don’t think.

So that’s sort of the the boogeyman out there is rates of rates can come down some more. That would help. But the longer they stay up here at 440 or so, they started to creep to five. That should be a warning sign to all of us that you should sit up and pay attention that maybe some bad things could happen, at least for a while.

John Coleman: I think almost certainly, Ros, you need to launch a podcast called Bond Vigilante at this point, or at least get a T-shirt.

Richard Cunningham: I’m in agreement.

John Coleman: Only appropriate.

Ross Roggensack: Now we’ll get Ed Yardeni to teach, and he’s the one right now is the one that came up.

Richard Cunningham: With some kid rock hair for Ross and a Bond vigilante t shirt would be would.

Ross Roggensack: Be the look that said that they threw.

Richard Cunningham: Up the shocker sign for all those at home. Man Let’s go back to John. You mentioned one last thing, kind of like the caveat to all of what you’re saying, and that is foreign conflict and just kind of the geopolitical scene, the two major wars.

Let’s double click into that a little bit because I think that’s another one of those hey, all of the optimism, kind of uniformity around House, Senate president kind of all in one direction. But here we have with these foreign conflicts that are pretty unpredictable and feel very fragile at the state. What thoughts do you guys have there? Russ, we’ll start with you.

Ross Roggensack: Well, not to be too much of a Republican here, but what’s happening right now in Russia with us approving the missiles that are being flown into Russia, that are missiles that are training is really dangerous. And I do think in this lame duck period, they need to calm this down or else we could have a very serious issue in Russia and in Ukraine if that doesn’t reverse itself or at least if somebody doesn’t calm the message because there’s a lot of threatening language by Putin about nuclear weapons, that.

Is really scary. And we will forget about the stock market in a hurry if a nuclear bomb gets dropped in Ukraine. No doubt. So I don’t really know what they’re trying to achieve. It’s scary and I don’t know what they’re trying to do. It’s confusing to me. And a little bit frightening, actually.

John Coleman: Yeah. You know, this is an area where everything is pretty unpredictable. I mean, I can offer some of my thoughts on where I suspect we’re headed. But the truth is with these I mean, international conflicts are very difficult to predict.

And, you know, first, as Christians, we just got to be. Any time there are wars at this scale, like what’s happening in the Middle East, what’s happening in Russia, in Ukraine, it’s just a human tragedy. Right. I mean, the number of civilians who have died in both of those conflicts, the number of civilians who are still threatened, even the military personnel who are dying and are threatened. I mean, it’s a human tragedy that that’s happening. And I think, you know, all of our prayers, regardless of where we stand on the political resolution of those, are that that human cost can end, that people will stop dying, that we can find a resolution to these. And, you know, certainly we want to be sensitive to that as we’re predicting things.

I’m actually reasonably bullish on a conclusion to those conflicts over the next year, and I’m reasonably bullish that we won’t see other conflicts developed with nations like China which might pose a threat. And I’ll voice why. The first is I do think that in both of the conflicts, Ukraine and Russia and Israel and again its neighbors, so Lebanon, Iran, you know, the Palestinian territories, the clear signal is that the new administration would like to actively in those conflicts.

I think with regards to the Israel conflict, there is a clear signal, the pro-Israeli stance among the administration, at least in the appointees we have so far. And I think the Trump administration’s strong ties with places like Saudi Arabia, you know, Saudi Arabia has already signaled that they’re willing to lower some of their standards for normalization of relations with Israel since President Trump won the election.

Are all signs that we could see that come to conclusion and Iran contained in the region a bit more, because if you had the Saudis and Israelis working together hand in hand with the American government, there are probably solutions that could be had to the ongoing conflict there. So I’m somewhat bullish that that will happen.

And then in Ukraine and Russia, I think both sides are legitimately exhausted with the conflict at the moment. Ross is right. Putin said some scary things. He revised his nuclear policy. Ukraine is now launching long range missiles into Russia. Russia recently launched a nuclear capable missile into Ukraine, even though it didn’t have a nuclear warhead attached to it. Those are super threatening signals.

My hope is that those threatening signals are jockeying in advance of what they understand will be a strong push for a negotiated settlement in the first days of the Trump administration. And the question there is exactly what they’ll agree to, the two big levers being how long won’t Ukraine have to promise not to go in to Naito? And how long will Naito have to promise not to allow Ukraine in? Is it ten years? Is it 20 years? Is it longer? And then the second is obviously where the territorial lines set. Putin would love to freeze them where they are I think on the front, Ukraine would like to push those back and only give up something like Crimea, for example. And so that will become the process for debate. I do think there will be a settlement to that. I think Putin may not acknowledge this, but he would like to see an end to that conflict. It hasn’t gone well for Russia, hasn’t gone well for Ukraine. Both sides are probably in a place now where they’re willing to talk with the right people at the table.

And then finally, I’m bullish. You know, some people still have a fear that conflict could escalate with China. And once again, I’m somewhat bullish that it won’t. I think China’s in a weaker domestic position than most outsiders recognize right now. I think their economy is a bit weaker. I think they just announced stimulus, I believe, over the course of the last week or two. They’ve got a debt problem. They’ve got a real estate problem. They’ve got a shrinking population.

And they’ve just witnessed what happened to Russia when it went into Ukraine, a conflict they thought would be easy, which has turned out not to be easy and quite embarrassing for the Russian state. It’s hard for me to imagine without some sort of massive provocation, China, for example, invading Taiwan or something of that nature at this time.

So I’m somewhat bullish. We can get those conflicts under control next year and I’m hopeful we can obviously because of the human cost. But, you know, the caveat is these things are hard to predict, right? You don’t know what these international actors are thinking. And so you can only hope for the best and develop policies you think you know, can drive those to conclusion.

Richard Cunningham: You know, we got a bond vigilante and a foreign policy writer on the podcast today. It’s good to be wrong.

John Coleman: All of this stuff will be proven wrong by the end of next week. Richard.

Richard Cunningham: It’s for the best part as you’re on the record, so we’ll be able to call you out right away and we’ll. Yeah, Thank you guys for sharing that. It’s been a thousand days plus now. And Ukraine, Russia and 400 plus Israel, Hamas. So as you’ve talked about, John, just the cost of life.

Ross Roggensack: 600,000 Ukrainians have died in this war, 600,000. Think about that number. Just amazing. That we know of.

Richard Cunningham: Well, maybe that’s a good place to just kind of stop. Put a pin in the conversation and just say, Hey, for anyone listening that maybe is disheartened by the election outcome. Here’s something like I was talking about the foreign conflict or on the other side of the coin is just overjoyed by the election outcome.

Let’s get back to that kind of like eternal mindset, biblical perspective. We asked the question at the close of every podcast of What’s the Lord been teaching you in and through His word lately? And so maybe in light of the subjects we’ve covered in just your time with the Lord, how would you process and kind of think about this? What encouragement would you guys offer? Ross, we’ll start with you. John will close with you.

Ross Roggensack: Well, my church has been walking through Joshua. And a few weeks ago we ventured out to the Battle of Jericho, which wouldn’t be encouraging to many. So I’m not going to go there. But just before the battle. Joshua is I guess he’s meditating or praying and he looks up and there’s a soldier in front of him with a strong sword.

And Joshua looks at him and says, Are you are you for us or against us? And this is the Lord now speaking to Trinity right in front of him. And the answer was no, which is not an answer. It’s basically that’s the wrong question.

And our pastor kind of asked us to think about in light of that, in the light of what we do in our work, oftentimes I want to go in a direction. I ask if the Lord is with me or against me. Am I going in the right direction? And our pastor kind of rephrased it and said, maybe we should be asking the Lord which direction should we go and not? Am I going in the right way? So maybe that’s a good thing to think about as we welcome to the next season, is us just being quiet and asking, Lord, where are you going? You know, where are you going? Can I go with you? So that’s sort of what I’ve been thinking about.

Richard Cunningham: And that’s good, Ross. We’ve been processing through God’s will and just call on my wife and I his life. Honestly, just lately just been processing the big questions I just got Where would you have us? And we keep coming back to the word will.

And what you just said remind me of first Thessalonians 516, which is rejoice, always pray, continually give thanks in all circumstances, for this is God’s will for you in Christ Jesus. We want to ask those questions about right and wrong. Got you on this side, that side, and you just stops and says, Rejoice, pray, give thanks. That’s my will for you. Kind of like you’re saying, God, what direction would you take me in? John Coleman, Take us home.

John Coleman: Well, first, just let me know. I’m almost shocked. We got through an entire podcast right now without having to talk about cryptocurrencies. Given that Bitcoin is almost at 100,000. I know that’s Ross’s favorite topic because it’s probably his heaviest asset allocation is is Bitcoin.

Ross Roggensack: So you’re a wealthy man right now?

Richard Cunningham: Ross That’s my fault for not bringing up crypto, but it has been rippin.

John Coleman: It has been good time in the crypto markets. You know, I have been thinking a lot over the last few days about humility. I heard the founder of Hello on a podcast recently talking about humility. They have some prayers for humility on the app. I’ve been using the Halo app actually to do daily devotionals and things like that, and they have some great prayers on humility.

And then I was actually watching a sneak peek of a TV show on Monday that I won’t reveal that forthcoming from some friends of all of us here on the podcast. And there was a scene with the Prophet Samuel where he was talking to Saul and he talks about how when Saul was small in his own eyes, God made him great. But then when Saul started to believe his own story, him to fail to attribute God, obviously he was humbled and it’s just helped to remind me constantly.

Like any time we start to feel on top of the world for anybody feeling on top of the world right now, you know, we need to remember God is in control and that we are subject to him and we should always seek humility. We should have humility. We should remember to give glory and credit to God. We shouldn’t let the valleys be too deep or the peaks be too high.

Right? We should know that we’re on a journey and that journey will have both suffering and triumphs. And we should just always be cautious in our dealings with ourselves and with others that we constantly give credit to God, that we treat others as better than ourselves, and that we as Christians are setting an example for how we treat others so that we communicate that message of humility and love that Jesus consistently gave us.

And it’s only by doing so that we can ever truly achieve great things not for ourselves, but for others and for God. Right? And that’s just really hit home for me over the course of the last week with a couple of messages I’ve seen.

It’s an area I fall short all the time, and so it’s something I have to keep in front of my eyes. You know, Ross is smiling way too big when I made that last comment about falling short on humility. But but it really is. I mean, you got to pray about it. You got to think about it. And I’m too tempted to give myself credit for stuff sometimes. And I think we all are. And, you know, as folks are feeling either great or bad right now, it’s important that we all remember to put that in context of eternity and the role that we play here. For the God that we serve to fear.

Richard Cunningham: The Lord is the beginning of wisdom. I think humility is one of those great byproducts of wisdom. Ross Robinson of City Consulting, John Coleman of Sovereign’s Capital Friends. This has been another episode of the Faith Driven Investor podcast. Wonderful to have you with us. Have a great Thanksgiving. Start your Advent season. We’ll catch you next time.

Speaker 2: We are grateful for the opportunity to serve this community and see your listeners come in for more than 100 countries. Faith Driven Investor It can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a groups study with other investors looking to get the same answers to questions you have and find great community as they do so. There’s no cost, no catch. In person or online, you can meet an hour a week with other peers from your backyard or the other side of the world.

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A groundbreaking vision to unlock $1 trillion in underutilized church real estate could revolutionize how faith communities use their buildings and democratize Christian impact investing. Nick Bonner shares his remarkable journey from developing an innovative church-sharing model to launching what may be the world’s first Christian impact investment REIT. Through unexpected setbacks and divine redirections, Bonner’s story demonstrates how surrendering business plans to God can lead to even greater opportunities for kingdom impact.

Please note that the views expressed by the hosts and guests are their own and do not necessarily represent the opinions of Faith Driven Investor.

Episode Transcript

Richard Cunningham You’re listening to Faith Driven Investor, a podcast that highlights voices from a growing movement of Christ, following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Speaker 2 Hey everyone. All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosted guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham Welcome back, everyone, to another episode of the Faith Driven Investor podcast. Man we are nearing the end of 2020 for Luke Roush and really it’s been since May, since we’ve had the opportunity really in earnest to hit on the real estate markets. And we’ve got an incredible leader in the space. Nick Bonner with us here today that will introduce your momentarily, but excited to have you back in the podcast. Luke, I know it’s been a couple of weeks and excited to be talking. Real estate feels like it’s after an election. A lot of Fed activity, everything that’s been going on, we just kind of need to pay tribute to that asset class and large. But Luke, how are you doing? How is Team Roush this Thanksgiving?

Luke Roush We are doing great. We had a great Thanksgiving. Grateful for unique times that we live in. And certainly the last handful of months has been unique in the real estate realm and dynamic, which makes for a fun podcast session. So this is a great guest and a great conversation we’re going to have today.

Richard Cunningham It sure does. So coming from sunny San Diego, California, where he can probably dunk on as in terms of weather as our friend Nick Bonner. Nick has been a leader in the FDI real estate space for quite some time, thinking about just redemption inside of real estate. Longtime CBRE, Caldwell Broker, great expertise. Nick, awesome to have you on the phone with us. Man.

Nick Bonner I was a joy to serve and I’m grateful for you guys and your entire team. What you’re doing to spur the movement of faith driven investing. We’ve heard Luke say it before. Aslan is on the move. You guys are helping investors to be found faithful and they can return. So thank you guys for what you doing.

Richard Cunningham Absolutely. Well, Nick, you’ve got a wild story. And I think that’s just kind of where we want to start with this podcast is your time at the Pine Tops Foundation what you’ve had your hand in over kind of your career, I think will help frame up where we’re going and kind of what happens now and present day with your work. But I just want to hand over the mic to you to kind of contextualize this episode a little bit and who you are.

Nick Bonner Awesome. Well, thank you. Yeah. So I’ll start off just like a quick background on me because I think it helps sort of frame this up. Pastor’s kid born and raised, actively involved in the church my whole life, spent about a decade on the board of a church board, 13 years on the board of a Christian foundation called the Pine Tops Foundation. In about the last 20 years in commercial real estate, in the capacities of lender, broker, property, manager of my own assets, investments and the like. And all that has sort of helped frame up a lot of my thinking around some of what we’re going to dive into today. Since I started volunteering with the foundation, we’ve deployed over 500 grants and over 40 different private placements, the majority of which were for impact investments. And I mentioned that because my roles in commercial real estate in the foundation have opened my eyes to a very broad spectrum of the deployment of capital and the impact that it can have, which has really stirred up a lot of good questions and opportunities around this space for me. Give me a what I think is a pretty unique perspective. So I’ll start real quick with Pinetop, just to give you a brief overview of that. So Private Christian Foundation, we set out about nine years ago. We sort of said, Hey, we need to come up with a theory of change because in spite of being one of the wealthiest Christian nations in history, the church in America has declined. And so we don’t have a money problem. We don’t have a critical mass problem. We have an efficacy problem. So what are we going to do to steward God’s money in a way that actually results in real change? And so the answer to that was what we call the Great Opportunity Report or the GAO report for sure. And how we came about with that was initially was intended to be a confidential internal domestic strategy for us. But we quickly realized it was something that was just much bigger than anything we could ever tackle on our own. And so what we did with that is we basically asked two questions. One, what is the state of the church look like in 2050 and how do we change that? So we built demographic models around it, and then we went back through history and said, okay, how do we change that based off historical record? Like, where have we seen big growth in the church and are there common denominators there? And the answer was, Yeah, there’s five. And so we built a chapter on each one of those five intro to kind of frame it up and then a closing chapter of just ideas, just tons of ideas to like, all right, how do we get after this? So if you’re listening to this podcast and you’re like, okay, this is an investor podcast, but a lot of people on here are faith driven. And so if you’re tired of people talking about the church and how it’s dying and how it’s, you know, not efficacious, read this report and get inspired and get to work, there’s some really exciting ideas that come out of that and so you can find it. It’s free. Great opportunity, dawg. We probably had 40, 45,000 downloads on it. We’re not marketing. And it’s just it’s kind of tough to tell like how much exposure it’s had because it’s a PDF document that just gets forwarded around. But our best guess is, you know, probably 45,000 different church leaders of major denominations and ministries that have been using that as their game plan. That’s required reading in a number of seminaries and denominations. And so, you know, we’re excited about what it’s. And I’m more excited about what other people will do with it when they get a hold of it and start to ideate on like, Wow, what’s my part in this? So one example of that is a real estate model called Open Doors. And what’s fun about this is this wasn’t even my idea. Like we hired a bunch of McKinsey consultants and KKR people. There’s 150 different people that helped us put this dock together. Their names are in the back of it. And they came up with this idea that like, hey, as we look at the overall church, like your two biggest costs, like most companies are people in real estate and arguably maybe there’s a vocational angle in there for pastors. But clearly the low hanging fruit is in the real estate because as I started digging into it, I realized the average church in an American city spends half of their finances on a building that the only fully utilize about 5% of the week.

Richard Cunningham Absolutely. I’ve always thought about that.

Nick Bonner It’s a colossal waste of stewardship. I mean, it’s just like it makes me angry when I think about it. And so their idea was we’ve got to have a better model for that. What if we had for profit sustainable solutions with third parties that owned this property? What if we had sort of like a we work for churches like 20 years ago, if I would have told you that you’d be interested in sharing your music collection, your home in your car, you’d be like, You’re crazy in your office space, for that matter, right? But like, here we are. So why is the church so far behind this? Why couldn’t we do that, too? So a couple other big stats for you, as I sort of do some of an original research on this is there’s about $1 trillion of equity just buried in the dirt in church buildings, just church buildings alone, not even the rest of the real estate the church owns. And so if we deployed that capital alone, we could triple the current rate of church planting. And why that’s important because I didn’t know really anything about church planting before this report is church planning is one of the five most catalytic things that could be done that would be positively disruptive for the church. It is a common denominator behind all big revivals in American history. One other stat on that, which is roughly 12% of companies own their own properties, but roughly 84% of churches own theirs. And it’s such a big difference. It’s like, wow, why are we settling for, you know, a property tax exemption and maybe 3% appreciation when the scripture tells us that we’re given returns of 30, 60 and 100 fold? Like what if we were putting our capital into our mission in the same way that businesses put their capital into their mission? And so that was sort of the big idea behind like, okay, we’ve got to do something different about about real estate. So what does that look like?

Luke Roush Yeah, well, I’d just dovetail on that, Nick. One of the things that we talk a lot with business leaders that we partner with about is stay focused and stay clear on the business that you’re in. If you’re in the business of distributing heavy industrial equipment, focus on distributing heavy industrial equipment. Don’t focus on somehow trying to become like a real estate mogul through the the dirt that’s underneath your dealerships. And so we try to always remind business leaders of what is the business that you’re in. If you’re in the real estate business and you’re trading multifamily properties, you probably want to own the real estate. But if you’re in almost any other kind of business, you’re looking to control that costs and make it a variable expense rather than a sunk asset. So what you’re bringing up is very apropos. And, you know, it’d be curious to go back and figure out how did we get here? Maybe it’s just a spirit around kind of own in the building that started, but more importantly, I think more constructively, where do we go from here in terms of trying to return to the core mission, which is reaching people with the Gospel? So please continue.

Nick Bonner Yeah, I know with you and I’ve got a whole white paper I wrote on how we got here that you guys have been nice enough to post on FDI on, you know, basically takes you into the etymology. It’s about words, like language matters. Like we can’t even look at a building and call it the right thing. We look at buildings and we call them churches. They’re not churches, the churches, the exits, the gathering of people. So, so long as we look at buildings and say, that’s a church, then we actually even create a mindset where a pastor is like, Wait, you want me to share my church? No, this is my church. Like, I’m not sharing this building. And so we just need to think differently about this. And to your point, there’s an example I give of you guys get pitched by businesses all the time. So let me pitch you on a business idea for a moment. All right. So I’m going to start a business. It’s a predominantly retail business. We are only going to be actually visible to the community a half a day a week. We’re going to go to our main parishioners and we’re going to ask them to take their day off for 2 to 4 hours and spend that moving, picking up stuff and moving in and out the rest of the week. There’s going to be zero sign that we actually are even in existence. And as the CEO of this company, I’m going to spend a decent amount of time on things that are. Pletely outside of my scope or set of abilities. Do you want to invest in me? You’d be like, Are you.

Luke Roush Crazy? That sounds like a long cut, Nick.

