Travis Penfield I think that maybe a lot of entrepreneurs out there, it is so easy, even as believers, to make our business our identity. And it’s such a sneak.

Richard Cunningham Travis, you mentioned your bride’s cancer over the last couple of years. You had a brain tumor in 2016.

Travis Penfield In a different place in your faith when each one of you experienced the thought of losing the other one.

Justin Forman You’re stewarding a business before. You’re steering a business after. What’s the BCAD of how you steward a business after going through things like that?

Travis Penfield I think that since that happened to her, the post, I guess, mindset in running the business is.

Intro Faith Driven Entrepreneur Podcast.

Justin Forman As faith-driven entrepreneurs, oftentimes we just don’t stop until something stops us. Today’s guest, Travis Penfield, talks about these tough moments in life where everything stopped in a moment to care for family, to care himself in these tough times, and how that gave him a bigger perspective of what it is that we are really living for as faith- driven entrepreneurs. So we’re here at South by Southwest having this conversations. Let’s go ahead and get started. With today’s episode. So speaking of life experiences, not all of us get to have the week that it sounds like you just had. Yeah. You gotta tell, we gotta start here. This is important.

Travis Penfield Okay, well, maybe. I did learn a lot. I had a buddy of mine that a few weeks ago said, you know, I’m going to change your life in a text message. I said, what are you going to do?

Justin Forman Three easy payments, yeah, yeah.

Travis Penfield Yeah, three easy payments just you can sell my my beauty care Yeah, that’s funny. And I’m like, what is it dude? And he’s like you love golf and I know your dad’s here as Jack Nicklaus like my dad’s always wanted to be like the guy He’s like he knows all about him all these things and he’s Like we’re going to have ten of us are going to go hang out with John Maxwell and Jack Nicklaus at his club In Jupiter, Florida called the Bears Club where all the guys live and Yeah, we’re gonna get there. We’re gonna do lunch ask a lot of questions. He’s gonna do a putting and arrange session and then we’ll go play, and then him and Barbara are gonna host at his house, and you know, we got some surprises for you there. And I’m sitting there and I’m like, you are texting me, right, like, cause you know Maxwell, he’s got some good stuff. You know, he has got so much leadership stuff, and there’s so much stuff that I’ve wanted to talk to you. Just a couple, maybe 92. Maybe 92. Yeah.

Richard Cunningham Where does the Golden Bear and Maxwell’s combo come together?

Travis Penfield Um, I guess they’ve been buddies for a long time, um, and you know, they’re, they kind of play off each other’s foundations of what they’re trying to do. So Maxwell’s a quip and then, you know Nicholas’s are so into, uh, beating cancer for kids. And, uh they knew about my wife’s breast cancer, you know last couple of years. And so I think that was part of it is they knew I’d have a heart for like both like leadership throughout the world, like spreading the gospel through leadership and then let’s end cancer. Let’s do this thing. Right. So it was, it was inspiring. It was a great time.

Richard Cunningham So tell us about the experience from a golf standpoint. Any highlights? Did you choke in front of Jack? Did you get some good pointers? Also from a leadership and some of the wisdom you got.

Travis Penfield My goodness, yeah, on the golf course, I will tell you, don’t try to hit a putt around the goat. I hit this first putt. I mean, it’s a 10 foot putt and I hit a 15 feet by. I mean this really, just those of you that don’t golf at all. Rimmer in hand. And then he keeps telling me, he’s like, dude, like just relax. I’m like, do you know who you are? Like you’ve done beautiful things with this very club that I’m about to not do beautiful things. And And it was just great, and I mean, we had a lot of fun. It is very difficult on the golf course when he tells you while you’re setting up for a shot that your grip is too tight. So then you’re like, okay. So I’ll just kind of lighten, and he’s like, yeah, I don’t like where your elbow is. And he’s saying all these things, so by the time I hit it, it just dribbles under the ground. So we had ton of fun, I think life lessons, you know. I asked him a question. Earlier on in the day and I’m like, you know, Jack, you’ve, you’ve won all these different things. Like tell me about the winning. Like, tell me, like, how did you do it? Like all these things. He goes, Travis, what do I care how much I’ve won? Like, that’s not my legacy. And I said, well, what do you mean? It’s not your legacy. And he’s like, man, I made a commitment to my kids that even if I was going to be a professional golfer, like they were going to know their dad, like know their dad. And, uh, I’ve made the same commitment to my grandchildren. And um, man he, he was talking about them. When I would ask him questions about like a win or shot I knew he had. Yeah, so I did this, I did that. And then I’d be like, so what about this grand kid? He just light up. Oh, wow. And so then I asked him, like, you know, they’re celebrating 65 years of marriage this year. And I said, you gotta give me a pointer. Like, what is it? And his sweet wife was there too. And both of them say this comment of 95-5, and it’s this idea that it’s 95% give, 5% take, and if both people are doing that, you’re gonna have this awesome marriage. And they, I mean, 65 years, the love that they had for each other, They’re just like, the intimacy they have. I mean, you should have seen him like walk to dinner. It takes him a little bit. But like, it’s like the most beautiful thing to just watch them kind of like in life, step by step together. And so he’s a legend. So many different things I learned. So many awesome takeaways even for Maxwell. But I think the biggest thing was like, I went home to my wife and I was like babe, I love you.

Travis Penfield This has been so inspiring. Being 13 years, I just, 65 years? You know, you just kind of think about that and you’re like, man, that’s a lot, raising all those kids and grandkids and to still have that deep love. That is more impressive than him being the goat in golf, I thought. So it was, I say a top five experience and then my wife reminded me, well, you know, Jesus, you got married to me and you have three daughters. So which one of us is getting the cut? So I’d like to say a Top Six time of my life.

Justin Forman There you go. Well said. Isn’t it fascinating? Like, I mean, we fall in love with the highlights. We fall in love with the moments where fans were enthralled by it. Yeah. Yet the thing that at least I’ll speak for this at 44 is like. I’m as much interested in that. Yeah, the untold story of faithfulness and obedience to do that, like to have all that accomplishments and tensionality with your craft. Come on and keep that stuff together like. Like, that’s a big deal. That’s bigger than many of those trophies on that case. Absolutely.

Travis Penfield Well, and I think for young guys like me, I think that that’s the thing that it seems like he cared about most to teach us, you know? And it was like the game of golf is just so secondary. Like that’s a platform that God gave him, and he happens to be the best at it. But I agree with you. It is all the in between, because the more people that I meet that are kind of like the hero types, I’d say the more often I’m disappointed. You start asking about it, and they’re self-absorbed. You know, doing different drugs and different things and whatever, and you’re like, well, this is what it takes to maintain. And then you got a guy that’s like, well, I’m gonna have a cheese omelet. And you’re, like, cheese omelet it is, It’s a strange dinner order. But just a total stud.

Richard Cunningham That’s awesome. Travis, you mentioned your bride’s cancer over the last couple of years. You had a brain tumor in 2016. Lord has dealt you guys some pretty wild seasons of health and things like that. First off, how are y’all doing? And just kind of give us some of the backstory there and all that God’s taught you in the midst of those trials.

Travis Penfield Yeah, brother, I mean, it is I would never want it to happen to anyone. But gosh, right, the testing of your faith, it does develop that perseverance. And so I think that because we’re both good, I guess it’s easy to say, it puts you in a different place in your faith when each one of you experience the thought of losing the other one within a day, right? And Jacqueline’s doing great. So here in a few weeks, we’ll be celebrating two years. And for anybody that understands the cancer battle, you gotta get to that five year mark. And so two years is a big deal. But you know, it’s really interesting. Like, you know Matthew Six talks about like anxiety and you know like the birds of the air and the flowers of the field and like, you’re not gonna add a single day of your life. And yet the thing I think I’m still struggling through and I think Jacqueline does better than me is like, for me the brain thing was easier because it was just happening to me and then I wake up and they’re like, hey dude, like I think you’re gonna be okay but it’s four months, you’re going to have to learn how to talk and walk and do all these things again. Um, but for her to watch that occur. Like there’s still times I would say monthly over the last two years where it’ll be like 2 a.m. And I’ll just wake up with like this crazy sweat and just start crying and not really know why. And like just a level of anxiety that I’ve definitely, I don’t think I’ve felt in my life. Just this like, what they don’t tell you is you’re so excited when they say you’re cured. And then they say, he got this five years to see that it doesn’t recur. No one really I think warned me that the anxiety of this five year is pretty crazy. You know, I mean she even gets like a sneeze or a stomach ache and you immediately go to like some type of cancer Right and it recurs But she’s such a fighter, you know, she did so The way she cared for our three daughters who were really young You know during that she you know she’s doing the chemo and you know her hair was starting to fall out and she made the decision to like make it a moment with the kids to like cut her hair and then shave her hair, and do all those types of things and Yeah, you know, they almost they almost like didn’t fully recognize what was happening. She’s doing such a good job. One of the moments you know strange that the things you remember in these really kind of dark hard seasons. You know, it was still really patchy on top of her head. Like, you know, you see like bald people that go through I guess I’m bald always. So but like you see that and it’s like patchy and all those things. And I was like, well, babe, I’m I’m decent at shaving ahead. You know, I’m good at that, you know, practice. Yes, some practice over here. Good Lord. Decided to make me ball to my 20s. And so, man, I held my wife in the shower, like slowly shaving her head, because they’re like, if you get a neck while you’re on chemo and stuff, it’s really bad. You know, they just don’t, the red blood cell counts are too low. And man, that is probably one of the like, most beautiful, heartbreaking, sad, lowest four or five minutes of my life. Sitting there shaving her had, kind of contemplating, like holding her. I can’t, I don’t know, I can even go there. Like, like emotionally, it’s almost too hard to but it got it got kind of bad for her says about three or four months into it. She’s one of the types of body types that can’t do chemo, which is not all that normal. So the doctor calls us and they say, you guys need to come in her red blood cell count is at a certain level, that it’s no longer worried about cancer we’re worried about like, can she even make it? Wow, you know, and so They tell me, they’re like, Travis, two things. First, she for the next week cannot be around anyone. She’s quarantined because a single cold could take her out. And then she’s like, the oncologist is like, and one thing I want you to prepare for is it’s not looking good. And so you need to take your kids somewhere. And my advice to you is, when you see husbands like you that are working, that don’t necessarily. Like take care of the kids full time. When a spouse goes out and passes away, like it can get really, really, really bad when she passes. So I’m gonna ask you to take them somewhere for a week and I need you to live that whole week as if she’s gone. I need to go there even though she’s still alive or I don’t think it’s gonna be good just seeing your reactions to all this. I just don’t get the vibe you’re gonna be in a good spot. And so I take the kids to San Diego and my sweet parents told me that, you know, I should take them somewhere where we do much activities, of Lego lands and all the things. And I’m crying in between every ride, trying to like picture this like, am I gonna work? Am I gonna? And I was just kinda like, I guess I’ll just stop and I’ll raise these beautiful three girls and just kinda, who knows? And so I get back and they tell us that what they found out was her cancer. They had put so much chemo in her that it was almost the analogy was that it like, if cancer is this hotbed, chemo is this like ice that goes in there and they just had put too much in it and they didn’t know. And so she has this immediate, you know, surgery, mastectomy, and she comes in the doctor and says, hey, this isn’t how it’s supposed to be, but three things need to happen. And she’s going to be considered cure, but we don’t know if it’ll happen. And I’m waiting in this room, and this is to kind of tie back the brain surgery, you know four by four walls, just waiting for her to get out of surgery to hear like, more or less, is she going to make it or not? Or are we kind of on a downhill slope? And I am listening to, you guys know United Pursuit, that simple gospel album. I don’t know, 10, 15 years ago. So before my brain surgery in 16, I was just listening to that nonstop, it like calmed me. And all of a sudden that’s what’s on my headphones. And it was such a blur over that time, I realized I was on the exact same floor in the exact hospital where my brain surgeries was. Listening to the same song, whatever that was seven years later. And there was a piece that like, I’m not one of those people I feel like I’ve ever like heard God visibly or any of those things, but this was one of these moments that I’m like. At a level of peace and then Dr. Carl within seconds and like, everything’s good. So we’ve been just celebrating that for two years. Wow. Holy cow, what a story, man.

Justin Forman Such a powerful story. How does your perspective of just everything else change? Like, I mean, you’re stewarding a business before, you’re steering a business after. What’s the BCAD kind of version of how you steward a business, after going through things like that?

Travis Penfield Yeah, I think, whether I wanted to admit it, I think that maybe a lot of entrepreneurs out there, it is so easy, even as believers, to make our business our identity. And it’s such a sneaky thing. It kind of reminds me of that old Cast and Crown song that says, it’s a slow fade. So it’s little tiny things every day, where you come home a little later, or you answer that email instead of being with your kids at dinner. It’s these little moments that we let the business become our identity, And, um… Man, I think that since that happened to her, my, the post, I guess, mindset in running the businesses, if the business doesn’t make it, it’s okay. If the business, doesn’t hit that growth goal, it’s OK. Whereas before, if it didn’t, it would just ruin me. And now it’s like, no, cause I’m going home to my bride and I’m just gonna be able to see her and talk to her and business can go up down. I could just not even have a business and I got it. I got what I wanted in life and the Lord has given me this beautiful woman. And so, yeah, I would say I feel more grounded. You know, Timothy Keller has that counterfeit God’s book where he talks about all these idols. And I think that for me, post her cancer, I think I was reminded again, last time I was remind of it was that brain surgery. It’s like, dude, I’m like an idol factory. And I the biggest one that I struggle with is approval of man. And I that what’s kind of gone away since that cancer is like, You start to just realize who’s for you and who’s not. And you start to just realize that like, life can’t be for others’ approval, because you can get one call and be taken out for four, six, seven months, which is I was taking care of my daughters as, you know, she was going through her journey and like, then you’re just not working. So if they think really highly of you or not, like you’ll never fulfill that, which gives you the approval in the first place. So stop chasing it. And that’s an interesting by-product that I would have never guessed from a cancer battle.

Richard Cunningham Man, I feel that deeply. So talk about the business. You’ve got the 49 logo on, 49 Financial, 2012 start date right, you’ve got this epic naming story of Ecclesiastes 49, but give kind of the audience a little bit of a lay of the land of what you guys are doing. You’re in the human services business, financial advising, and it’s an incredibly well-respected shop here in town, so we’d love to hear some of the backstory.

Travis Penfield Yeah, well, I mean, what are we trying to do in an industry? We say that we’re trying to become the Mayo Clinic of Finance. And we haven’t gotten to publish that yet, because turns out Mayo Clinic won’t let us. Shocker of the year, everybody. So if you know anyone there, if you just introduced me, would love to have that. So that’s more of an informal listeners out there. It was informal. This is our informal mission statement. And I so admire what they did. You think about it, like they more or less came together and said. What if we were to accomplish and tackle the most complex issues in health? And they just started years ago and just said, how do we keep bringing better and better experts? And how do continue to have a training hospital to have more and more doctors that learn under those experts? So I’ve just always loved the model, have some personal experience with it, and it’s wonderful. And so, if I think about what we’re trying to do, I’ll put it in a simple three things. So I think our industry, um is still stuck right average age is upper 50s and almost all of them white and so quite quite literally like this industry is Old white dudes behind mahogany dust still i’m in the industry for 12 or 13 years still the same dudes They just lost hair like it’s unbelievable like we can’t get women We can’t give minority we can we can do these things and it’s just kind of makes me mad Especially having three daughters. I’m like this ain’t right like I gotta try to do something about this But I think the problem also is like The industry is so old that everyone is scared to death in the halls of our industry of technology. They’re all, oh my gosh, they’re gonna take my job, they’re going to this, they are AI, and they’re also scared. I’m like, you can’t be scared of that stuff. Like you have to create an organization that can adapt to it. And so what we’re trying to do is three things that we believe over the next decade or two is going to keep the human side of financial services, right, the human of advice giving alive and well. The first is we want to handle more complex issues. And so we started as just advisors that were just giving advice. And now we’ve moved into estate planning, high-end charitable giving, doing all the trust and wills, doing their entire family office. Why? Because when you’re doing all of that, you can handle a lot of complexity. The second is more services. I think that Amazon has taught us all as a consumer that I love the fact that I can click a button. I don’t go to Target. I don’ go to H-E-B. I don’t go to any of these places because I can just get it all from Amazon. And so the idea is. If you can create an organization where when someone says I’m a client, they can get it all done for them, right? It’s like, my home and auto insurance, like when was the last time you met someone that knew what their home and an auto insurance meant? For real, like what does this umbrella mean? What do you give me a free umbrella? No one knows, right. And so the idea is simple. It’s, like, how do you get as many, we call it like the hub and spoke model. How do you do as many spokes and you be at the hub of that to where a client says like, how do I just work with them and they do everything? And then the third one, right? If more complexity, right, more services, that third one is more community. And I think what we’re seeing is post-COVID, our industry has turned very Zoom friendly. That’s great, right. The problem with that is what we’ve seen from clients is they’re not getting that feeling of community anymore. They’re not get that feeling of like, I like to do a review on my situation because I can’t wait to hear how that person is doing, right, and how this team is doing. And so I think that if we can accomplish those three, You know, we may just get Mayo Clinic to sign off and say that we’re the Mayo Clinic of Finance.

Justin Forman So when you say community, big word in the church, right? Yeah, no doubt. Like, says everything means something. Something, thank you. Okay, so when you talk about community and that, is it community more of like, hey, with your team, or is it with each other? Great question.

Travis Penfield So Clesiasi is four nine turns out that’s what the name comes from right two are better than one you get a better return For your labor woe to the person that falls that doesn’t have anyone to pick them up And then a cord of three strands is not easily broken So it’s kind of like I’ve thought about renaming it to 411 financial business doesn’t sauce clean You know, I mean for nine through and I like that people still think I’m a football player for San Francisco, but But like, you know, it’s interesting because As we think about this idea I think that people struggle with this idea of a team that can help you internally, but then also because they’re so happy together, invite you into almost a familial type experience. And so I think in 410, where it talks about that woe to the person that falls, like clients, and I think the thing that’s out there for them is many people can do a plan to plan for your goals, right? And like, I hope people can, I think JetGBT can do that, Like, don’t tell my advisors, but. Um, you know, it’s not bad, you know, but what’s different, man, when someone passes away, when someone loses a job, when the business doesn’t sell for what they thought, um, when, when when someone has a parent pass away and the estate plan wasn’t what they thought or whatever it is, right? Like when people feel like they have fallen, I think that’s what I mean by community. We’re the hand to pick them up. And I think an internal and external, and I think a lot of that’s just because you’ve heard my story like I was the big old ego, you know, like, I can do all things through Christ, you strengthen me, emphasis on the eye. You know, it’s like, it was just not as a kid and you know whatever, but I don’t know man, like we are going to fall, whether it’s a financial plan, whether it is in life, and can you have a community that’s like that’s when we jump in. Like almost the type of love we wanna exude is one that says, I expect you to fall and that’s not the time that I say. Something’s wrong with you, or like our relationship’s off. It’s like, knew it was coming, this is when I come in even more deeply and more intentionally.

Justin Forman I think there’s such a gap of like, again, in the defensive industry, like protectionist mindset, you’re missing the opportunity to really switch the value proposition of like really what you guys are about is trust. You’re selling trust. You’re a selling trust, you’re a guide. Like the days of technology being able to give us data and plans are here. Like just accept that. Now the question is how do you coach and guide people into that right position? I think what there’s that scarcity mindset that keeps us into the old way, but like the new way. I mean, candidly, yeah, it’s messy, life’s messy. But it’s the thing that fills our heart. Like if you’d say like, and as an advisor, like, hey, you don’t have to be the Excel master and this, that, and whatever, and performers and spreadsheets, but you can really be about helping people. I think in some ways, like that’s the same thing, whether you look at the church and pastors, they didn’t wanna run bank statements for a church. They didn’t want to run this and that and HR policies. They want to be about teaching God’s word and helping people, And how we put technology into its right place and to recognize how it frees us up for relationship. We’re missing it and we just, yeah, I don’t have a landing point as other than we’re missing the value trade that’s I think a trade up than a really a trade to hold on in the past. Totally agree.

Richard Cunningham So you’ve got to talk about the business a little bit in terms of number of advisors, the number of families you guys are privileged to serve, and this unique model that you have that you want a young team as you’re kind of raising up the next generation of advisors. I know you’ve gotten some wise old sages on the team as well, but you’ve purposely built out a youthful model that 49 can be something that lasts beyond. And also there’s just this transition you’re talking about of advisors are aging out just kind of systemically as an industry. Yeah. And also talk about the… Longing for next-generation clients who are the inheritors of wealth or stepping into wealth themselves who want that values alignment when they sit down across the Table from someone who’s providing that trust and that river guide type experience

Travis Penfield Well, brother, let’s start with like, I get asked it all the time, because our industry is all but given up on the 22 year old. I mean, it’s just not happening anymore. And people are always like, why are you doing it? And why are trying to do it at scale? Is that not the hardest thing in the world? Because you’re having to teach them how to like, answer an email without an emoji, you know, let alone financial services. And I’m like, no, you’re right, right? It’s true. Like we got-

Richard Cunningham Big emoji.

Travis Penfield Well, there you go.

Justin Forman And i think we do some training and i’m not going my space in the game is complex because uh… Goodwood

Travis Penfield But yeah, so like, I think for me, like, my heart and why 49, as long as I’m around, is gonna be for the young person is, you know, we, if you think about us human beings in America, like if you’re blessed to go to college, you’ve been living your life in approximately four year segments, right? You do like your first four or five years and you’re just like a little baby. And then you got your elementary school, then you’ve got your middle school, then you get your high school, then you go to your college. We’ve been trained in these almost four-year segments of, hey, four years, and then you get to here, and you win, and you get to advance next level. It’s almost like a Super Mario game. You know, it’s crazy.

Travis Penfield And then all of a sudden at 22, I felt this. I get out of school and now all of the sudden, I’m working at this big consulting firm, really successful. And I won’t use any names whatsoever, but I’m now in this like identity crisis. Cause I’m like, what’s the next four year thing? Like at 26, do you win a prize? Cause like my parents said that I’m great, even if I lose, right? I’m a millennial. For us it’s the first born. Yeah. And so What was so interesting, so I’m on this flight and we’re going to Amsterdam for this client. And we’re in line and true story. One of these higher up people, he says, hey Travis, I see that ring on your finger. And he points down at it and he says could you take that off for me? He goes, where we’re going and like, what we’re gonna be doing, I think that’ll be uncomfortable. And when we got there, I learned and your mind can go where it needs to go of things that were happening. And then I got like ostracized, I got, like, what are you doing? You gotta, you know, client’s always right. Like, why are you not partaking in some of this stuff? And I was like, man, if I didn’t have my faith, if I had to have this awesome bride of mine, I’d have done all that stuff. And then, I’ve just been another person on the path. And I started to think about that as I came home on that long flight back. Man, I wonder how many people at my age right now are gonna say yes to that. And that’s one of the first steps for the rest of their life to two or three divorces, kids they don’t see because they claim to work and that’s why they don’ see them, like all these things that I was hearing. And so when it was time to like start something, I think my heart was around this idea of, could we be the place that, I don’t know if they’re gonna make it at 49 or not. I mean, our average retention in the industry is 9%. Odds are good, they won’t. And while we’re four or five times that, that still means, right? Like half of them won’t, so my aim to the company is, if we’re really looking at it from the ministry perspective, like if a lot of them aren’t gonna make it, did we set them on solid ground to launch them into the next 40 years because it’s not a four-year play? Yeah. And I think that that’s, man, that’s what inspires me. That’s what I love. Uh, if you come in the halls of 49, you’re probably going to get a training about, um, how, how do you, uh, you know, make your own personal values versus financial planning at times. And, and it’s because like, these are the things that they need. Um, so I can, I can go into more, but I think that’s the passion of it.

Richard Cunningham Yeah, well quickly because I just the the scale you’ve achieved is so amazing. How many people are on the team?

Travis Penfield Yes, we’ve got 200 advisors and then it takes about 50 or 60 staff operations to run the business. And then, yeah, I mean, our big goal, we’re just launching Minnesota this year, so we’ll be in 10 cities around the country, Los Angeles to Atlanta, all these places. And the biggest thing that changed for me is, pre us going independent in 2019, we were working on the umbrella of this large insurance company. And, you know, we had gotten that group up to 350 people. And so much better than even what we are today. And you may ask him like, why don’t you just go do that again? Well, there’s two things that the first was effectively like we could hire people there, give them a shot. And there was not a lot of expenses to that because we’re a part of a master organization, right? So there’s a financial component we’ve had to really like dial in because there’s lot of costs to bring on a young person that doesn’t produce revenue for some time, right. That’s just business 101. But I think that the second thing that we’re seeing is When these people then do come on and they do want to be served and they want to work for us, I think one of my mistakes, I don’t want to go over Greg because I think the Lord kind of used it, but during the first seven years of building this thing, my favorite question for someone to ask me was what you just asked. It was my identity. Try to say how big is 49? And I was like, oh, I’m getting affirmed today. And I’d always answer it and they’re like, oh my gosh, how do you do that? You’re just this young kid and all these things. And I was always like, I have self-worth, you know? And I wasn’t mature, man. I had faith, but young faith. And I think this version, what we’re trying to do is say, can I answer that question and still say, I do think we’re on this race to a thousand, race to 10,000, all these thing? Yes, I believe we’re that path. But do I value that quantity as first place or do I evaluate quality? And I think for seven years, we value quantity over quality, if I’m honest with you. I think that we were, and in my own kind of immaturity, maybe more obsessed with the number, the development. And now we flipped it to say, no, no no no. We’re gonna track the retention. We’re going to track what is each advisor doing in success, and that’s what we’re gonna look at. And then if we can build the models and still keep the quality to get the quantity, great. And there was this wonderful mentor. And what she said to me is she had worked at Netflix and she said that something that they figured out when they were scaling and growing was this idea of a path versus a race. And she said, you keep saying like, here’s the path to a thousand or path to 10,000. You have these years that you baked them out. She said, make it a race, you know if it’s gonna be in three years, could happen in 10 years, 20 years, but the race is on, but you have told your firm, you do not care if it takes you many more years if it stays high quality. And I think that if I look first seven years, kind of last six years of the business, I’m just so much more proud of the businesses. You know, but I don’t get to answer that question with as much like, it’s not as cool. Yeah, it is not as as cool as it used to be. Kind of stinks, you know, I’m like, I want to say a thousand, but I think it’s ready for that. I don’ think we could develop them properly and get to a thousand.

Justin Forman Any time soon. So I want to jump in, it was something that we were talking about earlier is like this idea of, and you’re hitting on it in a business sense, and obviously God’s taking you guys through a lot as a family in a personal sense. Sometimes we think that the life gets easier, the sky gets clearer, it’s easier for us to integrate our faith in our work. Has that been the case for you or do you find yourself like kind of more in like the using your Mario Brothers kind of analogy like leveling up? Kind of is that.

Travis Penfield Brother, I think I’m the exact opposite. I think that when I was younger and more naive in all these things, I think there was actually a little bit of a beauty in that because I did have that childlike faith in a sense in business. And this is something I don’t think people talk about, but like the young entrepreneur that’s a believer, I think they’re such thing as childlike CEO faith. Yeah. Because you just like get and you’re like, you know what everybody, let’s stop the meeting. I’m gonna pray for this person. And you just do it. Like you’ve never heard of like this HR person coming in your ear and like, you know, that you could get sued for that one. And you’re like, Oh, I didn’t have a clue, right? Naivety. Oh, it’s amazing. Yeah. And it is childlike. And I think there’s a beauty of that. And so, you I think that for me, I have found myself especially over the last couple of years, now that I’ve been quote unquote, well educated in business and HR and all these things. I don’t know if I’d go as far as saying I’m scared, although you can call me out on that if you think that that’s true, there’s something in me right now that doesn’t do it with the same level of. Kind of almost like flippant, boldness, because I’m just like, well, yeah, I want to talk about it. That’s important to me. And so I don’t know that I have an answer, but I do think that it’s something that, you know, I’m 36 years old, just turned it, you know a week ago, like the 30 something year old, like we need, we need maybe it’s in your podcast, like some folks here, but like, we need older and wiser people to tell us like, so how do you do it when it starts to get successful, when it start to get more corporate? Because startup, I think it’s really easy to do. He’s gonna speak from your heart but uh… I would say i’m struggling

Justin Forman to find that balance today.

Speaker 6 Yeah, interesting.

Justin Forman We’re definitely in that how moment. And we’ve talked about this a little bit before on the podcast is like the last 20 years, we’ve just seen an incredible thing that we can look back and say, God has been at work. Yeah. He’s affirmed people understand that their faith and their work matters. Their venture is not theirs. It’s to be used for something bigger than themselves. But we’re stuck at the how. We’re stuck in the how of like, what does this look like? Whether you’re winning or you’re losing, whether you’re going up or going down or going through that season. But we are in that, how moment where we’re getting really nitty gritty and we’re being practical. And I think it’s an encouragement and a challenge for the movement is please make sure you share your struggles. Don’t just share your wins. Because like, yeah, great. That’s nice and up and to the right and you got a bow on it. But like, tell me the struggles because that’s where the real innovation for the next breakthrough happens.

Travis Penfield Yeah, it’s funny you say that. In our journey, obviously, folks that have cancer or anyone that’s got some brain issues or any of these types of things, we’re kind of a place that they come to talk about. But I do think there’s still a lot of things in business specifically that, to your point, it almost doesn’t feel safe to do that, right? Because there is, I still think this like, and this would be kind of like my shout out to all the successful older entrepreneurs that are looking at young dudes like me to mentor. We still really want to like make you proud. Like we still want to put up the results. We still want do these things. And so it’s difficult at times to tell them that. And so I think that, I love your podcast. I love what you guys are in here, because I feel the space is free for that in this moment. And I just don’t know that we talk enough about like, as the younger person usually in the room, I’m kind of reading the room to say, is it safe to do this? You know, and is it okay for me to just tell you all that You still want to mentor me. You know, I don’t know, I don’ think that always happens.

