Henry Kaestner: Good morning, partner.

Luke Roush: Good morning. Good morning. It’s great to be with Jason here.

Henry Kaestner: It is great to have Jason on. You know, we’ve been around the world on this podcast in many, if not most states. We have never been to the very, very fine state of New Hampshire. And when I was growing up, I collected license plates and I loved New Hampshire license plates. Live free or die. There’s just something just massively motivating about that concept and that context. And so we’ve got a really special guest. We’ve Jason Syversen in the house, who is an investor and entrepreneur and stepped into politics because I think he probably has read enough of the backs of people’s cars in his home state of New Hampshire and decided that actually maybe that might mean something. And so maybe he might even talk about that a little bit during our time with him today. But Jason, thank you very much for joining us.

Jason Syversen: […] Guys I am a long time listener, so excited to be on the show and enjoying the content that’s been producing and for being here.

Henry Kaestner: Thank you. Thank you for listening and your encouragement. And then also we’ve gotten to know each other just a little bit more. We’re you know, we’ve got this Faith driven entrepreneurs group which right now in our January cohort on time stamp on this a little bit about when we’re recording, we have 1500 entrepreneurs representing 88 countries going through these this eight week process. We’ve watched some Faith Driven Investor through that group, but we’ve never had a Faith Driven Investor specific group with new content. And you’re helping us debate that out. We’ve got four different cohorts going through that, some really neat stuff and exploring the new Slack channel. We have to be able to interact and you’ve been a big part of that and really advancing the conversation, so thank you for that.

Jason Syversen: I’m thrilled to. I think i have shared not having that local community, and […] to find a virtual, or even global community that you are helping assemble cause without you know those kind of matchmakers like you guys making that happen, that’s super hard to find other folks that have that same passion person. Investing in entrepreneurship so it has been awesome in finding. I feel like a wet sponge soaking up moisture. So it’s been great to get poured into and have a chance to share with others.

Henry Kaestner: Yeah, it’s been a lot of fun. Okay, so as we work with any podcast guest, we’d like to get a flyover of who they are, where they come from, give us a biographical sketch. And then eventually, of course, during this podcast, we’ll talk about all the things we’re talking about, the entrepreneurship, the investing and the politics a little bit. But who are you?

Jason Syversen: Yeah, thanks. I thought about this last night and I’ve been listening to podcasts. I listened at one and a half speed. I think I mentioned that, I have ADHD, so I like the extra stimulation. Funny trivia fact I actually read the entire Lord of the rings trilogy in a single night, which of course is part of the reason I never thought someone like me had ADHD, you picture ADHD as a person who can’t sit still and force my leg like sit in here as I chat, so I tend to move at high speeds. So for those of you that like me like to listen at high speed, I’m to talk fast and gain a lot of content. So you might want to move to one and a quarter speed or even one speed some of the Southern drawl folks that talk nice and slow. 1.5 speed works great but I might not do as well.

Henry Kaestner: Yeah, it’s funny you say that. I’ve always wanted to listen very quickly and I can’t. I feel like I’ve just haven’t been able to do it well. Luke and I have a great friend and business partner at Bandwidth With David Morgan who listens to books at 3 x , and I remember calling him up after a book. He recommended to me the hard thing about hard things, about the injuries and hardwood story. And I said, yeah, I just can’t listen to this guy. The guy that had read it had this British accent. I said, It just is grating on me after a while. And he said, I don’t know what you’re talking about. And I was like, you know do you know that British accent? And I listen to it. At three X, you can’t discern any accent.

Jason Syversen: That’s fascinating. Now yeah, I’ve never three is impressive. I’ve done two before, but one and a half is a little more comfortable where I can feel like I’m absorbing it better. But that three is that’s a real speed listening right there.

Henry Kaestner: Yeah, I’m locked into one and I feel really inadequate. Okay. Who are you? Where you come from?