Nick Bonner Right. So this is the model. This is plan A for church planting. Like we’re sending these guys out to battle the go get slaughtered. Like these poor pastors have these really crummy models that they’re given. And so you probably hear my voice. We just we need better solutions for this. And so I don’t want to camp on this for too long. But the quick idea with this whole open doors model was let’s go out and buy buildings or create a fund for profit sustainable, fund them, go buy buildings, be a church industrial office, whatever, it just have to work for the users, renovate it so that multiple churches can share the space when they need it, when they don’t need it, which we just learned is the majority of the time, at least the entirety of the building. We rent that out to other uses, like Christian preschool or coffee shop or coworking or let’s just let’s take wedding space back. I mean, an event space is a huge income generator and all of those uses can both subsidize the church’s cost to be in the space and bring in new sources of people. So that might not normally set foot inside of a church. So now you put the well inside of the building. You have these divine collisions that can occur within the church and you’re creating a sense of space of a third place that people want to be in. And you just tell the pastors, Hey, you’ve got access seven days a week, why don’t you sit in the lobby and just hand out coffee to people as they come in like they’re showing up at your front door? Just love people and basically take all the distractions away from them. So that was the model set out to do it. I love Henry Kissinger’s example of like introducing somebody to the world of sushi where he says, like, you got like the apartment life model over here. And that’s like, you know, the California roll. And then you’ve got, you know, some of these other private equity funds that are like the nigiri sushi, right? You don’t take somebody straight into Gary Sushi. You start him at the California, get an appetite and you go towards that. Well, this open doors model, like there’s so many different moving pieces to it and then there’s like all this cultural overlay and spiritual things of like people, you know, hating on the church that it’s like, that’s the nigiri sushi. And I came out of the gates swinging for that, and it was hard. It was an interesting time because I was a part of a group. It was kind of like the first FDI group ever, only unofficial. You’ll recognize the names of like Beaner Skin. And I don’t know if, you know Matt Migliore is, but couple of other guys that are part of this.

Luke Roush These are some of the urges and they threw in real estate.

Nick Bonner The O.G.. So we all get together. Dan Mack it maybe not a name you guys know, but it’s just a phenomenal human being. And a buddy of mine, John Kim, we all get together. We’re like, How do we solve for this stuff? So it’s during Covid. We’re like, Well, let’s just do like a video. Like we can’t meet with people. Just do a video meeting like, you know, every week. So it was awesome. Was first FTI Group during that time super formative for me. This is when Ben starts Callus Capital was turns in the Sovereigns real estate fund. We introduced each other like narthex, which is doing like their own real estate fund co hatch. Well then Field Redemption Collective. There’s like all these groups that are spinning in our minds and we’re learning about all these great solutions that entrepreneurs are pursuing and having the realization that, like, man, access to this capital is really hard because the only thing that investors love more than their money is their time. And so if you want to invest in one of these models, it’s going to take time to go evaluate is brand new. Like these aren’t California rules. These are somewhere between that and the Gary Sushi. And so God gave me a vision during this time that was like, Man, I love these people in their models so much. I’m going to take the operator route. But my goal is to prove this so well that we could go raise up ultimately a REIT where all of my buddies, we could all collaborate and roll up all of our individual funds into this massive REIT because then we can begin to democratize the capital in this space. Right now, the barriers of entry for anything really Christian impact is really high. If you don’t invest in this stuff, you got to have typically minimum like a quarter million bucks. Be ready to have your money locked up for 5 to 7, maybe ten years. And oftentimes there isn’t a massive amount of diversification. So if grandma wants to invest your money, you’re saying, no, grandma, don’t, don’t do it. And so what if there were a highly diversified vehicle that had a $2,000, you know, minimum and a ton of flexibility that opens up the pool so much bigger. And so I sort of got off track a little bit. I wanted to share an example of one of the thought experiments also that led me to this space. So years ago, Tom Blaisdell wrote this white paper where he explains that there’s we all think that government is supposed to solve this stuff. Or guess what? Like there’s only about 15 times the amount of government money available, then donation capital. And certainly donation capital was not enough to get the job done. There’s 100 and. 50 times the amount of investment capital available in the ecosystem. Then there is donation capital. So the thought experiment on this is. So all the two pocket investors, right? Let’s just imagine for a moment that in the philanthropy space we could create a KPI that measured kingdom impact. I don’t believe you can, but let’s just imagine for a second that you could. So if we did, let’s imagine that the philanthropy space has a 100% return on their KPI. Let’s imagine that the impact space does a really poor job and they only have a 1% return on theirs. Even in that scenario, the impact investment space would still have a 50% greater return than the philanthropy space because of its sheer size. Right. And so please don’t understand me. Like philanthropic capital is absolutely necessary. I’m just trying to cast a bigger net, bigger vision beyond that as the sole apparatus for solving the world’s issues. Right. So this is not binary thinking. This is like a continuum. God made 17,000 types of butterflies. So there’s plenty of room for expression and creativity in our work. But this thought experiment gives you a sense of like, how critically important it is to actually get into this impact investment space and start doing work there.

Richard Cunningham Right? That’s really important. I want to double down on that real quick because I think that’s just worth stopping because it actually plays off really nicely. One of the most legendary FTI videos, in my opinion, for those that have been through kind of the six week FDI cohort is when Greg learned a hand unpacks this concept and he talks about, you know, Americans are given somewhere around 400 to $500 billion to philanthropy, which what you’re talking about charity each year. And that number is actually going down, which is a bummer. You know, we the church should be joyfully, hopefully like increasing that number in that share that we’re giving. And that’s such a small percentage of GDP. And what you’re talking about here is the hundred plus trillion dollars in investable assets out there. Just a small portion of that was unlocked for other than, you know, purely profit driven purposes, which making a good return is absolutely key. You’re saying what could take place here is just an even greater multiple. Am I am I understand that correctly?

Nick Bonner Yeah. And I love Greg learned a hand. And that is a man that has put his money where his mouth is. And his two by two model was instructive and edifying for me as well, where like, you know, on the vertical axis, you’ve got the spiritual impact on the horizontal, you’ve got financial. Everybody wants to be talking to the right, but what about top on the left? Like what about concessionary investments? Like where’s our space for that? And like, where’s our ability to like seek the Holy Spirit’s guiding in that space. In fact, a lot of the times he’ll tell you this and I’ll tell you the same some of my favorite investments are talking to the left. So there’s certainly needs. One of my dreams is after we sort of prove out the right thing is actually go out and do a concessionary fund. But it’s a hard issue. And I think I need FDI to help mature the hearts of a lot of the faith driven investors before I’m willing to take a flier on that one.

Luke Roush Hey, Nick, one question that I wanted to ask pertinent to the reconstruct is any time you think about creating an open ended vehicle like that where there’s more flexibility around minimums, more flexibility around individuals who can access it is from a networth perspective. And then also having the liquidity to be able to support that more open doors access pun intended. Given your background, I’d love to have you just talk a little bit about how do you tactically start that? Like once it’s big, once it’s stable and you’ve got sufficient liquidity reserves and all that to be able to facilitate churn, it’s easier to imagine. But a lot of times I’ve seen folks get hung up on this model because they can’t figure out how do you get critical mass at the beginning? Maybe talk a little bit about how you’re facing into that or thinking about facing into that in the coming years.

Nick Bonner Yeah. So I don’t want to blow the story too much, but for the vehicle, the plan would be raise enough money that you can get an initial critical mass. And so, you know, an initial rig, A-plus offering, would allow you to do 75 million a year every year until you’ve got enough capital and operational history to go to an investment banker and say, okay, let’s go big now. And what an investment banker is willing to start with as their minimum, whether that’s, you know, 300 million or 2 billion, you know, that’s the question that would need to be answered at that point in time based on that fund and its performance. But ultimately, if you go the I.B. route to the road to Wall Street, we bring.

Richard Cunningham Luke on the pod for investment expertise, and you can just see him foaming at the mouth, chomping at the bit. Want to get into that conversation?

Luke Roush I love innovation. I love people who are looking at what others have looked at and seeing new opportunities. That’s really what innovation is. Very rarely is it inventing something new, but it’s figuring out how to apply a concept from one field in the maybe a new field and just creatively playing at the margin of, you know, intersecting circles. So I really like the construct and I think that know what you’re really pointing towards, Nick, is the democratization of faith driven investing. Even if it’s true that the majority of assets are held by very few individuals globally, the reality is that, you know, the vision, mission, dream, I think that we all share this is our collective mission is to be able to allow everyone to participate, whether in big ways or small ways, in this idea of reflecting our values and how we steward capital and to try to look for market based mechanisms that can lead to an enhanced ability to plant churches and do some of the things that you’ve outlined through that Global Opportunity report, which is incredibly insightful for me. And it sat on my desk for well over a year as I just kind of processed and reprocess the contents. So really grateful for point. Absolutely, in a way with that.

Nick Bonner Yeah, well, praise God and thank you. Yeah. One of the visions that God had given us with this is like the widow’s might. Like when we came out with this, we went to a number of the operators that are doing really good work, and the people that are running the ministry side of their work came to us, were like, I can’t invest in the work we’re doing. I don’t have a quarter million dollars. But like this vision of like being able to go to Wall Street and have a lower minimum, man, like I’m in. So there’s a lot of people that want to be a part of this. And that’s what’s driving me more than anything is all my friends and family that are like, Hey, I’d love to be a part of this, but I can’t do it just yet. And even like even the investors that have a lot of the money, like so my best friend’s house, three years old, he had a liquidity event recently and he came to me. He’s like, Nick, you know, I want to do a faith driven investing real estate thing. What do I do where I go? And I’m like, Yeah, here’s like six different funds have invested into you. And he’s like, Dude, I don’t know what I’m doing. I don’t have the time to dig through this. So is there an easy button? Like, is there like way I can invest in all of these? And I was like, Well, yeah, we could figure that out. Actually introducing the business, give us like solvency. Got a real estate fund, do that. So yes, trying to solve for that is the fun part. So let me take you back. Yeah.

Richard Cunningham I was about to say, bless my linear brain that likes to hear the conclusion of the story that gets us to the present day and go quickly through the kind of like the open doors to now.

Nick Bonner Yeah. So open doors start that, by the way. Like I still got a full time job at CBRE and joked during the time of working two and a half full time jobs and working full time at C, which is not like a residential where you can work like 20 hours a week, like you got to be full time. And it’s a very competitive industry. Plus volunteer and Pinetop plus starting this whole Open Doors syndicate, I thought it would take 18 months. And right before Covid, I was well on my way on pace for that. And then Covid hit and bunch of other things hit. And, you know, it ended up taking more like six years. And so during that time, I mean, this is a podcast for another day. But like I just had to say it was rough. I ended up having a full on panic attack. And I’m not a person that is panicky, my wife. Laughed when our therapist diagnosed me with anxiety. She was like, You don’t have anxiety, but there’s something to like going after this stuff that has real repercussions. And so I actually wrote a whole white paper on like discerning that call in, like, how do we know if like, we followed God when we’re in the middle of like, the desert? Did I do wrong or this is actually where you brought me God. And so during this time I bump into Dallas Jenkins and he’s like, Nick, you have to read me and myself and Bob by Saul Fisher The story of the collapse of Vegetables and shout out to the Holy Post. By the way, I’m Phil Fisher. So I read the story and he’s got we have time to go into it in detail. But like he talks about the Schumann Night Woman, which is not a story that I remember in the Bible, but quick upshot on this. So there’s this woman who’s barren. She’s serving a Leisha. He says, Hey, God’s going to give you a child. God gives her a child. A year later, she raises him up. When he’s in his teens, the child basically ends up dying in her arms. So she goes to her husband. Her husband asked her how she is, and she says this astounding thing. She says, all is well, which is not something you would normally say when your first and only child dies. She goes a like she asked the same questions. Use this all as well. And it’s clear that she’s messed up about this, by the way, like she’s like grieving over this. But the question that he poses in this is like, what kind of a God gives somebody a dream and then takes it away. Right. And then the second question is, what kind of a person answers all is well when their only child dies in their arms in the answer is like God had clearly taken her through a journey personally where the moral of the story that she learned was like, sometimes God gives us a desire or a dream only to take it away only because only then, after taking it away, can we really know if we love him more than the desire or the dream. And should he ever give that dream or desire back to us, only then would we ever actually be able to experience it to its fullest. So this is a super powerful lesson for me through this process because I think I sort of made this like seeing how important this vision was. I think I, in spite of my best efforts, I sort of made it a little bit of an idol. And so I’ll pause for a quick diagnostic for those listening, if you want to figure out if you’ve got an idol of your own, let me ask you two quick questions. The first question is fill in this blank. For me, living is for me, living is for me. And be like, I don’t know, going on great surf trips or, you know, hanging out with my family or having success in business. Right.

Richard Cunningham Spoken like a guy who lives in San Diego.

Nick Bonner Yeah. All good things, right? And then answer that next one for me, dying is for me, dying is, man, if I lost this or if that happened. Right. So if your answer to those two questions is anything other than Jesus, then you’re set up for failure. Because the problem is, for me, living is like all of those things can be taken away in an instant. The only possible answer that can fit in both blanks and protect you from suffering is if the answer is Jesus. So I’ll fast forward through the story and I’ve got the money raised. I’ve got 30 plus churches that are like, If you build, it will come. We’re excited. I got multiple redundancy and all the tenants. I’ve pulled the trigger on the Lego. I spent all the money, I’ve got everything ready. I’ve got a couple of buildings lined up and God presses pause in a big way. And so I’ve got to tell you, this only got story for a moment because I think people will be blessed by it. So five years prior, I’d been shopping for a new church after 17 years of the same church and during the storm camping out in the book of Colossians, I’m reading cautions every day for the entire summer. The Lord is speaking to me through caution so loudly that I actually read chapter one every day for 30 days straight. Never done this before or since then. Every time I read it, he speaks to me. So I go to 12 different churches, and if you know me, I’m a nerd. I got my spreadsheet. I’m evaluating these churches on like 15 different points and three pastors preach on Colossians chapter one. And I’m like, What are the chances? And the Holy Spirit, you know, meets me in a way as a sort of Baptist Presbyterian background that I am not used to being about. I’m like weeping in these churches, super embarrassing, but I don’t really care at the same time. And at the end of it, I’m like, God, wow, this is amazing experience. Like, what are you doing here? Like, I can’t attend three church. I got to pick one and he doesn’t give me that answer, so I have to pick one. So I pick one church back into the story. Fast forward five years. So church one, I’m attending church. Two of those three joins our church in August of last year and says, Hey, like we just love you guys are doing are going to join your church now two on the same roof. And then in September, a third church comes to us and says, Hey, we’re closing down at the end of this year. We want to sell our building to you. But this isn’t a market sale. We’re not stupid. This is a. Time passed. We see a legacy here and we want to basically hand this thing over to you. You’ve got to pay off our debt and our severance. But, you know, it’s a $50 million building. They want to sell us for 5 million bucks. And long story short, with this process, the church can’t raise the money because they’re like, look, their only catches. You got 30 days to raise 5 million bucks. So I call the people I know. I’m like, let’s get you a $45 million write off. You guys could buy this thing for 5 million. You could gift it to my church. Nobody wants to do it. Shocker to me. I can’t believe it.

Richard Cunningham I know where this is going. Back to the open doors thing. Yeah. Wow. I’m excited to hear how this ends.

Nick Bonner So bottom line is, we’re closing in and I’m like, Yeah, we’re not going to buy this thing. What are we going to do? And I feel like praying about it. I’m like, got to understand what’s going on. And guys like, Hey, who did I give that vision to? You have three churches under the same roof and I’m like, Me is like, Well, what were those three churches? And so I go back through my notes, You want to get to the third church was the preach on Colossians. There’s the church that wants to sell this building to us. And I’m like, Whoa, goosebumps, right? Like, okay. And then God’s like, Hey, how much money does the church need? 5 million bucks. And how much money do you raise for the open doors model? 5 million bucks. Like with God, like.

Richard Cunningham Isaac on the altar necklace.

Nick Bonner This is the Isaac on the altar moment, man. And so rule number one is churches don’t own real estate with open doors like they can’t like you need a third party. And so, again, just to abbreviate all this, I make the decision. I go to my lead capital provider. I’m like, Hey, here’s the idea. I don’t really know if you want to do this, but here’s the opportunity. We could do it alone. I could just back out. We could just sort of put open doors on pause and they’re like, This is great, let’s do it. And I’m like, okay, I was open. You’d say, No, but here we go. So bottom line is I put open doors on hold, give up my capital, then help them close escrow on the building. And that may end up being the first open doors building. And it may not. It’s out of my control. And so for the second time in six years, I give up my career and then found myself on the other side of it saying like, okay, God, like, what do we do now? And the following from that was really a dark night of the soul. My wife gave me John Comer’s book Lit The Dark Night of the Soul, which was cathartic during that time. So just like just felt like God had just sort of hugged me out to dry. And so this was a time of of a lot of soul searching. But now I just have to say that God is just so good and so patient. And I was rebellious in my heart during that time. But he just showed me a tremendous amount of grace through it. And I think the upshot during this time was what I came down to, in spite of all my anger about sort of like giving up my career twice now, this is like, you know, God, whatever you want to do with me, do with me. Where else can I go? It’s like Peter, like only you have the words of life. So if your endgame is for me to end up, you know, poor and naked and alone, then, like, I guess, like, okay, there’s nowhere else I can turn to. So that was a really, I guess, maturing time in my face. And I think I’ll speak to this maybe a little bit later. But there are few biblical characters that didn’t have a desert journey that God took them through or they just had to like abandon basically all things and make the decision that it’s really only God. It’s not the dream, it’s not the desire. It’s got to be only God. So you fast forward to today, which is shortly after all that happened. I got a phone call into Andrew Arroyo from Andrew Arroyo. Real Estate is a buddy of mine who calls me and says, Hey, Nick, I think there’s a generational wealth making opportunity in commercial real estate. We’ve got 40% of all commercial, say, debt roll. In the next three years. There’s going to be a lot of people that need to sell fundamentally good buildings for discounts just to, you know, meet redemption cues and to pay off their lenders. And so I said, yeah, it sounds interesting, man, but I’ve just seen too much. And for me, it’s in Pachter bust. Like, I can’t do anything that doesn’t have a legitimate impact. It’s like me too, like I’m in the same boat. He’s like, Nick. He’s like, for the last X amount of years you’ve been sharing all these Christian models, all these redemptive impact models of people for free. What if we did that? You actually got paid to do it? I was like, Whoa, that would be a dream come true. And so fast forward on this. Again, we’re in the process right now of starting, as I understand it, the world’s first Christian impact investment rate. And it’s one of those things where it’s like Mark since got this quote where there decades when nothing happens in days or decades happen. And this is one of those for me where I feel like by giving up Isaac on the altar with this whole open doors thing, like God allowed me to, instead of hitting my 20 year vision of like, Hey, we’ll go to open doors. And 20 years later I have a right. It was like, Now let’s just do the rewrite. Now you’ve been faithful, go. And so I’m super excited by this idea because we just yesterday, I mean, this all happened in real time. So what’s today’s Thursday? So Tuesday I sent my farewell notice to everybody at KB yesterday. The SEC got back to us and said, We’re officially qualifying you guys to be a read on. And is real. Like, it’s getting real really fast. I haven’t even updated my LinkedIn profile. So bottom line is we’re going to go start this REIT that can do all those things that we were talking about where we’re going to go find all these other operators and invest into them and lift up their arms and provide an easier route to capital on both sides of the equation. Want to grow both the supply and the demand side of the equation. So if you got a question of the REIT, we’ve talked about that more later. But I just want to say that the lesson here for me is it’s actually the second time in my career that God has taught me this lesson. I hope there’s not a third, but it’s a Joseph story. Like God doesn’t move in a linear fashion all the time. A lot of times we think he should go from point A to B to C to D, and God can go to A to F, over to Q and straight to Z and right back to again if he wants to. But like if you look at the stories in the Bible of people like Joseph, it’s like, man, we’re not in control of this stuff. God is in control of this stuff. And if we can just hang on to him, the places he’ll take us to, all the places will go.

Luke Roush I think that’s a good word. And you know what I would say, Nick? Is that what you’re talking through in terms of the journey that you’ve been on, is what it looks like to be actively faithful and guard against being willful. There’s certain things that God has put in our control and is allowed to be in our control and those other things that are kind of outside of our control. It’s a trying to discern, as you did in your path through the desert, what is the voice of God? What is maybe the voice of the enemy or your own voice? Kind of speaking of the voice of the world, speaking in the year, trying to discern which voice and listening for the accent that God has and how he speaks to us, which oftentimes is corroborated by Scripture and or godly counsel around us. That is what discernment looks like in the process of being faithful, but being actively faithful and moving forward with full recognition that God controls the outcomes and teaches us things along the way. And in Patterson’s quote, around decades happen in days and other times it’s, you know, days happen over decades. I think that’s a really important reminder around controlling what we can control and trusting God with some level of the timing and the outcome. So this has been super instructive and informative, I think, for Richard and I sitting here and it’s great to hear your story. I love the process that you’re going through to be able to democratize real estate and what it looks like for more people to get in the game, which in the words of Henry and Justin. So, Richard, over to you.