Richard Cunningham One of the things I want to commend about you is, I mean, we were hanging out pre-podcast just talking the number of times you said the word mentor. You referenced the people in your C12 group, which by the way, you are in the most stacked C12. Dude, shout out Mike Sharrow. It is unfair. It’s the all NBA team of all time.

Travis Penfield And then you got me little bugs bunny. Just trying to try to make the squad everybody

Richard Cunningham We need you to go just invite all of them onto the Faith Driven pod for us, so everyone can hear these stories. We got a couple of them. I haven’t even been here this much yesterday. Yeah, that’s true. They’re legends. We’ve bothered them all. But that’s just one area I want to commend you, just how much you’ve talked about the wisdom that’s gone before you. Hey, being the Faith-Driven Investor side of this podcast, as we get to do releases as FDE and FDI, selfishly I have to take us in this direction. I mean, 49 helps families shepherd a ton of capital. Yeah. And on that faith-driven investing front, where are you seeing the space kind of going? What are you encouraged by on this kind of values-driven front? How you all are approaching that conversation with families? Is it coming inbound to you all a lot of people saying, hey, I want a better line faith and investments? What is 49 kind of doing on that front?

Travis Penfield You know, what’s interesting is, and I’ll give God the glory on this one, it was probably four years ago that I told you about like the big three, like I wanna do more complex things with the business, more services, right, more community. And one of the first things when we said like, what’s another service we could offer the client, you know, NCF, National Christian Foundation, friends of ours, right? I started having a lot of discussions with them about like, so what do y’all do? And we get, you know we get deep into charitable trust and dafts and foundations, all these wonderful things. And I’m like I’m gonna go do a bunch of trainings for our advisors and let’s see what happens. Like, let’s if we can be the place that people know when they come to that you’re gonna hear just as much giving advice as you are about suiting your money and making it grow a certain rate of return for your retirement or whatever. And so we launched it and man, it is, I will tell you, I think that there is a hunger out there for, if you’re a financial advisor, listening to this, like, really, it really would press you into So, make that a part of what you talk about. Because the amount of times that people will, you know, you’re like, so can I just ask you, like, what do you give in a year? It’s like one of two places, right? It’s either like, well, I’m making all this money and, you know I’m doing this much and they have this shame, right. Or it’s like, man, I’ve given everything, like it’s amazing. And you know we have this opportunity in our industry, right, as like pretty much guiding investors, right, to have one of the more intimate dialogs, you know that almost any profession will have. I have somebody. And I cannot tell you how many times we’ve been able to help them understand giving, help them understand like, how could they actually make it work in their plan? And I think one of the other things that most people probably know is like, yeah, you get a deduction, but if done right, you get to save the capital gains tax. And so one of things that like is a coin that we have and I know National Christian Foundation, I think coined it themselves first, but it’s this idea of can we turn tax dollars into giving dollars? And I’d have to get you the exact stat, but I know it was over nine figures last year that would literally have gone to the federal government, which, you know, pay Caesar what Caesar’s, I’m not saying that like we shouldn’t pay our taxes, but like to do a plan that without us existing, would have just gone to government and next time you go down a road and there’s a pothole, you’re like, dang it, I paid for that to be fixed. Versus, you now, all of that money, then us saying, hey, this is new dollars. What do you care about?

Richard Cunningham Yeah, it’s so cool.

Travis Penfield That’s what I think is getting to be way more passionate, I think, for us than even just the financial plan in some ways, because it sure fires them up.

Justin Forman Yeah, and again, it goes back to the early side of like, if technology can take care of some piece of the puzzle and it frees you up to be more intentional in that, I mean, what’s the thought of just, what is the role of that advisor? When we think about who are the pastors of the marketplace, I think it’s the entrepreneurs. As much as the pastors are the conveners of the pastors in the marketplace and they equip and they affirm and they send out, but there’s an incredible emphasis there. When you talk about advisors, I mean, yeah, you’re gonna hear a sermon on a Sunday morning talking about giving and generosity and importance. But imagine if you can come to the plate and somebody knows the theological perspective and the practical side of things. Pastors of the marketplace and the role that advisors play is just tremendous. Not just today, but when we think about the optimism in the next decade or two, this is where that battle lines are. This is like having that conversation and saying, okay, I’m used to hearing one or two buckets, but how do I do this in a God-honoring, faithful way? To plant the seeds but or to bring the seeds of a conversation to bear. Yeah. I think it’s just it’s a reimagining of that and it’s a beautiful thing that I think is on the verge of happening.

Travis Penfield I mean, I think I cannot agree more. And I will say like this next generation, because we hire a lot of young people, I think that as you talk about the next 10 years or 20 years, I will whatever you wanna say about the generation, good or bad, like they’re hungry to learn. Like there is more desire than, you know, my millennial group, right? And so I do think that there is a readiness. And then on the flip side, the bulk of our clients are over 50 years old. You know, I mean, most of them are 55, 60, you know, of course, that’s kind of the business run. I cannot tell you how many of them need to be told. You spent 30 or 40 years learning your craft, learning wisdom, learning all these things. Yes, I’ve said mentorship, because I still think that’s it. Like if every single person, like said, I’m gonna mentor three young people this year and that was their goal, we may change the doggone world, right? But it’s just not happening. And sometimes like you gotta ask the young kid, they don’t even know what a mentor is. Like I did a training one time at Forty and I said, Everyone, define for me a mentor. You sure heard their responses, right? But we don’t know what we’re doing. Like it’s all just learning from those that went before us, but I don’t that that’s happening as much, but I can feel it rising.

Richard Cunningham Travis has been awesome. Loving this. Maybe to close, kind of bigger question type, if you will, but just, you know, what are you most passionate, fired up about, thinking about the most right now as you’re building in Scalent 49, caring for a family? I mean, what’s just top of mind for you right now is build this business.

Travis Penfield Yeah, I think there’s a personal and there’s professional answer to that. So if I think about what I wanna be involved in over the next 10, 20, 30 years in the industry, I want to be the team that bridges the gap of the trillions of dollars that are being managed right now by the older advisor, right? That’s sitting out there and 40 years, they’ve been loving these people, it’s amazing. But their only offer right now is to either sell it for a bunch of money and then not talk to the very people they want it to. Or stay on and keep hearing from the client, like, what’s your succession plan? Like, I’m getting nervous. And we have all these amazing advisors out there that they don’t know where to go because the options are not right. And they sure don’t like, is there people that agree with my values that will like hold tightly to these clients and love on them and steward them because I’m not gonna be here. And I really hurt for those people and I’ve met so many of them now. And then the young person, we need to do something in this industry to keep them coming in, develop, train. I get it’s the hardest work. I get it’s the work that no one really wants to do anymore. I get all the things and someone has to do it. And so I think as I think about in maybe a paragraph, like what do I hope happens over the next 10, 20 years, I think it’s this combination of, can we unite all of the older generation and younger generation to work together, but do it where we take this Amazon approach, this Meo-Khun-Kun finance where we say, we’re gonna bring a version of a family office to the massive fluid. Which is an offering that’s never been out there, right? I mean, family offices existed for the hundreds of millionaires, billionaires forever, but we are in the works of getting that to the mass affluent. And if you get all the old, all the young, and you have that offering, I think that we could shake up the whole industry. And to y’all’s point, use tech as a best friend. Absolutely, right. And so I think it’s everything I get excited by and I can go through all the different things. I think we’re up to like nine different companies we haven’t talked about that isn’t just 49 trying to combine them all to do it. It’s gonna be super exciting. But on the personal side, you know, the prayer is we got three years left for Jacqueline’s five-year journey, you now, post-cancer. And it is just every day, it’s how do we get to that? And I don’t have it right, but I’d say our prayer nightly together is, like, Lord, how do look forward to that day where we can celebrate that it has been five years and this monkey’s off our back, but then enjoy the moment? And that’s, I think, very difficult for us. And so if you like. What am I getting fired up by? The simple truth of like a six, five and a three year old daughter is looking at their dad to lead right now and a wife that’s two years removed from cancer. It’s got another three years for this recurrence. How do I lead in that moment us to have an unbelievably fulfilled, beautiful life serving the Lord, not in fear, but in a place of like Lord of Cheers anyways, like anything can happen. We’re all one phone call away from our life completely changing. And I think that I want to live in that. Not in fear, but in a, let’s just enjoy the moment. Let’s enjoy the days we get and hopefully lead them in the way that the Lord’s called me to.

Justin Forman What a gift. Grateful for the way that you open your story and allow us to kind of journey with you and just the joy, the sorrow, the pain, the beauty, the brokenness as you were describing earlier, just what you guys have gone through. But sharing that and allowing people to see that shadow of a leader and just to being able to say, okay, what does it look like to follow in that is really beautiful. So guys, it’s always good to be with you. If you’re hearing this and you are feeling like you’re alone on this journey, let today be the end of that. Take a step. We’ve talked about faith-driven entrepreneur, faith- driven investor groups. This is a chance just to be known, to begin that journey. It’s a place where online or in person, you can begin that conversation. We know that it never ends. There’s many seasons, many chapters to it, but we would encourage you to check those things out. Take advantage of that opportunity to begin that conversation with friends who can understand you and what God’s doing in your life. Always great to be with you. We look forward to seeing you next episode.

Outro Come for content, stay for community. Join a faith-driven entrepreneur group online or in person. No cost, no catch. Visit faithdrivenentrepreneur.org. That’s faithdriven entrepreneur.org

Richard Cunningham [00:00:00] 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.

Intro [00:00:17] 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 [00:00:46] Welcome back, friends, to another episode of the Faith Driven Investor Podcast. It is the month of May, which is pretty hard to believe, honestly.

We’re talking marks on the markets. I’ve got the one and only John Coleman with me in the podcast studio. John, we’re about to say hey to our guest, Deirdre Gibson. Before we do that, how are you, man? What’s new?

John Coleman [00:01:03] Richard, never a dull moment in markets today. You know, there are quarters where it’s like super relaxed to be an investor and there are quarters where its not.

And we’ve started talking about this all year, but at least we got plenty of commentary for the Marks on the Markets episodes, Richard. I feel like we’re never gonna be at a loss for content.

Richard Cunningham [00:01:22] No doubt, 2025 has brought it. Trump 2.0 has brought. We hit it last time in length with Bob Doll when we were doing Marks in the Markets with our tariffs. And we’re probably gonna get into a little bit more of that today.

I know you’re well briefed on the subject, but just for listeners out there, we’re gonna get in to a lot of the market stuff on the back half of this episode. Deirdre Gibson’s here as well to provide some market commentary. She’s from Praxis Investment Management.

But before we do that, Deirdra, you have done a couple of really cool things lately that we wanna get into in terms of a talk at KA, some of the research coming out of your firm at Praxis. But before we go anywhere there, how are you welcome on to the FDI pod? What a joy to have you with us for your first official Faith Driven Investor podcast.

Deirdre Gibson [00:01:58] Well, thank you. It’s absolutely a delight to be here.

Richard Cunningham [00:02:01] Awesome, and you’re coming to us from Denver, kind of Littleton, just somewhere outside of the Denver area.

Deirdre Gibson [00:02:07] Yes, Denver, Colorado, the southern suburbs to be specific. Yeah, so I’ve got a fantastic view of the Rocky Mountain Front Range outside of my window as we speak.

Richard Cunningham [00:02:17] Not bad. Not bad and then your job title says you’re an ETF specialist and one of the national sales directors at Praxis. So I think you need to set the record straight for just everyone out there. Can you tell us in layman’s terms the difference between an ETF and a mutual fund?

Deirdre Gibson [00:02:31] Oh, yes, I love this question in part because for so long, I worked in finance or finance adjacent and I, I thought really that ETFs were basically just another kind of mutual fund.

So it is kind of in the name, right? You start with the fact that they’re traded on the exchange. Okay, why does that make a difference? Well, if you’re buying shares of mutual fund, you hand over a lot of cash will pretend it’s a lot of cash. And that mutual fund manager has to do something with that. They’re gonna turn around and buy some of the shares of the underlying stocks or bonds or whatever’s in that mutual funds.

And likewise, when you wanna sell out of your mutual fund, they have to turn and sell some of underlying shares typically. And especially, you know, when do people wanna sell out often when things aren’t going so well. So you’re often, it’s not such a great time, but all of those buying and selling transactions are taxable transactions.

Whereas, with shares of an ETF that are on the exchange, You know, it’s all secondary market. Everyone’s buying and selling from each other and from market makers. And all those shares are put there by a third party. It’s called the authorized participant, the AP.

And that third party basically puts together the recipe of the stocks or bonds or whatever’s in that ETF. And they trade it to the issuer in exchange for a bunch of shares of the ETF. That trade isn’t taxable. And that allows portfolio managers to do all kinds of things to really avoid those tax implications.

So there’s tax benefits, there’s liquidity benefits, there’s transparency benefits, which I think are super interesting from the point of view of a values-driven or faith-driven investor that you know day by day exactly what you own and how much of it.

And then, you know, a fourth one that ETF folks don’t often talk about, but that’s kind of close to my heart is that… The minimum investment is a share, or for some ETFs on some platforms, a fraction of a share.

So, you know, if you’re opening up an account for your kid who’s got $5, they might be able to get a diversified portfolio on day one, which is pretty special. I think, you now, I have a heart for people who are trying to get started in investing, and you know I think that’s not often who the industry is set up to help, but I think it should be, I’d like it to be, and so that’s one thing that I like about ETFs just for myself.

John Coleman [00:04:42] Yeah, what’s interesting, before I joined Sovereign Capital, I worked at a big firm called Invesco for a period of time, and when I first joined, the ETF was already pretty cemented. This would have been 2012.

We had bought a firm called PowerShares at that time, which just became Inveso ETFs, and the ETF structurally just has so many advantages, I think, relative to the mutual fund structure. I know both kind of coexist today.

You highlighted it, the liquidity. The ability to create new ETFs at reasonably low cost that can index the market in different ways or provide different perspectives on the market. It’s just become a really flexible financial instrument that the average person can access that can create differentiated exposures that would have been really challenging, I think, in the old model and can often do so in a less expensive way than a mutual fund could.

So it’s a super fascinating instrument. It has been growing like gangbusters for 20 years now, I guess. I’m interested to see how much room there is to run. Maybe you know, I don’t know what ETF penetration of public markets is today, and now there’s direct indexing and things, but it feels like it’s still a growing instrument right

Deirdre Gibson [00:05:51] Oh, for sure, absolutely. I think it’ll keep growing for a long time, especially because, I mean, you mentioned the flexibility and that’s another key difference.

You can put virtually anything into an ETF wrapper. And all of a sudden, regular retail investors, including, you know, your five-year-old with $5, can access options, alternatives, like real estate, all kinds of underlying commodities, futures, leveraged. I mean all kinds of products are available to the average investor that were not available previous to ETFs.

And I think that that piece is really going to grow, which of course, you know, it’s a double-edged sword. Because if you think that an ETF is just going to be your regular vanilla stock and bond fund, and you haven’t looked under the hood, even with these leveraged ETFs, you now, they have a certain timeframe to them.

And if you’re not rebalancing your portfolio on the same timeframe, it’s not like a 2X ETF is going to give you double over a month if their time period is meant to be daily. You really have to understand what’s under the hood when you’re looking at some of the hairier ETFs, kind of the spicy ones I call them, you know? Make sure, like, if you’re not ready for spicy, vanilla’s delicious, absolutely, stick with vanilla,

Richard Cunningham [00:07:02] Spoken like an ETF specialist, which I love. And so, Deirdre, that was actually quite a bit of the genesis of you coming onto the FTI podcast is a crowd that knows all about ETFs and mutual funds is our friends at Kingdom Advisors and the thousands of advisors that are tied up in that community.

And this year you gave a pretty seminal talk at the KA conference. And it was our good friend Amy Minnick who reached out to me and was like, hey, you all have to have Deirdra on the FDI pod. The conversation she led at KA was just moving.

And so I wanna give you a couple minutes to kind of just preview that. We’re not gonna spend too much time here, but we’d love to hear a little bit about you and just kind of that conversation you led at Kingdom Advisors back in kind of early Q1 of this year.

Deirdre Gibson [00:07:39] Yeah, it was such a privilege to do it. And I really appreciated actually that the team at Praxis, you know, I came and I said, I really want to talk about this is really top of mind for me. And they said, you go for it, even though it felt perhaps a little bit dangerous, which is perhaps I shouldn’t have because we were talking about the life of Jesus, like maybe I don’t know, is Jesus dangerous perhaps in a way.

But part of it is, you I’ve been in this faith driven investment world for years and years now and I think a lot of us, when we look at the Bible to try to figure out what does it say about money, we look it, what does the Bible say about money, obviously, logically, like that’s a normal thing. And there’s a lot to be gleaned from that. There’s a life that we have glean that from that, but I felt like there was also a lot to be gleamed from just looking at the life of Jesus.

And so what I mean by that is essentially in faith-based investing, there’s three verbs, three actions you can really do. One of them is avoiding investments in companies or products or activities that are antithetical to your faith, not aligned with your values, all of that, right? One of the is to seek out those companies that have extra impact and blessing on the world. And then one of them is to engage with companies to make things better.

And I think the easiest one for most people to understand is the avoid side. Like that’s simple. And it’s simple to practice. Many forms of it are simple to practice because a lot of times it’s just like, Okay, this is a cigarette company. The thing they make is cigarettes. It is a product that kills people when used as directed. Like, this a simple thing.

Whereas, you know, some things can be more complicated to understand it takes more analysis, more nuance. It frankly costs more money to pay for that analysis and nuance. So I think we head towards the avoid side. And actually this relates to the research you mentioned. So remind me, we’ll come back to that connection.

But I think that the engaged piece is really a lot of what we see in Jesus’ life. So the talk that I gave at KA really focused on Jesus engaging with the woman at the well, Jesus engaging the woman who was caught in adultery, and Jesus engaging with the women who poured out.

So there’s actually more than one woman who poured perfume on his feet, right? But this was in Luke, I wanna say chapter seven and eight. So John had sent his people to say to Jesus, Are you the one? And he had said, tell them what you see, you know?

And then afterwards, Jesus is talking, presumably to the disciples or maybe just to the people who are standing there. And he says, John came neither eating nor drinking. And you said, oh, that guy has a demon. I’m paraphrasing slightly.

And then the son of man came eating and drinking. And you say, he’s a glutton and a drunkard, a friend of tax collectors and sinners. And then the very next story Luke tells, he gets invited to the house of Simon the Pharisee and a woman, a sinful woman shows up and spends the whole time like weeping at his feet, washing with, you know, pouring the perfume, wiping with her hair.

And Simon is sitting there thinking like, what is wrong with this guy? He’s letting this sinful woman touch his feet and all this stuff. And then he sort of gently points out like, Simon, you were supposed to give me a kiss when I arrived, you didn’t do that, but she hasn’t stopped kissing my feet. You were supposed to give me water to wash with, but you didn’t do that. But she’s been washing my feet with her tears. Those who’ve been forgiven much, love much.”

And so it’s just like, was he a glutton and a drunkard? No. Was he a friend of tax collectors and sinners? Oh yeah, totally. Guilty as charged, if you can call that guilt, you know?

So it really started to speak to me about what it means for us to engage in the marketplace. And when it comes back to this avoid… Seek, engage thing, there’s only so much engagement you can do with a company you’re not invested in.

Like you can write a letter, you can put something in the news, but what are you gonna really do to change somebody’s hearts and minds? And is it really just like, we wanna change their behavior, but also I wanna change people’s hearts and minds for Christ.

Like I want them to know who Jesus is. I want to be encountering Christians in the marketplace behaving as Jesus behaved with this powerful love and compassion and grace. And also, yeah, the go now and sin no more, but in this way that’s not pharisaical, you know? I think he set the example, and I think there’s opportunity for us as Christians in investments to do that with our investments.

John Coleman [00:12:03] Yeah, for sure. I mean, Deirdre, one of the things we focus on, so, you know, in my day job, I work at Sovereign’s Capital, not always FDI. And our mission as a firm is to love God and love our neighbor through investing.

And one of propositions there is that the gospel is always more about what Christians are for than what we’re against. Like, you mentioned Jesus always engaged with sinful women. He engaged with sinful everybody. That was one of hallmarks of Jesus, So it’s not surprising that they were all. Sinful as well, and we all are, right?

But the idea is that the gospel is about how we help people flourish, how we love our neighbor, how we lean into others, and how Christians can be salt and light in a world that has struggles.

And one of the things that’s embedded within that, I think, is if all we do is avoid, we actually lose our seat at the table. We lose our ability to lean into that.

And so two things we’ve been focused on. One is how do we create investment strategies that actually highlight companies that are creating human flourishing, that are leaning into this idea of love of neighbor? How do we funnel capital to entrepreneurs and business leaders who have this gospel mentality in the way they work with others?

And then in the case of companies where, that’s not the case, where the leadership is different or where their focus is different, how do use our seat at the table through capital to speak into those, right?

We set up an advisory firm called Prosper Align, for example, that’s intended to do corporate engagement. And proxy advisory for folks and the idea is when you have capital you have the ability to influence people but Christians have often lost that influence and a story I love to tell is you know in 1971 the very first kind of activist investor in the modern era was when the Episcopal Church engaged with General Motors over apartheid South Africa.

So at that time, the Episkopal Church held something like 0.03% or 0.003% of GM stock, but they opposed that company’s operations in apartheids South Africa because they felt like they weren’t abiding by human rights.

So they did the shareholder proposal at a board meeting to try and convince the company to take a stand against the acts of apartheid South Africa. They failed resoundingly. They were voted down by all the other institutional investors. I think they got two or 3% of the vote.

But their only ally was GM’s lone blackboard member who just happened to be the pastor of a Baptist church in Philadelphia called the Zion Baptist Church. And his name was Leon Sullivan, and within a year after that, there was this movement to push all of corporate America to change its practices in apartheid South Africa. They actually called them the Sullivan principles after this GM board member.

And I think the church has lost that ability to kind of really speak into things, I think, in a constructive way where we’re offering solutions. And this idea that we can use our capital to engage, I is one that’s costless for Christian investors.

We have a voice by virtue of holding shares of these companies and our ability to then use that voice to try and put forward the values that we know to be true, the kind of values that we think Jesus would embrace, is a missed opportunity too often and one that is a huge opportunity I think for people, whether it’s investment managers or institutions or individuals now.

Deirdre Gibson [00:15:19] Yeah, absolutely. It’s so interesting. One of my devotionals over the weekend was talking about how Paul, speaking to the Greeks in Athens, I think, he had been walking around seeing all these temples everywhere to all of these different Greek gods, and he saw one to an unknown God.

And then when he was speaking, he’s saying, hey, you guys have this temple for an unknown God. Like, let me tell you about this unknown God, and this devotion was all like, it was from the dwell app, in case anyone’s wondering, really great app.

And it was really How he’s using this to build a bridge across, this bridge is something that other people can come across that could lead to their eternal life. That’s amazing. Let’s not lose that opportunity by coming in with hostility where there are bridges that we could build instead.

Richard Cunningham [00:16:03] And the model I’m always reminded of is I’ve got a good pastor buddy here in Austin, who says, man, I am jealous of the people who get to go to work every day. He goes, my chance to interact with non-believers and do this engaged Deirdre that you’re talking about is at the gas pump.

He goes I spend all day long inside the walls of a church talking to other Christians. And he goes, I just long sometimes to just kind of actually be out on the front lines. Powerful.

I just want to land the plane on this real quickly before we move on to that research. So what is maybe the practical application or how are you guys thinking about this or reconciling this? Because if the desire is to engage. What do we do with the cigarette company?

If we’re shepherding and stewarding other investors’ capital in the seats that we all sit in on behalf of other people and we have a fiduciary call, how have you thought about that Deirdre?

Deirdre Gibson [00:16:45] That’s a great question, Richard. I have heard some folks say, well, you should just own everything, but nobody I know has unlimited time and resources and energy to engage with all of the companies and perhaps not with all of the company’s on all of topics.

So what we at Praxis do is choose engagement themes and these themes last for multiple years. So my colleague, Chris Meyer is the lead engager in most of our company engagements, although our team is growing. So that may change in the future.

And he told me that it takes two years. Typically to build up that level of trust when you have a conversation going. And then once you have that trust built up where they know, hey, you’re not just pitchforks at the gate. You’re actually showing up. You care about this company.

You are invested in it. Your clients benefit from the company’s wellbeing, but you’re bringing to them these issues that are also risks for the company. I mean, that alone, like just having the patience to show up for a couple of years until the trust is built is really powerful.

Now, I had the opportunity to have an amazing conversation with Chris and also with an advisor who’s been thinking about these things really deeply lately on Friday. And a big part of the conversation was, how do you know, like kind of like you said, it’s a really important part of the process.

So we’d screen out a bunch of companies where like, we’re going to shake the dust here. This is not the time and place for us. You know, again, I don’t think we’re gonna convince a cigarette company to stop selling cigarettes like that’s. Not our jam. Maybe it’s somebody else’s, like, I hope somebody else is called to help them transition to hemp clothing or something, I don’t know. But for us, that’s not it.

And so we choose the themes where we can become experts, where we could partner with others. And so one of those themes has included the topics of child safety online. And I think a lot of us have seen some really shocking stuff. And it’s everything, right? It’s child sexual exploitation, it’s also bullying, It’s also mental health like there’s a huge mental health crisis among Gen Z And all of that stuff kind of falls into like, what’s going on with children and young people online.

And the conversation you were having with Chris, like part of the conversation, the question was being asked was like, at what point do you give up? As I’m listening to Chris talk about how he approaches this, and also as I’m thinking about my own background, which I spent two years as a full-time, like fighting human trafficking, that was my job.

And so I have like deep somewhere buried in my brain, a lot of stories I’ve really tried hard to forget, truly traumatizing stories about things that have happened to kids, to young people, around human trafficking and stuff like that.

And in my mind, like, well, there’s no world in which these companies stop existing or stop dramatically influencing. Our society and our future and the world that our kids are gonna live in. So like, I don’t want him to stop. I desperately want him to keep those conversations going as long as necessary. I wanna bring more people to the table.

For me, that issue, like, okay, with cigarettes, that’s a whole thing because they have practices of targeting children in third world countries where they are not sufficiently protected. But we can at least pretend to ourselves for a moment that people have a choice about whether to smoke or not.

But I don’t know that today people have a choice about whether to go online or not. Like that’s not how we can live our lives very much. Even Chris himself who lives on a homestead like he built his house with his hands.

So yeah, I hope that he never stops and I hope others join us because it’s so important that we have a seat at that table. Children’s lives depend on it.

Richard Cunningham [00:20:11] Well, thank you for unpacking that. That’s helpful framing. And now I want to kind of pivot into kind of speaking to Chris, the Praxis firm more broadly is this research that you all put out and this will be kind of our last topic before we go markets.

And it’s pretty staggering on just when we’re thinking about the financial advisor client relationship, something that you’ll dove into was the client’s desire to have these faith and values alignment types conversation with their advisors.

This exact thing we’re talking about, is it negative screening? Is it leaning in to engage? What is the advisor doing at the firm level to do such a thing and the client’s desire for that convo, but an advisor’s apprehension to have the conversation. So give us a little bit of the kind of the primer on the research and what you guys found.

Deirdre Gibson [00:20:50] Yes, yes. So just to set the stage, the survey was filled out by over a thousand individual investors. We screened for people who are actually making investment decisions in their home, either alone or, you know, with their partner. But everything else was, you know, a representative sample of the American public, right? And then 400 plus financial advisors.

And around, I think, 67% of the investors are identified as being religious or spiritual in which, again, that matches up with the Pew Research is kind of the gold standard of like, you know, looking at, at least among secular institutions, I guess, looking religion in American life, and likewise with advisors.

But here was the thing, and you mentioned it, in several different ways that the question was asked, investors repeatedly said, it’s really important to me that my advisor understand what my values are, understand what my preferences are, give me information, give me options about how I can align my investments with these. And consistently advisers. Underestimated how important that was to investors.

So in the ranges, I would say, of investors saying like 70% to 85% were saying that that’s important and advisors more close to 50% to 60%. But only 9% of advisors said they initiate that conversation. A third of advisors saying they never initiate that conversation. They just don’t have that conversation at all. Typically it’s the investor bringing it up.

And now here’s a really interesting thing to me. That’s more investors than describe themselves as religious. So faith-filled investors, but also regular people who just have values really want to see those values at work in the world. And they want to them work in their money. And that’s like something, they’re coming to the advisor for expertise and the advisor is holding back from giving it. So then the question is why?

Richard Cunningham [00:22:44] Yep, absolutely. That’s what was top of mind for me.

Deirdre Gibson [00:22:47] Right. So a best guess based on the data, you know, is that advisors really want to come up with the best financial solution. Like they are obviously, it’s their job to be concerned about the financial outcomes and they’re concerned that the faith driven opportunities aren’t as good from various considerations.

I think in some cases, that’s a misperception. And in other cases, I think it’s a mis-perception about what the alternative is, because And this was one of the parts of the research that we thought was really surprising. A lot of investors, if their advisor isn’t giving them these options, so investors are going off and doing this on their own.

Even investors who have a financial advisor are keeping money on the side and going off in investing on their on. And as far as we can tell, what are they investing it in? Sometimes mutual funds and ETFs and things that you wouldn’t expect, but sometimes things that they, they check the box private equity.

And it had a description that was like direct investments in private companies. And I don’t think that most regular retail investors have access to private equity, but I think they are talking about direct investments in private company, which could be small companies, like small businesses.