Richard Cunningham Yeah, I mean, if you’d allow me, honestly, the liberty just to try to summarize like Nick, because it’s powerful and it’s a really cool, as you said, only God story, kind of all of it, but it’s this catalytic vision. You receive it pine tops for how you can engage as kind of this church issue that we have the systemic church issue. And I love that. It’s so overlaps with your passion and your background and, you know, just professionally what you’re capable of, which is in the real estate space. And so then you get this vision for open doors, which is for church real estate spaces, to kind of step in as an antidote and a healer. There Open Doors is at the finish line, docs are created and signed, capital is raised, and you’re there on the goal line. And then all of a sudden the Lord comes down the pipeline with this $50 million church that is an opportunity to be acquired for 5 million. You sacrifice the capital, the Isaac on the altar moment for Open doors. This project you are so excited about for the acquisition of this church leads to what sounds like a pretty dark season or just a lot of contemplation of like, God, how would you use me? And then all of a sudden this Rick comes to fruition in a way which was the ultimate end game. You started open doors with in a way that you could never have kind of fathomed. And so I just I love that it’s God not moving in a linear fashion and so deeply edifying. And there’s 30 podcasts inside of just this one podcast that we could pull on each individual strand. But maybe Nick closes down with this of just like generally you’ve given so many just kind of incredible tidbits of wisdom in here, like what it was like kind of that last piece of advice you might leave the audience with as it relates to real estate or just engaging with the space, what have you. And we’ll close there.

Nick Bonner Yeah. So and there’s so much I want to say on this front. So I’d like to speak to two different audiences here in your podcast. So first, to those who haven’t yet done any impact investments, I’d say, you know, there’s this great Leonardo Da Vinci Code who says, I’ve been impressed by the urgency of doing knowing is not enough. We must apply. Being willing is not enough. We must do right. So if you haven’t done impact investment like start now, it doesn’t matter how much money you have, like you start now. Don’t wait until your victory lap. Our time is now. How are you stewarding the other 90% of the capital that God’s entrusted with you? And if you don’t have time to go investigate, 400 different operators go investigate and five funds make them do the due diligence and I’ll give you a freebie. Like there’s a bunch of people that are on this podcast. Chuck Weldon was just on this podcast. He’s fantastic. Invest in him. We’re going to. Launch capital. Their outstanding guys are great. Yeah, we’re talking about really solid people. And so those who are active, I’d encourage them to consider the Greg learn a hand to buy to. I mean, try some concessionary investments and see what God does and go pray about that. There’s this Viktor Frankl quote that says Success like happiness cannot be pursued. It must ensue, and it only does so at the unintended side effect of one’s personal dedication to a cause greater than oneself or as a byproduct of one’s surrender to a person other than oneself. And so my final thought on this is if your identity isn’t being an investor, you will likely do a poor job of furthering that gospel through investment. Dump your identity as an investor or receive your inheritance as a child of God. Bring him your loaves and fish and watch him walk away.

Richard Cunningham Come on. Nick Bonner. Thank you. How awesome to hear your story, man. Thank you for what you’re doing for this broader, redemptive investing space, specifically within the asset class of real estate. I’m excited to follow your journey. Friends in the FDI ecosystem, I would say keep your eyes open on LinkedIn, social media, everywhere. You’re going to see Nick around and this is going to be something that we’re going to follow along closely. So friends, Happy Advent, we’ll catch you for one last FTI podcast after this one to close out 2024. But otherwise, we’ll catch you next time. Thanks so much.

Speaker 2 We are grateful for the opportunity to serve this community and see your listeners come in for more than 100 countries. Faith Driven Investor It can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a groups study with other investors looking to get the same answers to questions you have and find great community as they do so. There’s no cost, no catch. In person or online, you can meet an hour a week with other peers from your backyard or the other side of the world. You can also stay connected by signing up for our monthly newsletter at Faith driven investing.org. This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman. Intro mixed and arranged by Summer Drags Audio and Editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

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In this special edition of the Faith Driven Investor Podcast, we highlight the story of Sam Rhee

Sam was formerly a CEO and co CIO, global head of Asia at Morgan Stanley before starting the fintech platform, Endowus. 

Today, Endowus primarily serves Asian markets with $5 billion in assets under management and has recently raised 95 million dollars in outside capital.

In this unique narrative-style podcast, we hear how the biblical story of Abraham and Lot inspired Sam Rhee to step aside from the role of his dreams for the sake of a colleague and how God used that sacrifice to pave a path for victory.

Episode Transcript

Richard Cunningham: You’re listening to Fate Driven Investor, a podcast that highlights voices from a growing movement of Christ following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Welcome to another episode of the Faith Driven Investor podcast. Grateful to have you with us from wherever and whenever you are tuning in to this episode. I’m Richard Cunningham and super excited about today’s episode is we’re doing something a little bit different. You’re actually going to get to hear from our man behind the scenes, our executive producer Joey Honescko, today as he walks you through the powerful narrative story of a wonderful, faith driven investor and faith driven entrepreneur out of Singapore. Sam Rhee, now Sam, was formerly a CEO and co-CEO, global head of Asia at Morgan Stanley. So this is a behemoth asset manager and a gentleman who ran a significant portion of such a large operation and recently has gone on to found Endowus, Endowus is a wealth tech platform serving Asian markets. That is all the way up to $5 billion in assets under management. And recently also as a fintech platform, has gone on to raise $95 million in outside capital and an environment that has been unbelievably difficult to raise outside capital. And as many entrepreneurs can likely attest to. And what you’re going to hear today is this powerful story of Sam and his kind of testimony in the I sacrifice, we win type mentality that he truly adopted, that our friends at Praxis embrace and talk about. So thrilled that you’re going to get to tune in for this. It is a moving story and let’s dive in.

Sam Rhee: I think that act of giving up what is your right is actually what defines us as Christians.

Joseph Honescko: That’s Sam, and he’s the co-founder, chairman and chief investment officer at Endowus, a tech enabled tool that helps democratize money management for everyone. But before we get into the founding of that company, I want to give us a bit of context. We’re going to do a little bit of time traveling, go through Sam’s history to see what led him to this company. In the Gospel of John. Jesus tells his disciples that they are in the world, but not of it. And all of God’s people can relate to this feeling of being stuck between two worlds. But Sam’s experience has given him a unique perspective on this reality.

Sam Rhee: I’ve been what’s called a third culture kid, a multicultural background, and I fit in really well, but I also don’t always belong anywhere.

Joseph Honescko: You’ll see throughout this episode that the spiritual metaphor isn’t lost on Sam, and in fact, his life displays this tension quite well.

Sam Rhee: As a Christian, that really kind of, you know, in a nutshell expresses who we are as in this is my identity and this is not my true home. And, you know, my home is in another place, and I’m here temporarily for a reason. And I’m placed here by God for a reason.

Joseph Honescko: Sam’s desire to discover the reason that God put him on earth is something he’s going to wrestle with for most of his life. And it started even as a young kid, because he grew up in the home of a pastor. But he’s quick to point out that he’s not your stereotypical pastor’s kid.

Sam Rhee: Yeah, so when I was young, everybody assumes that a pastor’s kid should be a pastor or a missionary. But because my father was quite different in the way he lived out his life, when I was a teenager, I approached my dad and I seriously was thinking whether I should go into full time ministry. What does it mean to have that calling to go into full time ministry? And he wisely at the time said that he loves the full time ministry. But what the world needs is not more pastors and not another pastor who’s going to build another church, but he wants us as his children to also do what his ministry is, which is raising leaders, lay leaders. So I think from that young age, he had instilled that in me. He kind of like really put that desire in my heart that I should be a good lay leader and not be going into full time ministry. But it’s a struggle. I always like, you know, think maybe I should go back into full time ministry, but God always brought me back into the workplace and the marketplace. And so it’s been a constant thing that God wanted me to be here.

Joseph Honescko: Did you catch that theme again? The tension between identities. A person living between two worlds. Ministry in the marketplace. His dad did help him see how the marketplace could be a place for ministry. But still it didn’t quite click at that young age. It was one of those classic head versus heart situations where he had heard the truth, but still had a hard time actually believing it and living it out. When you start asking around, you find that most faith driven entrepreneurs go through the same thing. We all at various times might know something to be true, but we find ourselves struggling to live in that reality. That was true for Sam, especially as he started out in his career in finance.

Sam Rhee: Well, going into finance was a fluke. I was a social science guy more interested in like international relationships and, you know, economics and stuff like that. So I wasn’t really looking to go into finance, but a family friend recommended me an internship in Korea and I thought, hey, summer break. You know, I can go there earn some pocket money, practice my Korean and brush it up and I’ll come back. But at the end of the internship, they said, why don’t you stay? And that was it. That was my career in finance. That’s how it began.

Joseph Honescko: As Sam’s career progressed, he found himself at the investment bank Morgan Stanley with a desire to move up in the world. And through that, he started to see his faith become less and less of a priority at work.

Sam Rhee: There was a part of me when I was younger where I think I was kind of enamored with the worldly things like, you know, chasing after the same things bigger bonus and promotions and the work faith integration wasn’t really happening.

Joseph Honescko: Sam again found himself stuck between two worlds the world of finance and the world of faith. And to be clear, it wasn’t like he was out there rejecting God. It was just faith became a lower priority.

Sam Rhee: You know, yes, I was doing the things in the work place, meaning I would lay my hands on the chest of my colleagues and pray for them. I’d like, you know, do Bible study in the workplace, but it wasn’t like fully integrated into the day to day investment space, I think, and you get caught up by a lot of this, you know, game that people play.

Joseph Honescko: Anyone who works in professional settings has experienced the same thing Sam has at different levels. We start to be taught that these are the certain things you’re supposed to go after, and whatever it is, we’re shaped by these stories that say, this is what your desire ought to be. So I don’t think it will shock anyone listening to hear that. For Sam, the thing he was told to desire was his own success above anyone else’s. To look out for himself and to do what it took to get to the top.

Steve Son: Finance has been one of those industries where it’s always had a bit of a challenge.

Joseph Honescko: That’s Steve Son, a former colleague of Sam’s from back in the day at Morgan Stanley.

Steve Son: How do you think would you.

Steve Son: Lead personally into your day to day work? Because you have whether you are investing as are businesses or trading, whatever else it is? You know, part of my goal is just to make money.

Joseph Honescko: Perhaps the biggest issue for anyone who’s trying to integrate their faith into the work is that our work can easily become who we are. For Sam, a lot of his identity became tied to a specific role in Morgan Stanley. Everything he worked towards revolved around getting a specific title.

Sam Rhee: One of the most important things that you need to get if you’re in an investment bank or a large company like Morgan Stanley is, you need to get to managing director, the MD. That’s the partner level. That’s the ultimate goal in life, basically.

Joseph Honescko: Act two finding a better identity. The first question in the Westminster Shorter Catechism, recited by Christians for generations, is what is the chief end of man? The Catechism proposes the answer to love God and enjoy him forever. And I think it’s fair to say that most Christians would generally agree with this statement. But how often do we really live this out? It’s so easy to get caught up in the ways of the world. We, like Sam in the story, might even find ourselves thinking a certain position, or an acquisition or a funding amount, or whatever it is is the ultimate goal in life. Those kinds of things can quickly become our chief ends. And for Sam, he actually had a chance to arrive at his chief end. All that effort he had put in. All the drive was about to pay off until something unexpected happened.

Sam Rhee: So I was out for promotion together with another colleague. So we were going to step up as the Co-heads of Asia. And you know, the promotion was almost guaranteed in our minds.

Joseph Honescko: You can put yourself in their shoes and feel the weight of this meeting. They’re going into this conversation they’ve been waiting their whole careers for. There’s excitement, probably a healthy sense of accomplishment. And there’s also that sense of contained professionalism. Like you don’t want to show all your eagerness too much. So they all sit down together and hear the boss say something neither of them ever saw coming.

Sam Rhee: Sat us down and said, hey, I only have space for one for most of this year.

Joseph Honescko: Even now, you can practically feel the energy drained from the room. Like when it’s so silent, you can hear your own heartbeat. And then something even more unpredictable happened.

Sam Rhee: What was really weird was that he said he can’t decide. So why don’t you guys talk it over and you guys decide?

Joseph Honescko: Keep in mind, too, that these aren’t longtime rivals in the company. They were friends and colleagues and partners in many ways.

Sam Rhee: We built the career of, you know, 15, 20 years to get to this level. And we’re the same age we are, you know, managing good books. We’re going to be the co-head of Asia. So we wanted to build this team together. And one of us becoming promoted first as an MD was going to potentially wreck this kind of relationship of trust.

Joseph Honescko: The decision they had to make didn’t just affect their position in the company. It affected their relationship too. So you can imagine the weight they felt when they were given a bit of time to think it over. Sam was entered back into that situation where he was stuck between two worlds. On one hand, he didn’t want to overstep his colleague, but at the same time, he had worked hard his whole life for this moment. He did deserve the promotion, so it would have been easy to do what most people would do in this situation and come up with the big plan on why he deserved it and why he should go first. It wouldn’t be personal, right? Just business. But that’s what makes Sam’s eventual choice so remarkable.

Sam Rhee: I went home and I spoke to my wife. We decided to pray together and when we prayed, God kind of impressed upon us that this was a Genesis 13 moment.

Joseph Honescko: All right, so now let’s take our time machine and go even further back in history. Because if it’s been a bit since you’ve read Genesis 13, that’s okay. For a lot of folks, it’s one of those small, strange stories that we may not fully grasp right away, but it’s also essentially the story we’re told at the beginning of this episode. Abraham and Lot have just left Egypt, where Abraham was given an extraordinary amount of wealth, and now he’s settling into the land that God has given him. He and Lot decide to split up the land, and when they look out, half of it is all green and beautiful. It’s [….], it’s perfect for agriculture and development. And the other side is, we’ll just say, not as promising. So even though Abraham has every right to make the first choice, he instead lets Lot choose. As you might imagine, Lot chooses the good land. It’s nothing personal, right? Just business. So Abraham made the choice to lay down the best option for the sake of someone else. He sacrificed so another person might win. And at this point, you might start to see where this is connected to Sam’s story.

Sam Rhee: That Abraham and Lot story really resonated with us, and God convicted us on that verse. And so next day I went back to the office. I sat down with my colleague and I told him that, hey, these are the reasons, you know, we have to build this company together. We have to trust each other. And if you really want it, I’m willing to let you go first.

Joseph Honescko: Everything Sam ever wanted in his career. He was willing to give up. Now what prompts someone to do something like this? Because if you’re sharing the story and you feel like it’s a little crazy or even over the top, that would make sense. It is a bit of a crazy thing to do, but Sam saw that the Christian faith called him not to a life of taking, but a life of giving.

Sam Rhee: The language of the world is to take, is to take what’s rightfully mine and take more, whereas Christ is. And Christians are about giving and giving more. And if you go back to like Philippians and Jesus and how he was in the form of God, but did not think equality with God, something that he should be grasping that defines what Jesus did, he came to this world as human being even though he was. God gave up his right, gave up everything, his claim, and he lived a life to set an example to us all. And that life of giving is what Christ wanted us to live. As Christians.

Joseph Honescko: You’re probably catching on that Sam sacrifice wasn’t just financial or professional, it was also a sacrifice of his own identity. Dave Gibbons, who’s an advisor and author and activist, has known Sam for years, and this is what he says about the identity shift that he saw happen when Sam turned down this promotion.

Dave Gibbons: Well in Asia. A lot of times you may not be referred to by your name. You’re referred to by your title. And so your titles, everything. You know, it shows where you are in the pecking order. And so a person who’s offered like a top position, of course you take it, you may offer some type of humble resignation like, oh, I really don’t want it. But yeah, you’d go after it. So for someone like Sam to turn it down, I know how hard it must have been for him.

Sam Rhee: I was still struggling. You know, I say God convicted me and gave us a verse. But that, like, giving that up was probably the most painful thing that I’ve done.

Joseph Honescko: Sam didn’t have some super power or some extra special line to God. He just had the same tools that are available to all of us. Prayer, Scripture, community, the spiritual disciplines that allow us to seek the wisdom of God Almighty. And it might be tempting to hear Sam’s story, or even the story of Abraham and Lot and say, yep, that’s what it’s like to follow God. Give up everything you’ve ever wanted, and then you just wait around. But Christians aren’t just called to die to ourselves, even though that is a big part of our faith. We’re also promised resurrection life. We do see victory. Sometimes it just looks different than we might expect. Here’s how Dave describes it.

Dave Gibbons: I think a lot of times the moves of God in today’s world is really countercultural, like with Sam. It’s like in an upside down way of thinking. But if you look at really who Jesus is, that’s what he was about. He said he came not to be served, but to serve and to give his life as a ransom for many. He chose not to take the royal, pathway to be the king of the land, but he chose to be the suffering servant who would choose that path. I think many times that’s the path of following Jesus is a path of death, you know, that has the promise of resurrection.

Joseph Honescko: We can see that resurrection promise in the chapters that follow Genesis 13. God honors Abraham’s choice, while Lot drifts towards the ways of the world and further away from God. But Abraham’s faithfulness ends up being a beacon of hope for Lot. His radical, upside down way of living made a difference to the person he sacrificed for. And that same thing happened with Sam.

Sam Rhee: I went back to his office and told him that, hey, I told the boss. You go first. You deserve it. So congratulations. And I thought he was going to be, like, really happy. But he was really serious. And I said, are you okay? What’s wrong? And he said, you know, throughout my life, I thought that I could do anything that others can do because, you know, he’s tall, is athletic, he’s intelligent. You probably could do most things that other people can do. And so he said that and he was like, but today I realized that there’s something that you’re doing that I just cannot get myself to do. And I was wondering why. And I realized that it was because you have your God and I don’t.

Joseph Honescko: Sam’s decision to sacrifice became a testimony to a nonbeliever, but it also affected his own way of looking at work for the rest of his career. From that moment on, everything was different.

Sam Rhee: It just hit me right there and then that, you know, I’d been a pastor’s kid. A good kid had lived what most people would say, a good Christian life. And I always talked about glorifying God, doing things for his glory or for his kingdom, or pretty much everything that I done was for my own glory. And when I finally gave up, something gave up my right. Then God was glorified. I mean, this title is not important to me anymore because I had done something finally for God and that encouraged me a lot.

Joseph Honescko: Act three. Building out of sacrifice. So here we’ve got a guy who grows up between worlds. His multinational upbringing. He’s never sure where he fits in. He goes into investment banking and begins to find his identity in his successes, while trying to balance that with his life of faith. But then he finally realizes that his significance is found not in his successes, but in his sacrifice. So for a while, he continues working at Morgan Stanley. He does eventually become the managing director, but it doesn’t carry that same weight anymore. He’s proud of his work, but he also knows it’s not his identity. And that’s when he feels God calling him to something brand new.

Sam Rhee: So God place that desire in my heart to solve some of the bigger problems in finance with technology. And the one that I’m most passionate about is the problem of global pension and the retirement adequacy retirement preparedness.

Joseph Honescko: If you’re not familiar with this problem, it essentially comes down to the fact that people who retire are unable to sustain themselves.

Sam Rhee: Imagine people working all their lives, retiring and not having enough saved up.

Joseph Honescko: Some have to drastically cut back their quality of life, and others even end up in poverty. But the bigger issue is that this problem is growing in the world.

Sam Rhee: People are living longer so that, you know, horrible reality is going to be a reality for much longer than people think. And people have not been taught, whether it’s at the school or at home or even in the workplace, how to manage their personal finances well, how to prepare for their retirement. Well.

Joseph Honescko: While this is a global problem, Sam says there are particular concerns within the Asian population.

Sam Rhee: Unlike the developed markets, I think that Asia has aged much more rapidly without becoming rich. So China India doesn’t even have a proper social safety net. And it’s a massive, massive problem for the biggest population in the world. And so I felt that there was something that we could do.

Joseph Honescko: That last line is the kicker there. The core conviction, the magic phrase. I felt like there was something I could do about it. This is the call of every faith driven entrepreneur who has completely trusted God with their life, with their talent and their resources. Here is where God uniquely placed Sam to make a difference in the world through his company Endowus.

Sam Rhee: Endowus is a digital world platform that allows you to invest your private wealth and public pension. Basically, we’re trying to empower individuals and educate them and advise them and guide them towards a better future.

Gregory Van: So there is a wrong that we are trying to solve in the way financial services delivered.

Joseph Honescko: That’s the voice of Gregory Van, the co-founder and CEO of Endowus.