So I’m even wondering if it’s like, years ago, my friend Jonathan, who asked me if he should pull all of his retirement savings out of his, he worked for a ministry. He was very upset that they didn’t have any faith aligned options in their 403B. And he was like, maybe I should just pull it all and invest in this business in my neighborhood that’s doing these great things. I was like please don’t do that, Donovan. I want you to retire well and I don’t think this is gonna get you there. And so I wonder if that’s what people are doing, you know?

John Coleman [00:24:24] Yeah, there’s definitely what we find as we talk to people is there’s such latent demand for this, but often clients are very restricted by the platforms with which they operate with the financial advisors.

And one of the things I think that’s been most constraining is that the larger platforms in particular, wire houses, et cetera, don’t really allow their financial advisors the flexibility, at least on the investment side, to interfaith driven investing. Now. In terms of planning, in terms of life advice, I think there’s greater flexibility for that. I think financial advisors serve as coaches for financial decisions.

But the frustrating thing we see is people get fired up about faith-driven investing and then they go to their advisor and they’re at a wirehouse and they say, we really have no options for you. Or you can get in a Catholic screening fund that follows the bishop’s guidelines that kind of negative screens some of your public equities, but that’s it.

And so as people lean into the space, what’s the solution for that? Because institutions are able to move right now. Often they’re intermediated, but they have a little more discretion. Ultra-high net worth, high net worth individuals who are willing to go off platform have the ability to kind of allocate to funds, to investment managers that they’re fired up about.

But there’s this chicken and egg right now in the financial advisor community where most platforms effectively prohibit. Their clients from investing in things that are aligned with their faith and their advisors are stuck. They don’t really have the opportunity. So if they get someone excited about it, often their only opportunity is to go off platform unless it’s an independent advisor of Blue Trust or an Eversource or someone like that who is explicitly kind of faith oriented that has more flexibility as an RIA to get into those sorts of products and has a motivation to do that.

So what breaks that dam, so to speak, because most advisors do sit on broker dealer platforms or wirehouse platforms that effectively won’t allow them to participate in the faith driven investing movement right now. What’s the solution to that?

Deirdre Gibson [00:26:20] You know, I would tell those advisors, don’t be afraid to be the squeaky wheel. Don’t underestimate the power of your voice asking for those products over time because that is exactly what’s brought those products on board with other platforms.

And I think there’s a case to be made that clients at wirehouses are expecting the best. They’re expecting the fullest spectrum of the best of what’s available out there. In a lot of wirehouses, they know that they have the clout to make certain demands.

So speaking from an issuer standpoint, they can demand a certain amount of pay to play. They often require that you have a sales team making X number of phone calls and visits and emails to your advisors per year, which is hilarious to me, because I feel like a lot of advisors don’t really necessarily want that. But they call it product support. They want that product support, they want it shown that you’re selling the product.

And, you know, a lot faith-based Issuers are smaller, have a smaller sales team, maybe a smaller marketing budget, but that doesn’t mean that the product isn’t quality product.

And I feel like with demand from the advisor base towards the national accounts folks at the wire houses, I think that they would see that, hey, over time, maybe there’s an ability to bend those rules. Like a rule that you made is a rule that you can break in order to bring your clients the best of what’s available, including within the faith-driven space.

Richard Cunningham [00:27:45] Well, it’s important that you guys are putting out research like this because I think it’s this type of stuff that shows, Hey, there is a business case. Also, if you’re willing to be the squeak, we’ll be the advisor that hangs up a shingle and says, Hey we actually have a competency, a willingness to go carve out that opportunity for you. Mr. And Mrs. Client to gain access to the FDI space is huge.

It’s friends like Tim McGreedy. He were out there saying, Hey now I’m actually going to provide the research on the quality of the product. And then it’s issuers who are putting forth as we were just talking about. Excellent competitive product as well. And it’s kind of a multifaceted approach.

And I think we all just kind of pray that this is a tide that raises all boats. And so thank you all for this research. I think it proves a very important business case out there for advisors to keep leaning in.

All right, friends, well, in the time remaining, let’s make a pivot and let’s go markets. John, I want to start with you because you put out just this morning. So we’re recording this on May 5th. It’s a Monday. So I just want to make the disclaimer that anything we say today. Just given the speed and velocity of headlines and volatility that we’re experiencing by the time it releases on May 12th. Could be out of date here in a week’s time, but John, you put out a wonderful piece this morning, just a full-blown deep dive on tariffs.

And I think if we’re gonna have any type of market or economy conversation, kind of need a level set on where we are in the tariff situation. A lot of just kind of getting in the head of what is the Trump administration thinking, help us understand that and kind of set the playing field for us here.

John Coleman [00:29:01] Yeah, absolutely. So obviously quite a lot of my time today is thinking about tariffs and the impact on the economy broadly, as well as individual companies that we work with.

About three weeks ago, I put out an explainer on what I thought might be happening in the administration, what their goals were, and what tools they were thinking about using in pursuit of those goals.

I think what we’ve seen over the course of the last month, so Liberation Day was just about a month ago, in early April, Liberation day being the day that President Trump announced sweeping tariffs that were basically benchmarked against the trade deficit that we had with different countries.

So he has been a long-standing advocate that we should reduce our trade deficit, that we should try and re-onsure American manufacturing, both for our national security and for the benefit American workers, and that’s something he’s been talking about for around 30 years. So this was part of the campaign promise, but I think the scale and speed at which he tried to implement these tariffs and how aggressive they were was probably a surprise to many people.

So in the intervening month, what we saw was financial markets initially took a heavy dive. They went down quite substantially. They’ve actually returned to above their pre-liberation day rates right now. So the stock market is back up where it was before liberation day, But there continue to be a lot of concerns about the economy.

And what I might do is just lay out some of those concerns, lay out what I think the Trump administration is trying to accomplish. And then what I wrote today that Richard is referencing is what I think might be a soft landing for the American global economy that would help to achieve the Trump administration’s goals, but do so in a way that’s not economically damaging.

So what we’ve witnessed over the course of the last month is a worrying set of factors that are playing into the economy. First, the stock market was down and then it was back up. But the stock market is really just responsive to underlying economic principles.

And I think what everyone is watching right now is whether the tariffs create a greater possibility of recession, both because they slow down general economic activity, but also because they negatively impact American companies.

So if you’re a small business and you source 80% of your goods from China Suddenly, the cost of those goods went up 145% overnight, with some exceptions, right? If you source your goods from Italy, those might have been just stopped in port, at least they went up 10%. Some of these foreign suppliers are rerouting their shipment, so there’s a real danger that it causes an economic slowdown.

As a response to the tariffs, many foreign governments and even domestic participants began to sell off treasuries, so we saw rates going up rather than decreasing, which was, I think, the policy outcome that the administration wanted.

And tariffs are inflationary, right? Meaning that if you raise the cost of goods because of their input costs, because of tariffs. Naturally, those prices go up, that’s inflation.

And the problem is if you get in a situation where you’ve got inflation, you’ve got a general economic slowdown, you got rates rising, and you have the economy kind of in a state of dysfunction, you get what’s called stagflation, which is actually what happened to Japan for about 20 years that basically killed its economic growth. And so I think that’s been the concern in people’s minds.

The Trump administration seems to be fully aware of that right now. Scott Besson has taken to making public comments that are trying to ease some concerns. President Trump has done so as well, which is one reason I think markets have recovered.

And I think in the intervening month, we’ve gotten greater clarity in what they’re trying to accomplish. And I it’s four things, primarily. The first of those is, as I said, President Trump wants to reduce the trade deficit, and he wants to re-onshore manufacturing.

If you look at his electoral coalition, it really was a coalition of the working class this time. Even many union supporters actually came out for a Republican president, which was quite unusual. And so he has this belief in re-onshoring manufacturing, eliminating the The second is they want to level playing fields with other countries.

What they’re right about is for decades now, the United States has actually often allowed other countries to raise their trade barriers, whether that be tariffs or whether that be prohibiting U.S. Companies from operating. And that’s true in Canada, it’s true and China, it is true in the European Union elsewhere.

But America hasn’t raised its own barriers by and large. And so they get a sense that that’s unfair, that it’s actually unfair barriers to American producers who would like to operate abroad. And so, they wanna institute this principle of reciprocity to try and lower foreign trade barriers.

The third is that they’re trying to secure critical supply chains. I think many people were made aware of those during COVID, where we were aware suddenly that we didn’t have access to pharmaceuticals or medical devices, because many of the supply chains for those were overseas.

And even more concerning were often in adversaries like China, who could use those supply chains as negotiating leverage. And so in certain sectors that they view as critical, they want to make sure America has secure supply chains, and the fourth is a really target.

Attempt to change most of our allies position towards China. You know, China is the primary geostrategic adversary of the United States right now. China is a dictatorship. It’s a communist dictatorship.

And I think there’s rising concern that they have the economic and military leverage in order to put free countries like the United states into a corner. And President Trump sees this as an opportunity to try and mitigate or diminish the influence of China and its government on international economic and military or strategic affairs.

With that in mind is those goals of the Trump administration, because I don’t think those are going away. They’re very committed to that path. What would a soft landing look like?

And I laid out just a few places, and then I’d love Deirdre to comment as she sees it as well, where we could implement those policies, but do so in a way that potentially leads to a soft-landing both for the American economy and the global economy.

The first step in my mind is to assure that the tariffs are modest and genuinely reciprocal. And what I mean by that is modest, a five to 10% tariff probably isn’t that distortionary. It causes some inflation because it’s a part of the supply chains that are coming in. It is an alternative source of tax revenue, effectively like a consumption tax.

But you could probably bear a 5% to 10% tariff on almost all goods coming into the United States. And if it were relatively egalitarian, that might cause a little inflation, it might cause a little slowdown, but it would give American companies an advantage on the edge to price compete with foreign producers of supplies, and it would provide an alternative source of taxation effectively to complement income taxes. It would serve as a consumption tax.

And then if they were to make it modest and genuinely reciprocal, we could simultaneously lower foreign barriers to domestic producers. And what this means is if Canada, for example, has a variety of restrictions on US financial institutions right now, making it practically impossible for US banks to operate in Canada, that is an unfair barrier to American banks if we allow Canadian banks to compete in the United States.

If the Trump administration said, we’ll be willing to maintain our lower tariff rate, we’ll willing to maintained our lower barriers to entry for Canadian banks, but you have to lower your own barriers to American competition, that’s reciprocity, right?

In game theory, it’s called tip for tap, meaning that we really just do what other countries are doing in the pursuit of lowering their barriers. And so I think the first step is to cement that with the vast majority of countries and the vast of majority of products, what we really want is a modest tariff to achieve those goals and to implement true reciprocity where we are willing to lower our trade barriers as long as other countries are willing lower theirs and if they keep them high, we’re going to match those. Right? Meaning that we are just going to try and keep a level playing field with that.

The second component of that in my mind is to identify very clearly what industries we consider critical. So if one of the goals was to secure critical American supply chains, we need to give the economy clarity on which supply chains are critical, where we’re going to focus our effort to re-onsure or what’s called friend-sure, meaning move it to allied countries or countries that we feel are secure.

There are obvious categories for this, pharmaceuticals, medical devices, everything associated with artificial intelligence and computing, so things like semiconductors, sensitive national security inputs, et cetera.

But until they release a list of what these critical products or critical categories are and how they’re going to treat those, it’s very difficult for business actors to where they genuinely are going to have to switch those supply chains. Or make the investment to build those out in the United States and I think clarity around those industries would also give American companies clarity enough to invest to build their supply chains onshore or for insure those.

The third component of that in my mind is to give similar clarity on which partnerships with friendly or allied nations. We will look to turn to as we move away from China, so that as American producers are trying to build substitute supply chains outside of China, that they know which countries the United States is going to have lower trade barriers with, or we’re going to a consistent trade relationship.

That might be the Philippines, it might be Brazil, it might Mexico, it may be Canada, but as soon as we can clarify those, that gives the admin the ability to build mutually advantageous trade relationships with those countries and to give American businesses and foreign suppliers the clarity to relocate their supply chains, which might reside in China or other nations now and build out capacity in those countries knowing that that investment will pay off.

The fourth component in my mind, there are only two more, is a well-articulated approach to China, Richard. So I think we need to be very clear about what our approach to China is.

And I would bifurcate that between the critical industries we just mentioned, where I think on-shoring is an imminent need and something we need take action on now, versus non-critical industries.

So if you’re buying socks or tennis shoes from China, for example, those are not as critical as defense technology or semiconductors. And if we want to tariff those goods, my advice would be to stair-step those tariffs in so that American companies and other foreign suppliers have the ability over years, not months, to move their manufacturing supply chains to more advantageous countries like Vietnam or the Philippines so that we can secure those. Supplies.

And if the administration would give us clarity on what its intended approach is with China and give us time in non-critical industries to face tariffs or trade barriers in over a period of years, that might give American companies the time and breathing room to switch their operations without dramatically increasing costs.

And then the final component that I think might play a part in this. Is if tariffs are a stick that you use to punish foreign countries that are erecting their own trade barriers or to force American companies to switch their supply chains, you need to complement that with the carrot of incentives for our companies or others to invest in reshoring those supply chains or moving them to friendlier locales.

Scott Besant has hinted at some of this. He hinted that there is going to be favorable tax treatment, accelerated depreciation schedules, for example, for Americans who relocate manufacturing here on the equipment necessary to build that, President Trump has solicited investment from private companies like NVIDIA and Apple, foreign countries like Saudi Arabia into the United States that hopefully will go towards reshoring some of that capacity, but they need to think through the tax incentives, potentially credit lines that allow businesses to pay for the capital improvements they need, to reshore manufacturing capabilities, different types of subsidies or incentives that make it more possible for U.S. Companies to a return on investment.

For switching those supply chains, whether they are onshore here in the United States or in friendlier nations. And so if we could do that, if we can take a more modest and reciprocal approach to tariffs If we could clearly identify critical industries, if we could identify the countries that will friend short with us, where we’ll have an advantageous trade relationship, and if we can clarify the strategy with China and then provide positive incentives, I think we could potentially see an outcome to this tariff situation that doesn’t lead to the type of economic difficulty that many analysts are predicting right now.

Richard Cunningham [00:41:42] Ladies and gentlemen, John Coleman on tariffs. We might need to package that and just make sure the Trump administration sees that. That was robust.

John Coleman [00:41:49] That’s Richard’s nice way of saying, I talk too much, Deirdre, so.

Deirdre Gibson [00:41:53] No, that was incredible. And I think Richard is right, because the administration is paying attention to the markets. That much is clear, and I think a lot of us appreciate it.

Richard Cunningham [00:42:02] Absolutely dear how would you respond I mean there’s endless there that you could you know threads that you can pull on But what is in particularly you know kind of top of mind for you as you hear John and unpack that

Deirdre Gibson [00:42:11] You know, a few things are top of mind and one of them is just, you know, we’ve got all of the economic data that we’ve been looking at, sort of the hard GDP data and then all of the consumer and investor sentiment data. And those, the hard to stop data are telling very, very different stories. You know? We have a functionally resilient economy and a lot of people who are scared. And when you have that kind of divergence, that can be a setup for either opportunity or surprise.

So I think it’s, for one thing, a really good moment for investors to be paying attention to consumer behavior as well as economic indicators, because I think in a lot of sectors, that’s really what drives earnings.

I kind of, maybe a personal example of this, but my five-year-old is trying to earn money for a small motorcycle type device. And you know, five- year-olds don’t earn money quickly. And I was looking at it and looking at the news and thinking… This thing’s gonna double in price before he gets there. Maybe I should buy it early and just hide it in the basement until he actually like finishes earning the money.

And then I literally the next day was reading the Wall Street Journal and like, oh, everybody else is having the same thought. Everyone else is bringing in the goods and services, the goods really before the tariffs hit, okay. So that’s a great example of like, you know, what’s happening in our households is happening in everyone’s households.

Another example of that that I’ve seen just on the investor behavior side, and I always have a really strong interest in behavioral finance, is sort of the coming home of the home bias. So home bias and behavioral finance means anybody, and this is global, anybody is likely to invest more in companies in their own country.

And Americans, I mean, I think for good reason, we’ve done this a ton, right? Americans, it’s not uncommon to have an entirely US-based portfolio, or pretty close to it. You know, in the last decade, well, the numbers have really been on our side for that.

But I do think, especially with everything that John just said about the way that this is changing geopolitically, it’s a nice time to consider rebalancing in that regard and to really be looking at what our opportunities are. I think the opportunities globally are going to be changing from an investor’s standpoint.

The third thing that comes to mind is that amidst all of this, there has been, you know like uncertainty is always when people have a like to. And that flight to safety narrative has gotten a little mixed up lately. It just hasn’t been the same as we’ve expected. And so I think it’s a good moment to keep your eye on your fixed income exposure. It’s a moment for active management.

Now I say this with some bias because Praxis does have our flagship fund as an actively managed impact bond fund. And it’s got all the cool impacty stuff that we were talking about in the earlier part of our conversation, all of the faith driven activities built into it, which I think is really cool. So take that for what it’s worth. But those are some of the things that are kind of top of mind for me.

John Coleman [00:44:53] And I think the behavioral finance part of this is important, because people’s reaction to the terrorists is going to be almost as important as the policies themselves. And what we’re seeing is a lot of business owners in the presence of uncertainty. Like you said, there’s a fight to safety and there’s also natural conservatism.

So if you’re a big business right now and you’re uncertain about whether there will be a recession, what your input costs will be, what your providers will be charging you, you’re going to pull back on spending now and there is a vicious cycle, whereas people pull back, it impacts others, others pull back and there’s a general tightening or conservatism in the economy.

And that is a vicious cycle that can send you into a pretty deep economic recession if you’re not careful. And so one of the questions I have throughout this moment, whether it be tariffs or other policies that are happening in the economy, is how do you give the American consumer and how do give American businesses the confidence to spend, the confidence to continue capital investments, because if that confidence goes away, which is really behavioral finance thing.

It will change the way money flows through the economy. And that’s one of the things I think I’m most concerned about right now is if we enter this period where people are generally just very conservative with their cash because they’re worried about the uncertainty of the markets or the tariff regime or what other companies are going to do, we will end up in a recession. It’s a given, right? That is the very nature of it.

And those things can be deep unless you’re willing to use the tools to get you out of recession. And our tools are more limited than they were a few years ago. I mean, our fiscal situation is not. Incredible right now as a country and so fiscal stimulus might be more difficult than it was in the past.

Monetary policy is more possible now because rates are higher than they once were, but we’re still at long-term averages for treasury rates and for fixed income rates right now. It’s not like they’re incredibly low. They’re just higher than great financial crisis levels.

And so I think we need to be very careful because the fiscal and monetary tools at our disposal are not quite what we’d hope they would be to generally stimulate our way out of recession. And so generating this confidence in people that we can continue to invest and spend will be important to making it either a mild recession or keeping us out of it entirely.

Richard Cunningham [00:47:05] Well, good commentary from you both and just kind of to put a few kind of closing numbers behind it all because John, you spoke about the pre-liberation day levels that markets have kind of returned to and I like the framing of what you were saying is like, hey, this is critical that we navigate this to a soft landing because I think markets have processed a lot of the news and, you know, from April 22nd to May 2nd, nine-day positive run for US stock market, which is the longest winning streak in more than two And so that S&P 500 is still. Is only down 3.5% year to day.

Now small caps are taking it on the chin a little bit harder down kind of 10% year-to-date. NASDAQ tech kind of mag seven as we know kind of leads the charge there, dramatically is down 7.5%, year to date. So back to those pre-liberation day levels, experiencing some of the shock of it, but I think of process the information, John, that you talked about, but critical that we navigate this thing to a soft landing going forward where the recession conversation really becomes a present one.

And are we able to bounce back as you were talking about? Deidre could not agree more also on the behavioral finance component of this and how business owners are going to react and their necessity and need for, I think we would all agree, just predictable information. Very, very tough and challenging to navigate a business in the midst of not knowing what’s kind of coming around each corner. I know there’s so much more to say, but we are coming up on our time and I want to be sensitive to that. Deidra, you look like you’re about to come out of your seat. Was there something you were about to add real quickly?

Deirdre Gibson [00:48:28] I just want to pose a potentially crazy question.

Richard Cunningham [00:48:32] Ask it.

Deirdre Gibson [00:48:33] Okay. Just thinking about this from a long-term standpoint and from sort of a meta standpoint, I mean, we’re Christians on a Christian podcast talking about money from a Christian perspective, right?

And one of the things I have noticed, especially, again, since becoming a mom, so biased here, but a lot of the most important work done in the economy is unpaid or low-paid work, like parenting and caregiving for elderly parents and all of this stuff and This is often work where it’s not very easily monetizable, but it does reflect the Imago day, the reality that every human is inherently valuable regardless of their productive capacity.

And so there’s been this thing in the back of my mind, especially as AI has been coming online and now quantum computing has taken leaps and bounds that were unfathomable maybe even a few years ago. How do we think about these things and build a world an economy, how do we build an economy in which humans can thrive?

Is this a moment, this moment of rather extreme disruption and change, is this a movement where we can think about these things and build some of those things in now? I don’t know whose job that is to think about those things or put those into perspective, but I wanna put this out there into the world of like-minded humans who are working in finance and government and economics to think about, you know, maybe it’s.

My best idea is a poor one right now, which is like some approach maybe to universal basic income, but maybe it solves this confidence question that John was asking of, you know, some version of life where we’ve got, and I don’t know where that comes from. Again, I have no ideas. It’s not good. I’m not suggesting this, but just can we think about this? How do we think about the economy starting from the viewpoint that every human matters and not just for our productive capacity and build from there?

Richard Cunningham [00:50:25] This is epic because we typically close every FDI pod with the exact same question. And so we’re switching it up today and our guest is asking the question. So do you have a powerful, important question? John, what do you think? How would you riff on that?

John Coleman [00:50:35] Oh my gosh, that’s a, we got to do podcast part two. There is a lot to unpack there. I’ll actually just lay out my own scripture reference from a couple of days ago.

So I listened to the Hallow. I do my lectio with Hallow every day. So, I’m Protestant, not Catholic, but Hallow has this wonderful thing where for 10 minutes a day, you meditate on a scripture. And I believe it was yesterday or the day before that scripture was about the loaves and issues, right, where… God once again proved that.

It’s not what we have, it’s not our ability to control our material resources. But he’s in control and he can do a lot with what little we have even if we don’t understand how that’s gonna work.

So you know, the little boy brings five loaves and two fishes and they feed 5,000 men which was probably 15 or 20,000 people at this gathering and then they have tons left over. There’s a surplus after it, right? Because Jesus was able to do something extraordinary with overabundance with what little his followers could bring to him as long as they had faith.

And I think that may intersect with some of what Deirdre is talking about, because I think often we feel very constrained by a materialistic view of the world, by this idea of focusing on people’s productive capacity and what that means for their identity or by the resources that we have at our disposal.

And it is good to periodically step back and know that God has an entirely different view of us as individuals, and he has an entire different economy that he runs in the world, and his provision is greater than anything that we could possibly imagine.

And in times like this where you’re tempted either to devalue people who are not working or not productive, where people devalute themselves because they’re worried that AI is going to take their jobs, where we’re worried about economic uncertainty and what that might mean for the economy, I think anchoring on ourselves in the perspective of our faith where we know every person is infinitely worthy and possesses dignity regardless of what they can produce in a materialistic sense.

And that ultimately materialistic stuff is not what we rely on and that God is going to right the arc of history regardless of whether we go into a recession or AI eats jobs. Christians don’t have to be as afraid of these types of things as non-Christians would because we have faith that there is an arc of History that the creator of the universe is writing and that he actually has our best interest in mind and that He wants abundance for us.

That doesn’t necessarily mean material abundance, like the loaves and fishes. But he wants us to live fulfilling and flourishing lives. And if we can take confidence in that, I think it rewrites our identity and allows us to approach markets in a way that’s got a greater peace and a greater confidence than the average person would.

Richard Cunningham [00:53:19] Well said, John. I’ll take a quick real stab at this, and that is, in Matthew 25, dear Joe, parable of the talents, the final steward, who is the one that is told, you need to be somewhere where there’s weeping and gnashing of teeth. The mistake was not that this servant was a poor investor. That really didn’t do anything, squandered, didn’t even invest in the first place.

The mistake of that servant was they didn’t know the heart of his master. And he made wrongful assumptions about the master and the master’s intentions. And I think that is where we can get in the most trouble as believers, is we don’t go get to know the master. And we make wrong assumptions.

And so as a faith driven investor, faith driven entrepreneur, we choose not to do anything and we squander what’s put in front of us. I think what you’re talking about is this big grand macro question, like where do we even start kind of biting away at that enormous apple?

And it’s for each of us individually as the FTE or the FDI to say, hey, how do I get to the master and how would the master inform me? And so we aren’t found to be that last servant. And so that is my two cents. I’d love to hear your greater answers or give us any kind of final commentary as we close here.

John Coleman [00:54:19] Well, part two will have to be the UBI and in-center discussion. I know. Seriously, that’s teaming up a massive topic. But Deirdre opened up quantum computing and artificial intelligence in the last five minutes. You’ve got to be. I’m sorry.

Deirdre Gibson [00:54:33] I’m sorry.

John Coleman [00:54:35] Fascinating, fascinating topics to dig into, but I think that’s a really encouraging word, Richard. There’s a reason you’re the host here.

And Deirdre, I think your heart and the way that you laid out both the earlier investing conversation around engagement and faith-driven investing and the way that want to emphasize the dignity of individuals in the midst of all of this, I think is an incredible perspective and one that’s too often lost in our financial kind of discussions in the marketplace, but one in which we certainly have to anchor ourselves.

Deirdre Gibson [00:55:04] Yeah, we don’t want to rely too heavily on the idea that a rising tide lifts all boats. Some boats are anchored too tight.

Richard Cunningham [00:55:11] Well, Deirdre Gibson, Praxis Investment Management. What a joy to have you on the Faith Driven Investor podcast. Ladies and gentlemen, for John Coleman, I’m Richard Cunningham. We will catch you next time. Thanks for tuning in.

Speaker 5 [00:55:21] We are grateful for the opportunity to serve this community and see listeners come in from more than 100 countries. Faith-driven investing can be a lonely journey, but it doesn’t have to be.

The best way to stay connected is to join a group 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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Brent Beshore [00:00:00] The broader culture is the worship of mammon. I say mammon and not just money because I think it goes beyond just money. It is an idea of self- Reliance.

Justin Forman [00:00:09] And designed to be dependent. Have the hardest time accepting that idea.

Brent Beshore [00:00:12] Absolutely! We are tricked into believing that freedom… Looks like being independent and not in need of anything. The irony is that true freedom is found in Christ. He says, my yoke is easy and my burden is light, but you have to submit to him everything. If anything, I am way more excellent at my job as a follower. Than I was as an atheist. If you’re shooting the lights out and you’re making tons of money and you are sacrificing your family at the altar of success, you are losing. Yeah, you got a yacht and you have no one to enjoy it with. A driven entrepreneur.

Justin Forman [00:00:48] So often in today’s world we think of everything for instant gratification and short-term results. But what does it look like? To have the long-term perspective in mind, to maybe even think about something that might last. Beyond our lifetime. Today we’re at South by Southwest, a special gathering here in Austin, Texas. To talk about this topic. With Brent Beshore and Richard Cunningham. Let’s go ahead and get started. With our conversation. Hey, what is it like to have South By here? Like, do you normally flee Austin? Do you normally run from this place?

Richard Cunningham [00:01:21] Mixed bag. So I grew up in downtown Austin. It is an incredible, like you can feel the buzz in the air. It kind of reminds me of like a college football Saturday. For like a week and a half of having South By in Austin. I will confess because Marshall, my wife, and I live downtown. We’ve had this like tendency in the last few years to be like, all right, South by is coming. That’s a lot of traffic. Cunningham’s will exit. We’ll go make our pilgrimage to Breckenridge or something like that.

Justin Forman [00:01:41] Like that ski, or the Holy Land. We’re talking pilgrimage, you gotta talk Holy Land!

Richard Cunningham [00:01:45] Um… But it’s special, and then when this whole Sunday service thing started a couple years ago… There’s this dynamism of like, wait, we can plant a flag for Jesus in the midst of all of this. Not that he needs us to, but what an opportunity to, to say, hey. So many people are coming in. From so many different kind of. Cultural mountains. Film entrepreneurship, investing. What have you, it’s like the- networking event of all networking events. And someone had a brilliant idea to be like, you know what? Let’s do something faith oriented. And it’s been really special to see the church kind of gravitate around that, so.

Justin Forman [00:02:16] I think it’s been special to see it gravitate towards it, but I think its like. We were just with John Irwin when the House of David stuff was kicking off. Just to talk about his idea of just like, hey, it’s not that Hollywood left Christians, Christians left. What I love so much about this is like. In a time where people in the church would be known to run. Like the church is pushing in, the church is pushing into this conversation. And man, we’re seeing.

Brent Beshore [00:02:41] Can we just take a moment? House of David is so good. I mean, like. I-I-I texted Coleman. And I was like. Oh my gosh! Like this is a real show, like it like not like a like a almost there, but like. House of David was something that independent, like the cinematography, the writing. The entire thing like everything was It was incredible.

Justin Forman [00:03:02] I didn’t know Gandalf was making an appearance as Samuel. Who knew?

Richard Cunningham [00:03:06] Samuel is a beast. He is not to be messed with.

Justin Forman [00:03:09] He’s so much of a beast, like my 11 year old was like, that was a little weighty, that first scene, or that first episode. I loved it. I loved too. I loved. But I also didn’t. I was like let’s go. Let’s go!