Gregory Van: My real hope is that we leave our mark, our longer term mark on the entire industry so that they all need to work to serve the client best, not just squeeze as much margin as they can along the way, which is what we see a lot of the time today. And if Endowus is successful. The world will be a better place because people will invest better. They’ll manage their money better, therefore be able to live easier today knowing that they prepared for their future and therefore live better.

Sam Rhee: I think that’s been a passion for me to seek justice and righteousness in the space of finance, because that’s the space where I think the rubber meets the road, where this God and mammon fight is most intense, and God has placed me here for that reason, I think.

Joseph Honescko: So that’s the full circle moment of this story. Sam, like so many of us, spent the early parts of his life trying to figure out his reason, his purpose, his calling. Along the way, he drifted in the ways of the world, believing a promotion was the ultimate goal in life. But once he laid all that down, once he gave away what he thought he earned and what he deserved, he began to experience the freedom of life in Christ. But first, he had to stop chasing Mammon.

Sam Rhee: The Bible says you cannot serve God and mammon. It’s because money has power. It’s more than just an inanimate object. And so we have to submit it to God. And the only way to really deep mammon is through radical giving. Because the world is all about taking more, having more. Hoarding more of this money. And so radical giving. Giving up your right to own more. Giving up your right to having more money. Giving up your right. That is the only way we can defeat Mammon and submit money and finance to God. I think that act of giving up what is your right is actually fundamentally what defines us as Christians.

Richard Cunningham: That act of giving up. What is, you’re right, is actually fundamentally what defines us as Christians. Wow, what a good word from Sam Rhee. What a powerful story and testimony and friends. That’s the calling all of us as faith driven investors to dethrone Mammon in our lives, not to be caught up in the worries of the world and the deceitfulness of riches. Thanks for listening today. Know that if you are ever processing through working through some of these exact threads that Sam talks about, the faith driven investor community wants to serve you. There are groups to process and journey alongside. Love having you here and we will catch you in a couple of weeks. Thanks, friends.

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In this episode of the Faith Driven Investor podcast, Richard sits down with Henry Kaestner and Andrew Firman about the returns, rewards, and risks involved in investing in Africa. 

They discuss the opportunities and challenges of investing in the continent, the importance of spiritual integration in business, and the potential for economic development in Africa. 

They also highlight specific examples of innovative solutions being developed by African entrepreneurs to address real problems in the region. The conversation emphasizes the need for mentorship and support for African founders and encourages faith-driven investors to consider investing in Africa.

Episode Transcript

Richard: You’re listening to Fate Driven Investor, a podcast that highlights voices from a growing movement of Christ following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Rusty: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard: Welcome everyone to another episode of the Faith Driven Investor podcast. A joy to have you with us from whenever and wherever you’re getting this July 1st, 2024 marks on the markets episode of the Faith Driven Investor podcast. I’m Richard Cunningham, wonderful to have you with us. And all of you know, as our investor audience that we typically in Mark’s on the markets look at predominantly US public equities when we do this. And we’re taking a little trip across the pond today, deviating from the markets we normally look at. And we’re going to a continent that we have a deep passion and love for here in the FDI ecosystem, none more than our two guests here. And it’s the continent of Africa. And so we’ve got Henry Kissinger on to provide a little color commentary. And Andrew Furman, who runs Clio Ventures. Gentlemen, welcome onto the pod.

Andrew: Thanks for having us.

Henry: So good to be here, Richard.

Richard: Yeah. And I should say, welcome back, as you guys are both mainstays and great friends across this movement, have been trailblazers across the movement, and a lot of the work you’re doing right now is trailblazing in the continent of Africa. So let’s start there. As we get into this episode, where did that passion for Africa start in both of you? Andrew, we’ll start with you.

Andrew: You know, it’s a great question. I always sort of joke, if you would have told me five, six years ago, this is what I would have been doing, I probably would have chuckled it. It wouldn’t have quite made sense. The journey for me, and I think probably to Henry to some extent, because we’ve been on this together, even though he’s been on it longer than I have, is it really kind of came up as a really natural need that we saw in terms of capital mix with just some really incredible founders and people that we were meeting. I think a lot of this, and I know we’ll touch on this a bit later, but I think there are a lot of misconceptions people have that I had as well. And just, you know, early on and in that faith driven investor and faith driven entrepreneur journey, just meeting more and more and more specifically, I would say tech founders in Africa. And you walk away from these conversations thinking, this is not what I thought. This is incredibly awesome. Somebody needs to back them. So the really cool part of the journey for me is that it was incredibly unexpected, very natural, very iterative. And here we are.

Richard: That’s awesome. Henry, what about you? I feel like you’re kind of the John the Baptist for the continent of Africa, within the faith driven investing space. And so maybe give us a little of the background and color for your passion for the continent.

Henry: Oh gosh. Well, it sounds like a great thing to say. The reality, of course, is that the body of Christ has been here in Africa for hundreds of years, both on the missionary side, but to build hospitals and schools and and even business to. And while some of the legacy has been clouded by the extraction element, exploitation element of a lot of people that have gone into the marketplace in Africa, there have been some wonderful people and some amazing people on the continent that have been investing in faith driven entrepreneurs for decades. And yet there is, I think, though, I think you’re speaking of something that collectively, the body of Christ, primarily in the West, is starting to pay attention to it a bit more. And I think that we’re all kind of looking in emerging markets a little bit differently over the last 4 or 5 years. I think part of it is God removing the scales from our eyes to look at the rest of the world and realize that there’s 7.5 billion people who do not live in America. And that is we look at stories like and Bible, as you see on the parable of the Good Samaritan, we just realize that our neighbor is not necessarily the person living next door, but around the world. And realizing that God had worked through my career to help me to understand that there’s a lot of joy and a lot of productivity that can come from investing in emerging markets. We started an investment fund about 13 years ago, and seven of our first ten investments were in Jakarta and Singapore, and they were very, very successful both in terms of spiritual integration but also in terms of alpha. And that helped me to understand that there are great opportunities to invest with excellence overseas. And so when I went to Africa five years ago, six years ago, for the first time in a long time, I really think that God told me that all of the things that I’ve been doing up until then were in preparation to learning how to do investing and entrepreneurship with excellence. But bringing me to Africa and it’s given me great joy. Yeah, I love talking about it.

Richard: It’s awesome. And Andrew, why is it an investing approach as opposed to something like philanthropy or government work or NGO work, which is all exceptionally meaningful, as Henry was just talking about great believers being on the ground in Africa. But why investing in your specific approach?

Andrew: Yeah, it’s a really good question. So let me just say at the outset, there’s a wonderful place for both philanthropy and charity, government aid, all of that. There’s natural disaster. We want to get people food. We want to get people water. We think the data is pretty clear that aid, whether it’s government, philanthropy, charity in the wrong area, can substantially harm economic development. And we think we’ve got a couple decades worth of data to show that in Africa, but also other places as well. So our heart for investing is we want to see that economic development. We think that a lot of the other aid and philanthropy are very helpful and needed Band-Aids. But we can’t just keep giving Band-Aids to Africa. We actually have to give that capital to see it take a step in terms of economic development. I think there’s another question within there as well, which is we’re. Really excited about venture, specifically because we think that a lot of cases, I don’t know if we think Africa’s going to grow in the same pattern that other places have, but for us, venture is being able to bring really innovative and a lot of times new solutions and ways of doing things to very real problems. And so we look at investing to say if we want a long term change trajectory of Africa and actually see people grow no longer dependent on that aid, that’s what we think is a solution, is investing in the continent.

Richard: Henry, what might you add to that?

Henry: So I’m fascinated by the relationship between dignity and dependency. And I can think about a number of different times in my life where I’ve been given things and I can be grateful, but also a number of things where God’s allowed me to have opportunities to really to innovate and create and get out there and take chances and fail and and to do well. And it’s been that iterative creative process where I’ve really felt like I’ve come alive in my faith, and I really felt like I’ve been able to make a contribution to society. And I think that it’s given me the right type of pride, a sense that God might use me, and that by going through a journey with him and taking chances in employing people and making a service and testing it out in the market, well, it allows me to feel like I’m in a place to be able to help lead the transformation in whatever marketplace or whatever industry has put me in. But what makes an entrepreneur? How does an entrepreneur thrive? How do you do the helping on the teaching? Well, part of it is the job skills, and there’s some incredible organizations that help teach entrepreneurial skills. All throughout the canon, I think about snap and I think about trigger, but capital and the Holy Spirit are the fuel that allow veteran entrepreneur to thrive. And when you can come alongside somebody and be strapped to the mast with them by putting skin in the game. I’m mixing too many metaphors, but you follow me. But being in it with an entrepreneur and like, I know that you’ve got this vision and we’ve talked about how you might think about product market fit, we’ve talked about how you might think about intellectual property or supply chain. And I know that you want to go out there and you want to hire some people, and you want to develop some channels to market, and you’re going to need some capital to do that. And I’m in it with you. That’s a powerful bond. There’s something about putting in the fuel that symbolically says, you know, beyond the training that I gave you, I’m in it. I’m going to go ahead and take something that’s near to me and dear to me that I’m stewarding and throw in with you the encouragement and the wind in the sails that that gives to an entrepreneur is amazing. It’s the way that God created us to be in community. And I think there’s something really special. We do that, and to be clear, that’s best done when it’s multifaceted, when you’re able to come into a deal together with local capital. Right. It’s oftentimes a bad recipe. When we go ahead and we have money, we’re coming in from the West. We find an entrepreneur in Africa. They win us over from their heart story. And we come in and and we invest in them. A lot of times that doesn’t go super well because at some point in time, their vice president of finance is going to leave, and then they need a new one, right? The local capital, they comes in at equal terms to us, is going to be able to help them to get a new vice president of finance or to make the introduction of the customer that they need. But the capital that we come in with, and maybe some of the experience we have in a different type of market can add value to. And so it’s just kind of it’s a mix. It’s a bunch of different things that allow for the entrepreneur to feel like I’ve got partners that have got my back that are praying for me, that are in it with me. I’ve got local partners, I got partners from overseas, and now I’ve got the momentum to get out there and do all that God has given me to do.

Richard: It’s well said. And then when you think about Africa from a just general tailwinds perspective and kind of from a demographic 30,000 foot view markets perspective, I’ve heard both of you kind of make the case for Africa demographically, whether it’s the population size and age and just everything that’s taking place on the continent. Unpack a little bit of that more, because there’s truly a passion here for the redemptive and the financial alpha side of faith driven investing in Africa. But there’s also, just from a good business sense, almost economic case for Africa as well.

Andrew: Yeah, it’s a great question. So, you know, at the outset, let me give a quick sort of definition of what we practically see as venture capital in Africa. I think a lot of times in the US, we’re specifically thinking of, you know, advanced software, whatever that I SAS, whatever that might be. And to some extent, yes, it’s there in Africa. I don’t think we are going to see a lot of, you know, homegrown new AI type products out of Africa. That’s not exactly what we see. My definition of a venture capital investments a little bit simpler, which is something that can take on a rocket like growth trajectory. And so with that in mind, when we look at what we’ve seen be successful in Africa, I think there’s a little bit of a difference with the US, where in the US some of venture, not all is kind of nice to have products, right? Even thinking about ChatGPT incredibly useful to me. I probably use more AI tools and a lot of other people, but I’m using that with a. Over my head with access to food. I have the necessities already in Africa. A lot of the deals we’ve seen successful on the venture side are ones that are solving a core problem. So food access, last mile delivery, things like that. So going to your question, Richard, I view it as a couple things. There is a long list of tailwinds, whether it’s demographics, even tech penetration, smartphone adoption, all of that’s there. But I also think the other aspect that makes venture specifically very attractive, and I mean this from a tailwinds perspective, is there’s still a lot of problems in Africa. So we took a couple investors out there a few months ago. And I think one of the eye opening things for them was we were in a country in West Africa. And as we were driving from the airport to the hotel, they were seeing these local informal markets. And you’re kind of looking at all this and at the infrastructure or lack of it and thinking, well, how can venture exist here? But then you sort of have this moment of a really amazing tech founder that understands venture, looks at this is a glass half full mentality. There is a problem to be solved. And if we can do that in a commercially viable way, the world is our oyster. But also we’re going to be able to help a lot of people. So I think when when people hear my case for it, I think there are a lot of times surprised to hear me put there are a lot of problems that need to be solved on that list of tailwinds. But that’s what we think. We think there are a lot of great things in its favor, and the fact that there are opportunities we think are going to be solved by innovative solutions. That’s where venture comes in.

Henry: Yeah, and I think that’s important. Also, when you talk about venture, let’s talk about what we think of when we think of the African entrepreneur until 5 or 6 years ago. And this is gonna sound wrong because it is wrong. I thought of the African entrepreneur as somebody that’s making handicrafts, making oven mitts, and helping disadvantaged people to learn how to diversify their income by, again, making handicrafts. Or I thought about Fairtrade coffee, or I thought about mining or things like that. I had no idea about what was going on in fintech or software as a service and how Africa now it’s got 20 or 30 years of a legacy of jumping over traditional legacy telecommunications banking. You think about some of the best financial apps in the world have their origin in Africa. You think about Android, what is it? 5 or 6 unicorns have come out of the continent of Africa. There’s an innovative, particularly in West Africa. There’s an innovative aspect to their culture, and then there’s this financial need that has helped them create different products, which actually their marketplaces are ahead of what we have in America. And that’s continuing on. And one of the things that we’re seeing now is, is just seeing more and more African technologies. And that’s why you’ve got unicorns coming out of Africa. You couple that with the fact that you’re going to have twice as many people in Africa, because the average age in Africa is 19, with the fact that they are having massive economic development, many of their economies are growing at a rate faster than the United States. You bring all those things together, the innovative culture, the size of the market, the speed at which it’s growing. And you’ve got this cocktail for great financial returns from venture at lower valuations. And you’d find in the United States, which has lower growth rates and a different type of product base. And so that’s exciting. You couple that with the fact that, well, clearly the West has gotten bigger market. You’re starting to see downstream opportunities for liquidity. So when you come into a deal and see a deal or an aid deal, maybe ten, 15 years ago, the market wasn’t mature enough to a place where you could really see where acquisitions would come in, or there could be a B round or C round. But increasingly, you’re starting to see that because strategic in America are looking at Africa and seeing the market size and saying, you know what? We’ve been duking it out with people for market share here in the West for quite some time. Let’s go to where the market’s getting bigger and where it’s getting more prosperous, and where there’s more capital to buy the products and services online through the apps and the marketplaces and people coming to Africa.

Richard: What about from a risk standpoint, guys, because so Kaleo Ventures has a portfolio of 30 plus ventures, and just you guys are off to an incredibly hot start. Henry, I know on your own, you’ve also done a number of deals in Africa, whether it be through funds or with other faith driven entrepreneurs. When you’re talking to LPs and people are just you’re talking about Africa in the case and you’re making a number of the point you’re making right now, I got to think they’re just like, hey, this frontier market is probably has so much risk. How do you approach that conversation? How do you get someone to kind of from all of like the demographics you’ve pointed out in the possibilities, but how do you kind of get them warmed up to the idea of like, hey, there is a legitimate economic viability here?

Andrew: Yeah, it’s a really good question. You know? And one of the funny things for me is I think people are surprised where a lot of times in conversations with anyone who’s curious about Africa, they’ve got a list of ten things that scare them and it’s foreign currency. It’s all that. And I think people are expecting me to have a really good argument for why their view of economics is wrong, or that geopolitical. And it’s only not that I normally respond yes to most of the risk they face where I push is, I think sometimes we complicate some of the basic tenets of investing. If we can think back to what it is seventh grade, eighth grade algebra, and we think about, you know, probability weighted outcomes or it’s, you know, the parentheses. Are expected return. That’s what investing is. And I think a lot of times we forget that most of what we consider risk, which I put in quotes because I don’t always know what people mean when they talk about the risk. Most of it is just basic math, which means we can tweak some of the inputs and get a different output. Like one example I normally give is. A lot of times I’ll talk to people who view Africa only as concessionary and they do equity investing. In my mind, that’s a math problem. I’ll ignore dilution and a lot of other of the complications here. But like, let’s assume that your average entry valuation for a company is $10 million and you say you’re a concessionary fund because maybe you’re returning a net IRR of like 10%. That’s not the company’s problem that you’re investing. It’s not the portfolio company. If you have that valuation that you get in that $5 million entry, your return profile looks very different. Now, a lot of other considerations with minimum check size, maximum all that. But the bottom line for me is risk is really a math problem. If you gave me a $10 million valuation US deal. Same deal in Africa for ten. My case isn’t that we do the deal in Africa. We wouldn’t. The question I have is at what level of valuation does that become attractive if you bring that $10 million deal in Africa down to eight to 6 to 4 to 2 to 1 at some level, as an investor, you go, okay, even though there are these ten risks we don’t see in the US, man, it’s attractive at a $2 million valuation. So our main pitches, we think investors tend to view risk in a binary fashion. The US is not risky. Africa is risky. But we forget that Warren Buffett aphorism that you can find a great company that makes an awful investment. That’s how we view it. Risk is not binary. There are ways to structure around it, and a lot of it is based on the valuation that you find.

Henry: Okay. I love that I think that’s right on. But I’m going to go ahead and look at it from a little bit of a different angle. My biggest risk is getting up to heaven. And God is like look you knew there seven half billion people didn’t live in America. And you knew that when you gave a cup of cold water and in the name of Jesus, you took care of the poor. Those are the different types of things that pleased me. And since you knew was my capital all together, who told you that it was all about building up a bigger pile of capital so that you could either hand it on to next generation, or give it away, because you knew intellectually that giving it away wasn’t always the best way to lift people out of financial spiritual poverty. So my risk is at the end when I get up there and I’m called into account now, I think that the interview is going to go great because we have a loving God who loves us, and yet we know that there’s going to be some level of accounting about what we did while we’re on Earth and beyond that. And because that sounds too fear based, I right now want to experience his joy as I steward his capital. My greatest risk is that I live this existence where I just have index funds, and just the things that might seem to make sense on a risk adjusted return by just staying in America. And I live this plain vanilla life in a way that’s black and white, and I miss the technicolor, beautiful tapestry of investing in these different economies. And yes, with excellence in a way that you can get return. But I get down on my knees and I ask God how I might steward his capital. Where might I deploy his capital through the experiences he’s given me in a way that advances his kingdom the most, I have to change my paradigm about how I think about risk now. I think as we do that, we might find that we might get great return in terms of financial return. And I think that we can invest with biblical values and make great returns, not at the expense of biblical values, but because of them. And fortunately, that’s worked well in Southeast Asia and thus far in Africa. But the greater risk for me, the greater risk is God saying, listen, I give you all this opportunity, all this capital of steward. And you knew that the marketplace was going to double in Africa. You knew that investing in entrepreneurs and then entrepreneurs were cultural change agents. You knew all of these things, but you just elected just to do it where it was safe. Man, I just don’t want it to go down like that. And so at same time, I don’t want to preach or force anybody to invest in Africa, in my experience. So it just getting down my knees and like, God, how would I do this? And I felt him calling me to do that as a big part of what I do. But the listeners to this might go through that same exercise. Lord, how would you have me steward your capital? I just listen this crazy podcast guess you kept on telling me about Africa is the place to be. Lord, if you want me to go there and to investigate it and look at the different funds that are out there and look at their assets under management, look at their track records, look at their spiritual integration, and whether they indeed are moving the needle in the way the marketplace is set up. If you lead me there, find me faithful. If instead you have me to invest in faith driven investing in real estate in America, lead me there. But allow me to experience your joy now while I allocate your capital, and allow me to just be faithful and obedient to what you’d have me do.

Richard: So maybe let’s get into specifics of some of these stories pulling color for us a little bit. So. This episode releases on July 1st, 2024. We’re recording it on Friday, June 21st. Andrew Henry, you’re hopping on a plane and going to Africa tomorrow, so talk to me about some of the entrepreneurs, the folks. You get to go see some of these. Henry, you’ve used the word spiritual integration a number of times now, as you guys invest specifically in faith driven entrepreneurs. Tell us some of the stories and some of more captivating things that you’ve seen.