Richard Cunningham [00:03:20] They’re working on something John’s talking about. How cool would it be? Like you know when you see on Amazon? And you’re watching a show and it like flashes the actor who’s in that scene or something like that. Of how cool would it be. To see House of David flash the scripture and the verse where it’s like, did Samuel actually? That guy and like that brutal. And it’s like, yeah, there it is right there in first or second Samuel. Of Samuel doing that exact thing, and how cool to drive people to the Bible through House of David, so.

Justin Forman [00:03:46] Yeah, I mean, I’m trying to remember who was it that was talking about this, about scripture engagement, and they were talking about it. Maybe it was Bobby that was just talking about just… Or somebody was coming in, they were doing the data analytics, and they were looking at it, and they’re like, man, why did… I don’t know what the chapter was they were referencing had some huge spike. And they’re like, oh, well, you know, the chosen last night covered this passage. And how cool is it that we’re in a place where you can see the cause and effect of those things? Kind of hitting like that. That’s a fun treat to see those things.

Richard Cunningham [00:04:14] Adds up to cool stuff. Brent, you’re in Austin, coming from… The middle of america man beautiful columbia missouri You found me. I am the unicorn. I’m a Stephen F. Austin high school graduate in Maroon’s oldest public high school west of Mississippi.

Justin Forman [00:04:30] High school batting average was?

Richard Cunningham [00:04:32] Don’t worry about it. We’re not here to talk about that. We’re here to about Brent B. Short being in Austin, you’re speaking at a big South by event tonight. Permanent equity has just had, it feels like the Lord’s hand of favor on top of it. Give us some of kind of the Brent Be Sure 101. Bring us up to speed on where we are right now because your story is so powerful. And I know you can go in a bunch of different directions where you get into a bunch that. But maybe kind of give us some of the lay of the land. And we’ll just pull on a bunch of different threads.

Brent Beshore [00:04:56] Yeah, I’m married to Erica 16 years now. We’ve got four kids. We thought we were done after three. I joke that. My son’s the Chuck Norris of children. He battled through a vasectomy and 240 plus your parents trying to prevent his pregnancy. So what a legend. He’s amazing. I’m not sure what the Lord is going to do with him. But he is he’s gonna be on fire. The kid came out. He was like the happiest most joyful. He is incredible. Silas I can’t I just can’t tell you what an absolute blessing and I mean the reality was when I was an atheist I was a thesis in my 20s. I didn’t ever want kids They were I looked as an impediment to my success to it would be a lot of work. I got in want that It was all about me and uh… It’s amazing how just over and over again, I married my wife because she was hot. I started the business because I wanted to get rich. The Lord uses my sin and for my good in His glory, which is what He promises, but man, I just never knew and it’s amazing. So it’s amazing.

Justin Forman [00:05:50] No, no, isn’t it? I mean, isn’t that fascinating? Like, again, it’s our brokenness that he often uses most. I mean, we’re hearing that, we are seeing that, we’re seeing that in the stories. I mean, we’re seeing it in places like South By, or even people that are coming to Christ here recently. It’s like, there’s just that point. Where like, we’ve seen the facade, we’ve see everything that’s there, but it’s our brokenness. It leads it back to it. That’s one of the things I just love. Just about the way that you talk about that, always so candidly and consistently.

Brent Beshore [00:06:16] Yeah, I mean, I think it’s by His wounds we’re healed and by our wounds, we’re able to heal others. I’ve seen Christ through us. But I’ve seen it so clearly, it’s in our areas of greatest weakness and areas of greatest sin, usually. That is where we’re able to bring healing to others. I mean, I think that. The lie is that whatever you’re battling… Whatever you’ve got hidden underneath. That is so ugly, no one’s gonna love you if it comes out and that you’re the only one battling it, right? That you’re somehow a freak. That you’re the only one who’s ever had that issue. And I mean, that’s what the enemy wants from us, right? Cause it keeps it hidden. Uh… You know if the darkness grows uh and and unless you drag in the light it’s the only disinfectant like there’s no other disinfectant You’ve got to confess it to God, and you’ve got to confess to others. Um, I’ve just seen over and over and over again in my life. 

It’s it’s, you know, I I got a computer put in my room when I was 10 years old. I looked at pornography every day of my life. Right? Um, the amount of deep wounding that that created. I didn’t even know it was a problem. I remember, I mean, telling my now wife, I remember we were dating and She found out I had looked at pornography and she was like, oh my gosh, like. And I was like, I don’t think there’s anything wrong with it. Like I didn’t think there was anything wrong. I thought it was healthy. And in fact, if you read a bunch of like, you know, the, the quote unquote, modern health science behind it. It’s like, oh, pornography’s good, pornography’s healthy. I can tell you. Uh, no man who looks at pornography is healthy. You just can’t be healthy. It’s not how God designed this. It is a cheap imitation of a beautiful gift from God. Right? As Christians, like, we’re not anti-sex. Sex was made by God. It is beautiful. It’s just like a fire, though. You put it in your fireplace, amazing, warms the whole house, super enjoyable. Put it in the middle of your living room, you burn the house down, kill everyone. It’s the exact same way with pornography. So it’s things like that that I’ve now been able to say, hey, look, and by the way, I’m still in a battle with lust every day. I don’t want to give the impression it’s like, hey. I’m George W. On the aircraft carrier saying mission accomplished behind me, right? Like, we’ve still got a long war. There’s a long war ahead of us. But I can tell you that. When I am. Open and honest about where my struggles are, open and on us about who I am. That I am in real deep relationship. That’s where healing, incredible freedom comes from. That’s what the Lord made us for.

Richard Cunningham [00:08:29] You put this in an annual letter. So you close down 2024. Shared a bunch of reflections. This particular kind of thread you’re tugging on about the open transparency and honesty and realness about sexual sin or just getting things out of the darkness and into the light. Has been viewed. Just an absurd clip right now, so tell us about just kind of the wildfire spread of this like vulnerable letter you put out there for the public on LinkedIn and Twitter and everywhere.

Brent Beshore [00:08:53] Yeah, I mean, I felt convicted, you know, every year. So I write this, I basically write one thing a year. I should write more.

Richard Cunningham [00:09:02] You’re giving yourself a hard time, because I’d follow you closely on Twitter and you put out some absolute things yourself. Oh, okay. You write small amounts.

Brent Beshore [00:09:07] Small amounts, yeah, yeah. They’re a little bite size, but I write like one long thing a year, and it’s the annual letter. And it’s very odd to have an annual letter uh… That is both mixes personal and professional And I feel very called to do that. And so every year I just try to pray and Lord, what do you have for me? What do you want me to say? And it’s funny because I start that process in like September. And nothing happens in September. I keep chewing and chewing. I’ll start a couple of times and just nothing happens. And this year, it was about, oh, mid-November. And to be honest, what… Really convicted me was I saw more lives fall apart. I think in the letter I called it the unplanned rapid disassembly. Of so many lives, whether it was adultery. Addiction issues. Mental health breaks criminal activity. I got more people that reached out to me in the last year and said Hey, can we talk? Wow, man, when I get that text, you’re like, Oh, Thumbs up. And get on the phone, and somebody’s life’s a mess. It’s just an absolute wreck. And you start asking questions about it. Okay, when did this start? How did this happen? Almost inevitably every single time it started small. It was benign, it was just a little thing here, a little there, a little corner cut, a little season of life. It was just a little fun, a little flirtatious text. One extra drink, it’s not a big deal, and then all of a sudden… That slope gets slipperier and slipper and then you compound over time. 

And maybe it’s just my age, right? So I’m 42. I feel like there’s a way to get in trouble at 42 that you just couldn’t get in at 25. Like you have enough enmeshing of relationships and there’s enough people counting on you. That at. 25, you just don’t have that at 42. People are counting on you. And so I just watched over and over again, you know, people around my age and their lives just blowing up. I felt convicted to say, hey, I’ve got a front row seat. To this brokenness and the shrapnel and the maiming that is just awful. I mean, lives being destroyed, families being destroyed. And by the way. We forget these are not like, yeah, it’s not fun for the individual person. We’re talking about generational consequences. I mean, I can tell you in my family… Um, my uh, and. Died in a car crash at 16 years old. Um, let’s see here, six years before I was born. And I’ve lived my entire life in the shadow of that in my family. And it was a horrible accident. Um, It things happen that caused generational scarring and this generational sin that I think. If you look at most of the patterns, certainly the same patterns in my life, it comes through generations. And so I think that the, you know, the question we have to ask ourselves is if we’re gonna live in the darkness. And we’re gonna tolerate sort of the acceptable sin that we think we have. Really what we’re doing is we’re perpetuating generational sin and eventually it blows up Like even- the smallest unrepentant sin becomes big enough eventually and leads us into dark places. I just saw. 

The consequences of it over and over and over this year and I just felt. Called to say. To people, hey, you gotta live in the light. It’s scary. Look, we all wanna matter and we all want to belong, right? That’s what we’re all seeking, right. You cannot. Belong unless you’re in real relationship. And so we pretend, we wear these masks to each other and we pretend like we’re in a real relationship when we’re not. When I ask you, how are you? And you say, I’m good. How are you? I’m good. There’s nothing for relationship there. If you’re good, you know what I’m thinking? Shoot, he’s good. Like, he is actually pretty convincing. He’s good, I’m not good, but I can’t say I’m good. So what do we do? We keep it hiding, right? We gotta kind of retain things back behind the wall. Getting into a real relationship is scary because the lie that we tell ourselves, whether we hear from the enemy… Is that if people really know you, they wouldn’t love you. If they really knew who you were, not only would they not love you, they don’t like you. They wouldn’t want to be around you. They wouldn’t want nothing to do with you. And by the way, you’re gonna end up alone. The weird part is you’re already alone if you’re not in a relationship. I don’t know how many. You know, I’m going to say men because that’s who I really go deep with and who I know. I don’t know how many men I’ve known. Who th- they’re not known by their wife. Like they’re in a marriage where they don’t actually know, they don’t know their wife and their wife doesn’t know them. They have kids. They share a life together. They are strangers living in a household. I think you see this come out. People are like, oh, we. We fell out of love. Well, how does that happen? The night as you know each other right So I think the thing that, in that letter… By far, the letter’s been viewed so many times, it’s amazing to see how much it’s spread. And the part that was by far the most. Clipped, the most referenced, was nothing to fear, nothing to hide. And that was the message, right? To call people into it and say, Hey, look. The alternative is not worth it. The hiding that you think is tolerable isn’t worth it. You have to be known.

Speaker 4 [00:14:09] American

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Brent Beshore [00:14:59] You have to confess to God, you have to confess to others, you have to get into a relationship. The most incredible freedoms on the other side. I can tell you. When I started becoming known. I don’t think I fully appreciated how much darkness was in me. And I mean, this is the Christian walk, right? When you first become a Christian, the cross is really small. It’s like a little step stool. You just need a little help up, right, middle class in spirit. Lord, yeah, help me, but you don’t actually see the full weight of your sin. If you did, you’d be destroyed by it. You know, now, let’s see here, I don’t know, 12 years in. 11 and a half, 12 years into my walk with Jesus. And it’s like, man, I’m more aware of my sin now than I’ve ever been. Like if you ask me, how am I doing? I’d be like, I’ve got stuff I’ve gotta really work on. I want to be in known and in relationship with that. That’s actually where you gain freedom. So I think it’s just very counter-tuitive. I just see… Most people, I mean. Henry David Thoreau says the massive men lead lives of quiet desperation. I mean, this is not, he’s secular. He’s not a follower of Jesus. I mean this is just a widely known thing. Of course. Everyone’s hiding, everyone’s masking up, everyone is pretending. And we’re going through life numb. I mean, if you numb the pain, you’re gonna numb the joy. You can’t be in, if you’re not gonna have a depth of emotion, a depth relationship, there’s no depth of joy, there’s not depth of happiness, there’s depth of anything.

Justin Forman [00:16:20] Why don’t you talk about this? You talked about how it went viral and it had that traction, specifically the section. But I think it’s also the audience here, right? Let’s talk about the realities as entrepreneurs and investors. Like, you’re always selling somebody. Something. The perception of it. Like, let’s pause for a moment here to say we’ve seen the church, we’ve seen the brokenness, we seen church leadership challenges. There’s often times when I think about like. Some of his first gatherings and megachurch conferences and other things. What you wouldn’t do to be able to go back 25, 30 years ago and say, hey. Let’s bake this in from the beginning. Yeah, we got to make sure that we understand this. How important is this in this moment? When we think about fund managers, when we think about entrepreneur scaling and growing. The stories are getting bigger. The crashes will get bigger too if we’re not careful. How do we bake that level of vulnerability? Into this. Movement into this conversation.

Brent Beshore [00:17:16] Yeah, well, I would say going back 25 years with the… The big gatherings, like there’s not many pastors who have survived. I mean, if you look, there’s very few pastors who you would say were well-known pastors 20, 25 years ago, even 15 years ago. Who’ve made it. Almost all of them have fallen. Well, how did they fall? They fall because they weren’t known. And by the way, whether you’re a pastor at a church or you’re the CEO of a business or anyone, you don’t even have to be in leadership. As you become more successful, it’s more isolating. And that doesn’t matter what line of work you’re in. I mean, my heart goes out to a lot of these guys if you look like. I remember getting- given a number of books when I was first becoming a believer. By people who were these incredible inspirational people. I would say 80% of them have had some huge fall since then. Now it doesn’t invalidate what they said. But man, it would have been so much more powerful if they had said, hey, I’m actually in this act of struggle. I need to be known. I think that the formula is the same for everyone. If you’re not actively in a relationship, if you’re being known, if you don’t have anybody in your life who can tell you no. You are screwed and you just don’t know it.

Speaker 6 [00:18:25] I don’t know it yet.

Brent Beshore [00:18:26] And so yeah, the audiences, I mean, fund managers in the financial world, I mean let’s be honest. The entire financial world represents a microcosm of what the broader culture is. The broader culture the worship of mammon. I say mammon and not just money because I think it goes beyond just money. It is an idea of self- Reliance. You know, the opposite of faith is not doubt, it’s self-reliance. Like if you think about what the enemy really wants us to believe. Is that we’re self-made men

Justin Forman [00:18:53] We’re designed to be dependent, but we have the hardest time accepting that idea.

Brent Beshore [00:18:57] Absolutely, and we are tricked into believing. That FREEDOM! Looks like being independent and not in need of anything. The irony is that true freedom… Is found in Christ, which is he says my yoke is easy and my burden is light. But you have to submit to him everything. Everything I am and everything I have has to go in. Before you can gain the freedom. And so I think that this is the upside down kingdom that we live in, but when we look at the world, it looks right side up. And you look and I mean, I, I’ll confess like. I’m tempted! You know, I mean, I’ve spent, um, I spent. Earlier this week. At a high-end investor conference. These people are the best in the world at what they do. And everyone is talking about all their wins. Talking about how much money they’re making, they’re talking about what they’re buying, they’re taking about their third vacation homes. They’re talking about how they’re going to do this and conquer this and and then you look in their eyes. And there’s this deep sadness. And everyone sees it, but no one wants to acknowledge it. Because man, we can put this nice shiny veneer over the top of it. And so, yeah, the audience, when I wrote my annual letter, I felt very called to write it to a financial, for the most part, a financial audience. Maybe it has broader appeal, but I go into quite a bit of technical detail about the financial side. But to say, hey… If you think you’re winning… If you think that that’s going to be the way to life and life abundant. You’re going to do what I did, which is you’re gonna catch the car hopefully eventually. I mean, there’s only two types of people, right? There’s these people who think, okay, if I only had that, then my life would be complete. Or the people who actually get it. And it tastes like ashes.

Speaker 7 [00:20:37] Yeah

Brent Beshore [00:20:38] And that’s what I did, that’s my story. That’s my story.

Justin Forman [00:20:40] And I think there’s something so much like we, oftentimes we flip on the TV, we watch sports and let’s face it, it’s been an amazing run. The last couple of months. Are you talking about the Chiefs? Well, we’ll talk about the Chiefs, but it’s an amazing one that most of those Super Bowls, most of the games, it ends with the soundbite of saying. I just wanna thank God. Yeah, there has been revival sweeping through. There’s been revival. Man, some incredible work. Steve Centrum, Professional Athletes Outreach. FCA so many different ministries a long obedience in that direction chasing after the

Richard Cunningham [00:21:07] Chasing after these athletes is so cool.

Justin Forman [00:21:09] Chasing after to say, how do we help serve and disciple you for those moments? But one of the things. I love. Is like, you’ve heard the story of Riley Leonard. We heard all the story on the ascendancy. When you lose that game. And you praise God just as much. And losses. As you do the winds, that’s hitting on what you’re talking about. That’s what Patrick Mahomes did. Yeah, he loses the Super Bowl and he’s

Brent Beshore [00:21:30] Thank God for that.

Richard Cunningham [00:21:32] Me as much as I’d. Hate to say it here in Austin, Texas. I mean, they are my bitter rival, the Texas Longhorns. Quinn Ures, Michael Taft, Jade Baron, all of their studs got in the post-game conference and they Jade baron the DB stopped the interview after so I was like, hold up. I need to say something, like, Jesus is good. Regardless of us just losing this game. We always say it after we win, because we win a lot. But we just lost in the Koshuel playoff. And I need to acknowledge. God’s goodness and the opportunity to do this.

Justin Forman [00:21:59] I think it’s beautiful, and I think you’re hitting on something, Brian. It’s just like, just… We are surrounded by the world’s trappings. And like, we are I mean like the fiercest parts of the battle. Are coming to the footsteps of entrepreneurs and investors. Everything the insecurities identity and there’s always something no matter what conference you go to There’s always somebody that’s like, man, you know what? They got it, if only we can get to that point. And like, it’s when do we put to death the comparison? How do we put to death a comparison? Step into that moment of contentment. It’s a struggle. Right? Like every single day. But I think it’s worth it. Builders Investors that aren’t ever satisfied, always looking for that next improvement. How do you pull that in tension with?

Brent Beshore [00:22:47] I think that, for me, I think God calls us into excellence because He’s the God of excellence, right? And how does the enemy work? He takes what’s true. I mean, the devil doesn’t pop out in horns and a cape and, you know, that’s what, I mean the depictions in the movies, right? Like the enemy is going to look like an angel of light. Like it’s going to look like it’s right and true. And so, I mean, I was raised in a culture where competition was good, like you go out and try to win, winners win. Competition and being competitive with one another, I think is. Excellence with a twist at the end. Right? So I think it’s good and right and true that we try to be excellent. It is not good and right and true when I say, I am excellent because I put you down because I beat you. And therefore I can be above you. Anytime we’re trying to elevate ourselves. Above anybody, I think that’s where we’re off track. And for me, this has been revelatory, really in the last three or four years for me. I am so competitive, like if you, if you like. When I have lost the plot. I get incredibly competitive. I’m gonna beat everyone, I’m going to win all the things, I’m to do all, I mean. That was. Unconstrained, that was my life in my teens and 20s. And there’s a feeling that rises in me that’s so dark. And it’s anxious and it’s insecure. It’s, I’m never going to be enough. I’m never going to have enough. 

There’s no amount of winning that satisfies it. So you just keep competing and it destroys relationships. It eats you up inside. But I’ve realized recently… Wonderful to be competitive with yourself. It’s wonderful to say. I am pleased with what I did there, and I’m thankful that whatever the Lord provided, but I want to be more excellent because I wanna do everything unto the Lord. And no matter how I play, if I win or lose… Isn’t the point. It’s how do I play? And usually when I can get myself into that position. Turns out I actually win a lot more. But the difference is, instead of me being like, yeah. I won. I’m over you, I’m the winner, you’re the loser, I am like Hey, that was a really fun game we played. And I mean, I think this works the same way in business, right? Like, I feel the inclination when I’m around fund managers who are managing more money than I am, doing bigger deals, going faster. Man, I am not doing as well as they are. Like that, that feels terrible. Like I’m not. Then I’m like, wait a minute. The Lord has called me into something. Independent. Of any of those games. All I’m called in to do is do what he’s called me into. Be obedient. He’s going to give me. What I should have. I will never have more than what the Lord wants me to have. I’ll never have less. And I am a steward of whatever he wants to do. While I can get myself into that, I actually play the game way better. There’s a grain to the universe. If we actually go with the grain of the universe, things typically go better. Job can happen. Things can happen, bad things happen to good people, right? I’m not trying to, this is not prosperity gospel. It is also true that Proverbs says a lot on this topic. Like to the hard worker, to the diligent, to the wise. Go a lot of the spoils that the world would call good. The difference is we get them to receive them as a gift, we don’t earn them, we’re not gaining them. And that’s the big difference.

Justin Forman [00:25:55] You know, there’s, I’m reminded of a video that we showed this year in the Faith Driven Investor Conference is the one on Roy Ellis when we talked about the cathedral-like thinking. And I think that there’s something that we’ve. Whether it’s what the narrative has been in business or investing other it’s like oh man it’s quick hit oh Why didn’t you start your first business from 17 and exit it by 21? Why haven’t you done this, why haven’t done that? The quick, you know. Business flip, but when you think about this idea of just a long-term in mind, because that’s what you’re getting. Like what does it take for us to get to this cathedral? Thinking to live for something beyond our lifetime. I love that story. That just says, man. When we look back in history. The great. Cathedrals of our time. The stories of like, God and his church there, they took generations. To build. And what does it look like for us to kind of get back to that cathedral-like thinking? In a society and culture that values so much the short term. I mean, you’ve. You’re in that space when you think about the long term whole.

Brent Beshore [00:26:56] Yeah, I mean, if you think about it, as followers of Jesus, we should have the longest time horizon of anybody. Like our time horizon is eternity. And if we really believe that the more the people who take. Eternity most seriously, but the people who take this world most seriously too. Like, you know, it’s not the only two things that are going to survive or the Word of God and the… the souls of men, that is escapism. That is not what the Bible says. The Bible says, heaven is coming back to earth. There’s an incredible short story, I highly encourage anybody. To read it, you all to read, it called Leaf by Nickel. And it was written by J.R. Tolkien, so this is one of Tolkien’s essays. And it’s this really interesting concept, like I think niggle. Is Tolkien. Because if you read biographies of Tolkien and how he developed his world, I mean, he developed the whole languages, all the languages of Lord of the Rings first, right? Which, I mean, it was a painting, it was decade long process to develop the languages. I mean you wrote out entire languages before you ever got into any plots, before you got into character development, right? You wrote out languages. It took him forever. To write. Lord of the Rings, The Hobbit. And Leaf by Niggle has this really, it’s a beautiful concept. And I, again, highly encourage you to read it, which is. There’s a painter. Niggle who could only, he had this vision of this grand tree that he wanted to paint. It was like the tree of life. That’s kind of how I interpret it. In his lifetime, he could only get himself to paint a single leaf on it. Just a single leaf. And he beat himself up about it, and the enemy got into his ear and said, “‘You’re worthless, you’re no good. “‘You can only paint this leaf.'” I think that we do the same thing, right? He passed into eternity. And he sees… The tree that was in his mind, that one leaf has been transformed into the entire painting, it’s affected the world, right? So the things we do now get carried on and perfected into eternity. And so. The cathedral thinking is, okay, you don’t build a cathedral in a year. I mean, cathedrals sometimes took. A hundred years, fifty years to build, right?

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Brent Beshore [00:29:46] For me as an investor, you know, the standard model in private equity is what I call the by lever strip and flip model, Get tenure fun life. It takes a couple years to buy stuff, takes a couple years sell stuff, so really you got three or four years at most five years to own something. It’s just impossible to develop. Good long-term strategy. Great long-term relationships. Make good long-term decisions when you’ve got that time horizon. It’s impossible to make. Good long-term relationships, good long term decisions with short-term capital. And so I think one of the things as followers of Jesus we can do is continue to push the time horizon, which is really hard with investors, as LPs. You’re trying to tell an LP like, hey, give me your capital for 30 years. I had more than a few of them say you’re a complete idiot, which is also true, but just maybe in different ways. There’s no way. I remember one guy, we were at a family office in Florida. And we thought we were getting investment from these people. The CIO came in, and he’s like, asking all kinds of questions. At the end, I was like, are, you know. What do you think? You seem pretty interesting. He’s like, Oh, I would never give you our money. And I was like, Wait, what? I was like, why are we here? I mean, we flew down our whole team, like we spent all this money and time to come down here. And he was like oh, I just wanted to meet the guy who was even asking for 30 years of capital. I was like that’s What are you talking about dog and pony show man? It’s brutal.

Justin Forman [00:31:02] There’s no way, right? You get validated parking on the way out? Yeah, exactly.

Brent Beshore [00:31:05] Yeah, exactly. His logic was, he was like, hey, 30 years from now, he’s like, you’re going to be on your third wife. You’re going have a bunch of step kids you don’t even know. Like you’re gonna have vacation homes all over the world. You’re not gonna care about what you’re doing. And I was like, man, that is such a, well, at first I was like, that seems like an oddly specific.

Speaker 6 [00:31:19] Yeah. Correction.

Brent Beshore [00:31:21] Um, but beyond that. I think that’s a point of view which basically says, hey, the only things that you can really count on are in the short term because everyone’s gonna go off the rails. And you know what, for most people, that’s probably true. I mean, you and all, you, and I have. Probably all of us have seen this. Most people cannot continue to stay focused on what they’re doing and and and a life happens and things go off the rails I think this is the idea though that We can really. Focus on these few things that we can do right and true and be unconcerned about what they mean into eternity because we are trying to build the cathedral over a long period of time.

Justin Forman [00:31:54] It’s fascinating. I mean, can you imagine being a cathedral builder? Like, hey, I’m just gonna build up to this part. I don’t know who’s coming along behind me. I’m not sure. I don’t know their name. Maybe I’ll train them as an apprentice. But somebody else is gonna build the top half of this. And I mean, just that perspective shifts. Yeah, you got it right.

Richard Cunningham [00:32:07] Yeah, you got to write yourself in the story. Yeah. You put yourself in a perspective of like, this is no longer about me. It’s about the cathedral.

Brent Beshore [00:32:14] Investment partnerships also aren’t built that way. Like, if you look at most investing firms, they are just pure partnerships, right? There’s no lasting value that’s being created. I mean, it’s kind of like a brand that you kind of come under. But there’s nothing enduring about that. That’s why these partnerships break up all the time, right? Um I think that you can build, I mean, this is one of the things that I’m excited about with permanent equity. I’m trying to build permanent equity… Not as a partnership, not to say we don’t have partners. But as something that’s enduring that stands for something that hopefully we can have stewarded into generations to come. Which is a very different line of thinking than saying, hey, you and I are gonna be partners. Eventually, we’re not going to be partners. We’re going to try to bring some other people in at some point. They can choose to be partner or not. But there’s really nothing enduring about the structure.

Justin Forman [00:32:58] There’s nothing enduring about it, but, you know, I- It was interesting, somebody was talking about this in terms of… I think the example was in politics is sometimes there’s a candidate that like you’re charging down a path. But you might not agree with the candidate that’s needed to turn the car in the opposite direction. To plant the seeds of going a different direction. It might be a short-term season, but then the question is who’s going to take that baton, right? And so, I mean, I hear the idea. That in a short time horizon. You can’t finish the task. But you can plant some seeds to that. And I think that there’s an incredible rebirth of people that are thinking with that mindset of like, hey, how do we? Let me plant seeds into that, but I’m fascinated though, and I kind of want to approach it from the idea of like, hey, what? Unique opportunities are there. In the long-term hold. To look at things differently, whether it’s the mentorship, the culture development, the team structure, the… The generational mindset of not looking for the quick fix person but somebody that’s thinking with the long term in mind. I think that there’s just so much opportunity. When you talk about the long-term. Cathedral-like mindset. To think about spiritual integration. And think about ways that we can bake this in. And it’s not. And again, there’s some that are planting seeds, and there are some that planting seeds and they’re also the same person harvesting. And that’s what you guys. Are in the business of. What are some of the things when you look at it, when you think about… Maybe not where it is today. But even just thinking about in the next 10, 20 years, as this conversation matures. How does a long-term hold increase those opportunities to take things deeper?

Brent Beshore [00:34:32] Yeah, well, and I think at the very core, we’re not a forced actor. So if you talk to most private equity. People. And you ask them, like, what are their biggest losses of their career? It’s really interesting. I’ve done this quite a few times, almost inevitably. They don’t talk about the deal that went bad. That’s what you think, right? You think they’d be like, oh man. We had this zero. 10 years ago, it was a zero out. Like we thought it was gonna be this incredible thing and just. It detonated. It’s actually not what they say. They say is. What really kills me. The biggest losses I feel like are the ones that I knew were gonna be incredible long-term compounders. That we were forced to sell. And so, yeah, I think that by the nature of having long-term capital, it gives you the option. To not to have to do anything. And again… You know you plant a seed using your analogy you plant seed if you keep digging it up. As soon as it sprouts, you’re gonna kill it. Right. It just, it just can’t sustain that. I think there are good reasons to sell and bad reasons to sell. So I want to be clear, like permanent equity is not one of these firms that would say we would never sell. In fact, I had the pleasure of having dinner with Warren Buffett. And it was. Phenomenal evening, three and a half hours, there was five of us. And I got to ask him, I came with like loaded, it was probably awful. I’m like his nightmare. But I like. I came in like loaded with like 40 different questions. But one of my main questions was I was like, hey, I just want to understand like. Don’t you think that there are companies in the portfolio that you have? That would be better off owned by somebody else. And he’s like, absolutely. And I said, well. Why wouldn’t you sell him he’s like because I want to be able to go to the person say I’ve never sold anything and I’m not going to sell your baby right. And I think, look, I think the ethos behind that is good. I think that the practicality of it is. 