Andrew: Yeah, I’d love to. So, you know, going back to what I said about some of the really good venture founders we find in Africa are ones that are tackling something that is a problem that would cause people not to invest in Africa. So one of the common ones we hear is, well, how can there be economic development when there’s not consistent access to the power grid, right. And so we’ve got two startups that I absolutely love. One of them is focused on, you know, it’s a it’s a software solution that helps utility providers minimize grid loss. And with some of the initial pilots they ran, you know, they’re a couple of years past launch now. But average on grid time went up by about 35 or 40%. So if you think of the working day and you’re adding 35 or 40% of power to the working day, the economic benefit of that is massive. And so again, it’s this glass half full mentality. Yes. Lack of access to power is a huge problem in Africa, but a really good, innovative founder is going to find a way to fix that. We’ve got another one that, you know, for a lot of places in Africa, solar is actually probably one of the best solutions. It’s incredibly cost effective. And it’s also very dependable because a lot of these rural areas especially, or even some of the urban areas, there’s some of the at the mercy of the grid, which ties into governments. Have they been efficient with funds, all of that. So to be able to essentially have your own grid through solar is massive. But the upfront cost of solar is very prohibitive to actual adoption. So we’ve got a company that is essentially a credit or financing plug. So kind of a mix of fintech and climate tech. And those are the kind of solutions that we think are great. They adapt well to the context in Africa. If they’re successful, they’re going to help an incredible number of people, but they’re trying to do this in a commercially viable way. So those are the types of solutions we see as identifying a real problem in Africa. They’re thinking, how can we think through a new innovative solution to cover that. And so we just continually meet with founders. We don’t invest in everyone we meet unfortunately. But you know, I think everyone we meet with, we just love this passion and this energy of, you know, whether it’s the continent as a whole or in most cases, it’s their country that they love and they want to see and grow, and they’re just trying to think through really new, cool ways to solve very real problems.

Henry: Yeah, well, I’m glad that you don’t invest in everyone that you see. I think that a good venture portfolio invest in a distinct minority. So I think the selectivity that you and other managers have there is really, really important. But I want to also introduce a different paradigm. And I semi conscious of the fact I’m getting all preachy on this podcast. I don’t think that that sells podcast very well, but there’s a working theory of change that I have when I think about the alleviation of financial and spiritual poverty in Africa, that I think is really compelling for me. And it’s twofold. One is that when you think about spiritual integration, because that’s the other thing, like, so we talk about risk. We’ve unpack that a little bit, some nuance. And I think that Andrew looking because he is he’s a fiduciary manager to deliver and wants to be a top quartile fund to deliver great financial return. That’s his job. And he does that. And that’s important. And I looked at risk from a little bit of a different level as an LP in his fund about how I get excited about what it looks like to come alongside these men and women of their faith as they look to be a blessing on their community. And one of the things that is really just captivating me, and has allowed me to experience more joy in my investing in Africa, is that when I sit down with an entrepreneur in Africa and I meet some of Andrew’s portfolio or some of the portfolio companies of the other funds we’ve invested in, they get spiritual integration in the fact that they can bring their whole selves to work into the marketplace every day. Somewhat of a foreign concept here in the United States, when you work with a feature, an entrepreneur in America, you have to help them to come along to understand that their work matters to God, and that being a Christ follower means that you can share your faith when someone in your story, when somebody in the marketplace, you can pray for people in Jesus’s name. These are all things that are counterintuitive to a Western entrepreneur that is trying to throw off the vestiges of an evangelical Gnosticism. What in the world does that mean? Well, you know, a lot of us in the missions world will know that you can go to a place where they formerly had animist beliefs, and then they convert to Christianity. You go to their churches and it’s kind of this mix up of just, you know, kind of some of the animist traditions and then the new Christian ones. It’s called syncretism. And it’s easy for us from the West to be able to see that and say, that’s really weird, and that’s messed up, and it is. And yet we’re unconscious of the same type of syncretism we have here in the United States, and that is that we come out of the Greek belief. Gnostics were early heretics, but it was just the way that things happened in the agora, in the Greek marketplace. The Greeks believed in a separation between the secular and the spiritual, and we have exacerbated that. And that ends up being the case today. And you don’t see that in the Bible. You see Lydia, you see Paul. You see Priscilla and Aquila, you see these people bringing their faith into the marketplace in a way that was just inclusive. Well, we have to realize that because we come from the Greek tradition, we have those challenges. They don’t have that in Africa. In Africa, the traditional faith traditions are that if you have a problem with your business, you go to the witchdoctor and he gives you an idol to put in the store window, or he gives you a powder sprinkle over your competitors products. When they come to Christ, they haven’t come out of that type of background. And of course their work matters in the spiritual world. They have no problem praying with people in Jesus’s name. They have no problem talking about their story. We don’t have to talk about the integration, about being a blessing, making a redemptive product and service, loving on their partners, vendors, customers in place. That becomes intuitive and the next thing that happens, and this is one of the things that Andrew and I are going to be spending some time with, with some of these companies next week, is that as they integrate their faith and they become more generous and they understand that God owns it all. They’re in a great spot to go on boards of ministries and orphanages in the villages they came from, and to love on the people in an expanding marketplace. Nigeria has 210, 220 million people going to 400 million. The people are going to have the best idea about how to come up with the right type of new systems for adoption, or foster care or church planning are going to come from this entrepreneurial class. They’re going to be coming in with their own financial money, their own resources, their time, their resources, and then inviting us to come along side with them. So sometimes I wrestle with. You know, we’re investing all these fintech entrepreneurs, many of whom are Western educated. And is that really going to be enough to lift people out of poverty in these villages? Because that’s a big passion of mine. Well, I think that part of the answer is understanding that since entrepreneurs are the cultural change agents and continents in emerging markets like Africa, that if we can come along with them and give them an alternate sense of what success looks like from the financial success that they will have, what does that look like? And instead of going ahead and buying a flat in Kensington or sending their kids to Eton or Deerfield or Phillips Exeter for them to instead understand that God owns the financial resources that will come out of their business, and to pour that back in to their countries that they know the culture of. That’s what gets me really fired up.

Richard: Henry, why are you talking about those specific countries? I think it’d be helpful to do this real quickly. Where are you guys focus currently from? Like, a specific country standpoint. And are there differences? Kind of. Africa is a massive place, like in kind of what you’re seeing in West Africa versus East Africa, and where kind of some of your focuses.

Henry: Well, Andrew should answer that for his find a clue from a family office perspective. We’ve invested in funds in East Africa, in South Africa and then in West Africa. I may have a special place in my heart for West Africa, because the dynamism of the marketplace and just there’s a creativity and innovation of entrepreneurs there that’s really compelling. But there are great opportunities to invest in entrepreneurs all over emerging markets and in Africa, pretty much in every sector.

Andrew: You know, and I would agree with what Henry said. You know, on our thesis, we are technically a Pan Africa fund, so we’re one of the few we can actually do North Africa as well, even though, to be clear, we haven’t. I think a lot of times, you know, we’ve done a lot of investing in East Africa. So some in Kenya, Uganda, Ethiopia, South Africa, Latin Nigeria. The one clarification I normally make is I think especially when Western Christians talk about Africa, they tend to say Kenya and Nigeria in the same sense. And I just try to remind people Kenya is just over 50 million people, Nigeria’s 220. So yes, again, very developed countries. We’ve got some great portfolio companies. Kenya. We love Kenya. Nigeria is big. And when you think about, any kind of venture backed company to have a captive market that’s four times bigger without having to go cross-border is a very big deal. So we are pan Africa and probably with deals in 12 or 15 countries. But, really West Africa for us is a good additional focus to have just because, again, it’s just such a larger population to some extent, a little bit more untapped. I think that a lot of the DFI and some of the more impact focused money for a lot of good reasons has centered on East Africa. The UN’s there, there’s some easier entry points. And so to some extent, West Africa is a little bit more untapped. And as Henry said, in some ways we just see a little bit more of an innovative approach to problems because they really haven’t had the capital access in the past. And so their only option is finding something different that’s market compatible.

Richard: Well said. Thanks for explaining that. That’s probably a good point to plug if you’re a faith driven investor out there. Curious about frontier emerging markets, Africa specifically, whatever it might be, there are faith driven investor groups designed to go focus on specific geographies. I feel like I mean, I want to plug in, explore West Africa, East Africa or Southeast Asia, what have you. There are ways to plug in to the FDI kind of community and ecosystem with that geographic lens, alongside other faith driven investors who are passionate about a particular area. All right, gents, last question. And then I want to hear about what the Lord’s been teaching you in his word. And we’ll wrap this thing. But I’m a faith driven investor listening to this podcast, and I’m still kind of wondering, man, like, it just feels like the investment minimums would be so large to go into Africa and make a change or just I’m not there yet. Like, I can’t hop on a plane reasonably like the two of you and go to Africa tomorrow and things of that nature. What all opportunities as you think about the continent, are there beyond maybe just capital or what is kind of that final thing you’d like to kind of encourage someone with or leave with them?

Andrew: It’s such a good question. You know, one of the things about a year ago, I started we’ve got some friends who are a little bit later founders maybe kind of series B or series C in Africa. And over the course of a couple of weeks, I pulled all of them and essentially asked them how much of the mentorship that you’ve been given from people in the West has ported over to the African context? And the reason I ask that question is, as I talk to Americans, I think their view is I don’t have anything to offer. Right? I mean, I just don’t understand Africa. I don’t stand a local context. I don’t understand the risks that they face. And the average number and I have is written down. The average number was 95%. So in other words, the founders at succeed tend to say almost all of the mentorship that we can glean from somebody in the West ports over to Africa. So yes, there are local things that you might not know, but I think my encouragement would be if you’ve got a heart for it, and maybe over the capital or the logistics or even the time to pursue it, don’t underestimate the impact that you can have made. Terms of mentorship perspective to a younger or just earlier founder in Africa. I think that would be the encouragement I’d want to give is there are more ways to help than just capital, and it’s probably going to be more helpful than you think.

Henry: My encouragement would be to just check it out. And there’s some really, really neat funds out there. And of course, Andrew with Kaleo. But you’ve got Sango, you’ve got a Rua future Africa Ventures platform, aka Creed. There’s just some really, really compelling ways to get in, to invest with excellence, with people who understand the marketplace and then just and pray about it. If the body of Christ just realized that God does care about how we steward his capital and ask him, Lord, should I be looking at this or not? That’s the big one.

Richard: All right. Well, our favorite question to ask on the pod, what’s God been teaching you in it through his Word lately? And we’ll close there.

Andrew: You know, I think my answer, this is one of those things that’s not new, but I think we have to continually remember as believers, I’ve been in the book of Hebrews in Leviticus a lot, and I think Lord’s been hammering home is the work is finished. I know Jesus said that on the cross, but you see in Hebrews, you know, he sat down at the right hand of the father. Our high priest sat down. He finished his work. That’s what the Lord’s been showing me. The work is done first.

Henry: I love, of course, this question, and really the story in the Bible is that I think it got really used on me recently. Is the ten lepers okay, Jesus going down the street and he sees ten lepers and he heals them all. And some amount of time goes by and I don’t know how much time it was, but one comes back and thanks him in a loud voice. Okay, what happened? The other nine? What do they do? Well, I don’t know. They went back to the office and all these emails get caught up on. Or maybe some of the lepers went back and try to figure out if that cute girl that they knew before they had leprosy is still available. I don’t even know what they’re doing, but they got distracted. Only one came back and said, thank you. If you look at that story from an apocryphal vantage point, Jesus walks down the street, sees ten lepers, and says, here’s the deal. You’re going to have to work for me for the next 7 or 8 months. I’m going to get you at 6 a.m., and you get off your shift at 10 p.m., but at the end of that, you will have earned your freedom from this debilitating skin disease. How many of the ten would have taken him up on that deal? The answer is all ten. And then we have this challenge with the beauty and the challenge of our Orthodox Christian faith, which is we have unmerited favor, free grace. And the question is, am I the one leper? Am I going back and praising God in a loud voice? Or am I completely sucked in by the worries of the world and the deceitfulness of riches? And I don’t have the opportunity to have the type of return of the 30, 60, 100 fold. Because if we just have an intellectual cultural understanding, the odds are that nine out of ten of us won’t live the type of life that we’re capable of, and we’re at a disadvantage to other faith traditions in some of these emerging markets that are based on earning your salvation by doing good works. But again, if we can really capture the beauty of the gift given us and the value of it, then God can use that to multiply again 30, 60, or 100 fold, which gives us an advantage over the faith traditions where you have to earn something. And so what he’s been teaching me is and just really question is like, are you the one leper I want to be the one leper. I don’t want to be the nine.

Richard: That’s awesome. Well, Andrew Furman, Cleo Ventures Henry Kastner, obviously co-founder of the Faith driven movement, both of you guys are such a profound encouragement. You’ve been trailblazing inside this FDA space. Safe travels to Africa. Have a wonderful trip. Thank you for what you guys are doing, the work you’re doing, the ways you’re kind of helping faith driven investors shift their focus from maybe just their domestic focus to what else God is doing across the globe. What a joy to have you on, gents.

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Richard and John check in on two of the key trailblazers of the Faith Driven Investor Movement, Aimee Minnich & Jeff Johns of The Impact Foundation, to learn how Donor Advised Funds (DAFs) can help investors who want to use their capital for God’s Kingdom.

The four of them discuss the power and necessity of impact investing, the history and mission of Impact Foundation, and the importance of innovation and entrepreneurship in the charitable sector. 

Aimee also shares her recent experience testifying in front of legislators about rules surrounding donor-advised funds and gives practical next steps for those who want to get in the game with impact investing. 

Episode Transcript

Richard Cunningham: Welcome back everybody to another episode of the faith driven investor podcast. A joy to have you with us. If you are in the Northern hemisphere. I pray your summer has been friendlier to you than it has been to us here in Austin, Texas, from a weather perspective. It is scorching hot, but John Coleman, [00:01:00] that’s not what we’re here to talk about today, because we have two fabulous guests in the FDI podcast studio.

And my friend, you’ve actually been out of the Keller commentary seat for a few, uh, FDI podcasts recently, as you’ve been everywhere this summer speaking at conferences, hosting conferences. It looks like you’re at a conference right now. Welcome back, man. Good to have you here.

John Coleman: Yeah, scorching hot probably also describes all the commentary I have saved up for today, given that long absence and given the quality of the guests that we have today.

I’m very excited.

Richard Cunningham: You are exactly right. Jeff Johns, Aimee Minnich of the Impact Foundation, some of our closest friends, thought partners, people we look up to dearly here in the faith driven investor movement. It’s a household name here if you’re around the hoop of faith driven investor frequently. But Jeff and Aimee, so good to have you guys on.

Fun fact, Aimee actually hosted the very first ever FDI podcast roughly five years ago in July of 2019. So, Aimee, good to welcome you back.

Aimee Minnich: And it’s taken that long to get me back on because [00:02:00] that’s what they thought of my first performance. So, I guess y’all must have forgotten.

Richard Cunningham: It’s been a five year sabbatical.

Jeff great to have you here too, man. Let’s start with this, guys. I think it’s just kind of helpful to level set who, who is Impact Foundation. You guys have been such key contributors to the FDI movement, but not everyone knows all of the gaps that Impact Foundation steps into and what all you guys do.

So maybe a little bit of the history story of Impact Foundation, your stories, and then we’ll kind of go from there.

Jeff Johns: So Aimee and I both grew up in families where business was what we talked about at the dinner table, basically every night. And, you know, I think we knew about cashflow from a young age, probably around the same time as, um, our parents were, you know, discounting the value of our Christmas presents and talking to us about if we’d invested that money instead, what that might look like.

And so that was kind of part of our blood. Uh, Aimee’s younger than me and her family, I think came into, uh, business and wealth a little bit later, [00:03:00] but for mine, it was always kind of part and parcel of everything we did. And You know, I went through a journey for a long time, kind of wrestling with some questions that are a little bit more common now about how much is enough and where we should spend our lives.

And at the same time, you know, I was really trying to seek, you know, what does it mean to be successful in business? And what does it mean to live a life of meaning? And that led to a few mentors who told me like, look, if you want to be in business to give away money, Maybe you should go upstream a little bit and help this burgeoning generosity movement with all the things that are happening there.

And so I went and interviewed with Daryl Heald, and he told me what was going on at Generous Giving. And then I talked with David Wills at the National Christian Foundation. And it was like all of a sudden, the purpose that God had for me at that season was revealed. I was the first MBA at a table of accountants and attorneys at the National Christian Foundation when they hired me.

I was 28 years old and a newly minted [00:04:00] MBA and thought I knew a few things and it was quite a ride for those first few years where I got to help NCF grow their offices and it was so easy. Our good friend Kevin Palau would just call me and tell me which cities he had been working in and who was ready for an NCF office and then Chuck Bentley at Crown would tell me where they had Crown champions.

And I would get together with those two groups of people and just say, Hey, do you want to start a community foundation for Jesus? But you can do the relationship and we’ll do the accounting, the software, the technical stuff, all the boring stuff. And it was the easiest sale ever. And so that led to just this tremendous growth period.

And during that time, one of my favorite affiliates was the affiliate in Kansas city. And Aimee was running that. And we got to know each other pretty well. She saw me as she would call me the corporate stooge. It’s not

Aimee Minnich: fair to lie, Jeff. You lied and said that we were your favorite. No, I said you were one of

Jeff Johns: my favorite.

Aimee Minnich: Okay, alright. Fair. [00:05:00] That’s fair. We had a lot of fun and we really didn’t take no for an answer. Like if a donor asked us for something, we were going to do it. And so that’s actually how we got into impact investing because one day we had a family call us and say, Hey, we want to make a loan to a ministry in Uganda.

And I’m thinking to myself, I’m sure that’s not illegal. We can probably figure that out. And so we did, we figured out how to make a loan from a donor advised fund to, uh, this ministry in Uganda. And that was the beginning, tiny little seed that became impact foundation. Impact foundation is like really fancy plumbing.

In some ways, I mean, we’re more than that, but at our core, we’re like plumbing for financial resources. So you have 1. 4 trillion dollars that’s been set aside in private foundations and donor advised funds nationally, and 7 to 10 percent is given away each year, which means there’s more than a trillion dollars that’s been set aside for charitable giving.

People have [00:06:00] gotten a tax deduction on it and it’s waiting to be given away. And while it’s waiting, it’s invested in something. We exist to put that to work in something for the kingdom of God. So it might be hydroelectric dams in Honduras. It could be solar farms or solar installations in Southeast Asia, agriculture in Africa, or one of our very favorites.

Sovereign’s capital.

John Coleman: Can I ask a question touching on what you guys both touched on? Because Jeff started off saying, you know, we both grew up in families where we talked business every day at the table. And Aimee, I love what you just said, where you basically said anytime a donor comes to us and wants to do something, we’re going to help them figure it out.

And I would say one of the challenges often in the nonprofit sector is kind of, a lack of an entrepreneurial spirit within certain organizations, right? Particularly in the charitable sector over time, the institutional charitable sector and the donor advised fund structure was actually huge innovation in charitable giving and philanthropy.

And what you guys have done [00:07:00] from my point of view is dive in and innovate on that even further in the spirit of enabling other people’s entrepreneurship. Like, where do you think that comes from? And how do you as a team keep that spirit of innovation and entrepreneurship alive in the charitable sector?

Aimee Minnich: Yeah, I’ll jump in on that. So donor advice funds were invented in the early 1900s. So like 1917. Is that right? Yeah, 1917, 1918.

Jeff Johns: Wow. That’s

Aimee Minnich: when they were innovated. Was it the Cleveland

Jeff Johns: Foundation, Aimee?

Aimee Minnich: Maybe they were one of the early ones. The one I’m thinking of is in New York. And so there were these community foundations, people who wanted to come together as community members and do what they saw Rockefeller Foundation and others doing at a big scale.

And so community foundations were a way for the everyman, sort of, to be able to give back. And then we saw the rise of community foundations and donor advised fund sponsors. But when Fidelity Charitable and Vanguard and Schwab Came on the scene and said, you know, we’re not just going to offer financial [00:08:00] services.

We’re going to also help our clients with these giving tools. That’s when we saw this explosion of donor advice funds. And when we saw that explosion of donor advice funds, we saw some rules come into play. In 2006, we finally got the pension protection act to give a definition to donor advice funds and start some regulation.

And when he said, we talked about. Business around the dinner table. That was not an exaggeration. That’s like literally all we talked about. Like what’s the loss ratio? What’s the return item ratio? What’s the latest marketing campaign? Who are we acquiring this week and how is that going? And who are the problem employees?

Like. And I thought that was normal. And so that’s how my brain is wired. I remember I was practicing law and I walked into the corner office of the guy whose name was on the door and I was working on a project for him. I sat down at his table and I asked him about, you know, there’s stacks and stacks and stacks of files on his desk.

And he said, you know, some of those [00:09:00] files have been there for 40 years. I’ve been working with these families for 40 years, and I remember thinking to myself, Oh my gosh, I think I’m gonna die. I cannot. Imagine doing the same thing for the same people for 40 years. That sounds so boring. If there wasn’t an innovation to happen in donor advised funds, Jeff and I would have come up with one because there’s really only so many times you can talk about.

before you’re like, okay, what’s next?

Jeff Johns: And that being said, something that I find fascinating is I run into people every day who have no idea about the power and simplicity of giving through a donor advised fund. So it’s still for us, obviously we talk about it all the time, but it is so powerful. It’s such a great way of giving your best asset cash is the worst way to give.

Appreciated stock, much better private stock, better yet. And so when you have those liquidity events, you can create tons and tons of [00:10:00] generosity and the simplicity and the reporting of donor advice fund is super powerful. One of my favorite things about our innovation at impact foundation is we do not want to be your primary donor advice fund.

We work hand in glove with all the donor advice funds out there to do impact investing. You should not mess around. I think Luke Roush once said you shouldn’t dabble in private equity. And you really shouldn’t dabble in impact investing with charitable capital either, because there is so many things that have to be done properly in order to do this well.

So we’re the solution, not only for our good friends at the National Christian Foundation to partner with for donor advised funds to impact investments, but we work with Fidelity Charitable. We work with all the community foundations, Waterstone, the Signature, any of those people who want this done, we get to work with them.

And we specialize in The tax, the investment, all the side that has to do with investing with charitable capital, which is great.

Aimee Minnich: You’re kind of underselling how you specifically, you Jeff Johns, got into [00:11:00] this, right? I mean, you’d gone to Hong Kong to open up an NCF affiliate in Asia, and you came home and who was it that called you?

That friend of yours who called and said, you know, Jeff, every time I pray for you, the phrase impact investing comes to mind. And this is what like January, 2015.

Jeff Johns: Yeah. Mike. And he met me in Hong Kong actually. And he was working on some stuff there. And he’s been our good friend from Houston for a long time.

And it was a whole confluence of things where family after family that we talked to has said some version of, look, we went deep with generous giving. And we’ve decided that we don’t need more money for ourselves. And our kids don’t need more money, but we love to make money and we love private investments.

So God created us to do that. Can we use our charitable capital to make these private investments? And so saying yes to them was great. And now one of my favorite conversations, I get 75 year olds all the time who say. I’m not sure I should enter into a 10 year fund at [00:12:00] this point in my life, right?

They’re like, uh, I don’t want to burden my kids with 64 K 1s that they have to manage. And so for people like that, we manage all the K 1s. All their kids have to do is give away the proceeds for these impact investments. So there’s so many little fun things that have come up for how we can serve these families who are generous.

Richard Cunningham: Alright friends, so while we’re talking mechanics of donor advised funds and all that impact foundation can do as a specialty type of donor advised fund that’s making impact investments with charitable capital, Aimee, you’re our resident attorney in the room. And so, I want you to really quickly just for our audience to define a donor advice fund super simply just so we’re kind of all clear there before we go forward.

And then in light of that, you were actually just on Capitol Hill testifying in front of our legislatures about some rules around donor advice funds. So what are kind of some of the updates in this space and why is it pertinent to Impact Foundation and what’s going on in kind of the broader redemptive investing movement?

Aimee Minnich: Yeah, a donor advised fund is simply a [00:13:00] charitable checking account. You can put money in or put an asset in and get a deduction, a tax deduction at that moment. And because you got a tax deduction for it, it’s gone forever from your pocketbook. You can’t get it back, but you have authority to recommend grants and recommend investments.

And like I mentioned before, there’s over a trillion dollars in private foundations and donor advised funds nationally. And most of the time while you’re waiting to grant it, you can invest it in some version of a pool of capital that ranges from conservative to very, very conservative. And then when you’re ready to make the grant, you make the grant.

And our innovation on that is saying, Hey, wait a minute, actually, you know, we’ve heard our friends say every investment has an impact. What if we actually intentionally tried to place capital? Into companies that align with our mission. And so let’s say your normal donor advised fund is at Fidelity or at NCF.

You would grant to impact foundation, recommend an [00:14:00] investment to us. We’ll do the vetting, we’ll sign the paperwork and then we’ll fund the investment. And then when the returns come back, they go back to your donor advised fund at impact foundation to either reinvest. Or you can send it to your donor advice fund it came from originally.

And so donor advice funds are these really flexible, helpful tools for my family and I, my husband and I love to use a donor advice fund for our giving because it separates the step of obedience, like actually giving money, taking it out of our own bank account, which we do right away. As soon as money comes in, we, you know, tithe on it or give what we feel like the Lord has called us to give, put it right in that donor advice fund.

And then that step of obedience is complete. And then we can wait and listen to the Lord about what he might be calling us to do. And so we have some grants that we set up that are automatic and recurring. And then sometimes, you know, we have some friends who were missionaries in Ukraine. They got kicked out of Ukraine.

And so we had the opportunity to help them relocate and make some special [00:15:00] gifts to them. to actually get them back on their feet with their missions agency in Poland. And so things like that, if we didn’t have this sort of savings account for giving, we wouldn’t have the same flexibility that we do.

John Coleman: One, I think that’s such an important point before you jump into the hill, Aimee, because I hear people express this concern sometimes about DAFs, where they wonder, you know, if you’re giving, shouldn’t you be giving it away right away?

It doesn’t adapt, just kind of prevent you from passing along to the end charity. And I’d say my observation is just like yours. It has made us much more consistent givers because just like you, basically we have NCF withdraw, A percentage of my normal income, whenever that comes in every month, we know when it comes in, it’s a percentage.

And then we do more when there’s other events that would cause additional income. We then have the opportunity instead of like rushing to figure out how to give that away at the end of the year. I’m always shocked with the nonprofit boards. I’m on how that last couple of weeks in December, there’s like this flood of donations and it’s people kind of wanting to hit their target or wanting to do something, but not having been [00:16:00] thoughtful or considerate about it.

Whereas we don’t do that anymore at all. We, I mean, we kind of give throughout the year. When we plan to do so with the organizations were involved with and the technology between, as you said, the kind of primary donor advised fund, which you guys work with. And you all is so simple. I actually I don’t think we’ve talked about this.

I did a transfer to my impact foundation account this morning and it took all of Probably 60 seconds, I think, to get it done for the thing that I was transferring it into. And your team is just always so well prepared, so professional, so helpful through that process. And so I think it can be intimidating when people hear these types of things.

Like, maybe this is hard. I don’t know if I can figure it out. I’m going to wait on this. And I just love it because it makes us so much more consistent and thoughtful, as you said. And it’s so simple.

Jeff Johns: Yes. The other thing I love about the Donor Advice Fund, when we go to fundraisers, I know my wife is always going to ask me this one question.

How much have we given to these people over the last X [00:17:00] amount of years? And my family started a private foundation before we knew about National Christian Foundation. And if I had to ask our accountants how much we had given, it would probably take a month. But if I pull up my NCF account, I can figure it out within 30 seconds.

And then she’ll say, what’s your number? And we almost always have relatively close to the same number. We enter the grant before we leave the rubber chicken dinner and it’s done. It’s like so great. So it’s really, really helpful in the data and the simplicity.

Aimee Minnich: I heard a stat one time, and I want to say it’s from Barna, but I don’t know for sure, that the average person who thinks they’re giving to their church monthly, so, you know, you ask somebody, how often do you tithe?

Well, they say every month, but actually they’re really giving nine to ten times. People who think they give monthly, Forget sometimes. And it ends up being 9 to 10 times per month. So a donor advised fund, because you can set those recurring grants, actually makes people more regular and consistent in the discipline of giving.

And I say discipline in the spirit of [00:18:00] Richard Cunningham Foster, because it’s a spiritual activity. Giving money is a spiritual activity, not just a transaction.

Richard Cunningham: That’s really good. So Aimee, tell us a little bit about what happened on Capitol Hill.

Aimee Minnich: Yeah, I’m not sure if I was technically on Capitol Hill. I was at the IRS building, but it’s pretty close, like neighbors.

I was in the neighborhood. Fair enough. Thanks. So in 2006, Congress passed the Pension Protection Act. It added to the Internal Revenue Code the first time there was ever a definition for donor advised fund.

And then they made some rules. And most of the rules that they made sort of paralleled rules that were already in place for private foundations. And so, and then they said to the treasury, Hey, treasury, you can go create some interpretive rules to help people figure out what we meant because we didn’t say everything we meant.

So you can fill it in for us. So fast forward a few years to 2023. So there’s a long time, we waited a long time and the treasury promulgated some proposed rules and I’ll [00:19:00] say it as kindly as I can possibly say it. They were not well received within the donor advised fund community. And there were, you know, four sort of consistent themes that everybody wanted to talk about and sort of raise caution flags about.

But I didn’t hear any of the commentators talking about the one that felt most significant from our perspective, which is around investing. And so I reluctantly said to Jeff, Hey Jeff, I kind of think I need to submit a response letter to the IRS. And he’s like, I don’t know that that’s a good idea. Will they even listen?

Jeff Johns: You know what happens with that, right? Yeah, exactly.

Aimee Minnich: He didn’t want me to raise attention of the IRS, but I felt like it was really, really important. And so then what happens in this rulemaking process is if enough people send in a letter and say, Hey, we’d like a hearing, the IRS is obligated to. provide a hearing and listen to the testimony.

And so then you have to submit to provide testimony, and they had set [00:20:00] aside one day for testimony. They actually ended up having to do two full days of testimony because there were so many people who wanted to tell the IRS ways in which they could make the proposed rules better. And so I did that, and it was really kind of fun, actually.

I learned a lot. I met new people. Other lawyers and other experts in the space. The only downside was I had to wear heels all day and that is a total drag. But otherwise it was really cool. I don’t know how it’s going to turn out. The IRS and the treasury are pretty closed lipped on how these things will come out.

But the other big thing that happened, and I’m sorry to be a Supreme court deke, but there was a huge case that just came down a couple of weeks ago. Overturning a 1984 case. Yeah. called Chevron, which, uh, the Chevron deference has been overturned now. And so we’re not exactly certain what that’s going to mean going forward.

But one thing that seems pretty clear to everybody who knows these sorts of things is regulatory bodies will be [00:21:00] more careful when they create new rules because the courts don’t have to provide the same level of deference that they used to to regulatory agencies issuing rules. So all that to say, I’m pretty confident.

Actually, I’m confident a lot of the time, and sometimes I’m right. But I’m pretty confident that the proposed rules are not going to get enacted.

Richard Cunningham: Well, good rundown. I mean, sorry about the heels, it sounds like a very successful and fantastic trip and prayerful for positive outcomes as well. All right. So something if people have been listening to the FDI podcast for the last few months that they hear John and I talking about all the time is this concept of getting in the game of faith driven investing.

And we’re hopeful and prayerful that faith driven investors will come to see that all that God has given us. giving them the steward as an opportunity to faithfully and obediently step into what he’s called them, whether it be your income statement, your balance sheet, whatever it is. And so impact foundation is knocking on the door of almost 600 million out.

Impact investments, which is incredibly exciting. But as you [00:22:00] guys think about the concept of getting in the game of faith driven investing, talk about the stories of investors where you’ve been super inspired, the mechanics of how impact foundation is enabling people to do that with charitable capital, maybe as opposed to just their normal, traditional investment capital.

How you all think about counseling investors when you run into a situation when someone’s like, Hey, I want to do this investment. Should I do it through my donor advice fund or should I do it with personal capital? Yeah. Educate us and coaches up there.

Jeff Johns: Yeah. So one of the things that I think is incredibly important to understand when we started at impact foundation, impact investing, wasn’t quite as proven out the products.

, but now there is so much great product out there. Yeah. And so we need to be very certain that people do not. Use the thought about charitable capital to say, okay, I’ll do my impact investing with my charity money and I’ll take all the rest of my money and just kind of do it according to wall streets tenants.

So we tell people all the time, let’s get in the game and move a percentage. And I know, you know, faith driven investors starting to talk about what does it look like to [00:23:00] maybe have 20 percent of all your capital aligned. We’re all stewards. Every dollar that we have belongs to the Lord and we stored it equally.

So impact foundation, the decision to use charitable capital is simply. Do I have extra money sitting around in a private foundation or a donor advised fund or do I need a tax deduction this year? Those are the two drivers of why you would decide to use charitable capital to make your impact investment.

There’s a third for a particular subset of families I mentioned earlier. Families who have decided that they do not need any more money for themselves and their kids don’t need any more money just do all their investing with their charitable dollars. And people like that do exist. They’re some of the most Fun, free, humble, amazing families that we work with who are just like, Oh yeah, it’s all gods.

And I’m going to put his name on every investment that I do. So those are kind of the three reasons that you would use impacts foundation, but we never want people to say, Oh, well, you know, I’ll do impact investing with charitable dollars and I’ll do regular investing with kind of my other dollars because the products are all too good now.

And there’s too much movement [00:24:00] that’s been made in this space. So that being said, some people want to dip their toe in the water before they jump into the swimming pool. And so we’re a great way to kind of do maybe a first test run with an impact investments.

John Coleman: Can I ask a followup question about what Jeff just articulated?

Because I did have one of those topics on my mind and I’ll tell you in my mind, Your uses of capital between giving and investing fall on a spectrum. That’s the way that I think about it, at least in that, you know, on one hand, you really are looking for high return investments, whether those be values oriented or not, because we agree completely that you can have values aligned, high return investments.

On the other hand, you have. kind of pure philanthropy. And there is this category of impact investing that we typically would call concessionary, where either the risk is greater than is justified by the return, so it wouldn’t commonly be viewed as a responsible or more fiduciary investment, or where the return is Consciously sacrifice for mission where it’s mission first and return second rather than [00:25:00] holding those two things in tension, and I’ve known Investors who have also considered uses of charitable capital for investing in things that are intentionally concessionary Right where they’re very purposefully placing the mission of what they’re doing above the return and their perspective, for example, is and I’m going to lay out the case for you.

So you can tell me how you think about this or what you hear from investors. But this I’ve heard before where they’ll say, you know, I really want to do good work with this. I want to have a positive impact on society with these charitable dollars. I think, actually, in this case, rather than pure philanthropy, the right answer is to invest in this thing.

I know it’s unlikely to get the same return as investments I might otherwise pick in a portfolio, but I’m comfortable with that, right? Because I’m really choosing to do a philanthropic activity. An example of this, you know, guys might be something overseas, for example, where there’s currency risk, there are other risks, the markets are uncertain, but you say, you know what, instead of donating to this area, because I think maybe my charitable [00:26:00] dollars might have a perverse incentive in this area.

situation. I’m going to invest in something, right? Or it might be with, you know, there are certain instances of like school bonds, for example, where you’re getting a very low return on your fixed income money, but you’re helping to fund schools, public charter schools, Christian schools, et cetera, as they’re being built.

So there’s almost quasi philanthropic intent with that. How do you think about that? Is that a case that you commonly hear? How do you advise people when they’re thinking about it that way?

Aimee Minnich: For sure. It’s something we hear a lot, and I also have a friend who challenges the use of the word concessionary.

Because he said, if we’re thinking about it in terms of total return, maybe your financially driven investment is concessionary on impact. And I’m hopeful, I’m genuine when I say this, I am truly hopeful that in 25 or 30 years, the measurement on impact is so powerful and robust that we can actually figure out how to quantify the impact that we’re having so that we can compare it to the financial return.

And then we only call concessionary things that don’t have [00:27:00] Impact commensurate with the financial return that they’re providing to investors. So with the caveat that I’m not a hundred percent in love with concessionary language, I understand the point you’re making and it’s totally valid. There are a lot of people who say I would never invest in a Christian movie.

with my own money, but it’s a great use of charitable capital because, you know, the last grant I made was a zero return investment. So even if I get some of this back, it’s better than the last grant I made, and I think it can have outsized return. Now, the Christian movie example is a not great one because the spectrum or the landscape for investing in film and media is changing, but it used to be the case that, why would you ever invest in a Christian movie?

Maybe we should use a different example.

John Coleman: But I do think there’s a case here, you know, a lot of folks I talk to, we’ve all become familiar with where pure philanthropy can, in certain circumstances, actually be destructive. And there’s, I think a lot of us believe that Implementing market forces, like in the developing world, for [00:28:00] example, there have been numerous examples.

I spent a little while in my professional career working in Afghanistan, where charitable capital, especially from governments, actually quite often had a perverse impact on that society. It actually accomplished the opposite of what it intended to. And incorporating market forces so you can build more sustainable industry within that society so that you can help to build the right incentive structures for people.

In that society, and so that’s part of it too, Aimee. I think it’s like there’s also this move from thinking either I got to go invest in the S& P 500 or I got to go give money away. You know, somewhere in the developing world or something like that to saying, Hey, maybe we can kind of combine this impact.

I’d like to see in the world. This vision I have for positive social outcomes with what I believe to be true, which is starting businesses or running enterprises or investing or actually the more sustainable ways of creating human flourishing in a society. And so that’s one of the things I love about the space you all occupies.

I do think. You’re one of the [00:29:00] levers that’s making that type of decision more possible for people and helping people with that calculus more intentionally, at least from my perspective.

Jeff Johns: Well, not only that, it’s the dignity that comes along. With the value that is created, because right now you’re in the developing world and someone comes and gives you money so that you can take care of your kids.

And you feel a certain way about yourself and your country and God. And then instead, somebody comes and invests money in you and you create value and you pay them a return. You’re not beholden to them. They’re not like somebody who’s come to save you. They’re just an investor. And you have the pride of saying, now I’m going to change what’s happening in my community.

And, you know, I used to be on the board of the seed company, which has a lot of Bible translation. And just over the last few years, I’ve been. Africans started paying for Bible translation in Africa instead of Americans paying for Bible. How cool is that? So there’s all this dignity to say, okay, it’s now time to change the paradigm.

Yes, we have some [00:30:00] investment capital that they don’t have that we can, you know, speed things up, but they are taking a little bit and turning it into a lot and God told us to be fruitful and multiply and so I just love the example of them being able to do that.

John Coleman: And then the other side, I think the thing you all are equipping is, and you mentioned this with the rise of DAS at like Fidelity and Schwab.

Typically within a Fidelity or Schwab, you can basically invest in index funds or public companies, right? This is it. And what you all are doing is giving the individual. Some of the capabilities of a big family foundation or endowment or a nonprofit where you can get into more sophisticated, higher return products so that over time, your charitable capital is growing even more aggressively, potentially, if you invest it well, and you’re basically making these tools available to normal people who don’t have hundreds of millions of dollars in a private family foundation.

And so I think that’s the other really neat innovation right where Even if it’s a high return investment that someone’s going into that’s more focused on that, even though it has impact oriented, Aimee, as you mentioned, that tool is available to you [00:31:00] now in a way that it probably wasn’t before. And certainly isn’t at most of the major donor advice funds today.

Aimee Minnich: That was the motivation of one of our earliest clients and board members. They said, our high return years are probably in the past, you know, we’ve sold our company. They had actually sold it twice, I think. And they said, and yet we have these ministries that we love to support. And we want to make sure that we are able to create a revenue stream for funding them into perpetuity.

But the three to 4 percent that we can get in one of these safe index funds.

And so they started putting their money in private equity and venture capital firms or funds, and the money that they’re making from that is funding the growth of their grants that they’re able to make. And so it’s kind of a win all the way around.

Richard Cunningham: That’s awesome. With all this in mind, Before we go to kind of our signature closing question where we ask you about what God’s teaching you in scripture, how about a investment inside your portfolio, a story from each of you about some of your kind of like, this is what makes [00:32:00] impact foundation so special investment stories.

Jeff Johns: So one, I just, I like the simple ones that are easy for people to understand. And it also happened to be the 500 millionth dollar that we invested is in a group called pure flow. So pure flow is in Uganda. And what they do, if you’ve been to Uganda, the way that the average citizen gets around is on the back of a motorcycle called a bota bota.

So the taxi drivers, you know, they can’t afford a regular car and the traffic is terrible. And so the bota botas get people from here to there very quickly. The average bota bota driver cannot even afford to send their children to school because they’re just working for the person who owns the motorcycle.

It’s a 1, 200 investment for them to buy the motorcycle, which would be a lifetime for them to usually get together. But we can give them that 1, 200 investment at a relatively low interest rate. They’re paying back between 12 and 18 months at a 97 percent rate. Every single vote, a voted driver. to a Bible study and the majority of them get in a group and start to kind [00:33:00] of do life together and think about other things because as soon as they own their own motorcycle, they finally have some free cash flow.

They have some wealth to deal with. They have some giving questions of their own to deal with on kind of a micro level that then gets bigger and bigger. And a lot of them start second and third businesses within three years. So just so simple, like, Thank you. 1, 200, what I would pay for a plane ticket these days, I can change someone’s life, give them an asset that now means that they can start creating wealth.