There are different seasons for different stewards of different assets. And there’s nothing that’s more holy. About you and I saying, Hey, even though we’re not the best owners of this thing. We just need to own it because selling is somehow bad. In fact, if any owner occasionally, you know, I’ll get this question from a seller. And they’ll say, well, you’re never going to sell my business, right? I didn’t say that. They’re like, whoa. If you’re gonna sell it, then why don’t I just sell it to the highest bidder? And I said. Wait a minute, is there something wrong with selling the business? Yeah, I don’t want you to sell it. You’re selling the business. They’re like, oh, well, I said, so can we agree? What’s the idol underneath? Yeah. Can we agree that there are good reasons to sell and bad reasons to A great reason to sell is there somebody else who would be a better steward of the asset. Somebody else who could carry on forward that legacy. And I think that gives you the optionality to do it. But there’s also a lot of reasons to hold something, not only to make money, but to endure the culture, to be able to reinvest in relationships. I mean, the hardest part of doing what I do is for sure the first 18 months. Because the default assumption, no matter what you say, no matter where your track record is. Default Assumption from people who don’t know you is. They talk a big game. They’re going to come in. First week, they’re gonna say, ah, okay, niceties aside, now the ax comes out. Now we’re going to grind on you like… You never believe be possible, right? It’s funny because we’ll tell people during due diligence, just operate the business the week after as you did the week before. Two days after closing. Hey, so what do you want me to do this week? I don’t know. What were you gonna do this week? They’re like Well… I don’t know, I mean, just do whatever you’re gonna do. Without us. And they’re like, well, there’s really no catch. What do you want to know? I don’t wanna know anything right now, I just want you to be you, just operate. Do you need any help? No? Don’t need any help? Call me if you need something. I’ll call you if we need something. No one really believes that. 

So the first 18 months is this like testing of exploration of trust. And there’s a lot of opportunities to get sideways. I mean, any relationship you can get sideways, so I feel like once you clear 18 months, especially three or four or five years, you start to get into this really nice rhythm of. High trust, expectations, know what’s going on. That’s really the beauty that the speed can really accelerate because you have that trust. Now think about that compounding for 10 years, 12 years, 15 years, right? I mean, I still own the business I bought 15 years ago. The relationship I have, her name is Jenu Molly. Is phenomenal. I was talking with her a couple days ago. We’re dealing with something really difficult right now. And. The ability for me to hop on and say, hey, how’s your daughter doing? She’s like, oh my gosh, you know. My, my, my youngest just started driving. I’m like, you’re gonna start driving. I remember when she was like one, you know? Um, we’ve been in relation for 15 years. What does that business do? It’s a military recruitment firm, so we help the military recruit. Hard to get. Kind of across different series.

Justin Forman [00:39:15] Hard to get people sounds a little suspicious for a record. I think we veer off of that.

Brent Beshore [00:39:20] Yeah, yeah, it’s kind of like one time I was at a national defense. Event and I sat next to a woman and I was like, Oh, what do you do? She was like, I work in the Middle East, and I was like oh cool, like get more specific. And she’s like, are you new here? And I was like, I am, how’d you know? And she’s like… Yeah. Can I just give you a pro tip? Sure. She’s like, when people say they work in the Middle East, don’t ask more questions. This is not the place to be.

Speaker 6 [00:39:43] Yeah.

Richard Cunningham [00:39:44] We don’t post on LinkedIn. No, that’s hilarious. So get specific on both sides of the permanent equity equation. So you’re buying these businesses. I think we’d love to hear about some of the businesses because i saw the amusement park transaction and we gotta get into that And then the other side is you’re kind of hinting at the family office in Florida who laughed you out of the room and was like, I’m not giving you capital for 30 years. Talk about because you’re deploying out of a pretty sizable fun right now that took an outside capital. Talk about that partnership with the investors who have to kind of reorient their thinking around. The long-term hold. And hey, in- three to five years I’m not going to see a liquidity event in one of these businesses sells. Traditionally, in your model, there are opportunities for sale. What does that look like? How are you guys bringing them into the mix and saying, hey, this is an opportunity for. Cash flow and for all of these other things that comes with this. So kind of break down the strategy from both sides of the aisle if you will.

Brent Beshore [00:40:31] Yeah, maybe you started on the capital side first because it really enables us to do what we do, right? If we had a traditional two and 20 structure, 10-year fun life, we just couldn’t. Make the promises we make, we couldn’t do the things we do. Honestly, I probably couldn’t sleep at night, which is by far the most important thing right getting a good sleep Um You know, I feel like our. Our structure. It really selects for incredible investors. Because when you go to somebody, most people would say, hey, we want to take your money for 30 years, like. They’re going to tell you no, and like, no, just straight off the bat. And by the way, it’s a very common, it just outside of our mandate, we can’t do it, you know, and we always say, of course, it sounds like they’re bad people or anything. It’s they have a mandate. They have constraints on their capital, they can’t do it. So it’s a very rare investor. That can give you capital for 30 years. By the nature of that, their longer term, their higher relationship, they’re excited about the long term that we are. Um… So I feel like we’ve got. Some of the best investors in the world, the people who think like that. It’s just rare. And so WashU, their endowments, our anchor investor, Scott Wilson and Adam and Andrew and the whole team there. You know, it’s been a beautiful partnership, and I tell you what. Know, COVID hit, I just want to tell you a little vignette, COVID hit, and no one knew what was going to happen, right? If you guys knew, then you should’ve told me. Um… No one knew, and look, I had fears, and I remember calling up Scott and I’m saying, We may have a whole bunch of businesses that go to zero. I’m not sure if we’ll be able to float all of them. And, you know, I think. Most investors would say, okay, this is an opportunity. I’ve got the upper hand. Maybe I can negotiate some terms. Hey Junior! Userist line of credit, you know, kind of get sharky about it. And Scott did the most beautiful thing. He said… First of all, Brent, we’re 100% behind you. We have a lot of cash. And we would love to support you in whatever you need. You just tell us what you need And I said, well, Scott, I don’t need anything right now. Knowing that that was standing at our back. Knowing that we had access to capital if we needed it, that it was gonna be kind, generous, long-term capital. Made all the difference. It allowed us to focus on what mattered, to make good decisions. Um, that’s what you get with investors who I would say, get it, quote unquote, long term, right? And so, you know, we’re deeply grateful. Like I said, we think we have the best partners in the world. That enables us to go then to business owners and say. Um, everyone else is going to, um, try to resell you within a short period of time. Probably acts a bunch of your leadership. Kind of bring in their people, maybe move it out of the community that it’s in. Levered up with a bunch of debt And it’s just going to completely change the nature of the business. We can come in and say we like you because you’ve done a great job. We wouldn’t be interested unless we thought you did a great job. We want you to continue to do a good job. We hope that. We can support you and maybe increase the trajectory, but we’re not trying to completely transform, remake the business. We’re trying to help support you in your vision of where you want to take this. So let’s talk about that. Let’s talk about what we should be doing. The ability to not use debt is highly underrated. You know, math is pretty straightforward. You know, if you know exactly what the future holds. It’s not hard to say, okay, use max leverage, but as little equity as you can, you’re gonna get incredible returns on that equity. Things go okay. The problem is the world is unknown and unknowable. Like that is our viewpoint. And it’s been proven over and over again, especially recently. I have no idea what’s going to happen the next year. Right. Um, I can remember I was in a conversation. It was, uh, fall of 2019. We were completing our $300 million fund raise and our last fund. And I was talking with some investors and I was like, do you guys see anything on the horizon that could potentially like. Upset the apple cart. No, everything was great, everything’s awesome. Fall of 19. This is great, fall of 19, nothing could be going on. We buy an aerospace business fall of 19. I don’t know if you guys know this, but aerospace never goes down. Always Flatter Up. Always flatter up. We’re working the seller’s team and one of the guys on the team says. Are you guys like? Complete idiots, like you’re buying an aerospace business with all cash, like. This is a bunch of parts. You can lever it like it’s, this is. Why are you guys doing it this way? And we were like, well, because we believe in this, you know, philosophy that we have better optionality. We have no idea what’s gonna come down the pipe. And they’re like. All right. We are idiots just for different reasons. Um Turns out, it’s not like we foresaw COVID coming, believe me, we didn’t at all. But when COVID came, we were literally the only one of the people in our industry who didn’t have that. And we made 10 years of progress in two years. And the business completely transformed. I think it’s 7X what it was. In 2020 now. And um… It’s been an incredible success story. And it wouldn’t have happened if we had been beholden to banks and being able to do that. So I think it’s the pairing of. Long-term time horizon. The lack of debt that we put on these companies. And then our fee model, which is. Crazy. I mean. I think it’s unique, I don’t think anyone else has done this, but they take no fees of any kind. No reimbursements of any kind. There’s no cash that comes from our portfolio companies or from the LPs to us. Outside of… We take a percentage of free cash flow above a hurdle as we return cash back to investors. So it’s incredibly entrepreneurial. You know, said differently, there’s no fee income coming in. There’s no incentive for us to. Amass more and more resources so that we can get more and more fees, which is kind of the trap that traditional private equity falls into. We’re doing it just. Purely for the love of the game and for what we’re doing and we’re pairing our capital with their their capital and we are trying to do the best we can, and if we can’t do well, like our investors. Make more money than us. And if they don’t make money, we don’t make any money. They had to make a lot more than us for us to make money. And so I feel like it’s those things that really just perfectly align. You know, the incentives at the company level, the incentives of the permanent equity level, and the incentives that the investor level are all aligned as well as they possibly can be. To make good decisions. And again, it’s kind of like. We want to have all the incentives lined up to push us in the right direction, we can still screw it up. We do, we have to say sorry. But… I don’t feel the poles of traditional fund manager in having to make those trade-offs.

Justin Forman [00:46:49] That’s awesome. Well, this is a special episode. It’s fun to be here at South by just to talk about this and this convergence of. Faith Driven Entrepreneurs and Faith Drived Investors is going to air on both of those. I want you to talk about just kind of where some of those conversations for you guys and the importance of community hits. With Main Street Summit. I just want you to just kind of talk about. What is it? Who’s there? What’s that journey been like?

Brent Beshore [00:47:10] Yeah. I joke that. Private equity is an excuse for hospitality. I like I love my friends becoming friends, like nothing makes me happier. I don’t get any envy. If they’re all getting together without me, it might be. But for the most part, I want them to go off and have a great time together. For me to be able to see my friends become friends is just the greatest joy in my life. And I think, you know, kind of going back to part of our earlier conversation. You know, to be known means to be in community. And most people don’t have access to community, especially in the financial world. And the community that we do have access to feels very shallow. Transactional. Money focused and was what we’re trying to do with Main Street Summit. We were at another event called Capital Camp that’s only for investors. We’re trying to bring people together and say, hey. We’re all here to do well. We want to be excellent at what we do. There’s no sacrifice of excellence. If anything, I am way more excellent at my job as a follower of Jesus. Than I was as an atheist. Um. We want you to be excellent, but we want you to be in relationship and remember what excellence is. Excellence, if you’re shooting the lights out and you’re making tons of money and you are sacrificing your family at the altar of success. You are losing. Like, yeah, you got a yacht and you have no one to enjoy it with. And so we try to have messages like that where it’s not a, so it’s on a faith driven event necessarily. I mean, there’s a lot of people of faith at the event. We want people to be authentically who they are. And we want it to be something where people feel comfortable inviting their atheist or maybe it’s a person of a different type of faith. To come to the event. But we can all share these values and say, hey, we’re pursuing excellence. We’re putting our family first. If we want to be in real relationship. And that aroma of Christ, I think, just comes through. I think that people, I mean, why don’t you talk to it, Richard, I think you were there. I knew it.

Richard Cunningham [00:49:11] It was unbelievably powerful. First of all, you show up to Columbia, Missouri, it’s fall. It’s beautiful. Which is the center of the known universe. The center of known universe

Justin Forman [00:49:18] Waco was that? What’s that? I thought we established Waco as the center. Okay, they’re competing closely.

Richard Cunningham [00:49:23] Absolutely. But like, and it just feels like when you show up to a conference and you feel this rush of like, I got to meet, meet, network, network. And somehow, some way, you’ve created and curated this environment where Main Street Summit takes over all of downtown Main Street. And things just kind of slow down, you’re like, wait. I’m here to just like fellowship and enjoy. And then the people you put on the main stage, which is just so commendable is like John Coleman gets up there and he’s like, Hey. We’re all here to make more money, it feels like. But I’m actually gonna talk about how that’s actually not beneficial to your soul is to pursue money. Alan Barnhart gets up there and talks about giving away. Billions of dollars and how just the Lord called him this radical generosity. And so you are so winsome and strategic and how you position people up there but you’re hittin’ on it. It speaks to this whole person. I mean, you put your personal trainer up on stage to talk about just being healthy. And what it looks like to go on a fitness journey because We are mind, body, spirit, soul, as we run businesses or invest in businesses. It’s this incredible kind of opportunity to say, Hey, let’s talk about. The whole person and there’s. Fun whiskey and tequila tastings and there’s great live music and it’s just it. Had this kind of ability of like, I walked back and as a you know, middle of the week event and I was like, I feel like I just had the greatest long weekend of all time with a bunch of really special people. So you guys have nailed. Just the heart posture behind it, so keep going, but…

Brent Beshore [00:50:34] Keep going but well honestly i i mean we’re here you know we’re in austin we’re at south by southwest i mean as i have in my head of what i hope it becomes You know, South By started with. 40 years ago? 50 years ago, maybe we’re pushing now. I don’t even know. It’s in a long time Um, and I’m, you know, I’m sure it started small. I’ve talked to a bunch of people who started these events that became big and they were like, and we couldn’t get anybody to come. I mean, Allen and co, I talked to the guy who runs the Allen co conference, Which is like the, you know, if you see Bill Gates walking next to Warren Buffett, it’s at Allen co, right? Like that’s, you know, they all got vests on the old puffy puffy vester in Sun Valley, And I talked to him and I was asking him all kinds of questions about how do they do things, what are they working on, all this stuff. And he said, well, how many people do you have do your first year? And I said, oh, you know. First-year capital camp was like I think 260 and he’s like And I was like. Oh, man, that’s not very good. Is it? He’s probably going to he’s like. We couldn’t get like two dozen people to show up the first 10 years of the Allen Coat Conference. What? And he’s like, yeah, it just over time gains momentum. Being here is actually, I’ve never experienced South by Southwest. One of the things I’m excited about is. Got an invitation to speak tonight. I’m excited to just go and experience it because What in my head is South By is kind of where I want Main Street to go, which is a festival. I want it to be a festival where instead of, you know, food and wine or instead of. You know, films. You sit in relationship with people and learn and grow together. And different niches and different interests and different industries and. Want all of those people to come together in this very broad tent. So whether you’re. Running a startup, whether you’ve got a 50-year-old mature business. Whether you’re an owner or an operator or an investor in this area of the market, we want to create the big tent gathering. Where people start to come in. And say, hey. We want to be in relationship. We want be known. Let’s gather there once a year. And make it something on the calendar that we go to.’

Richard Cunningham [00:52:20] I think you guys have captured lightning in a bottle. Gravitational force type of thing. And I bring up Main Street Summit, people are like, you got to go to Main Street summit. Oh my goodness, I saw so-and-so was speaking or so-so is there, so. Kudos and job well done. I just love that your philosophy to private equity and kind of your redemptive mindset. Gets to kind of permeate throughout all of this, because people naturally look up permanent equity or be sure and. They start looking into. What do they do and how do they go about it? And they’re like, wait, what is this? Long-term hold private equity company. That’s not just like stripping down. It’s just a really. Kind of winsome way to kind of. Showcase what you guys are all about as well

Justin Forman [00:52:56] Fun conversation. It’s great to be with both of you guys. Friends, if you’re listening to this and you’re wrestling with this question of like, man, it feels like a lonely journey, or it feels that you’re in that burnout stage, I would just encourage you, whether you’re a faith-driven entrepreneur or a faith driven investor. Find somebody, find somebody in a place where you can begin to get known. And so that it starts with the little things that pull us off track. As we talked about today, it starts small, and it starts little. Find a place. An event, a conference, whether it’s Main Street Summit or some of the opportunities that are all over the Faith Driven Entrepreneur and Faith Drived Investor site. But just take a faithful step. Take a step towards somewhere where you can be known. So, great to be with you guys. Thanks for tuning in, we’ll see you guys next week.

Close [00:53:39] Come for content. Stay for community. Join a faith-driven entrepreneur group online. No cost. No catch. 

Richard Cunningham [00:00:00] 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.

Intro [00:00:17] 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 Cunningham [00:00:44] Friends, welcome back to another episode of the Faith Driven Investor Podcast. Great to have you with us for episode 198. John Coleman, we are creeping up on 200, which is really exciting. It’s Marks on the Markets. It is technically the month of June. I will admit it is May 20th and we are recording this episode a little further in advance than we like to record our Marks on the Market episode. But that just means life is full and there’s a lot of good things going on, gentlemen. And the nice thing is we’ve got a couple of juggernauts here to talk markets. And so these insights will still be relevant, regardless of us being seven business days away from this podcast releasing.

John Coleman [00:01:19] Well, fortunately, we live in a really slow news cycle.

Richard Cunningham [00:01:23] Absolutely.

John Coleman [00:01:23] So what could happen over the next 10 days that would make our comments outdated?

Richard Cunningham [00:01:28] Literally nothing, absolutely nothing. So there’s the voice of John Coleman. John, we’re joined today by our great friend Matt Monson out of Denver, Colorado. Matt, I pray the weather is better where you are than where I am in Austin, Texas. We’re feeling summer.

Matt Monson [00:01:40] Richard, it is always beautiful. Thanks for having me.

Richard Cunningham [00:01:42] We’re pumped to have you, man. Guys, let’s start with this. A couple days ago, the US credit worthiness was downgraded. Did you guys see this? So we went from AAA down to AA1 from Moody’s, and this now joins S&P and Fitch, where they have long had the US rated back, that’s back to 2023 and 2011. Markets haven’t really kind of responded in some like big downward way. What do you make of all the spent, Monson.

Matt Monson [00:02:09] You know, I think there’s room for someone who’s wittier than I to come up with a new phrase other than the risk free rate because it seems like there’s a little bit of risk now in U.S. Treasuries. It’s the slightly risky right now. That’s right. I mean, you know, big surprise, right? If we spend more and keep racking up the debt like sooner or later, we’re going to end up with a whole lot more debt than we can support. So I don’t think anyone should be surprised by it. And that’s probably why the markets didn’t react is a lot of folks in fixed income space saw this one coming. Yeah. I mean, this.

John Coleman [00:02:42] This has been on the horizon for a long time. I think probably the US rating was slower to drop because the US dollar is the world reserve currency, and it was the most stable of the currencies. And what’s interesting about all of these, right, is the US is definitively in an unsustainable fiscal condition. I think the debt is at something like $36 trillion. We’re not having to refinance it at higher interest rates. The new budget, which I know we’ll talk about, leads us to something like an eight or nine percent deficit. So not government spending, an eight to nine percent annual deficit adding to that debt. There’s just no way that makes sense. I think one of the reasons markets have kind of priced that in and one of reasons the dollar has remained somewhat strong is because when you look around the world, this is a problem almost everywhere, right? Almost everywhere in the developed world. Has an unsustainable fiscal condition right now. I think the Japanese prime minister recently went public and said that he thought their fiscal condition was less sustainable than Greece’s, particularly because of their decline in population. Germany is the only place in the EU right now that seems to have a somewhat sustainable fiscal situation. China doesn’t report real numbers, but everything that we hear coming out of China is that their economy has slowed, that they’ve got. Internal debt as well as their national debt. So internal debt, meaning different provinces, the different state controlled companies, etc. And here in the US, we got the same thing. The states are typically very indebted, many of them unsustainably. So our entitlement programs can’t be paid for even under the current deficit spending that we have. And it’s got to be a wake up call for national governments because this is unsustainable. And one of my hopes is that Moody’s taking action and downgrading. The U.S. Credit rating is a wake-up call for the people of the United States who will always have to lead their elected representatives who have really very little incentive to reduce spending, given that spending produces votes. And I think, you know, hopefully this is a time for us to take it seriously because markets have not reacted, but over time, the markets are going to have to react more dramatically to this if we can’t solve the unsustainable government fiscal situation that we’ve gotten ourselves into. That’s my position at least.

Matt Monson [00:04:58] Yeah, that’s right, John, no one would run their personal lives like this. So why should we run the country like this? That’s well said.

Richard Cunningham [00:05:04] It’s a moody-sided U.S. Government’s failure to implement measures to reverse the trend of large annual fiscal deficits and with growing interest costs because as the debt racks up higher and those interest payments come due, then they just start to kind of snowball on yourself. And without adjustments to taxation and government spending, the federal budget flexibility is just getting too tight. It’s too limited. And so that brings into the question this big, beautiful bill. John, I know you’ve spent a lot of time recently talking and helping the listener get into kind of the Trump kind of administration’s head on how they’re thinking about tariffs. This bill doesn’t necessarily show a kind of return to pre-COVID levels or let’s stabilize spending if anything, the deficit would grow. You know, you hear both sides, there’s proponents of it. There’s defenders of it, there are people who are up in flames about just more and more spending kind of on a congressional front. Matt, what do you make of all of this and kind of where do things go from here, kind of siding some of the budget deficits we’ve already talked about?

Matt Monson [00:06:01] Yeah, I think it’s hard to say that you want to reduce a budget deficit at the same time as what we’re talking about with the big, beautiful bill. I’m just not sure that we’re going to accomplish what Trump has set out to accomplish over the longterm. So I’m as excited and as interested as you are to have a front row seat and watching this unfold.

John Coleman [00:06:20] Honestly, I’m not an expert on what’s in there. It is a big bill. The early signs are that it doesn’t dramatically enough take steps towards reducing the deficits that we’re talking about, particularly with us having to reset many of our interest payments at higher rates, which is hundreds of millions of dollars that will go out the door for no additional programs. Congress has had a very difficult time even getting to slow down in some of the spending in some of these areas. Even moderate reductions. I think there was great hope that with the DOGE initiatives. And with more restraint that we could reduce spending enough to really start to get to, I think, what people have rallied around as a potential stable long-term situation, which I might disagree with on the margins, is a 3% deficit. So people say they want to get to 3% inflation, 3% economic growth. At least that’s what Scott Besson has talked about. Ray Dalio has rallied about the 3-3-3 plan, which would be those three numbers. And this bill obviously, from what we’ve seen so far, does not seem to get us there. And what’s surprising to me is, you know, if we were to just cut spending to pre-COVID levels, we would actually be in a much better fiscal situation. I think people don’t understand how dramatically the fiscal deficits have expanded because initially the COVID situation, which maybe was explainable, but where many of those things persisted after COVID. And the number of these benefit programs that have expanded in an unsustainable way and aren’t being addressed right now from what I can see in the midst of also trying to cut taxes and things like that. We’ll have to see what the final bill says, but if the early indications are correct and it really keeps our deficits in the seven to 9% range. I think we’ve got a long year ahead of us to try and get something more accomplished over the course of the next year because it obviously doesn’t do anything to slow the deteriorating fiscal situation that we’re in right now.

Richard Cunningham [00:08:20] So Matt, you’re a markets guy, public equities manager. You’re perceiving all of this as you make kind of buy sell decisions inside a portfolio. So let’s kind of shift over there as we’ve now kind of laid the land of the economic landscape and maybe just go back to start at 25 for us because there has been a lot of action that has taken place. You think of early April liberation day, S&P 500 reaching an all time peak in February, but then just, you know, a 20 plus percent kind of crash after liberation day. And now we’re back to. Pre-liberation day levels, if you will. Some markets have rallied. What has been kind of your annual take thus far on where things have started, where they’ve come? Where does the market sit today? Kind of some of your outlook that you guys have.

Matt Monson [00:09:00] Yeah, for sure. So I’m actually surprised the market recovered as fast as it did and as much as it did. And part of it’s because when tariffs get announced at 145% on Chinese goods, it’s a huge number. So, I recognize why markets sold off as fast and as hard as they did. But now that we’ve settled at 30%, at least for the next 90 days, I don’t think people are really internalizing how big 30% is on Chinese goods coming into the United States. And consumers haven’t seen it yet on the shelves. And so I think as those moments start happening where item A coming off the shelf might be up to 30% more expensive than item B, I think you’re gonna start to see it in markets again. And so that’s one thing I’ve been thinking about in terms of how markets have recovered and just valuation multiples. You know, I hear it every day that folks will say, gosh, large caps seem expensive. Well, if you back out seven companies and you- pretty sure you can guess which seven from the large cap index. The large cap the index doesn’t look expensive. It actually looks like it’s trading right on top of its historical trading multiple. And same with mid and small caps. They typically traded a premium to large caps, but are right now trading at a significant discount to large gaps. So just to put some numbers to that, and then I’ll hand it back over to you Richard. When you look at the median forward PE of the Magnificent Seven, I ran this this morning, it’s 31 times. The S&P 500 is 23 times. And to give you something to compare against when you’re an active manager who’s going out and picking companies with the same expected earnings growth as the Magnificent 7, you can pick them at 16 times. And so it just gives you a sense for how much price-to-earnings premium there is on those seven companies and how much that drags the entire index up. Hey, Matt, a couple.

John Coleman [00:10:50] Of follow ups on that. I’d love to get your perspective. One is we’ve been in this growth cycle for a period of time. We go through these different cycles of value and growth. I know you put out research how up into the great financial crisis, effectively, we lived through a period where small and mid outperformed the large cap and outperform some of the growth stocks. We’ve been at a very long cycle now where the largest stocks have perform small and mid. First question is just kind of are we seeing any reversion to the mean there? Are we seeing a potential turn in the cycle? I know people have talked about that for a long time, but the timing has been difficult to pinpoint if we are gonna see a reversion in that cycle. Have you seen any early indications of that, or is it still a continuation of the cycle we’ve been in?

Matt Monson [00:11:36] Yeah, I haven’t seen a turn. I mean, you’ve seen a little bit more sell off in the mag seven this year than in some of the other names in the market. And I think it’s just because they had a whole lot more PE multiple that could come out and that, you know, they had further to fall. You know, using what you just mentioned over the last decade, large caps were absolutely the winner. But what people don’t think about is that the decade before large caps significantly underperformed, not just small and mid cap equities, but they underperform US treasuries. And when you add the two periods together and you look at the last 25 years, large caps have still underperformed mid and small caps. And so I think there’s just so much recency bias to the performance of the S&P 500 that people are hung up on that index. I mean, likewise, you’re seeing that across, you know, different data points as well. You know, people wanna see rates go back to zero. Well, people don’t remember that even though Fed funds spent more time at zero over the last decade, the 20 years before that from 1990 through the end of 2009, the average was a little over 4%, which is where we’re at now. And so I think that, you know, people just get hung up oftentimes on looking at what the last decades has brought and not remembering the 20 and 30 and 50 years before then. Well, I’m looking at the-

John Coleman [00:12:52] seven Matt, one of the things that keeps going through my head is there could be various reasons the mag seven are valued at a premium over the others. Right. And I’ll offer a couple that you reflect. I mean, you’re in markets every day. One is just a flight to quality. They’re big, successful companies. This is not the dot-com bust in the early 2000s where it was kind of vaporware. These are big cash-flowing successful companies and just like people flee to U.S. Treasuries in times of crisis because of their safety, that could be one reason. The second could just be this increasing holdings in ETFs and passive holdings, all of which seem to have exposure disproportionately to the MAG-7. So I think it’s something like 30% plus of the S&P 500 asset weight right now is in those seven stocks. They’re also in growth-oriented passive holdlings, et cetera. And so there’s this self-fulfilling cycle where these passive holdnings, which have grown up so much over the last 15 years will reinforce the valuation of those. And then the third, which I haven’t totally discounted, is that those seven stocks actually are positioned, or at least some of them are positioned to take advantage of what I think is the biggest technological revolution of our lives, which is artificial intelligence. You know, if you look at some of the big names and we’re not making specific securities recommendations here, I’m just mentioning companies, but if you look at Google, if he look at Tesla, for example, which has a lot of AI embedded within its hardware for driving, for robotics, et cetera. If you look it Apple, if look at Microsoft, certainly. All of these seem poised to use their cash to seize on this growth in artificial intelligence. And so it could be that their near-term earnings don’t reflect that, but people are betting that these biggest companies are best positioned to take advantage of this technological revolution. Maybe there are other factors. I mean, why do you think there’s so much of a premium on, we’ll call it these seven stocks, but these seven, eight, nine stocks right now, which are all clustered around those technological advancements that we’ve been seeing.

Matt Monson [00:14:53] Now, going back to something you mentioned a minute ago, every dollar that flows out of active management and into passive, I think, in general, benefits the magnificent seven. And it’s because I don’t know that many active managers that put 30% of their money to work in seven names. And so if a dollar comes out of Active and it goes into passive and that means 30% goes into seven names, you’re right, you’re gonna incrementally buy the names that are already really big. And there’s good reasons to own them too. Like you said, if AI ends up being an arms race, and if you have to spend a hundred billion on hardware in order to get an edge, I think that there’s something there. Now, if DeepSeq can be replicated across a whole bunch of small kind of tier one players that can spend a smaller amount of money to build an incredible large language model that can outmode some of the other bigger, more established, let’s call it $100 billion large language models. Then I think it starts to break down that thesis. I wish I was an expert in whether or not that was true. I don’t think anyone knows. I think we’re gonna see as folks continue to spend and we figure out whether or not you can be small and win in AI. One more thing just to reflect on is that the Magnificent 7 do all have one key thing in common. And it’s that many of them have technology monopolies or in some cases duopolies. And When you’re looking at Google and the talk around whether or not pieces of their ecosystem need to be broken up or pieces of meta need to be broken or Apple is too fiercely guarding their ecosystem. I mean, the EU doesn’t have any of these companies headquartered there. They don’t seem to like any of them. And so I think that folks are taking risk in a sense that they’ve got 30% of their cash or invested capital in the stock market in these seven names. And yet these seven names actually share risk factors in common, and so it’s just something important to draw to listeners’ attention if they haven’t thought through it before.

John Coleman [00:16:52] Yeah, and that’s one thing I’ve talked a lot about with people, and Richard, you can direct us where you want to go, is if you just think about your risk budget, I think intuitively a lot of day-to-day investors think of the S&P 500 or similar indexes as a low risk way to get into the markets. They think this is broad coverage of the markets, I’m in the index, quote unquote, I’m investing what others are investing in this is like a safe bet I mean, it’s performed extraordinarily well over the last five years, right? So I’m not saying there’s not some validity to the performance of that index, but from a risk budget point of view, it’s worth people knowing you’ve got 30 or 40 percent of your exposure in these seven names, and because the risk factors are correlated, even more of your risk is in those names, right. And so you may think of it as a lower risk bet, and it’s certainly returned really well over five years. But that level of concentration with aligned risk factors. It creates more risk than a more diversified pool of holdings would be, whether that’s in private markets or commodities or a broader array of public securities. I think the average investor probably underestimates the risk that they’re taking by going into just the big passive indexes like the RUSP 3000 or the S&P 500 and the concentration in those asset-weighted indexes. In those in a few number of small names with correlated risk factors what that introduces to their portfolio and so that is something I think that investors need to grapple with with their advisors is you know this seems like the safe bet but actually do I need to diversify my holdings in some way so that I’m not entirely risk-adjusted to these largest names.

Matt Monson [00:18:35] Absolutely. And my favorite is when someone says, Well, I own five different ETFs. Well, within each of the five, you might still have 30% of your exposure in each of the five in the same seven stock.

Richard Cunningham [00:18:45] And just to tie a bow on kind of the Mag-7 conversation, looking at those seven specific names, you’ve got your positive performers on the year, Microsoft, NVIDIA, Meta. That intuitively makes sense. Microsoft has had strong earnings growth. NVIDia continues to kind of ride the AI demand and just the demand for their products. And then your negative performers, Apple, Amazon, absolutely tariff-related, Alphabet, you know, which is Google, a lot of talk about Search and OpenAI and ChatGBT possibly replacing. What is the Google ad revenue that is traditional search and then Tesla and just all the volatility they’ve experienced with Elon kind of floating between different positions. And so there’s your kind of three positive performers, four negative performers. And then overall, when you look at the indices that we’re talking about here, NASDAQ, S&P 500 that are heavily concentrated, Mag-7, both are about flat year to date. We’ve talked about the increase, the sharp decline, and then kind of back to pre-liberation day levels. Speaking of AI arms race, gentlemen, Once again, we’re recording on May 20th. How about Trump’s kind of tour of the Middle East and the big conversations with the kingdom of Saudi Arabia. One of the things he promised was foreign direct investment to the U.S. Just massive announcements around AI investment from UAE, KSA into the U S and the reciprocity there. And just kind of some of the forward momentum as we look at what was traditionally very tough and kind of hesitant relationships and now becoming kind of big time. Commerce, pro-commerce relationships between the US and these Middle East partners.

Matt Monson [00:20:17] Yeah, we’re thrilled to see this taking place because if the U.S. Wasn’t there striking those deals, someone else would be there striking those deals six months after. And so I’m thrilled to be as a member of the United States to be partnering with those countries around the future of their investments in AI hardware and software.

John Coleman [00:20:34] Yeah, I think if you go back far enough in history, Richard, some of those partnerships, and they’re not alliances because we’re not formal allies with those countries in the technical sense of the term, but we had been deeply partnered with countries like Saudi Arabia and the Emirates on multiple fronts, particularly through the Clinton and Bush administration, which was an extension of some of the prior policies before that. I think those relationships. Got a lot shakier during the Obama administration and subsequently, again, during the Biden administration. Two thoughts here. One is I do think constructive engagement with those countries, which actually have been liberalizing quite a lot. If you look at what’s happening in Saudi Arabia, I lived in Saudi Arabia for a few months, once early in my career. And if you look the country today versus when I lived there almost 20 years ago, it’s a dramatically different place. So it is good, I think, to build our partnerships abroad with economic ties, and especially to diversify those economic ties so that we have a broad base of countries where we’re getting that foreign direct investment. I think our economic relationships have become a bit too concentrated in places like China, which are now adversaries, at least on some fronts rather than partners. And then like Matt. I think this idea of getting quote-unquote friendly countries or countries with which we have broad-based economic partnerships, investing in U.S. Infrastructure, building those economic ties is something that we should seek. I think that will help to power U. S. Companies which are using that infrastructure to develop things that we can sell abroad. And I think those economic partnerships at least traditionally have mitigated the possibility of conflict. They’ve mitigated the possibility that things. Escalate in a military way or in a foreign policy way, and economic ties have tended to dampen escalation of various other types of conflict, which are obviously worse, even than economic conflicts. And so I think it’s good news, particularly as we need to, Matt mentioned it earlier. We’re gonna have to pour hundreds of billions of dollars into energy infrastructure in order to power all of these AI capabilities into semiconductor plants, into related technologies in order fuel this technological revolution. And I think seeking that investment abroad is actually a pretty smart way to seek it if we do that on terms which are friendly to the US government. I say we speaking as an American. I also think it’s pretty good for the world if we can get a handle on some of these technologies which could potentially make life better, potentially make it worse, but the technological revolution is coming and the question is whether we can keep pace with other countries with which we might have less trust like China in the development of energy and artificial intelligence or whether we fall behind like Europe has. And I think it’s good for America to keep pace, especially with some of the Asian economies like China. Where we are in an arms race right now on both energy and artificial intelligence in the broader technology ecosystem.

Richard Cunningham [00:23:29] And so as we talk in international relations, let’s go over to the tariff conversation. I know we’ve hit this the last couple of Mark’s episodes as it’s been an enormous headline over the past few months. Matt, where do you kind of stand? What have you seen in your portfolio, the companies that you’re monitoring? Mark, it’s hate uncertainty. And I know this conversation has bred a lot of uncertainty. We’re starting to see kind of some light at the end of the tunnel, if you will. There was a China deal kind of announced or at least the next 90 days. We saw a UK trade agreement come to fruition. Pretty friendly, favorable terms to the U.S., if you will. How are U. S. Companies responding to all of the uncertainty? What are you seeing within your portfolio? What’s kind of your general take and outlook with the tariff kind of broader conversation?

Matt Monson [00:24:10] Yeah, we had to build a whole framework based on analyzing the risk from tariffs, both on revenue and cogs. So I’ll just break down how we thought about it from a public equity’s perspective and how we analyzed all of our holdings for this type of risk. So first, figuring out how much of each of your companies that you own, how much they sell into China specifically, is the easiest part of the equation. Because thinking back only a few weeks ago, if there’s 125% tariff on a company sales going into China. That’s going to make that good less attractive than a substitute good, if there is a substitute. So what we did was we quickly figured out which companies were selling a material amount of their revenues into China. And in some cases, we reduced or we sold out of those positions. But we didn’t have a lot of those. The other side of the tariffs equation that is more common that people have been talking about a lot over the last few weeks is… So many of our companies in the United States get their inputs from or their cogs or cost of goods sold from China. Now, companies don’t break those out as cleanly in their disclosures as they do their revenues. So it’s actually been a really big research undertaking for us to try to identify which companies we have that source a material amount of their inputs from China, and now once you identify which ones do that, now the next question. Is where are the company’s sales, the U.S. Company sales? So I’ll give you an example. One company I was on the phone with said, well, we manufacture about a third of our goods in China, but half of our sales are outside the United States. So we’re never going to bring those goods manufactured in China into the United states. We’re going to sell those to our customers in Germany and in the UK. And so it’s actually a very complex spiderweb of. Components to be able to figure out how much gets manufactured abroad and whether or not that needs to come through the United States. And so that’s been a really interesting undertaking for us over the last few weeks. But going back to something I said earlier, even at a 30% tariff rate for goods coming in from China, I think that number’s a lot bigger. We started with something that was even larger, 145%. So now 30% looks relatively small. But if we would have started from nothing and gone to 30% It’s actually a much bigger number than what I think folks can appreciate.

John Coleman [00:26:26] That’s one of the things that is making the Fed’s job hard right now because the tariffs kind of by definition, if not absorbed by suppliers, which I don’t think they can be fully absorbed even at the 10% level, will be inflationary. Now, it’s a one-time step up in inflation, assuming those rates stay stable. Not everything is subject to a tariff including input costs because we don’t get everything abroad but we do get a lot abroad so it’s only a portion of the input costs that we’re talking about but even at a 10 percent level you’re talking about an inflationary impact and certainly at a 30 percent level with China you are talking about inflationary impacts. A lot will depend on where these bilateral negotiations go. We’ve got this 90-day pause, which I believe might be extended beyond 90 days from when they announced the 90- day pause, depending on how those negotiations are going. But if the conclusion of the UK negotiations are any indication, the Trump administration likely will stick to wanting to have an across-the-board tariff with almost every country at or around the 10% level. And I think if you’re the fed… You’ve got a very difficult problem right now because the U.S. Economy, at least the latest I’ve seen Matt, doesn’t seem to have slowed dramatically. The equity markets have recovered. Employment is still very high for those participating. Labor force participation is low, which we could talk about, but employment numbers are still relatively high. And we’re looking at the likelihood of inflation somewhere between two. And 5%, 6%, 7%, at least in a one-time step up because of tariffs, depending on how you calculate all the input costs. And so if your Fed mandate is full employment and low inflation, it’s really hard for you to drop interest rates right now. And I think we’ve seen a lot of the rates rise over the last few days. We saw mortgage rates top 7% again. And so I think, we’re in a sticky situation right now for the Federal Reserve where we can’t inject a lot monetary easing at the moment or drop rates. Because all of these other factors are making it difficult for the Fed to achieve its objectives given the broader policy framework. And so we are in a precarious economic position right now as we try and figure out what’s going to happen in these bilateral negotiations from a macro perspective. And then at the company level, you’re even more confused right now. You’re slowing investment. You’re trying to stockpile cash to figure out how you’re going to navigate the tariffs. Think about, I talked to a company the other day, a smaller company that sources 100% of its goods from China. 100% percent of its goods just went, a fairly large company went up 30% in price. They are struggling to figure whether they can pass that to consumers. That would be quite hard to pass to consumers, so they are in a very precarious cash position right now to see if they can survive the year. And that single example is happening in tens of thousands of small and large companies all over America, all over the world right now. And so I think the chances of a general economic slowdown have increased dramatically. The cause of all the uncertainty and the conservatism that that’s inspiring in companies, apart from the unfavorable rate environment, which makes borrowing more difficult, et cetera. So we are in this kind of difficult economic situation right now, where there’s not an easy way to relieve some of the economic pain that these companies are feeling.

Matt Monson [00:29:51] Yeah, and I’ll just say too, it’s self-reinforcing. When one company wants to pull back a little bit and reduce investment because they’re not sure what the future looks like, well, that reduction of investment is a reduction in revenue somewhere else, which means that they’re now forced to reduce their own investment. And so it’s a dangerous circle once it starts.

Richard Cunningham [00:30:11] That’s what we got into on our last Mark’s episode. If you hadn’t checked that out was Deirdre Gibson got into kind of the behavioral finance side of all this too. It’s just a human component that comes into the large macro response. Yeah, originally, it looked like a lot of the tariff impact was just going to kind of come in margin compression. And it was this, hey, how long can we hold without having to pass along significant price increases? And John, to your point, it’s eventually going to come and hopefully doesn’t come in one massive wave. Maybe that takes to my next question, both of you guys. Is Trump seeking an off ramp in these kind of new negotiations, these 90 day pauses, is he accomplishing what he set out to accomplish? Like I look at the efforts of Doge, I think we all can intuitively see the intention of the tariff revenue, which will enable kind of certain, you know, tax breaks to go in place that is helpful for the flourishing of the American people. But then you look at things like the big beautiful bill, which is possibly more spending. Where are you guys at right now as you kind of look at the overall approach in game plan? Are you still buying stock in the long term kind of philosophy or are you having kind of some questions about reconciling some of the decisions that have been made?

Matt Monson [00:31:18] So John, I’d love to hear your view on, you know, just the reworking of the tax base, you know, similar to what we saw historically.

John Coleman [00:31:27] Look, I’ll be honest, Richard. I would be pretending if I knew where all this was going to land. I don’t know that the administration knows exactly where it’s going to land right now, right? I’m not in those rooms at the moment. I don t know where it s going to land. I do think they are aware of the distress that these tariffs, especially at higher rates, were likely to cause, particularly in the small business community. And I would not be surprised if we see a series of measures to ease the pain, particularly on small businesses, maybe businesses broadly, but small businesses. Secretary Besant has hinted at things like accelerated depreciation schedules, maybe even rebates on some of the tariffs. I don’t think Secretary Besent has said that, but I’ve heard for small businesses there might even be limited rebates of some of tariff increase in price. There might be some measures to ease. The oncoming set of tariffs that are coming, I do think they understand that if we don’t reach the right bilateral negotiations in these trade agreements and get to a more predictable place, that we risk economic jeopardy in the economy. And so I do think they’re trying to work expeditiously to get those deals done. And I do think foreign countries are quite engaged right now. The US is still the world’s largest consumer. This has really upended the global trade ecosystem in substantial ways. I think this is priority 1A for many countries right now. But we don’t know where it’s going to land over the next three, six, 12 months. And I think the outcomes of that will matter a lot. Look, if we settle on lower trade barriers for American producers abroad because of the reciprocal nature of some of these tariffs and if we settled on something like a 10 percent tariff and it’s predictable and it stable and people can plan three, four or five years out. That the pain could be limited to businesses. If the uncertainty persists for a long period of time or if the tariff rates go beyond that or if we do get into a trade war with major counterparties like China in a significant way, I think that will have ramifications both for us and for China or from the other counterparties that we’re acting with. And so, look, I think my position is typically to stay invested, especially in assets that tend to appreciate with inflation. Like equities, like real estate, et cetera. Holding cash can be the right thing to do in any given moment, but it can also be risky in the sense that if you miss the big updates in equity markets, for example, that’s risky. If the dollar were to depreciate because of an economic slowdown, holding cash is risky rather than assets that tend to appreciate with inflation. And so I tend to stay invested. But I do think people have to be really thoughtful about the diversification of their portfolios right now so that they’re mitigating risks in their own portfolios that help to manage the exposures they have across different parts of the ecosystem. And part of that might be diversification even within the public equity markets where you get exposed to a variety of industries so that you’re not wholly contingent upon a certain area or industry that might get disproportionately impacted by some of these moves.

Richard Cunningham [00:34:36] Matt, I want to open up the floor to you a little bit and just kind of say, hey, broadly, what else are you watching with a close eye? You know, it could be the FDI landscape. It could be IPO and M&A markets. It could something on an international front. You know just what right now, as you think about your role as an allocator, engaging with companies in just some remarkable ways, which you’re obviously of course welcome to speak to as just a general encouragement. What do you have your eyes on?

Matt Monson [00:35:01] Yeah, we’re watching the 10 year closely. So historically there’s been a really well laid playbook where the moment that we come into volatility, the moment people are fearful, it was a buy US treasury, sell anything else kind of playbook. We’ve not seen that this time around. We’ve actually seen the opposite where people are saying, well, what are good safe havens other than the US dollar and everything else is really small Swiss francs is really small. Gold is small, Bitcoin is small. And when I say small, I mean, the asset class is just small. Like the amount of dollars you can put to work is small so if ever there’s a day where a significant buyer is buying any of those safe haven assets, and I’m not trying to say that I think that they’re safe. I’m saying in general, some folks in the market have claimed that they are safe. So I’m endorsing them. But they’re just such small asset classes that you can see their asset prices spike on a day that folks buy them. And so this is the first time that we’ve seen that this playbook hasn’t worked to go by U.S. Treasury. So the problem there is you’re seeing the 10-year yield tick up. And when that happens, I think that I believe that the administration is also watching that closely and keeping their eye on that as they determine which path they want to take forward and how long they have to negotiate when it comes to tariffs. Do you think we’re gonna go…

John Coleman [00:36:21] Rate cut this year, Matt, what are you thinking about the rates?

Matt Monson [00:36:25] You know, I was around looking at rates when they were averaging 4%. And so I think a lot of folks want to see low rates of 0% because they maybe want to seem mortgages. They want to seed demand pick up, but I don’t think that we’re necessarily going to see rates back at 0% unless you have an economic scenario that demands that we drop rates. And I don’t think any of us want to that economic scenario that needs to take place in order to get rates significantly lower. So maybe they go down 25 basis points. I don’t know if that’s what we’re going to see this year, but I’m certainly not calling for.

John Coleman [00:37:01] A significant rate cut. Yeah, I think it’s gonna be modest, if anything. A few weeks ago, I mean, by the time this airs, I might have a different.

Intro [00:37:08] I don’t know if any of us…

John Coleman [00:37:10] A few weeks ago, I thought we were headed for a rate cut, probably, honestly, when the equity markets were declining and it looked like they were predicting an economic slowdown, which is probably the one thing that could trigger a rate cut on meaningful economic slow down. Absent some fundamental indicator moving in the wrong direction dramatically, if I’m the Fed, I have a really tough time cutting rates right now, right? I don’t think they’re going to hike them because of the signal that that Good sin. But my best guess at the moment would be they take a wait and see approach to see what the fundamental economic indicators are for the next few months.

Matt Monson [00:37:44] I agree. And, you know, double back to something you said earlier, too, John, like there’s been really strong growth in the United States. However, think about your personal household budget and your neighbors and your friends who went out and made a purchase when tariffs were being highly rumored or maybe announcements had just come out and they pulled forward some of their purchases. So I’m actually really curious to see what’s going to happen of growth rates in the month of May and in the month of June and July. So we shall see.

Richard Cunningham [00:38:15] That is an interesting thought, Matt. Yeah, and just as a reminder for folks out there, as Matt kind of said, he’s got his eye on the tenure. It’s hovering around four or five right now, climbed pretty steadily in these last couple days. And then the rate cut conversation that John is speaking to. As a reminder, 50 bits cut last September, followed by 25 bits cut in November and December, and there has been no cut in 2025. All right, gents, let’s pivot one last time here to the broader FDI conversation. Matt would be remiss not to talk about some of just the things you’re seeing. As it relates to just the broader framework that we all know, which is avoid, embrace, engage and some of the inspiring work you’re doing or you’re seeing colleagues and peers do in the broader FDI space as you think about loving on companies, shining a light to companies, challenging them to kind of go further on some of their spiritual integration or human flourishing practices.

Matt Monson [00:39:04] You know, there’s a few big themes right now in the faith-driven investing movement that I think are getting people really excited as they become aware of that theme and then really get their arms around it. So I think for the longest time, Christians who had their money invested in the market felt that their money was only going to have a positive impact once it was taken out of the market and it was given away to a charity of your choice. And so what we’ve really seen happen in the Faith-Driven Investing Movement, you know, and pick up steam over the last few years. Is the recognition that your capital can have impact while it is invested in the market before it is given away. And so being able to be part of that ecosystem where we’re encouraging people to give yet delivering an incredible amount of impact along the way has just been such a thrill for me to be a part of. And then when it comes to the companies, and I’m just speaking from a perspective of what we do, the companies that we invest in. That are having the greatest amount of impact by way of creating just these exceptional cultures for their employees, are also the companies that generate the best financial performance. So I think historically there was this thought in people’s minds, a bit of a paradigm, whether they were consciously aware of it, or it was just subconsciously in the back of their minds that impact investing must require some trade-off and the trade- off must be returns. And so it’s been really fun to be part of this story and sharing with folks. That impact investing can drive better returns. And so if there’s no trade-off, then why wouldn’t you pursue it to let your capital have impact over those 60 years while it’s growing before it’s given away?

John Coleman [00:40:43] You know, pivoting from the prior conversation, I am incredibly optimistic on two fronts. One is I’m just optimistic about the environment I’m seeing where company leaders, real estate developers. Are thinking a lot more about the way in which they run their company, about the advantage of culture. We see companies every day, CEOs every day trying to adopt practices which are good for their people. I think there is a broad theme right now that morally people just feel that they should try and help their employees to thrive, that they should trying to help their customers to thrive. And then financially they’re starting to really believe in this idea that great cultures outperform. There’s a lot of data around that that Matt and team have been great about. Alex Edmonds out of the London Business School has put out some, McKinsey’s put out, some our team, you know, Matt and Justin have put out. Some there’s real evidence that great cultures can outperform over time companies that have poor cultures. And so we’re seeing people both realize they have this. Moral commitment to people to try and create thriving workplaces to address this crisis of purpose and meaning that we have to help their employees flourish and thrive. And I think as a part of that, we’re also seeing a re-evaluation of the impact or values-based investing ecosystem. It was so dominated by the ESG framework for some period of time, for better or worse. Now I think people are looking at that differently and they’re starting to think about the impact on individual employees and customers within company. There’s a shift from some of the macro issues that ESG might have focused on into employee care issues, for example. We’ve recently encountered a guy named Terry Teeley from Impact Evaluation Lab, who’s doing a lot of good work on this, trying to evaluate how different fund managers are approaching this, how they’re thinking about their companies, and there are a lot other initiatives. And then on fate-driven investing specifically, I think we’re seeing a lot really positive movement among the managers that we’re saying rise up in the ecosystem for adopting some of these practices, a lot interest in it. Companies really wanting to be partnered with capital partners who can support them and the efforts to build great cultures. And so I am, if I think about when I joined. Our sovereigns capital four and a half years ago and really got introduced to faith driven investing versus now, even over that four and half year time frame. I just see way more clients, companies, fund managers talking about creating flourishing with the dollars that they’re putting to work and how they can create cultures that can both outperform and treat people well. And so I think we’re at the very early innings of a really transformative period in the economy where people are focused on that. I’m very optimistic about that at the moment.

Richard Cunningham [00:43:22] Yeah, to summarize you guys’ points, I don’t know who said this, and I wish I knew who it was so I could give them credit, but they said, hey, when you think about kind of the movements of God across the investing or like financial landscape within the church, someone said it started with the bad debt. The debt is bad movement. Think of like Dave Ramsey and just avoid debt at all costs, credit cards of the devil. And then it went into this kind of recent movement, which is the generosity movement. Matt, that’s what you were talking about. Make as much money as you can in one hand so you can give the rest away. And I think the point you guys are speaking to that we’re stepping into is this balance sheet movement. And when capital is in motion, what is on your balance sheet can also be leveraged for kingdom impact, not because God needs us because we get to participate. Matt, you’re about to say something.

Matt Monson [00:44:01] Yeah, I just really wanna lay this out that let’s use a hypothetical household that makes a hundred thousand dollars a year in income. And let’s say they’re tithing on that. So they’re giving away $10,000 a year. Let’s say, they have a million dollars saved. And this just is our hypothetical couple, right? The million dollars that they have saved is 100X greater than the amount they’re tithing every year at the 10,000. So back to your balance sheet example, Richard, this is why I wanted to jump in. The balance sheet is 100x greater than the amount that’s being given every year. And so the impact that that can have is phenomenally larger than what’s being given away every year and it’s being left aside and not focused on.

Richard Cunningham [00:44:47] Not to downplay giving, because it absolutely has a role. But there is an exceptional opportunity now to lean in with the balance sheet. All right, fellas, take us home with some scripture. Let’s go to God’s word. John, we’ll start with you. What’s the Lord been teaching you in and through his word lately? And then we’ll let Matt close.

John Coleman [00:45:01] My gosh, thank you for starting with me. We’re just testing you making sure you’re on top of your reading You know, I’ve been thinking about the Psalms a lot lately and reading through some of the PsalMS I think maybe on a prior podcast. I mentioned my favorite new Christian music is this song called still waters That’s about Psalm 23 and there are just so many Psalms where David in the midst of uncertainty Is seeking a sense of peace, right? He does want to be led by still waters, right He’s asking God to be a good shepherd to really help reduce his anxiety, to stand up against his enemies, to give him a sense of comfort. And when life is moving so quickly, I think our natural predisposition is to take things on our shoulders. It’s to try and be in control of the outcomes that we can drive. It’s become anxious about the future. Matt and I live in a pretty anxiety-inducing industry at the moment to some extent, but it’s to be anxious about it. And David was so good, I mean, he was also anxious. He lived in uncertain times at various parts of his life, obviously, and he just kept returning to this idea that God is the good shepherd, that he can lead us beside still waters, that he could calm our souls, that even in the face of death, that we should have no fear, that God’s with us, right? And as I return to those Psalms, it’s just such a great reminder for me that I’m neither the first nor the last person that’s experienced that kind of uncertainty and anxiety. It’s a permanent part of the human condition, often far more serious than the type of anxiety or uncertainty I experienced working in financial markets. And God is a God of peace, right? He’s a God that cares about us individually. And that if we really return to Him, if we trust in Him, if we submit ourselves to Him that He can give us a peace that surpasses all understanding. Right. And I think that should be a hallmark of us as faith driven investors is that even in the midst of uncertainty, we focus, we pay attention, we’re detailed. You know, we strive for excellence, but in the midst of that, we have a sense of peace because we serve someone greater than ourselves and because we’re promised that the God we serve is in control. And our momentary anxiety or uncertainty is not something that dominates the rest of our lives or certainly in the grand scheme of eternal life. And so those Psalms have just been really comforting to me lately as I’ve kind of thought about David’s own journey and how he had to process the things that he dealt and how God was able to give him comfort. In even the most uncomfortable situations.

Richard Cunningham [00:47:27] Leanna Crawford, Still Waters.

John Coleman [00:47:29] It’s a great song, so no security recommendations today, but if you haven’t listened to Leanna Crawford’s Still Water, song 23, you absolutely should, wonderful song.

Richard Cunningham [00:47:39] I think that’s compliance approved too, which is a good recommendation. All right, Matt, what a privilege to have you on and join us today. Thank you for your commentary. What would you say? Has you been kind of spending time in God’s word?

Matt Monson [00:47:50] This has been really fun. Thanks for having me. You know, it won’t surprise anyone that all scripture seems to rhyme with other pieces of scripture. So what I’m about to say is just really dovetailing off somewhat John said. So I think that one of my weaknesses can be putting together big to do lists and checking things off the list and feeling like I’m in control and solving problems. And so. You know, you read a verse sometimes and you maybe have heard it a hundred times but it just talks to you in a different way. And so for me, over the last few days, this Proverbs 3, 5 to 6, you know, the part I’m gonna highlight for you here is trust in the Lord with all your heart and lean not on your own understanding. And this, and lean on your understanding part is the hard part for me because it’s really easy for me to default and do that and then to finish it out and in all your ways submit to him and he will make your path straight. So if anyone can identify with me and using this first, just to serve as a point to get you back on track, I’ve really been dwelling on this one over the last few days. Thanks, Richard.

Richard Cunningham [00:48:58] Well folks, thanks for joining us for this late May recording of a June 2nd Marks on the Markets, but I think you’ve probably enjoyed this and found the insights refreshing like I have. For John Coleman and Matt Monson, I’m Richard Cunningham, and we will catch you next time.

Speaker 5 [00:49:12] We are grateful for the opportunity to serve this community and see listeners come in from more than 100 countries. Faith-driven investing can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a group 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 a monthly newsletter at faithdriveninvesting.org. This podcast wouldn’t be possible without the help of many of our friends. Executive producer Justin Forman, intro mixed and arranged by Summer Draggs, audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

Richard Cunningham [00:00:00] 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. 

Intro [00:00:17] 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 Cunningham [00:00:44] Friends, welcome back to the Faith Driven Investor podcast. And today is not a normal episode as it is a time for celebration. We have reached a milestone. It is episode 200 of the Faith-Driven Invester podcast. And I have got a couple of the OGs with me. The two guys that helped start this ministry. Well, we’d love to have John Coleman and Justin Forman here with us as well. A couple of mainstays you always hear. I’ve got Henry Kasener and Luke Rausch. And gentlemen, we’re celebrating. We have hit 200 episodes. HK, let’s start with you. Do you know when you recorded your first ever Faith Driven Investor podcast? Nope, no idea. 

Henry Kaestner [00:01:17] 200, that’s incredible. Richard, that is amazing. It’s amazing. And it’s been so much fun. You know, in the early days, Luke and I would do them and hang out and celebrate the mission that God put us on and had some fun doing it. And, I mean, I remember the feeling. I remember really looking forward to doing them. And as we started, as I started spending more and more time on faith-driven entrepreneur and faith-drive investor and Luke continued to. Run Sovereign’s Capital as we did a divide and conquer. I remember really looking forward to hanging out with Luke and just joking around before the mic went on and joking around while the mic was on. And then, you know, coming back together, it makes me feel like 200 is a long, I mean, it’s a lot of them, but really it’s just celebrating what God has done through the movement. It’s just awesome. But you know they come back and now we’ve got the video going, Luke’s got the dignified gray in the beard. You know, I think when we started doing these, you were in like second grade and now look at you and- It’s more salt, more salt and pepper these days. That’s for sure. There is. I’d do it. I’d invest in you though. I mean, you look like you know what you’re doing. Hey, a little gray in the beard is good when you’re raising capital, and so that’s helpful. We’ve already established I need a haircut. I don’t know how many of you are going to be watching this on video, hopefully none of you. 

Luke Roush [00:02:30] It’s Gavin Newsom’s Doppelganger right now on the pod. 

Henry Kaestner [00:02:34] I don’t know how I feel about that. 

Luke Roush [00:02:36] Hey look, he’s not 

Henry Kaestner [00:02:37] He’s not a bad looking guy. He’s a good looking guy, he’s got great hair. He’s got a great taste in nice restaurants, right? I mean, let’s look at the positives. 