Aimee Minnich: We have over 600 investments and I sit on both sides. I sign all the transaction documents. And so sometimes skeptical me says my favorite investment is the one that isn’t causing me difficulty. But that’s only when I’m really grumpy. Really, actually, some of my favorite investments lately have been in film and media.

Because my kids are 12, 13, and 16. And one of the things that we actually all enjoy and nobody argues about is watching a fun story together. And it’s one of the few times where [00:34:00] we can all, like all five of us, two boys and a girl and a mom and dad, sit down and get along and not have to talk about whether you’ve done your homework and did you put your laundry away and all of the things that sometimes feel heavy.

Watching a redemptive story together is actually brings us together and yet it’s really hard to find great stories to watch as a family. So selfishly I love some of the film investments we make because it gives my family and I something to watch. But also, I think even bigger than that, these stories that we’re able to bring into the world, like the possum trot story that just came out on July 4th, is a fantastic story and motivator to get people thinking about how the church can care for orphans and kids in foster care in really impactful ways.

And so to me, those are some of the most fun things that we get to be a part of.

Richard Cunningham: Thanks for breaking that down, guys. All right, well, take us home with this and we’ll close here. What’s the Lord been teaching you in and through his word lately? [00:35:00]

Aimee Minnich: In repentance and rest is my salvation, in quietness and trust is my strength.

And it sounds really simple and very easy, and yet it’s very, very difficult to live out. I am a person who feels like, Showing my own weakness would be, like, life threatening. Like, how could anybody ever take me seriously if they saw me as a weak person? And yet, in quietness and trust is my strength. So actually, when I stop talking, or when I stop problem solving, or when I stop trying to fix things myself, that’s when I really find true strength.

Jeff Johns: So, at Impact Foundation, we get together every day and we pray. And that’s been amazing. Aimee a while ago said, let’s just have a day where we’re just worshiping. We’re not asking God for anything. And so Monday, there’s no prayer requests. It’s no like, Hey, my dog’s sick or anything like that. It’s just purely like worshiping God.

And so we’ve tried to keep it fresh. And so one of the team members had an idea that we [00:36:00] should look into our favorite hymns. And then we will talk about the hymn, listen to the hymn, and read through it. And so, I went this week and I chose, Come Thou Fount of Every Blessing. And if you remember one of the lines there is, Here I raise my Ebenezer.

And so I started looking into it, and an Ebenezer is a time when you know without a doubt that God has intervened in your life. And so what I’m trying to do is to remember and give thanks for those times and share them with my kids, share them with my friends and family to show the glory of the Lord because God intervenes in our life so often.

And sometimes I feel like, like my kids, when I do things for them, I appreciate it when they’re like, Hey, thanks dad, that was awesome or whatever. And I think God’s waiting for us every once in a while to maybe notice some of the things that he does for us. And so I’m trying harder just to say, Hey, God, thank you.

That is an amazing display of your glory and your blessing to me.

John Coleman: Well, Jeff, Aimee, I think I speak for myself and a bunch of other folks in the ecosystem saying that you all have [00:37:00] been truly instrumental. To growing faith driven investing, I think y’all are sitting at the heart of some of the most important innovations in the giving world, as well as the investing world.

And I know y’all’s hearts are in it. You really have a passion for this, Jeff and Aimee, both. I mean, hearing you even talk about the investments you’re excited about, it just reminds me, you know, how much you all really care about what you’re doing and what it took, the sacrifices it took to innovate this and bring it together.

And the spirit of collaboration that you bring to this place, working with the other donor advised funds, working with different. Asset managers, different investments with different givers. This is all about how you can help to coordinate people for a greater purpose. And so I hope if folks haven’t checked it out before, Hey, I hope everybody listening to the FDI podcast at this point has a donor advised fund.

If you do not have a donor advised fund, get out there. Check them out. There are some awesome ones that Jeff talked about earlier. And secondly, I hope that everyone with a donor advised fund is also looking at impact foundation and thinking about how they can partner with impact [00:38:00] foundation and their primary donor advised fund to begin to explore this investing universe even more aggressively and think about some of the really neat things that they could do with their charitable capital.

So Jeff, Aimee, thank you so much for being with us today. And we’re so grateful for the work that you’re doing.

Aimee Minnich: Thank you.

Jeff Johns: Thank you, John. Thanks, Richard Cunningham. You guys are amazing partners.

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In this episode of the Faith Driven Investor podcast, Richard Cunningham and John Coleman interview Brandon Pizzurro, Chief Investment Officer at Guidestone, to discuss the state of the US markets. 

They cover topics such as the performance of the S&P 500, the dominance of big tech companies, the potential for a small cap rotation, the impact of artificial intelligence on the market, and the possibility of rate cuts and inflation. 

The conversation also provides insights into the current trends and dynamics in the US markets and discusses the possibility of a soft landing for the economy, with declining rates and inflation reaching a more normalized level.

Episode Transcript

Richard Cunningham: Welcome back, everyone, to another episode of the Faith Driven Investor podcast here. For this end of July 2024 Marks on the Markets edition and John Coleman. I’m particularly excited about today because our last few marks on the markets episodes hasn’t been a good kind of macro. Look at US markets, US equities, we’ve gone super deep with Tim McCreadie on the FDI space. Then we had Andrew Furman on talking about tech investing in Africa, which was fascinating. So I would highly encourage you to go back and check out those episodes. But we’ve got the perfect guest on today to kind of zoom is back out here in the end of July and look at all things kind of US markets. Brandon Pizarro, chief investment officer, president at guide Stone Capital Management, coming to us from Dallas, Texas. Gentlemen, welcome in to the FDI podcast studio.

Brandon Pizzurro: Hey. Good morning. Thanks for having me.

John Coleman: Yeah, I’m super excited for today. I mean, for listeners who aren’t familiar Guidestones, it’s one of the most important faith based institutions. That’s an allocator in the industry representing a number of Christian organizations, particularly Baptist organizations. But I know you’ve moved beyond that, Brandon, and serve a broad array of folks. And Brandon in particular is someone I’ve gotten in over the last few years and just have a remarkable amount of respect for the insight that he brings to public markets. So I think it should be a fun discussion today.

Brandon Pizzurro: Thanks, John. I’m excited. Looking forward to talking to markets.

Richard Cunningham: Yeah, absolutely. And so, Brandon, I think it’s 2017. You joined guide Stone and you guys are looking after now just south of 20 billion in AUM. And so just an incredible volume of assets to Stuart. And as John said, just a key leader in the Faith-Based investing space.

Brandon Pizzurro: I appreciate the compliment, Saro. We’re doing good work here. And it wouldn’t be without an army of people behind me. It’s making it all run. So God’s definitely blessed us with a great group of people to kind of coalesce around some of these things.

Richard Cunningham: Awesome. Well, gents, it’s July 23rd as we record this, and there have been plenty of headlines as of late. There was a failed assassination attempt on a former president. We’ve got the sitting president who has said, hey, I’m not going to run in this upcoming election campaign. Markets have been just on an unbelievable run. So where do we want to start? We start in the public markets and look at the S&P 500 and everything that’s going on there. And just kind of generally.

Brandon Pizzurro: Sir, certainly a good place to start, kind of the epicenter of what your average investor or even institutional investors would think about. When you say markets your mind goes towards S&P. So it’s certainly a good place to start.

Richard Cunningham: Absolutely. Let’s do well Brandon John, what do we seen? I mean it just feels like The Magnificent Seven have been on a terror of all terrors. Last week it started to look like things might slow down a little bit. Wednesday and Thursday showed some turbulent markets, maybe some kind of reallocation to non-tech non growth stocks. But here we are kicking off this week with just a rebound of Nvidia in particular. Markets are way up. Some people are saying well they’re so far concentrated into these kind of particular top 10% holdings if you will the S&P 500. What are you guys seeing Brandon.

Brandon Pizzurro: Yeah I mean big tech just can’t be stopped is probably the biggest thing to say at the front end there. The fact that we’ve had such a proliferation of these top ten in these top five and Mac seven and they’ve they’ve evolved, right. What we call them the Fang, the Mag seven, you know, all of those have really just done a fantastic job of just propelling markets forward. The big differentiation that I think a lot of people are looking at is just outside of those Mag seven. What’s the rest of those roughly 493 names doing so from an equal weight perspective, if, say, Nvidia was equally weighted with everything else in the S&P 500, you know, just watching that gap between those two oscillate, it’s really exploded out. One of the things I think’s important is what’s propelling that. So it’s different than like in 99 where a lot of that was based on eyeballs and clicks and pets.com. Right. Kind of the poster child for one of those silly names that just got this huge valuation. The earnings growth, these names do have earnings growth. They’re not running for no reason. In particular the differentiation though if you look back in 23 earnings growth for those big, you know kind of mag seven names around 57% where the rest of the S&P 500 median was around 4%. Just huge gap out 2024. We’re expecting somewhere around 37% for Mag seven and about five for the median. But as you get into 25 and 26 that collapse, it’s dramatically looking out to 26, which I know for prognosticators seems like an eternity from now. You’re really only looking at about a 14% earnings growth on those top seven and around a nine on the median. That’s median, meaning that there’s plenty of names that could well outperform that Mag seven grouping. So the exceptionalism that you’ve seen in that large growth space is starting to narrow that violent reversal. Well we saw markets with the small caps was tremendous last week. And I’ll pause there. But there’s certainly a lot to be said about the small cap rotation we can get into.

John Coleman: Yeah, I think this is a great place to camp out because as Brandon highlighted, you know, one of the stats I saw recently was that right now or effectively probably last week before this reversion that we saw, which Brandon highlighted the gap between the Russell 3000 and the Russell 3000 equal weight, which basically eliminates the cap weighted nature of the Magnificent Seven in some of the larger stocks in the, Russell was the highest it had been since March 2000, which was immediately preceding the.com. Right. And so there’s been this just incredible run by Nvidia in particular. I mean, I can’t remember a time when a single stock dominated the returns of the entire stock market in the way that Nvidia has, at least in my professional career. And the Magnificent Seven. More broadly, when you start to talk about Microsoft, alphabet, etc., have led this like super large cap run, especially over the last couple of years. We think that that is not quite like the.com bubble, as Brandon highlighted, the fundamental business models of the Magnificent Seven, or substantively better than a lot of the securities that collapse in the.com bubble, for example. So Nvidia has a real business. They’re a good company from what I can tell. And there are fundamentals that really support their growth and their profitability. The same is obviously true of Microsoft, of alphabet, of meta, of Apple, of some of these big names that have been running. We do, however, think that we might be reaching a point at which their run relative to the rest of the market, the gap between their valuations and the rest of the market, their appreciation of the rest of the market, is such that will likely see a reversion. So if you look, for example, just that the S&P 500 index as of like 630 of this year, the S&P 500 index, which is cap weighted, was about a 22 times price to earnings. Right. And if you look at that Mac seven, they’re often up in the 30s or 40s for some of those stocks. The S&P 500 Equal Weight Index, which actually spreads among those 500 largest securities. The appreciation was only 16.9 times. Right. So there’s this massive gap in the price to earnings. It’s larger than it has been historically. And I think that’s been a part recently, which we’ve been putting some research into this almost decade long run or a little more than decade long run in large caps generally. So if you look, for example, at 1999 to 2013 or end of year 99, so 2000 to 2014, effectively small cap and mid-cap dramatically outperform large cap over that period of time. Right. So if you look at the Russell Mid-Cap index, it was up 217% over that time, whereas the Russell 1000 was up 74%, the S&P 500 was up 64%. Massive differential. If you look 2014 through present through June of this year, large cap indexes like the S&P 500 was up 259% during that time, whereas the Russell Mid-Cap is only up 160%. So we’ve been through this decade now. So there was this decade where small and mid-cap dramatically outperformed large cap by 2 to 3 times. Now, we’ve been in this area where the large cap stocks led by the Magnificent Seven and a few other technology stocks have dramatically outperformed small and mid-cap for a decade. And so the question we’re asking ourselves is, does that continue? Or do we get back to historical norms where if you look over the last 25 years, comprehensively small and mid-cap have performed better than large cap, even blended over that period of time. Do we get to a place where there’s a reversion to the mean, not where those stocks collapse, as in the dotcom bubble? Because I think they’re fundamental business models, which Brandon highlighted are better than many of the stocks we saw collapse at that time. But where we see at least some gravitational pull of that other 95% of stocks that we’re paying attention to with the top performing technology stocks. And that reversion itself would actually represent a dramatic catch up from the rest of the market, particularly if interest rates do indeed begin to decline later this year.

Brandon Pizzurro: Yeah, that small cap rotation is real. One of the things that I gravitated towards when we’re doing some back of the envelope, what just happened, right last week with Russell, 2000 shooting up, reached an all time low versus the Nasdaq back in July. So that disparity that’s going back to 1979, by the way, that disparity it just really gapped out wide. But then when we saw that take off that was the fourth largest single day outperformance spread over the Nasdaq since 1980. What were those other time periods. The 87 low a global financial crisis low. The Covid.

Richard Cunningham: Low.

Brandon Pizzurro: And then last week. So we had those four key areas just going back decades where we saw that. And so it’s almost like there’s a lot of expectation built into small caps that they’re just ready to go whether or not it’s time for them to run truly. And we can talk about some, you know, headwinds and tailwinds relative to rate cuts that are potentially on the horizon. But small caps definitely peaked their head back out. We’re in the spotlight. And we saw the second largest weekly inflow ever going back to data tracked back to 17 years. So people that were underweight small cap there might be that catch up trade. Right. People always tend to do it after the fact. But if institutional investors that are underway, retail investors that are underweight definitely got caught off sides.

John Coleman: One, I’d be interested, Brandon, in your reflections on like what has caused this disconnect because it does seem different than some of the other time periods that you mentioned, where obviously we can pinpoint big extreme events or big extreme periods of time. You know, as I think through it, there could be a number of dynamics at play. I love your reflections. You know, one is just. The way passive funds work today. There are so many people concentrated in the S&P 500, cap weighted, you know, a tilt towards the larger cap, which is kind of a structural thing in the industry. I think in a period of time where people had a lot of uncertainty about the economy and where interest rates were rising, I think there was more of a feel of safety in some of these big technology stocks, you know, that caused them to run. And then certainly over the last year, at least, this isn’t part of the ten year trend. But maybe over the last year, this run about artificial intelligence. You know, maybe as the closest thing to the kind of.com dynamic where, you know, 5 or 6 years ago it was probably blockchain or, you know, something like that where anything just touching artificial intelligence has exploded. So I don’t know what you attribute it to, but I’d be so curious that, you know, which the dynamics do you think are most important right now and like, which may in fact be fading, that could cause the broader index to catch up. Yeah.

Brandon Pizzurro: Great observations. I mean, I exuberance is very real and it’s centered around Nvidia’s earnings right. When they’ve released earnings the last two marches for those time periods you’ve seen those just be massive inflection points. Remember when SVB and some of these other kind of, you know, those banks started to collapse. It started to have some fragility to them, those kind of midcap banks. It really started to get people worried and a lot of angst over what was going to transpire in that banking sector. But Nvidia basically saved the day, right? Yes. The government came in and helped, you know, backstop and support these banks and tidy everything up. But really, markets completely oscillated and turned their attention over to, oh, Nvidia is doing well in this. I think it’s going to be here and here to stay. So that has been the safety trade, so to speak. It’s amazing that large cap tech has been kind of a defensive sector in a lot of ways. That’s where people have gone. And to hide out you get treasuries and U.S. large cap growth. So that’s definitely one area that’s been kind of predominant in terms of the way that the trades worked out. But you’re right. I mean, passive flows have been such that there’s been this preaching of passive for such a long period of time in we’re believers in active and passive. I mean, there’s definitely a place for passive, but that’s just where a lot of money’s gone. And there’s more passive than active money now out there in the retail space. And so those tend to be very large programmatic trading. When these big giant passive funds have to move, you’re going to have a lot of momentum behind that. But camping back out on the I think in particular, I think it is astounding how much people have gravitated towards that. I think the easy money, so to speak, has been made in that I trade Nvidia’s run and some knock on adjacent names have run as well, but you’re going to have to start to get a little bit more discerning in what’s AI adjacent that’s going to continue to have legs. No doubt artificial intelligence is here to stay and will continue to change our lives for the rest of our lifetimes and beyond. But the fact that people are trying to pick the next Nvidia or the next, you know, where’s the growth going to come from? You’ve seen a lot of people talk about the energy demand that’s going to come from AI demand, and people are concerned about our infrastructure and our grid to support AI generation. So people are going to try to tease that out. But it’s interesting how much that is really kind of neutralized. Any other concerns that have come up in markets? Inflation gets batted down, uncertainty, geopolitical or even domestic politics and heat warnings across the consumer, all of that fallen by the wayside. So that’s going to have to be dealt with head on at some point once this AI continues to fade a little bit. But there are other things that should be concerning relative to how well we’ve kind of seen in masks. I think some of the underlying trends by just having these big names wrong. Yeah.

John Coleman: And I know Richard probably wants us to move on to the next topic, but I’ll drop a couple of quick comments on the AI front, specifically Brandon, because I think you’re spot on in any trend like this. Look, I personally believe that AI is a secular trend, artificial intelligence. I mean, anyone who’s used ChatGPT, which is still a rudimentary version of artificial intelligence, knows this is going to transform the way in which we do business. Probably a lot like the internet did, right, where it is transformative technology. That said, I think we’re starting to see some conservatism or caution arising at the pace at which this has been promoted. You know, Goldman Sachs, I think, recently came out to caution that the level of capital investment in artificial intelligence was probably unsustainable, given the near-term revenue bump of those. I was listening to the All In podcast a couple of weeks ago, and they were focused on the same trend. Just how much more can an even an alphabet or a Microsoft invest in this topic, and how much revenue would needed to be demonstrated to continue the investment at that level, which is obviously where all the revenue is coming from for Nvidia. The second is right now there are a couple of competitors that are just dominating like Nvidia competition. Never sit still. The fact that Intel is trading at a small fraction of the valuation, for example, of Nvidia. But, you know, they’re inevitably working on these things. There will be competitors who arise who kind of spread. I think some of the impact of this. And then the third, which I always tell people, having worked in big companies before, is there are always micro factors that we tend to underestimate within very successful companies. It make it incredibly difficult to perform over the long run. So I’ll just do one. This survey I found on Twitter, so I can’t vouch for its veracity, but it was conducted by survey firm of 3154 Nvidia employees, and they asked what their net worth. Well, I saw that. Yeah, right. So think about the run. 36.6% of those surveyed, 1154 of that, 3154 said their net worth is now greater than $20 million, 7.8% rated between 10 and $20 million. Only 24% of those surveyed had a net worth under $1 million. And if you think about what I mean, it’s been on such a run that very mid-level employees in Nvidia are now fabulously wealthy. The best engineers are wealthy, probably beyond their wildest imaginations. And that puts pressure on a company, right? Because some people choose to retire, some people choose to then go launch their own things. And so I think there are just a lot of reasons to kind of think through very carefully the allocations amongst these artificial intelligence players. Now, I think it’s a secular trend, but like anything like that, we have to approach it with a real dedication to try and develop insights on those particular firms and on how much those trends can continue to run.

Brandon Pizzurro: Yeah, time to take a breather and reassess.

Richard Cunningham: Hmhm man, that’s fun to hear you guys in pack AI, we’re moving down the line and let’s talk inflation and what appears to be possible rate cuts coming maybe September undetermined. The Fed Fund futures certainly believes that we’re going to get at least one, maybe two. That Jerome Powell is going to finally make the move. CPI for June was at three when it was expected to come in at 3.1. So we’re seeing some positive news now. I think that needs to be said in light of if we back up and look at the end of March 2024 versus just five years ago, March 2019, the CPI has rose 23%. So that kind of gives you kind of the staggering sobriety around just how large inflation is. Can we get lost in kind of these numbers of like is it going to get down to two. Is it three whereas the CPI can end up. But what are we thinking about rate cuts, the overall macro effect. They could potentially have the kind of stickiness and the persistence of inflation and where we are today guys.