Richard Cunningham [00:02:46] It’s an edgy reframing you guys always talk about. Well, Henry, to answer the question, it was July of 2019. So we’re almost six years to the date of when the first FDI pod was launched. But I know the story goes back even further than that of kind of launching faith-driven entrepreneur, faith- driven investor shortly after. I’d love to hear, I mean, and travel back both of you guys as far as you want. Cause today’s the day of celebration. We’re kind of going back to the origins and we’re gonna talk about where God might be taking all of this next, of course, and celebrate some of what’s happened along the way. But go back as far as you’d like and tell us kind of how your paths crossed, how this idea of faith-driven investing kind of started. And I know faith- driven entrepreneur may have proceeded it a little bit, so it’s worth maybe getting into some of that. But Henry, we’ll start with you. Go back as the story needs to go to kind of orient us to where we are today. 

Henry Kaestner [00:03:33] Well, we could go really far back. A great friend of ours, Luke and mine, is a guy named J.D. Greer. And J. D. Is the head pastor of Summit Church and co-author of the Fate Journal and Osprey Book, and just a great encouragement to both of us. And this is going back probably 16 or 17 years. He called me up and said, hey, I’ve got this guy in a Bible study I’m doing that I think you’d like a lot. What would you get together with him? And he probably said a version of the same to Luke, and J.T. Grear was… Matchmaker just said, you know, this is somebody who’s really serious about using his guests in the marketplace is trying to figure it all out. I know you’re trying to do the same. And so we got together and went to a place called Joe’s Diner, downtown Durham, North Carolina. Great hot dogs. That’s right. It’s famous for the hot dogs that you could have a hot dog with mustard. You can have a Hot Dog with chili. You could have. A hot dog would hot dog. So we had the hot dog and it was just like, I really like this guy is awesome. And then he was living in the same neighborhood as. My best friend, business partner, as we were running bandwidth at the time, David Morgan, and hung out, mutual friends. And then over time, we really just had this sense of shared mission, that there’s actually, rather than just talking about faith in the workplace and the struggles we had and the challenges and the opportunities, what might it look like if we actually got together and did something about it? And this is the point in time where… Through the grace of God, bandwidth was having some success and I’d meet some other Christian business owners, but most of them felt uncomfortable in sharing their faith in the same type of way that Dave and I felt liberty to do so because they had outside venture capital and what they’re doing. And we’d gotten together along the way with another guy that JD introduces to, Andre Mann. And Andre had also had this thought that there’s an opportunity to blend work and investing in business excellence. And so we got together and decided that the way to… Really seize the opportunity that we saw was to start a fund whereby we would be an encouragement to faith-driven entrepreneurs coming alongside them. And yes, absolutely helping them with customer acquisition and intellectual property distribution channels and things like that, but also encourage them as they encouraged us in our faith. What does it look like to have a chaplain? What does look like to pray with non-believing employees? And so Sovereign’s Capital was started. And then life went on for five or six years as we endeavored to start a fund and run it with excellence, believing that you could get great returns, spiritual and financial bottom line, not at the expense of biblical values, but because of them. And through the grace of God and some great deal flow and some great entrepreneurs and great advisors and great investors, oh, my goodness, you know, six or seven years into it, we were finding great success and that we could throw it with some of the biggest venture capital funds. And deliver good results. But then we saw another opportunity. 

Luke Roush [00:06:26] Yeah. So, you know, just to jump in to break up the monolog. 

Henry Kaestner [00:06:32] Please. 

Luke Roush [00:06:33] The reality of our work is that we were looking at all these companies and we’d look at 100 companies and there’d be like one that really fit the right stage, the right geography, the right industry, something that we felt like we could bring some value beyond just down stroke and a check. I think all of us were a little bit troubled, but Henry probably most of all, that like the other 99 people that we met, many of whom were running really great businesses, But it just wasn’t in the right sweet spot for us. You know, they were looking for something a little more than some prayer on the way out the door, you know, and like, don’t call us, we’ll call you, let us pray for you and you know send you on your way. There’s an issue with that in that it felt as though even as we were called to kind of build sovereigns capital and focus on the investing work and reinvesting time and energy in the companies where we invested, we had all these other companies that were looking for community, like they needed content. They needed a place to be able to come together and collaborate like with other entrepreneurs who were like them trying to build something for God’s glory, but like wanted community in that. And so Henry, I think really identified that like we’ve got to do something for these folks because the sovereign’s team at the time or even now today, like we can’t pour into every entrepreneur that we meet. And yet every faith-driven entrepreneur needs someone or something to pour into them. And so FDE was really born out of this. Kind of heartbreaking for all these entrepreneurs that we were turning loose because we couldn’t invest in them and we couldn t spend as much time with them as we wanted to. And then Faith Driven Investor came a couple of years later because we were really trying to say, all right, ultimately these builders are looking for ways to tap capital markets. They need help in being able to re-envision what they’re building. But as they build, there’s capital requirements for for creating new things, right, for scaling growth stage companies, for… Facilitating transitions in multigenerational family businesses that are more mature. And so Faith Driven Investor was a way of actually creating some content, some lexicon vocabulary for how do we actually educate people on how they can reflect their faith in the way they invest to complete the other side of the market. Henry’s great analogy that I reuse weekly is that in the early days of sovereigns 2012, 13, 14, our industry was a little bit like the Eastern Black Bodega. But at least with an Eastern Block Bodega, there was a line wrapped around the block. In our case, there wasn’t really much product on the shelf. What had been there was mixed in terms of quality, and there weren’t really many people shopping in the store. And so with FTE, we started to actually develop more product in terms of companies that were being born. And with FDI, we actually started to develop a queue that started to form outside the building. But it’s still early days.

Henry Kaestner [00:09:26] Today is a Spanish term for like a little Latin American market, and they probably have a different word for Eastern Europe. 

Luke Roush [00:09:33] And mixed metaphors have never stopped me. 

Henry Kaestner [00:09:34] No, me neither. I think it was awesome. You know, one of the things that I remember about that is there are these kind of these infamous stories of Anatole Melanchier coming in, who’s a fate-driven entrepreneur that want us to invest in and he’s from Moldova and we said, I’m so sorry we can’t invest. But then there’s John Porter, who came in after we’d started fate driven entrepreneur. And we thought, gosh, you know, we’ve got these resources, this content and community. By then, gosh fate driven entrepreneur probably had watch parties in 300 different locations around the world. And John Porter wanted to look for capital. And I said, well, I’m sorry, we can’t invest in you because we’re not investing in Africa. But we have all these incredible resources and really realize and talk to them that we weren’t scratching his itch. But I went to Luke, we’re talking about what does it look like to open up our LP base to invest in somebody like a John Porter. We knew that we had some LPs that had been to Rwanda, which is where this guy was running this company, Misaka Creamery. And this was not Luke’s problem, this was my problem. I was just like, you know what? Gosh, if 80% of businesses in America fail, what are the chances of the business in Rwanda working out? And it’s just, I don’t know what it looks like. And if we refer this on to some of our LPs that have been to Africa, have an interest in Africa, maybe that just doesn’t work well, and they’re gonna assume we did some discovery and diligence on it, and this is just like a no-win, so we’re just not gonna do it. But really, as Luke and I were processing that, it was really a Holy Spirit moment where we can realize that that was not for us to decide, and that we were being tight gripped. On our LPs and we weren’t thinking first about the kingdom of God and that let’s leave it to God and the Holy Spirit to help lead these LPs about where they’d allocate capital. And while we’re at it, maybe we’re not the only game in town. By then we’d had some success and we thought, gosh, if somebody is motivated by their Christian faith and they’ve got investment capital to deploy, of course, they’d choose sovereigns. But we never really just thought like Who else is God calling to the same thing that he’s called us to? Is there anybody else out there? And there are lots of people, especially in real estate. And so we just said, gosh, we need to get out there and expose our investors to other fund managers motivated by their Christian faith. We did the first one in partnership with Chuck Bentley out at the Christian Economic Forum, which that year has been held in Deer Valley, Utah. We invited our LPs to an event. We found some. Faith-driven real estate fund managers that were very much started and run by their Christian faith, delivering incredible financial returns and incredible spiritual impact to their LPs by including things like chaplaincy in the way that they invested. And we said, all right, this needs to be a broader movement. This is not the sovereign’s capital story. This is something that needs to much broader. And so that was this moment where we said all right here’s an opportunity. To instead focus on just sovereign’s capital, to instead, focus on a broader movement of the body of Christ looking to steward their investment capital in a way that built God’s kingdom under his power for his glory with men and women who were driven by investment excellence. And that was the beginning of FDI. That’s awesome. And somewhere around that, we decided let’s talk about what we’re discovering and let’s interview some of these other fund managers and let’ look at what spiritual integration looks like across investing in a bunch of asset classes. That we didn’t have any any expertise in. I remember talking to a guy who was running a natural gas and an oil fund. I’m like, guys, where’s the spiritual integration in that? I mean, how do you evangelize like a, you know, a barrel of oil, right? Because like, how about all the oil field workers? Like, oh, yeah, of course. And then we had a guy on the podcast early on had written the book, Thank God for Bitcoin, Jimmy song, I still haven’t figured that completely out. But you know, there’s spiritual integration and that or at least the guys completely convinced of it. But it really just, you know, part of this whole movement has been about just a personal quest of mine to just see God at work, to see God working through other fund managers. And you know it’s the C.S. Lewis thing, right? It’s like, I thought I was the only one that cared about this, but Luke and I have had the opportunity to interview really literally now hundreds of people that God has also given a calling to to start his capital with excellence. And so every time we talk to somebody, we hear more about just another one of God’s image bearers doing some incredible things all around the world. And it’s instead of this feeling like, oh my goodness, gosh, another competitor. It’s like, oh my gosh, Luke and I and the team at Sovereign and the Team at FDI get to be involved with some unbelievable men and women. And it has been really cool. 

Luke Roush [00:14:19] Well, I think actually like one of the things that was a shift is that the early days of the faith and work movement and the early days of what was traditionally called biblically responsible investing. So the faith in work, and this is actually first time Henry and I have actually talked out about it out loud. So it’s kind of fun to process this together with him. But my sense of the early faith and work movement was largely about personal transformation, right? How am I going to actually contextualize my faith in the way I show up at work? And it was really more kind of internally focused, heart posture, head posture, stewardship, a lot of focus on generosity, but less focused on like, how do I actually leverage my business to change the way I build product and service, change the ways I engage with my community and actually be salt and light in a more catalytic way, not just individually being transformed in one or two people that I might work with, but actually more broadly. Like, how do I actually take this idea of what was originally called business as mission, which is more ministry people trying to become more sustainable in their work? How do I flip it and actually take red meat-eating capitalist pigs who are by the grace of the Holy Spirit being awoken in their faith and now actually looking to take their business and reshape it or take something new that they’re trying to build and build in a way that is very, very catalytic? That’s actually, I think the shift is actually moving away from. Early days of kind of faith and work, how do I see these two things come together in my life? No, no, no. How do we actually take a business and think about transforming the industry that we’re playing in by virtue of the way we develop product and service, the way deliver product and service to our clients and engage with the community? I think the other thing that I would say is that going back to sort of the early days of faith-driven investor, before we waded into this and again, like all by God’s grace for his glory. I think that the emphasis was more on like, what do we want to avoid? So biblically responsible investing was very much around what are the things that we really probably shouldn’t own and profit from because they’re antithetical to human flourishing and they rely on some form of addictive behavior in humans to make the business model work. So gambling, adult entertainment, you know, things like that. I think what Henry and I and Andre all got aligned on early is we want to be known not just for what are we against as believers, but more so what can we fall in love with? Where do we see human flourishing occurring in the marketplace? How do we want positively screen for businesses that are making a difference? Let’s focus on that. That’s the main narrative. There will be some things that we want avoid. There may be some other things where we want a presence on their cap table and then with management to see if we might reframe some of how they do their work. Primary motivating factor in the early days of the phase of investor movement, certainly sovereigns, was very much of like, let’s be known for what we’re for. 

Henry Kaestner [00:17:18] This is a good time, so I really wanna make sure that I highlight some of the other influences. A lot of it was God speaking through His Holy Spirit to Luke and I, and then a whole bunch of others. Justin Foreman, who was running the Featured Entrepreneur at the time, was an early contributor, of course. But there’s also a group that we got together maybe six, seven years ago at a French bistro after a Sovereign’s Capital LP meeting. And it was people like Josh Kwan from The Gathering, and Mark Wesson from Eversource, and David Wells from the National Christian Foundation, And there may be a 25 or 30 getting together and just saying, okay, so what does it look like for there to be a broader movement in the way that we’re able to hit at some of these themes that Luke is talking about right now, about what are we for as Christ followers? And that’s really important. So it just has not been the Luke and Henry show by any stretch, although the team at Faith Driven has been nice enough to let us be on the mics a lot at the expense of the overall quality of the podcast. But there have been a lot of great. Great people that have really sown into our lives, prayed with us, for us, inspired us. You think about the redemptive work that Praxis does in helping to reshape the way that people think about how they’re running their businesses. Lots of folks. God has removed the scales from lots of our eyes to include the listener to this podcast. And this is a movement. If you’re listening to this podcast, this is something to bring to your community. One of the things we have been able to do over years is with the faith-driven team put together a community group course of six weeks that explores some of these concepts. And you do that in a peer-based community of 12 to 15 folks and with a great facilitator. So this is something that God is bringing us all into. 

Luke Roush [00:18:59] Well, and two things that I’ve learned from Henry, one is we serve a god of abundance. We don’t serve a God of scarcity. The early years of my career were very focused on direct competition and a bit of a zero-sum game. That’s kind of how I thought. And that is not the reality of the world that we live in. And one of the things I’ve learnt from watching Henry is that like, now we need to be rooting for rivals. Like we need to be rooting for people who are doing work well. And there’s a bunch of people, you know, even as the movement has evolved that went before, right? You think about Praxis, you think about Timothy, you think of Ave Maria, you think a whole bunch of other early movers that were down the road, at least wrestling with this question of what does it look like? And that work continues. You think of Eventide, you think Robert Netslade inspired, a whole of bunch of different people that have actually been circling on this area for a long time. And one of the things that I think has allowed. The movement to flourish is that broadly speaking, with maybe a couple of exceptions, broadly speaking the movement is for each other. Like there’s obviously places where there’s direct competition kind of A versus B, but by and large, like the movement has grown and rising tide raises all boats. I think people have kind of leaned into that. And also the broader idea that like, it is not about any one of the private equity firms or any one to the advisory firms, RIAs that are in this arena. It’s really about like, what does God want to do? And Lord willing, He does it through us, but if He chooses to do it through someone else, we need to be excited about that because the mission is fulfilled. It’s not about us individually, it’s about the mission. 

Henry Kaestner [00:20:34] Well, and it is a broader movement. I mean, maybe nobody better to speak about the expanse of the movement and the growth of movement than you, Richard, right? You know, so you’re providing leadership for the fate driven investor, institutional investors summit. And gosh, how many folks did you have out at the Rosewood? 

Richard Cunningham [00:20:52] I mean, what you guys are getting at is there’s multiple expressions of what this can look The answer is 180. 180. You had 180 out. It was awesome. I like giving indirect answers, Henry, and kind of arriving after a nice monolog. Well, thank you guys for all of that. But yes, we’ve gathered- Keep on going. I’m sorry. I should have let you go. 150 to 200 the last couple of years of private equity and venture capital. 180. Managers. 180 is the round number. Gavin Newsom, thank. The desire is like you guys said, is hey, they all have a unique expression of faith-driven investing. There’s a hundred plus trillion dollars in managed assets across the globe. Only a couple hundred billion of those are in explicitly faith-aligned products. But there’s, Pew Research says there’s 60% Christ followers in the U.S. Or at least people that identify with a Christian faith. And so just the numbers don’t add up in terms of the number of assets within faith- driven investing made a couple 100 billion. There being a hundred trillion in managed assets in the US. And there’s just such an opportunity for Christ followers to keep leaning further and further in. Like the math just doesn’t make sense. And so the desire here is to say, hey, private equity and venture capital managers, you probably have an outsized opportunity to rethink the shaping of your portfolio or the spiritual integration practices you have. Not that a public equities manager can’t. I mean, Luke could speak to that extensively in terms of the influence you can have on a public company CEO. Henry, you took a company public. Private equity and venture in particular, and private companies, when you have direct influence on the owner operator of the company, there’s just an opportunity there. And so that’s why we gathered those folks. 

Luke Roush [00:22:22] Well, and to your point also, like, you know, I think that just to tie into that, one of the things that we’ve said since the beginning, and I think it continues to be true, is we want to be descriptive of what faith-driven entrepreneurship, faith- driven investing looks like, but not prescriptive. One size fits one, you now, and, I failed to mention Bob Dahl, now over at Crossmark earlier, but he’s been thinking about this for a long time in different contexts, really active within the kingdom advisor community, think about Rob West and the whole K.A. Crew and the journey they’ve been on. So I mean, there’s a plethora of different ways. To represent faithfulness in the way we do our work. And it’s important to not become too myopic on our particular flavor of what it looks like. What is important and what I think is a mandate is you gotta be seeking Godly counsel. You gotta be on your knees in prayer and you gotta look at God’s word. If you’re doing those three things as you interpret where God’s calling you as an entrepreneur or an investor, you’re gonna end up in a good spot, but it’s gonna be different. And I think that giving some grace as we all figure this out together is important. The good news, here’s the good news. We’re probably in the top of the second inning of a very long baseball game. So it is early. It feels like at times like we’ve been at this forever. But the reality is in the long arc of history and sort of what are we trying to build together for God’s glory? Like really, really early innings still, still a wonderful time to jump in. 

Henry Kaestner [00:23:45] Thousands, thousands of podcast episodes in front of us. 

Richard Cunningham [00:23:50] I love a good baseball analogy, Luke. Thank you, guys. That’s a lot of fun coverage. I guess the question that has to be asked next is what happens next? Luke, you mentioned we’re in the top of the second inning of a really long baseball game. Where do you guys want to see this go? And I know, is this a domestic thing? You know, Luke, You spent a season in Indonesia building out sovereigns capital over there, making some Southeast Asia investments. Henry, we know about your passion for Africa, the school of hard knocks video that just went viral. You reframed kind of. What stewardship can look like in talking to Africa. Justin Forman is currently on the continent of Africa. As you guys think about where faith-driven investing goes next and broadly just kind of faith- driven movements, how do you frame up the global kind of domestic conversation? 

Luke Roush [00:24:33] I’ll comment super briefly and I’ll turn it over to Henry, but I think our view from the beginning is that this is a global movement. The pacing, the way it shows up around the world is going to be a little bit different. But if we believe capital has influence to be able to shape culture, then that’s an important opportunity, I think, as Christ followers, to be salt and light all over the world and to be to find ways to reflect our faith in the way we put capital to work and help shape cultures, many of which are still in the process of being born, developed, shaped. So I think it’s a global thing and we’ve seen that at work very much in Southeast Asia, which is the only place outside of the US that we currently invest. But Henry, I mean, you’ve been much more globally exposed. Your thoughts. 

Henry Kaestner [00:25:15] Well, from a movement perspective, and this is as you’re saying, this is outside of what sovereigns capital as an investment fund does. But from a moving perspective, the singular thing I’m most excited about is the development of a faith driven investment industry in Africa with some unbelievably talented men and women with great investment backgrounds, Ivy League educated, Wall Street, 10 years. Real assets under management, really great performance. And then just a spiritual integration that is really almost unparalleled. Just the development, the maturity of an industry. As an investor, I get excited about the macro environment too. You’re talking about a place where there is an average age of 19. It’s gonna be the only continent that’s gonna to be growing. Average age of cross-country is 19.2 years. The number of producers and consumers coming into a marketplace is astounding. There’s been some great political stability. As much in Africa as anywhere, any other continent in the world. And you’ve got this incredible sense of just individual economies growing, six of the ten fastest growing economies in the World will be in Africa and yet only 0.5% of the world’s venture capital and private equity are going on to that continent. Now I get excited about it from an investment perspective that’s one that’s seeking alpha, you know, you want to steward the capital that guys entrusted you with with excellence. But I also get excited about it because I also know that in a world in which USAID is pulling out, but believing that trade, as opposed to aid, works. Now that’s not to say that the way that we pulled out has not been very, very shaky, and I would have done it differently, to be clear. And yet, as a Christ follower that is stored in individual capital, or maybe institutional capital, to look at an opportunity in Africa where there are hundreds of millions of people living on less than $5 a day, believing that as we… Invest in that marketplace, providing employment, and doing that with faith-driven entrepreneurs, faith- driven fund managers. There’s a chance that 20 years from now, that is a vibrant marketplace, that it’s all about spiritual integration. You know, one of the things I love about Africa is that when I go and speak to faith- driven entrepreneurs in Africa, I don’t have to tell them that the work matters to God. When I’m here in America, in my hometown, there’s some amount of work for people to just kind of lean into the fact that God has glorified through our work in the marketplace. And this is something I picked up from Brian Fickert. We had the vestiges of this evangelical Gnosticism, right? Which is a thing that comes from the Greek faith, which is the separation from the secular with the spiritual. They don’t have that in Africa. So like, of course we should pray before our board meetings. Of course we shouldn’t pray for the healings of our employees that are sick. And of course, we should have a winsome witness to those who don’t yet share our faith. Of course, of of course. And so we have this opportunity as faith-driven investors to be able to put capital and encouragement and in prayer support. Behind these entrepreneurs as they in turn develop relationships with us and they pray for us a big part of the reason I get excited about Africa is this selfish thing as I do that as I get involved in these stories of these African fund managers that are doing this with excellence I come to know God more fully myself you know it’s all about me right I get more as I stored capital now. To be clear, this is not about an Africa story. This is about a bigger, broader thing. It’s about us as the body of Christ getting on our knees and just asking God how he’d have us steward the capital he hasn’t trusted us with. And for some of us, it will be check out what’s going on in Africa, it’s amazing. For others, it’ll be let’s look at innovative ways to continue to think about real estate investing across multifamily or retail or office, incredible things going on and co-working. There’s more of an opportunity to expand what’s going on in the lower to middle market. Incredible things that are going on the venture side. Think about all the just incredible technologies and artificial intelligence and the opportunity to come alongside investors like a Mark Sears that’s coming up with a novel approach, the redemptive way to do domestic AI investing. So there is incredible opportunity all around the world, but this is one that’s not to be prescriptive. As Luke said before, it’s meant to be descriptive. Opportunities virtually in every asset class, in every geography, but it’s an invitation to us all to just ask God how he’d lead us and with a hopeful expectancy that as we ask that question, he’ll answer. 

Luke Roush [00:29:38] And here’s the vision. The vision is that every Christ follower, independent of net worth, independent of asset class, independent of geography, has an opportunity to reflect their faith in the way they put capital to work. That’s the mission. And so back to kind of what does the store shelf look like, still really, really early, there’s tons of opportunities. And there’s areas of the world, there’s different industries, there’s different types of businesses, where you can have more or less impact. Doesn’t make one better than the other, but there are highly catalytic parts of the world. And sectors of the economy where I think that, you know, the impact can be multiplied. So super exciting about where things are going. 

Henry Kaestner [00:30:14] Guys, it’s been great to do this with you. I’m just, I’m grateful for you, your friendship, your partnership. I’m thankful for all of our listeners. My request is that as you’re listening to this, this is a movement of God and it’s not meant to be consumed, it is meant to be passed along and encouraged and maybe you get together, a group of people there in your small group and just wrestle with things like this. But thank you for tuning in over these 200 episodes. We wouldn’t have a podcast if we didn’t have listeners and we wouldn’t a movement if God wasn’t. Inviting others to participate. So you as the listener are a big part of what God’s doing. 

Richard Cunningham [00:30:47] Well folks, this has been episode 200. It’s coming out on June 30th as you listen to this. Going forward, one of the things I wanted to say from a housekeeping standpoint is that the Marks on the Markets will continue as every other episode for Faith Driven Investing podcast and the video podcast will start to be more and more normal. We’ve seen a couple teased out with Brent, be sure. Henry thought today was a video podcast and so we’ll see, there might be some social clips of Henry today. But going forward, the actual in-studio live FBI video podcasts are coming to kind of match more of the Fates of an Entrepreneur podcast. But pump for the next 200, Luke, pump for next 200 Henry, thank you guys for your time today. What a joy to celebrate the FBI pod together. 

Henry Kaestner [00:31:26] We are grateful for the opportunity to serve this community and see listeners come in from more than 100 countries. Faith-driven investing can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a group 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 faithdriveninvesting.org. This podcast wouldn’t be possible without the help of many of our friends, executive producer Justin Forman, intro mixed and arranged by Summer Draggs, audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb. 

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. 

Welcome: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosts and guests may maintain positions in the companies and securities discussed in 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’s episode 181. We are closing the book on Q3 2024 as when this releases, it will be September 30th. Hard to believe we are entering into the last lap of 2024 as it relates to quarters at least, and we’re talking marks on the markets. We’ve got our resident expert, John Coleman, in the podcast studio. And before we welcome John onto the pod, just a couple of quick things I want to note. If you haven’t yet, listen to our most recent FDI podcast that dropped a couple of weeks ago, episode 180 with Richard Garnett. It was a special tribute to his life. I just cannot recommend enough after you get your marks on the markets. Phil here, to go back and listen to that episode. It was unbelievably fantastic. I promise you, you will end up sharing it with a friend or someone you love. Just the wisdom and the principle shared in it are timeless and it’s worth a listen. And the final thing I want to say is, I know we’ve got a lot of cross-pollination in the faith driven investor and faith driven entrepreneur audiences. And on Friday, the 20th FD hosted its annual conference. And man, it was a big hit. I know I got to attend a watch party here in Austin, Texas. There were dozens, if not hundreds of other watch parties across the globe, and I say that to tease out that if that was a really special experience for you, the FDI conference is coming up in January, which is hard to believe. It’s only three and a half ish months away. And so it’s conference season. It’s the fall of 2020 for John Coleman. We’re talking marks on the mark. It’s great to have you guys on the podcast. How is Team Coleman. How are you guys doing. How’s your summer. How’s the fall kicking off. 

John Coleman Yeah Richard, thank you for having me. Obviously fun to be on this side of the mic. With you interviewing me, the fall is off to a good start. We love the fall. Atlanta, like Austin, can be a little bit hot. And so it’s starting to cool down just a little bit. We’ve got kids. Richard knows we’ve got four kids between 3 and 11. And so I was telling him a lot of my life is is unpaid Uber driver at the moment or chauffeur. And so, you know, but the kids are having fun. It’s super fun to get out and watch them play sports or do their theater performances. You know, this age range is just really special. So the Colemans are having a lot of fun right now. 

Richard Cunningham Great. Fantastic. Well, John, this pod comes at a great time because I feel like we’ve got kind of one of those organic stopping points in the calendar where it’s the end of September, Q3 is over. And that’s going to kind of be the theme of today is that’s, you know, we’re in an election year. We’ve got three fourths of the year covered. We’ve had some massive kind of markets and economic headlines. And so we’re just gonna kind of go subject by subject on a few big items and let you kind of provide some commentary and some thoughts and always that kind of redemptive and biblical perspective on things. And let’s start with the big one from just this past week, September 18th. The fed cut rates, and it is a long expected, long anticipated rate cut. They’ve been at, you know, multi-year highs, I think as a 23 year high cut rates down to 50 basis points. And so what has kind of been the storyline. Why did we go on this rate hiking situation and kind of cycle in the first place and kind us kind of some of the commentary and background as to the decisions the Fed’s been making. 

John Coleman Yeah, obviously huge news this week, Richard, in softening in the fed rate. You know effectively we started this rate hike cycle because of inflation. So we went through this uniquely long period of low interest rates globally after the great financial crisis in 2008. And we’ve talked about this on the podcast before that period, 2008 to 2000, 22 or so was really one of the more unusual in economic history. You know, we began to think of that as normal because for most of us in our adult lives, that was kind of normal. But if you looked at the prior hundred years, for example, the interest rates that prevailed during that time were unusually low. Our current rates are actually more in line with historical averages. If you were to look back in the 60s, 70s, 80s, 90s and before, in fact, in the 70s and 80s, interest rates were obviously quite, quite a lot higher than they are right now. And so that period after the great financial crisis was unusually low. And what happened at that point was in order to avoid a Great Depression, you know, a repeat of 1929. In the 1930s, the central banks around the world, not just in the United States or around the world, felt the need to drop interest rates artificially low. And when you drop interest rates, that obviously spurs economic activity because money becomes cheaper to borrow, you can borrow money to buy a house, you can borrow money to buy business to finance new capital. And so it’s stimulatory to the economy. As we rolled through Covid, right, interest rates were still unusually low in the United States and around the world. But then we got hit with a ton of fiscal stimulus. Right? So we went into Covid. The federal government just dropped from a helicopter a ton of money into the economy that was warranted at the time because it felt like in the initial lockdowns, we could risk going into a severe economic recession and then coming out of that, what a lot of people believe is the federal government, they can continue to stimulate the economy too far. So the Biden administration’s so-called Inflation Reduction Act, which was like a very Orwellian term because it was actually a very stimulatory inflation causing act, dumped a ton more money into the economy. They continued Covid stimulus long after the lockdowns were over as a reality. And what happened on the backs of that is massive inflation, which we’ve been living through for the last couple of years. Right. And I say massive inflation. I mean, this wasn’t like Argentine style inflation that we experienced as the United States, but it was very high inflation relative to what we’d experienced for the couple of decades prior. In response to that, the fed had to go through one of the most aggressive tightening cycles of our lifetimes. And tightening means they’re raising the federal funds rate, which is the rate at which they loan to banks, which raises interest rates all over the economy. Right. And they did so up until we got to kind of like 5.5%, which was much higher than where we had been previously, or almost 6%. So what’s happened most recently is the fed has now begun to loosen the economy. So inflation has slowed. There are some signs that the fundamental economy might be softening a little bit. You know, what was really interesting about this tightening cycle is usually when the fed raises interest rates, you slip into recession and they basically break the back of inflation by forcing the economy into a recession, which kills inflation, hopefully. And that’s kind of what happened coming out of the 1970s. In this case, we never actually slipped into recession. We never actually saw unemployment rise to the level. You could characterize it as problematic or outside of historical norms. And we never actually saw at least the official growth rates of the US slip into recession territory. Although we’ve seen there there’s been some funny business with those numbers over the course of the last 18 months or so. So it’s difficult to tell. And so now the fed is living in this interesting period, Richard, where the economy is softening a bit, but it’s not yet that the inflation is coming down and more under control, but not yet at their target rates. And yet they’re anticipating problems. And so the fed is now trying to cut rates to get ahead of those problems so that they can have a so-called soft landing where, you know, the nirvana here is that we get inflation under control and then we start to lower rates in a way that keeps inflation under control, but avoids any sort of dramatic rise in unemployment or dramatic recession in the economy. And that’s what they’re targeting so far. It seems like they might have achieved that. It’s a bit too soon to tell. We’ll know in a year. But this week they dropped rates by 50 basis points. The prediction markets would tell us that most people are anticipating they’ll drop it by another 50 basis points before the end of the year. So a full percentage drop between this week and the end of the year, which would be a fairly dramatic cut and would get us back to even below historical levels at like 4.5%. I think, you know, the fed is probably targeting getting to something like 3% by 2026, which may be the new normal for interest rates. More what we’ve lived through previously. If they can keep inflation under control. 

Richard Cunningham Well, man, that’s a fantastic run down. And so just to recap kind of some of the actual rate numbers behind it. So in March 17th, 2022, as John alluded to, the hiking began and it rates were down in the 0.25, 2.5 50% range to 25 Bips to 50 Bips, and they aggressively spiked them over the last two and a half years. And finally, on September 18th, 2024, we saw our first cut. And we’re back in that 4.75 to 5% federal funds rate as John was speaking to John. Fantastic rundown. And so here’s kind of, you know, hindsight’s 2020. And I know it’s as you’ve kind of mentioned right now, it feels like the fed has navigated us to a spot that is digestible. But there have been nine rate cutting cycles over the past 30 years that have taken place. Three of those nine have began with a 25 bips cut, and six began with a 50 basis points cut. As we just saw, history suggests that after the 50 basis point rate cuts, we tend to see recessionary periods and markets the S&P 500 declining on the back of that recessionary period. Do you think that is a possible outcome here, or would you kind of say, hey, I think we’re heading in the right direction? This was the move that needed to be made. Recession is just TBD. 

John Coleman Yeah. No one knows. For sure. But I do think there is a correlation causation issue there that we have to be aware of. So typically rate cuts are because we’re already heading into recession. Right. So if you think about it, the rate cut itself might not be the causal factor throwing an economy into recession or increasing unemployment, right. It could be that the economy is already sliding into recession, unemployment is spiking and the fed cuts rates as a response. And so it would be natural that as the economy deteriorates, even if the fed is cutting rates, that it might continue to deteriorate. Right. And that that might be what’s actually causing the recession or causing a decline in markets. I think that’s entirely possible here. Right? We don’t know how deep this slide and underlying the slip in underlying economic indicators is. I would say it’s tough to parse the data right now because a lot of the economic growth in the United States, I think, is currently funded by deficit spending, by government spending, because we’re still running massive historically high deficits and running up a huge, unsustainable debt, which we could talk about. We we also see employment information is a bit off in the sense that, a lot of it is spurred by immigration. And so, citizens in the United States, the employment data is a little bit weaker than in the economy overall, which would include a wide variety of workers. And so without any judgment on any of those underlying trends, it can be tough to parse just how strong or weak the underlying economy really is. I would say, given the way that this has played out, our chances of avoiding a significant recession or a significant rise in unemployment feel to me better than in the past. I think the economy, the fed, is really trying to get ahead of significant deterioration right now. So I think the real economy has a decent shot of maybe, maybe a mild recession, maybe some continued deterioration, but potentially not getting that bad. Markets are a little bit more difficult to predict in my mind, Richard, because they are at such high levels of valuation right now. So particularly at the top end of the market in large cap growth stocks, the Magnificent Seven, we are at much greater than average price to earnings ratios for those biggest stocks right now. And in fact for that top I think it’s like quartile the Russell three 3000. The price to earnings ratios are above historical averages in significant ways. How that interacts with this rate cut with some softness in the underlying economy. I don’t know if I were to tell you what I’d really be predicting is that if it looks like we’re going to get a soft landing, that small caps will likely appreciate some, that The Magnificent Seven and some of the other large caps are likely to return to historical averages of price to earnings ratios, or that they’re going to come down a little bit. The overall impact on markets is likely to be slightly negative on, kind of market cap weighted index perspective, but that’s because the valuations of those are so high right now. So there’s a lot going on in the economy right now. I don’t think anybody has exactly the right picture of what’s going on. But if I had to predict the next year, it’s kind of a sluggish economy that’s not quite in recession, where we’re kind of chugging along the chance that markets kind of come back to historical averages for price to earnings ratios or decline a little bit would be somewhat high. And the fed is going to continue to be relatively cautious, do a 50 basis point cut, I think by the end of the year, and then take a wait and see approach in the new year to see how much of an impact that had. 

Richard Cunningham Fair, fair, really good breakdown. Let’s go to that next because I want to talk about how what’s taking place in the economy with the fed is kind of dovetailed into markets and how they’ve interacted. So you spoke to Magnificent Seven. As we all know, a large part of the S&P 500 performance is attributable to those seven largest market cap weighted stocks. And so you’ve got the S&P is up 20.57% year to date. We’re recording this on the 24th of September. So barring something massive happens between now and release date that’s kind of where we are. Nvidia up 141.35%. Meta up 62.99%, Amazon 29%, Apple 21%, Google and Microsoft, respectively. Almost 17% Tesla, who’s kind of that seventh member of the Magnificent Seven who had been on a really tough slog. Looks like they’ve benefited from the rate cut. They’re back up and 64 bips on the year, but that is up almost 5% in the last five days alone. And then compare that to the Russell 2000, which is kind of the representative small cap universe, if you will, not having a bad year up 10.31%. But comparatively to what’s taking place in the S&P 500 and with kind of the mega-cap stocks, if you will, still lagging far behind. So that’s kind of one. Realm is the public markets and their interaction with what’s taking place in the economy. But John, you’re investing across multiple asset classes. And your role at Sovereigns Capital, whether it be private equity, venture capital, real estate and elsewhere, what have you seen kind of on a on a macro perspective with where the economy has been, what’s been taking place and how it’s kind of permeating into multiple different markets? 

John Coleman Yeah. Great question, Richard. So to start with public markets, I think you highlighted the trends perfectly. We’ve been on this crazy run in stocks generally. I think people are starting to assume like I get 20% a year in stocks and that’s not true. You know, the historical rate is like 7 or 8% in public markets if you look over time. And I would expect that at some point we kind of get back to that 7 or 8%, which means we’ve got to have some sort of significant decline for averages to start to take hold. There’s really, as people have been fearful of a potential recession and also very enthusiastic about the rise of artificial intelligence and other technology trends. There’s been a flight to quality at the top end of the stock market in these technology enabled stocks. And I would say that Google, meta, Nvidia certainly we could talk about that separately. Amazon. These are all stocks that are not just quality stocks. You know they’re performing. They’re profitable. They’re growing. They also intersect with artificial intelligence quite a lot. Tesla is that story too in a very different way. They’re not large language models, but Tesla is trying to develop artificial general intelligence for driving, for physical spaces and for robotics. And so you’ve got this thing where at the top of the market, there are these high quality stocks in a growth market where people are flying to quality, and they all intersect with the biggest trend in markets, which is artificial intelligence. And so they’ve been bid up above historical price to earnings ratios. And people have been a bit nervous about being in small and mid-cap because of the fears of recession. Again, I would expect if we hit a soft landing for some of that to normalize. I think that enthusiasm around artificial intelligence is also likely to normalize. I firmly believe that artificial intelligence is at least the biggest trend since the internet. I mean, it has the power to be incredibly transformative, especially moving beyond the large language models like ChatGPT. If you start thinking about like what Tesla is doing, trying to develop artificial intelligence for physical spaces, for driving, for robotics, that’s where I think we take a leap where this begins to dramatically impact the economy, even as large language models are, you know, revolutionizing certain areas of the economy, like customer service or some legal tasks, things like that. And so I think those underlying trends are somewhat likely to continue. But I do think we’ll see a normalization in public markets. I think in private markets you are seeing continued sluggishness. Right. And that has a few sources. One is we’ve just seen fewer exits in private markets lately. And private equity and venture capital real estate is its own segment, which we could talk about in a moment, because I think that’s a totally different set of trends. You know, the FTC in the United States has been very aggressive about restricting acquisitions and mergers in the United States. So Lina Khan has been particularly aggressive about that, meaning the lot of potential options for venture backed companies to exit have not materialize. They haven’t been able to be acquired or to go public with the public market. IPO market and the Spac markets have been quite slow lately, and so there haven’t been as many opportunities for exits, which means that if you invest in in a venture capital fund ten years ago, you might not be getting your money back in the way that you thought, which means you can invest it in a new thing. Right? So I was listening to a very good podcast, the All In Podcast, last week, and they had a stat which I haven’t had a chance to verify independently, but they had a stat where, you know, typically over the last period of time, first time venture funds, about 50% of them are able to raise a second fund. Right now, the stats are that about 15% one 5% of venture funds are able to raise a second fund after the first fund. Because it’s been so difficult to fundraise, it’s been so difficult to get returns. The vintages have been really challenged for 2019, 2021 because of the collapse in venture markets and the slow period to get liquidity. And I would say from my point of view, we’re seeing that I think our team that looks at different fund managers, I want to say this statistic was something like the average fund manager was only raising about 60% of its target, according to the broad based indexes that we look at, which is resonant with this idea that most venture funds, that sort of fund one are not getting to fund two right now. You know, a lot of clients pay to invest in their new venture and private equity funds by getting DPI or distributions from their old funds. Nobody’s distributing capital right now, which we’ve seen. People are not selling positions they bought at inflated rates. Financing is more expensive right now, so leveraged buyouts are more challenged at the moment because rates are higher. And so that’s generated real sluggishness, I think, in the private markets, both for limited partners and general partners. What that hasn’t meant is that the underlying companies are necessarily doing badly. You know, some of these fast growing tech stocks in the venture markets have obviously had a difficult time because there aren’t many exit opportunities. And there’s been this, you know, 2021 was this weird upcycle in venture where everything was really over bed. So valuations have come down from that. But if you look at like real companies in the economy, a lot of them are still doing pretty well. And you know, we see that across the companies that we look at. Employment was really tied a couple of years ago. It’s hard to get good people still hard in certain skilled trades, but that softened a little bit. So hiring is a bit easier right now. Borrowings expensive but not out of control. Expensive like it was in the 70s, for example. So you can sell finance equipment and things like that. A variety of private lenders have sprung up in the private market, so it’s a little harder to get bank loans right now because of some problems in banks where they’ve got exposures they’re trying to manage. But there are private credit markets where you can get loans. So we’re still seeing reasonable health in the underlying economy itself. But transactionally things have slowed. And that means that the funds markets have slowed. And again, I’ll pause there. We could talk about real estate a bit if you want, but that’s what we’re seeing in the private company world. 

Richard Cunningham Yeah, it’s a great recap. And I’m looking at a couple of charts here that relate to what you’ve just talked about. And so going back to the venture and kind of the market for exits in the IPO market, you mentioned that wild year of 2021. And then there’s kind of the Spac craze and everything like that going on. But there was and U.S. stock markets, public markets, there is 1035 exits that took place. And then in 2022, it dropped all the way down to 181 exits. In 23, it was 154. We are at currently 145 exits here in U.S. kind of IPO markets. And so, as John was talking about for these high growth tech companies that venture capital funds back, you know, it’s either get acquired by a strategic to get distributions back or take the company public. And when those exit markets have dried up, as we’ve talked about, not fully dried up. These aren’t crazy off of historical averages. It’s just in 2021, everyone, when they’re seeing companies go exit hand over fist, decided to launch a venture fund and said, I want to get in the game. We can go take this company public in a matter of months. Things have just come back to reality. And then additionally, John, you were talking about private equity and private credit and things like that, and just the difficulty for fund managers to raise funds. And there’s just been LP hesitancy because of the lack of DPI or liquidity coming back to them. A vintage year is when a fund launches and ultimately, you know, kind of classifies the year that fund was launched and how their performance ranks amongst their peers. That also launch that year, 2023 vintage private equity funds are down 8.85%, venture capital funds are down 6.22%. This is a chart from PitchBook 2022. Vintage funds are a little better, private equity is roughly flat and venture capital is down 6%. And it takes you going back almost to kind of 2020, 2019 realms to find that kind of outsized market performance in terms of IRR amongst private equity and venture capital funds. 

John Coleman And one thing to be cautious at there, you know, is the J curve. So I would expect that 20 2223 tight private funds, maybe even 2022 would be a negative right now because of. So for listeners unfamiliar, there’s some called the J curve in private markets where money tends to go out quicker than it comes in, there are transaction costs to it. And so if you hold a private equity fund, it’s not unusual to see it go negative for a couple of years and then come out of it. What I would say is like, you know, we were looking at venture funds that were posting 4,050% paper returns, IRR, you know, with no DPI, but 50% paper returns a few years ago. Some of those firms are still posting pretty good paper returns IRR. There is no DPI, right. Or there’s very limited DPI and funds are stretching on past their like ten year windows and things like that. And so one of the challenges, particularly in venture private equity is a bit different is are the paper returns really real if you can’t get money from them? And how are you going to start to get DPI? How are you going to start to get liquidity if the exit markets are not so good, that’s where you can start to use secondary markets, which has come into favor. But secondaries are trading at deep discounts right now. So you’re taking a hit on your IRR. So I think it’s a bit too soon to tell how these most recent couple of years of vintages will turn out. I’m actually optimistic that the vintages starting in like 2022, where they’re investing end of 2022, 23 are going to end up being positive. Typically, when you see a big dip like we saw in 22 when the rate cycle started, it hurts the vintage a few years prior to that, but really helped. The vintage coming out of that. So if you went back to the great financial crisis, I think it was like 20. 2006 vintages were really bad, and then like 2009 vintages were really good, or ten vintages. I’m maybe beginning that just a little bit wrong. You might see something like that here, but certainly, you know, the returns are going to be flatter than they looked for these like 2016 vintages that were just killing it in 2021 overbid. And we really don’t know how the venture funds are going to turn out until we start getting real cash back. Right. These paper returns are much more difficult to assess. 

Richard Cunningham Well said, well said. Yeah. And our actually two podcasts ago we had Chris Kim on who is from a secondaries firm breaking down just what it looks like to be a provider of those liquidity solutions where they come in and buy, you know, LP interest and private markets position. So definitely worth checking out. And if you’re curious about kind of some of these exit solutions John is talking about and what a secondary is. All right. Let’s quickly hit on real estate because we’ve alluded to it a number of times. It’s, you know, acutely affected by the rate environment. And then let’s go on to after we talk real estate, just some of the election year stuff. You’ve made a few nods to government intervention and activity throughout this podcast. And so I want to talk about that. But real quick on real estate, John. 

John Coleman Yeah, so on the real estate markets, it’s so pretty dicey right now. Honestly, Richard, you know, some of the more attractive segments like industrial or warehouses etc. got a little bit overbid. And so there’s still a lot of demand for those as we have this kind of secular increase in the need for those types of facilities in the US office is still very precarious. I think any of these real estate cycles can sometimes take some time to work through because of all the lease agreements. You know, we’re still working through leases that were signed five, six, seven, ten years ago sometimes. And so it’s not a cliff. You know, those tend to roll off over time as rates reset, etc.. I would say office is still somewhat weak. We’re seeing a lot more return to office, but I don’t think we’re seeing anything like the demand for office that we saw in 2019, for example. I mean that structurally things have just changed in the way that people work. And I think that’s going to stick. And then residential is in this odd period of time where because a lot of people locked in rates for their properties that are renting a few years ago and rates have gone up so dramatically, it is much more expensive to buy an apartment condo house right now in most areas than it is to rent. There’s been this inversion where, you know, the natural order of things is it’s a bit more expensive to rent and to buy because landlords are getting rewarded for basically their outlay of risk capital. So you pay a premium to rent, not outlay any upfront or risk capital. And then if you buy something you kind of benefit from that over time. Right now there’s an inversion of that where it’s much cheaper to rent than to buy. I think because of the movement in interest rates over the last couple of years. I saw a chart recently where, you know, cap rates on rental properties right now, which is which is obviously the income from that property divided by its value are lower than the mortgage rate. So there’s an inversion in that because mortgage rates are higher. And that’s just caused a lot of sluggishness in the home market. Rates are coming down but they’re still high. You know mortgage rates I think for really good credit score like six a little over 6% right now. Many people are locked in at like three, which is, you know, almost twice the cost on a monthly basis. I mean, not quite twice the cost. And so people aren’t selling. A lot of people aren’t buying. A lot of people who stocked up on these kind of rental properties, Airbnb, Vrbo that’s coming back down to earth. And there’s been some not distress in that area. But I think you’re starting to see that space more challenged. And it still just doesn’t make sense to buy a new property right now to rent. Right. That’s inverted at the moment. And so that continues to be sluggish. The other thing that’s been true for more than a decade now is sluggishness in new home starts, a lot of which never really recovered to pre great financial crisis levels. I think that’s continue to be sluggish, although I think the August numbers said new home starts were up just a bit. Obviously there’s a secular shortage in housing in America. Our population is growing faster than our housing stock, especially when you include immigration. And so there’s a shortage of housing right now, whether rental or purchase. And so you would think that would lead to more construction. It’s helping to lead to higher prices, right? Where there’s the highest gap between the price of a property and the average median income in history, basically over the last couple of years. So that shortage is driving up prices. You would think it would drive up new home starts or new construction. And maybe that’s starting to happen, although that’s a pretty sluggish indicator. And so housing right now is still continues to be tough. The mortgage market continues to be tough. And if I were, you know, to predict I don’t. I think that dramatically changes in 25. Even with interest rates coming down. Although if we come down another 50 basis points, and especially if the fed were to bring things down another full percentage point next year and we get in the kind of threes again on the fed funds rate, mortgage rates get down in the force. We see that starting to loosen up quite a lot. But I think that remains to be seen. 

Richard Cunningham That’s a really good analysis. I know the season of life we find ourselves in, it is friends and family. Friends and all that situation are looking to be that first time homebuyer. And they sit there and they say, man, my rent payment as you’re talking about, would double because of where interest rates are and mortgage rates are, even though I can afford a 20% down payment. And so why go under that duress or that stress when you can rent it below market rates, if you will? And I know people are feeling that acutely. All right let’s pivot John. And we’ve got a few minutes left here. And we have got an election coming up in a month and some change. We currently have a Democrat controlled Senate, a Republican controlled House and a Democrat controlled white House. Obviously, you’ve got Kamala Harris running and the Democrat Party, you’ve got Donald Trump running on the Republican side. We are in debate season. We saw the debate a few weeks back, and it feels like the tension and the temperature is up, as always in an election year, but maybe help kind of bring us back down to earth and steady us as you kind of provide some of the maybe economic commentary on both candidates or some of the things you’re seeing and what the bigger issues are as we head into November’s election season. 

John Coleman Yeah. I mean, anybody who tells you they know what’s going to happen right now is lying to you. This has been and this continues to be like the craziest political environment of my lifetime. Certainly, you know, we’ve had two assassination attempts. We’ve had a president be revealed to be in cognitive decline, ousted from office, a new nominee basically appointed by the party without a process, massive reversals in polls, obviously, just a number of kind of crazy policy proposals. And I think more than at any point in my lifetime, too, we’re also seeing candidates just throw spaghetti at the wall in terms of policies. They think we’ll get them votes right. So every day some new promise comes out to try and for lack of a better term, by a vote, right up. Student loan forgiveness, no tax on tips, no tax on overtime. You know, mortgage, first time homebuyer assistance. I mean, we’re running trillions of dollars in deficits. And every day I wake up and there’s some new handout that people are proposing. I think, look, this won’t be revolutionary analysis. I think that in general, it’s likely that markets would react better to a Trump win than a Harris win at this point. What do markets not like about the Trump candidacy? I think and this is one man’s opinion. I don’t think they like some of what they perceive as the volatility of that, not knowing exactly what might come of that, not knowing exactly how the administration will behave in certain circumstances. What I think they favor versus a Harris administration would be a lot of kind of traditionally conservative policies that would be positives for the underlying economy. Right? I think a Trump presidency is staked out pretty clearly that it would try and slash regulation, that it would cut down on the regulatory burden of the business environment in the United States right now, or at least that’s what they’ve stated they would do. They did some of that last time. That would be very stimulatory for business right now in a positive way. I think the Harris administration has signaled in alignment with the Biden administration on some just absolutely insane policy proposals on tax. To be honest, a lot of people now are saying, well, you know, she kind of doesn’t mean it. She’s just appealing to her base. But this idea of taxing unrealized capital gains, for example, even if they’re only doing that higher income people of dramatically raising capital gains taxes at the federal level, of dramatically raising income tax rates, all of these would range from slightly negative to catastrophic for markets if they were to be implemented, and seemed so poorly considered that a lot of people are basically saying they don’t mean it, they’re just appealing to people. I think that with regards to potential negative shocks in the international environment, you know, we’ve obviously got very volatile situations right now with China, with Ukraine and Russia with a widening conflict in the Middle East, where Israel is now effectively, openly at war with Hezbollah in Lebanon, which has been a breaking thing this week as they’ve stepped up that conflict, moving beyond pushing back on the terrorist attacks that occurred out of Gaza. I mean, so that’s very volatile. I think people are very split on which candidate would be positive for that. I think there are wide contingent of. Folks who believe that a Trump presidency would potentially change that environment a bit, that Russia and China would be a bit more cautious during a Trump presidency than during a Harris presidency. And there’s a lot of fear, honestly, right now, with Joe Biden seemingly not as engaged as president, as he was before that something could happen between now and inauguration, right where it’s kind of unclear how the power structure is operating at the moment. So I do think there are some near-term risks to that. And then, you know, one thing. I’ll make an overarching comment, Richard, and it kind of goes back to this. You know, we’re in the handout stage of the election process where everybody’s just trying to announce new policies. They think people will vote for neither candidate, neither party has in their platform any significant way of addressing the structural deficits and debt that we’re accruing right now. Early in the next year, our interest payments on the federal debt are going to go over $1 trillion, effectively, no matter what happens with rates, you know, our entitlement payments for health care and for Social Security in our interest rate payments now eat up the vast majority of the federal budget. They dwarf defense spending. They dwarf spending on the apparatus of the federal government itself. And I heard a stat the other day that almost half of the US economy in some way touches government spending, meaning either is directly a federal agency or state or local agency, or is reliant as a private sector business on funding from those. Right. So we’re reaching this point where the government has just become an enormous part of the federal, state and local economies. Right. And that used to be a platform of the Conservative Party, the Republican Party, that was a loser electorally, because no one likes to hear that we’re out of money and we can’t spend anymore. And everybody wants to know that you can. No one likes higher tax rates, which is the other way to solve that. Although higher tax rates at this point, a lot of people think would be negative for the economy. You reach a point at which if you tax more, you actually hurt the economy. And some people think we’re there, and I just don’t know who’s going to actually begin to fix that. It might be a significant crisis with our debt that forces us to do any sort of cuts or reform to things like Social Security and Medicaid or Medicare, which are really the only ways to fix this imbalance going forward. So I think the next couple months are going to be nuts. Honestly, next month and a half, whatever, it’s in the election. I think it’s going to be pretty dicey all the way through inauguration, because I think the likelihood that we definitively know who won the election on the night of the election is as low as it has been the case since Bush versus Gore, and I think we’re going to see a lot of tumult no matter who wins. And so I would just be prepared for a ton of volatility through at least the inauguration. And then after that, you know, I do think Trump would be initially better received by markets, especially because of the tax policies that have been proposed by the Harris administration. But I do think the long term health of the US economy will be contingent upon whether either of the parties faces up to this deficit and debt problem that we have in a responsible way, and help the United States kind of fix the imbalances that are going on there, which it doesn’t seem like either party or the voters behind them have any appetite to deal with right now. 

Richard Cunningham Like one double clicking on the the debt problem is Donald Trump’s proposed a government efficiency commission, if you will. And he’s specifically and maybe this is just social media world, as you know, called on Elon Musk to be the person to come in and almost clean house and just let’s evaluate where overspending is taking place. And to be clear, there’s some phenomenal people that do incredible tasks for the US government. But as John has kind of alluded to, there has been some just wild overspending which has led to our debt levels. Any thoughts on just kind of that approach, if you will, instead of kind of looking across just government inefficiencies and waste of money, if you will. 

John Coleman Look, I think it is I won’t comment on the Elon thing. I won’t comment on that specific circumstance. I would say, obviously government spending is inefficient right now. Right? I think there’s been a lot of news recently about this, like Federal Broadband Initiative that put forward $45 billion and has not connected a single user to broadband, right? The cost to build infrastructure in US cities now is often two, three, four times as high as it is in European cities, which shocks a lot of Americans. The American government is not working well right now, and we need significant reforms to the way in which we spend to the structure of the federal government structure of state governments in certain circumstances, and there is huge opportunity for efficiency in that. I think it is a no brainer to try and take that on. I think it’s quite difficult to take on because of various employment rules around the federal government. I think it’s needed. I don’t think it fully solves our debt or deficit problem, and I don’t say that in a dismissive way, in the sense that I think we should do it. But ultimately, you don’t solve the federal deficit problem unless you either dramatically increase taxes. And again, I’m skeptical that you can do that to fix our current deficits, because I think it would flip us in. To negative growth territory, or you have to rein in the entitlement programs Medicare, Medicaid, Social Security and have positive interest rate movements, which would lower the interest rate on the debt a little bit. And there are some straightforward mathematical fixes to that. Like, you can mean Social Security, you can raise the retirement age, you can do some other things on the health care side. But right now, neither political party has expressed an interest in anything, which I understand because they’re deeply unpopular with citizens. And so I think it’s a no brainer to try and do efficiency in the federal government. I don’t think it gets us all the way to fixing the structural imbalances that we have. 

Richard Cunningham Fair enough. Well said. Well, as we’re talking election volatility and just the chaos that is likely to ensue throughout the month of October and into November. Let’s rein it back in with kind of the eternal and redemptive perspective and close here with just kind of man. What’s the Lord been teaching you lately, John? And and through his word and just kind of in your time with him? 

John Coleman Yeah. Apropos to this kind of discussion, Richard, I think I’ve mentioned it once on the podcast here. I’m writing this book on money at the moment for my publisher, Harvard Business Review. And the idea is like, what are the principles for money that can make it a tool for human flourishing rather than something that’s destructive? And I just wrote a Substack about this particular point. I have this Substack on purpose, and I wrote about this passage from First Kings, about Solomon, you know, the passage where God asks Solomon what he wants, basically as he emerges as king and he asks of all things for wisdom. And because he asks for wisdom, God gives him wealth and power and those kind of things, at least out of the gates. And then, of course, we know Solomon kind of lost his wisdom over time, but it really made me reflect. In this latest piece, I put up on wisdom as a precursor to getting those other things right. I think one of the errors that we make in modern life is to turn means into ends. So power and money, for example, should be a means to doing something good in the world. You know, in the Christian world, we think of that as stewardship. Did that power money belong to God? He doesn’t need us, but he can entrust us with those things to do his purposes. And the way to use that well is to do what God intends for it, right? To use that as a steward, not to think of it as ours, our money, our power for our purposes, but his money, his power for his purposes and to submit ourselves to that. A lot of people today confuse that as an ends. I want money for money’s sake. I want power for power sake. That is the end of itself. And I think that’s obviously distorting point of view. And the wisdom of Solomon was to ask for the right judgment and discernment in wielding the authority that was going to be given to him. And, you know, that’s something that’s natural to us. But I think we do lose sight of that in day to day life, right? That wisdom is an end of itself. It is good to be wise. It is a means to stewarding all these other things because it’s discernment for God, but it is also an in. It’s good to be wise regardless of anything else. It’s good to be wise for wisdom sake. And so it’s encouraged me to think a lot more about praying for wisdom, for discernment, for judgment. Many of the folks listening this have been blessed with financial resources. They’ve been blessed with professional position. They’ve been blessed with political power. They’ve been blessed with an audience like you, Richard, on this podcast. And those things aren’t good or bad in themselves, right? They are only good or bad, depending on what we do with them. And so it should be each of our prayer every day for wisdom, discernment, judgment so that we can see the path God has for them and that we don’t ask him to join our path, but we ask that we see and join his path, that we see his will for that, and that we align ourselves with it. And so that passage in First Kings about Solomon has caused me to just reflect more and more on am I seeking and praying for wisdom enough for discernment, for judgment in every area in which I’ve been given authority, so that God may trust me with that authority and whatever else he chooses to give me, that I would be trustworthy of that, and I would have submitted myself to his will for that, and that I would have the discernment to see it. And I think all of us could potentially lean into that. 

Richard Cunningham Man, that’s fantastic. Especially relevant to me as I turn the chapter this morning out of first Chronicles, and Samuel in the first Kings of David is handing over kind of the throne to Solomon. So historically relevant to me in my own scripture time. John Coleman, thank you for that, man. How fun to keep kind of this podcast inside the FDA host family this time around. And he remarks on so many things from the fed to the economy to markets to the US election, and just always grateful for your wisdom and your timeless kind of insights that apply on this podcast. And so, folks, thank you so much for joining us. We will catch you next time. 

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