Brandon Pizzurro: Yeah I mean great question to your point. The September rate cuts priced in around 94% where futures are pricing at this morning. So it’s interesting to see that the market has coalesced around this idea that we’re going to get this rate cut right in September. Now, we do have a fed meeting that people tend to be overlooking right. Next week. We’re in that blackout period where you’re not seeing a whole lot of fed officials going on the offensive in their media blitz, which, by the way, is just kind of more of a recent phenomenon. Right? It wasn’t that long ago that the fed was completely mum until you got the fed meeting, and that’s where you got your kind of 1 or 2 day insight. And then they were quiet again for multiple months now we have fed governors and people adjacent to the fed and voting members and voting members that are giving their viewpoints on all of the media stations and doing talks, closed door talks, you know, public talks. So anyway, it’s interesting to see just how much they talk these days. So it gives markets more volatility I think because they’re hanging on every single word. All these sell side shops put out pieces highlighting what was said. They have eye back to eye point right. They have AI that’s going through and interpreting what they said whether it’s bullish or bearish. So it’s been in the driver’s seat right. The fed is the driver in all of this. So it looks like we’re going to get our cut. And that’s dramatically changed since the beginning of the year when we expected all these rate cuts. It’s trickled down. I mean you saw people that were getting, you know, laughed out of the market, so to speak, by saying we’re only going to get 2 to 3 this year perhaps, or even none. Well, that’s a real possibility. Now, the 2 to 3 is kind of base case and none, you know, possibly. Right. There’s a world where that does become a thing. It’s not impossible. But that’s really the zeitgeist. What the Fed’s doing, whether they’re doing it or not doing it, that’s all anyone can speak to. And certainly it’s been a big driver from a correlation perspective to markets. We do get quite a few data points this week for fed members to ingest before that announcement next week. And remember, they can change their mind right up until like just a mere 12 hours or so before that number’s released. So there’s a real opportunity for them to ingest PMI. This week. We get their favorite inflation gauge on Friday. We’re getting some consumer data. We’re getting housing data. So they’re getting a slew of data on this blackout period before they speak next week. And so anything can come out of that.

John Coleman: Yeah. And I think, you know, an important corollary to that, what Brandon is talking about, I do think expectations are that at the very least, the rate increases are over unless there’s some dramatic change in the underlying signals and that people are, as you said, Richard, pricing in a potential rate cut before the end of the year, maybe in September. As Brandon said, a lot will depend on some of the feedback they’re getting from the numbers next week. But what we are seeing are the types of signals that you would expect to trend in that direction, right? So employment is softening a bit. I think long term employment was up a bit in June over that same time last year by about 400,000 on long term unemployed. So employment softening a bit. CPI is decreasing but other measures are decreasing too. So the Goldman Sachs core inflation number for example, just dropped below 2%. And there are a lot of debates about what the right inflation measure is. And you know we don’t want to get into those. But it does seem that the inflationary trends are backing down now and then. Inflation is declining incrementally and with softness in employment with a little bit of risk in the underlying economy. It does seem like the type of environment where you could begin to see rate cuts. I think what is challenging for everyone to consider right now is just there is so much unpredictability and political situation in the United States right now. I still think there are so many opportunities for exhaustion of shocks in environments like this, whether you know that the international conflicts or whether it be unexpected shipping challenges. That’s the stuff we’ve seen over the last couple of years. So you always want to approach this prediction about rates coming down very cautiously, I think, because there are so many variables at play. But I do think we’re finally seeing after a couple of years here, an environment where we could start to see rates begin to decline, where we could start to see inflation get to a much more normalized place. And frankly, it looks like we might be heading for a soft landing. Right. Which we all kind of hoped for but thought was unlikely. You know, employment is dropping a little bit or unemployment is rising a little bit, but we really haven’t hit any sort of dramatic recession or any dramatic increase in unemployment. And so my net net right now is it feels like I was critical of how they handled the initial inflationary environment. I think the fed has actually done a pretty good job over the last 18 months or so of trying to navigate us to a soft landing. And I mean, my hope is that’s where we end up, which would be about the best case we could have predicted two years ago.

Brandon Pizzurro: Yeah, I agree, John. I mean, it’s interesting that at the beginning of the year, if you said soft landing and if you did, they stuck their neck out there, that was definitely not part of everyone’s calculus. That soft landing could come to fruition. Now again, that’s kind of turned into a base case of you’re right. The Fed’s generally engineered a pretty good what appears to be soft landing. Thus far things have moderated. Nothing’s spun out of control. Markets have continued to be healthy. The economy continues to be pretty healthy. Consumers have been healthier than anyone could have possibly predicted. Right. The expectations that their excess savings were going to run out far before where we stand today have been, you know, expected for about a year now. But to your point on jobs in particular, that jobs workers gap is back to about February 2020 levels, if we saw some further softening in labor demand, that might actually hit, you know, real jobs right now. What that just means is we’re having, you know, a lot of these job openings that are starting to close, people are pulling those back. But as that labor market softens and we kind of start to cool down a bit further from there, you know, and that’s not a linear process by the way either. Right. That non-farm payroll, if you look at where the street is versus actual, there continues to be a pretty big disconnect where the street expects it to be versus where those have come in the last three and four months. So because of that, it’s harder for people to gauge where this market is heading and whether or not we can really kind of plant the flag on saying soft landings occurred. But thus far, things have simmer down in a pretty orderly fashion, and that’s what you’re looking for. We don’t want to see total destruction, but we do need to see a little bit of this come off the boil. There is going to be pain on the margins, right? Nothing’s ever painless as you’re transitioning an economy. But thus far, so far, so good. Really.

Richard Cunningham: That’s encouraging to hear you guys. And I want to, you know, re-emphasize that on the Faith You’re an investor podcast. We are people of deep optimism regardless of what is going on, always, especially from an eternal perspective. But I do want to play devil’s advocate just for a second and talk about corporate bankruptcies being at an all time high this last month, government spending, you know, just as a percentage of U.S. GDP is getting to be alarming. So there are some contrary signals to kind of this idea of soft landing inflation coming down. We’re going to finally get that rate cut. The employment market kind of finding its right balance coming in at 4.1. You know, the highest in a couple of years. What is the other side of not getting that soft landing possibly look like. What could be kind of you know, maybe something internationally geopolitically shocks markets, John, is to kind of what you were talking about. Political headlines get more and more kind of unsettling, if you will play the other side out, just kind of real briefly before we move on. Yeah.

Brandon Pizzurro: The other side of the coin absolutely exists. I mean, we’ve only had a 5% drawdown this year, and it hasn’t been since 2021 that we’ve had such a tepid drawdown in markets. And that’s obviously a full annualized basis for 21. But that’s far in 24. A 5% drawdown is pretty minor. We could absolutely benefit from having some of the heat come off further. From a market perspective, it would be healthy, in fact, to have the markets draw down a bit, reset themselves. We opened this discussion with talking about just how far and how fast things have gone. Oscillating back, reverting back a bit would certainly be healthy. There’s a lot of things that could be cracks in the facade, and we talked about the consumer. The consumer, I believe at this point finally is starting to get exhausted. They’re fed up with the inflationary environment and rather. Than just being fed up. They just simply can’t afford to live the way that they had been, and they had spent all of their revenge spending, so to speak, coming out of Covid. Americans do a great job of spending to that very last nickels burning a hole in their pocket. And we’ve done just that. If you stratify that out amongst income quintile, so to speak, even that top quintile of earners is starting to really run out of gas when it comes to their spending. And that obviously the consumer is a massive part of U.S. GDP that could absolutely start to retract this economy by quite a bit. So there’s that front. You could have inflation pick up again, especially if you get a rate cut. And that’s inflationary in some areas. Depending on where we go from a political standpoint, you could have some inflationary policies that creep back in and we start this whole cycle over again. The market psyche would be absolutely rocked if we got a rate hike. We’re not predicting that. And that’s nowhere near base case. But that’s just yet one more thing that could add to the stones that are stacking up on on one side of that liability column. And to your point two. Speaking of liabilities, our interest payments as the US government is probably going to eclipse $1 trillion in interest payments coming up very soon. That is absolutely unsustainable. So we have a lot of things and factors that are baking into all of this that are cracks that could become massive fissures. And it’s always the thing you don’t necessarily expect. Maybe it’s not the Black swan, but maybe the gray swan, right. Something in between. That’s the bit of a known unknown. Those are the things that crop up when people aren’t looking. So we should never be so foolish as to think that we as, you know, people that are observing markets and in them every day have any way or capability of fully mitigating against some of these downsides. So there’s very real concern that we’ve gone too far too fast. We have yet to really ring fence a lot of these issues that I mentioned, not the least of which, of course, is geopolitical or even non-U.S. markets and economies.

John Coleman: Yeah. And I would say if you ask me for kind of one short term thing to watch, just to complement. But Brandon was saying valuations are pretty high in the stock markets right now. If you think about it’s not necessarily Black Swan. It’s just looking at historical averages. You know if you look 2002 to 2020. So pre-pandemic the average price to earnings in public markets was just above 15 times our forward price to earnings or just below 16 times thrown off a little bit to the downside by the great financial crisis. So even say it might be a turn or two higher than that right now. They basically said it 22 times. And so it’s 40% higher than the pre-pandemic average of the last 15 years. And so we are seeing price earnings multiples in public markets that are historically quite high. And in the long term problem, you you guys are highlighting with government spending in the United States, I think is real. Give a speech recently where, you know, we think rates are high, all this kind of stuff actually putting in context the environment we’re in today, inflation’s pretty normal given 50 year historical standards. Rates are actually pretty much the average of the like the last 40 or 50 years. Mortgage rates are like pretty much the average. I mean, people forget in the 80s, for example, there were like 15% mortgage rates, right? I mean, you know, pretty out of control inflation. So a lot of those readings are actually we feel tight because since the great financial crisis, we’ve been living in like a zero interest rate environment. But that was actually the historical anomaly. And so we’re actually a little bit closer to normal rates right now, which I think is a cause for optimism because it’s like, look, the economy function pretty darn well, you know, for 50 years operating at these rates. And so we got used to something lower. But the big problem I see is how much government spending could long term really hamper the effectiveness of the US economy. That’s the big difference versus the last 50 years, Brandon said. First quarter and next year we’re going to pass $1 trillion in interest payments annually. The deficits are as big as they’ve ever been. Basically right now, that’s across administrations, Republican and Democrat. There’s no meaningful push right now to reform entitlements, which are, you know, between interest rate payments, health care and Social Security. That’s the vast majority of government spending right now. So even if you cut military spending in half, for example, you’re not really cutting the long term budget deficit or the debt. And I think over time, that’s the type of thing that genuinely can overtake an economy. We saw that happen in Japan, where they ran these massive deficits and built up a debt over time, and we’re not immune to that. And I think that’s something over the medium to long term that I think we can’t underestimate the impact of, and which is quite different from all the kind of 50, 60 year historical metrics that we’d otherwise look at in the United States. The other thing is, our growth rate right now is like much better than Europe. For example, the US is 26% of the global economy. The state of Missouri is richer GDP per capita than the country of Germany. I mean, you know, the United States is a really effective, successful, wealthy nation. And yet most of our growth recently has been a result of the increased government spending. And so I do have long term concerns about the growth of the US economy, especially in light that the long term debt that we’ve accrued as a government.

Brandon Pizzurro: Non-u.s markets remain about two standard deviations cheap to U.S. markets, just U.S. exceptionalism across the board.

Richard Cunningham: Wow. Right. Well, that’s a great segue, guys, because let’s talk U.S. government spending in particular. Who’s going to be in charge come this next election cycle. There’s all types of debate about how much who’s in the white House, the House and the Senate, who’s in control actually pertains in the markets. But boy, it sure does get the headlines. We now know who Donald Trump’s running with in Ohio, Senator JD Vance. President Biden will not be going up for reelection, at least at this time. It sounds like the Democrat nominee will be Vice President Kamala Harris. Where are we at with all of this, Brandon, in your role stewarding so many assets, leading a massive team? How do you keep your team kind of, you know, level headed and on the playing field, kind of focusing on the right things in the midst of, you know, all of the political headlines and everything like that. And also just praise God. What took place in Butler, Pennsylvania, did not end up resulting in the death of a former president and that Donald Trump is okay and back on the campaign trail. So how are you guys kind of processing all of the political headlines in the midst of all of this, Brandon?

Brandon Pizzurro: Yeah, absolutely. I mean, there’s a lot of noise right around these time periods, right, in terms of elections. And so, first and foremost, I say this a lot when people maybe catch me in the elevator or I do a presentation, maybe to our board. It’s just that markets like certainty and regardless of what outcomes are, there’s certainly a variety of outcomes. And there’s different ways to play those outcomes. But markets like the certainty of knowing who those people will be, those people being president, vice president, and then of course, you know, on down the line House, Senate, etc.. And that is where we really try to focus people in on is like, once you know the rules of the game, you can play to that game, but it is a bit of a distraction. It’s something that you have to take into account. That’s where you kind of start to think about the probabilities of each of these scenarios. You can’t lose too much sleep over it. It’s something that you have to monitor and take into account. It goes into your overall calculus of what areas would benefit from what scenario. So you can always do the, you know, kind of cross sectional matrix, so to speak. But it’s something that’s certainly real. If you’re kind of taking this back from a market perspective, it’s all great. Poll the other day that just said that 70% of young voters in key battleground states say that cost of living and inflation are the most important issue. Think about that 70%. And I mentioned young voters in particular, because that’s an interesting point. In 2024 is actually the first election in 30 years in which baby boomers won’t be the majority voting bloc. And so the young voters, well, that’s always been a phrase and a theme that people look to. They’re an important cohort this time around. And cost of living and inflation is 70% of them is concern. By the way, the next biggest issue is abortion. And so in terms of us being faithful in the way that we are voting and keeping our focus there and stewarding assets and contemplating life and being pro-life, that’s the second biggest issue. And while there’s both sides of the equation in abortion, of course, when that poll comes out from a secular, you know, pollster, we know that there’s faithful people that are being included in that poll and that that’s an important element of where young people today thankfully see that pro-life stance. So just an interesting thing to take into account. But there’s a lot going on from a political standpoint. But will I have to stand by and see where the chips fall?

John Coleman: Yeah, I have zero, ability to predict what’s going to happen in this country over the course of the next week. Four months, I think. Yeah. Day, 24 hours, you know? Gosh, all I would say is I’ve never certainly in my lifetime, there’s never been as unpredictable a political environment. I think in the 60s, you saw the closest analogy to now where very unfortunately and obviously, I mean, the one thing we can all say, it’s like political violence has no role in a democracy. The attempted assassination of former president was a horrifying thing. You know, the only analogy that comes to mind for me is the late 60s, where they went into where Bobby Kennedy was tragically assassinated as the leading candidate for president among the Democratic Party, unpopular Republican, went into the convention not knowing exactly who would be the candidate. There was a lot of disruption. The external environment was pretty chaotic as well, really, and that was before I was born. That’s the only time I can think of that looked a little bit like this time in recent US political history. And so it’s very unclear. It does seem like now we have a pretty good sense that Harris and Trump will be the two presidential candidates. The prediction markets now have them pretty close to equal. I mean, Trump on predicted I think is at $0.57 on the dollar. Kamala is at $0.44 on the dollar. And so it’s tightened a little bit. I think the markets have Trump probably winning. I think there will be obviously between Democratic and Republican administrations. There are different approaches. Republicans are typically more anti-regulation, typically in favor of lower taxes. Democrats are typically the opposite in markets, you know, tend to look favorably on less regulation, on lower corporate and individual taxes. What’s interesting to me right now is neither candidate is trying to address structural spending problem. So they both effectively said that we’re not going to touch Social Security. And. Health care, Medicaid and Medicare. And the modern Republican ticket is a little more populous and a little more big government, I think, than a recent history of Republican tickets. Just in terms of, you know, you saw the president of the Teamsters union speak at the Republican National Convention recently, which is a huge change. And Vice President nominee Vance. Senator Vance has actually been a pretty big proponent of unions, for example. And so I find it harder to predict what’s going to happen in politics now than any time in my lifetime. I think my hope as a person of faith and as an American is a couple fold. One is, some of the more extreme rhetoric in this election has got to come back to Earth. I think certainly acts of violence have no place in the 60s. The Democratic convention that I talked about had a ton of violence at it. Honestly, going into it, I really hope and pray that’s not the case with the coming convention. That’ll happen in August. And, you know, my hope is that as Americans, we really take a sense of responsibility and that we can restore a sense of stability and civility to a process which has become quite chaotic this year. But beyond that, I don’t know that I have any particular insight to what the next 24 hours will look like, much less the next four months.

Brandon Pizzurro: Yeah, it seems like almost every year you could say we are living in unprecedented times. And I think it’s almost always true as well. So yeah, there are corollaries and there’s things that we can learn from, from the past and history rhymes, but it is very interesting to see it unfold in real time.

Richard Cunningham: Well, hey. Well, we’re talking about kind of having that eternal, steadfast approach to just all things as relates to political times, whatever it might be. I do want to spend just a couple minutes, Brandon, while we have you talking about the faith based investing space, the innovation you’re seeing, some of the things you’re deeply encouraged by, maybe some of the areas where we still need to innovate. We don’t have a ton of time to hit on this, but Guidestones being such a look to leader across this space, should we be missed not to kind of have an opportunity for you to lean in real quickly on all you’re seeing and kind of the faith driven investing ecosystem?

Brandon Pizzurro: Sure, I appreciate that. We’re certainly seeing. I think a wider adoption and acceptance for maybe those that were on the periphery, maybe those that were faithful, that never really saw the juxtaposition of where their money intersects with their faith. And I believe all of the players in the space Guidestones and all the others that are doing great, faithful work in the faith based investing space have really done a superb job in starting to get the word out and having people start to embrace what this is. I think a lot of the ways in which we have approached just trying to be biblically sound, you know, one of the things I try to tell people is that if you flip to the back of your Bible, you’re not going to have a list of things to do and don’t from a faith based investing standpoint in terms of, you know, public markets and private markets, that as long as you try to be as most biblically centered as you can, and that’s what we seek to do. And I know a lot of others seek to do the exact same thing, and then that’s going to win over time. I believe we’re starting to see that. My head of intermediary distribution the other day and I were talking, and he was just saying that out in the field, the sense is that he doesn’t necessarily have to open so much with. Here’s kind of what faith based investing means. It’s more of giving them more detail on how to go about doing it. And he just said he feels like there’s a stronger yearning from people not only in the pews, so to speak, but just even a broader public that are coming around to seeing. It’s not a mutually exclusive proposition. You can have faith based investing, and you can also seek to solve your retirement or any other investing goal. So I’m really encouraged by just kind of the momentum, so to speak, that’s really been taking place here. And impact investing, which again, a lot of people are doing great work in, in that space that we’ve fully embraced as well. And I think that’s not only the next frontier, but just being biblically sound is really kind of the, you know, the North Star that we always have to seek to honor.

John Coleman: And I say a lot of that is driven. You know, the idea is how do we just better align all of our capital with the values of our faith? Like, how can every resource at our disposal be aligned with our mission personally or institutionally? And I’d say, just briefly, to affirm what Brandon was saying, it’s the intellectual curiosity and the seek to innovate are the leaders of these institutions in a way that’s aligned with mission? I think that drives the trend that allows people to really serve their constituents better. And I’ll compliment Brandon on what I’ve seen. I think his curiosity about this space, his willingness to innovate, the exploration of these trends, it’s leaders like him who are really able to push the boundaries of what this can look like in a sensible way, in a fiduciary way, and with the professionalism that needs to take place for this to become an institutional approach to faith driven investing. And I hope we can all kind of continue that innovation, that intellectual curiosity, coupled with the commitment to excellence that’s necessary to make this a sustainable trend.

Richard Cunningham: It’s awesome. Well said, both of you. All right. Well, we’ve covered a lot of ground, gentlemen. And, Brandon, you get to take us home. Just we love asking this question. And it is. What is God been teaching you and in through his word lately?

Brandon Pizzurro: Yeah, it’s it’s a great question and a constant. Right. Every day. There’s always something to learn. There’s always that striving towards, you know, keeping your faith closer in alignment in that walk and encouraging not only yourself, but also others around you. And that’s part of my role here, Guys town, as well as leading from that standpoint. I kind of settled on a verse I think that’s been running around in my head quite a bit more recently. And that’s first John 217. It’s just the world and its desires pass away. But whoever does the will of God lives forever. And I think that’s really a mantra that we should be getting behind all of us, right, in the Faith-Based investing community broadly. It’s just that what we are doing, we’re dealing with intermediaries and counterparties and trading and accounting statements and everything else that goes into the world of what we all do every day. But we need to daily pick our head up and just remind ourselves that all of these things pass away. We’re doing these things for our current human existence on this earth, but there’s certainly the next world, and that’s the eternity that we’re seeking, you know, to find, you know, our passion in our heart in. And that’s where we really need to our, our store of treasure. Right. But that verse in particular has been resonated with me lately as we seek to lead our team in the second half of this year and going forward.

Richard Cunningham: That’s awesome. Well, Brandon Pizarro, president Chief Investment Officer at Guy Stone Capital Management. What an encouragement to have you on, John Brandon, both of you. Thank you for your wisdom. We looked at a lot today. It’s great to get some fresh perspective and just appreciate you both and friends. Thanks for joining us.

Brandon Pizzurro: Thanks so much. Enjoyed being on.