Jason Syversen: Yeah. So thanks born in New Jersey. You grew up in Maine. My dad, is some KAT engineer that they’re working in the paper mills for […] reasons. Someone tried to abduct a girl down the road from us in our house in Jersy. And so my parents decided they wanted to move somewhere safer. And that works with paper mills. They start shutting down and we ended up being out of work we loss the house that we bought on the auction. When I was young maybe 10 and went through period of a decade of kind of, I guess American poverty. So rental properties and crappy housesyou know with like a holes in the floorboard and wearing your shoes and doors and cutting wood in the middle of the winter time. So we’d have heat. My dad ran ground over a gravel driveway trying to fix our broken down. 1967 Chevelle was cutting Christmas trees or all kinds of crazy stuff, fermenting butter and food stamps. I did not realized that this was like life in Maine and everybody’s like that. Normal, rich people from out of state can afford to come Maine in the BMWs eventually was that wasn’t the case. And we’re just actually in a very poor place. We were actually homeless for a summer, living in someone’s pop up camper, and I remember the shame my parents had in kinda sharing that, but I just thought it was cool we were camping, but I didn’t realize some of the ways that that changed my mindset and motivation to try to live differently until I got married and my wife was kind of yelled at me one day. Why do your socks have holes in them? I was like because I wear them and they’re tube socks. What’s the big deal? It’s like they have multiple holes and she pulls up the socks and there’s like holes around them. I was like, Yeah, cause I just rotate them and keep wearing them like to do with socks. And she kind of soften in her face and she realizes, like, honey, you’re not poor any more like wearing some decent the socks. We are going to throw them out. We are going to buy you new socks. Like, why that’s so wasteful? Like, I didn’t understand. That wasn’t what normal people did with socks. And so that’s some of that mentality. Even my forties, I find myself still sometimes spending 5 hours to try to save $15 on something. I’m like, It wasn’t a good use of my time. I really need to delegate that and just like pull it in. So it’s something I’m still working on today. Yeah, I’ve got a free ride for computer engineering at U Maine then went to New Hampshire because I love that […] mentality and have a quality of life of Maine by people. Slower pace of life, but also a great high tech economy. Close to Boston. I live about an hour north of Boston and my wife and I got married in college. I have been believer since I was five. Never went to that falling away phase In college, many do when I try to center my entire life around my relationship with Christ I have loving, homeschooling parents you know grew up reading scripture and made that the centerpiece of my identity and my wife. We have four children biologically we end up adopting twin boys. My wife and I felt passionately about kind of adoption story and being something in our family because that’s so central to the gospel message about us being adopted into Christ’s Kingdom and family. So that was a long journey and my wife actually wrote a book about it […] CNN was interested in. We also went three years infertility.

Henry Kaestner: Wait What’s a book called.

Jason Syversen: It’s called Mustard Seed Faith Journey Through Infertility, Miscarriages. And Faith she talks about our process of trying to adopt to adopt failed adoptions, people ripping us off lies and crazy stuff. And then also years of infertility, miscarriage and how challenging that was in her faith and just her belief is God good, right. We feel called to do this and age analogy seems like touching a hot stove and keep burning its keep touching on the hot stove that we felt like we’re supposed to at some point feel like I don’t want to touch the stuff anymore. I keep getting slapped or burned. And then we gave up trying and then someone approached us and ended up adopting these amazing twin boys, four identical twins, like the guys […], which is really fun to watch them growing up. So, yes, I went to New Hampshire, I work for the defense company, decided signal processing all that was great, more like warfare school but I really want to be a hacker and started hacking the company network reporting it to the IT guys which of course annoyed them but their management loved it.

Luke Roush: So in the wake of like events of the last year or two with Russia, many of our listeners are probably wondering, you know, what does it mean to be a hacker? Maybe just talk a little bit more about that.

Jason Syversen: Yeah. I mean, I was just I was going to grad school at Boston Polytechnic Institute for Electrical Engineering focused on crypto and security. So I’m getting the academic knowledge. But inside the network, I’m poking around and like, how can I do this? And realizing I could see vulnerabilities in the network and I would try them out or I’d get permission before I actually did anything. I’d try stuff out of my own system, but if I was touching anyone else’s, i want to make sure I wasn’t breaking any rules. So I told the IT guys what i was finding. They’re like, no, you can’t do that. Oh yeah, i could get domain admin. I can on all 4000 computers in this network and they’re like, prove it. Like, cool. I was hoping you’d say that. Like, you give me that in writing just so I do not lose my job or get in trouble here. So his boss emails me and it’s like a couple of weeks and I wrote a little program and I had full control over the entire network and I sent him a message was like, How did you do that? But I told you about it two weeks ago, man. He’s like, Oh, you got to write that down. So I wrote a whole report up about all the things I was finding. Then had a meeting. Yeah, one of the IT guys like you should be fired. Like, I can’t believe you’re doing this. And I’m like, Dude, I’m not making the issue. Like, I just got a flashlight and showing you what’s there like, You don’t have to fix it. You don’t have to do anything. I’m just identifying stuff that exists on the network because your boss told me to like, No, no. And the boss is like, You’re good at this. Like, you should do this for a living, but I don’t really want to do IT. I really want to be an engineers engineer. I love inventing stuff and finding new things that other people have done. And if I’ll be on a IT management side, I really want to be inventing finding new capabilities. So ended up hooking up with the older guy in the building, a group inside the company to do cyber warfare. So built it up to about 20 folks.

In that siege. That siege right.

Jason Syversen: Now, this is inside of a large defense company. Then I got recruited to go to DARPA, which was a total joke, going to out of jail to Pharaoh’s Palace. I’m a 30 year old guy in New Hampshire, and I am going to DARPA and all my peers are in their forties and fifties. They have PhD These are like lieutenant colonels and military. I’m running $100 million portfolio of research programs. And I’m this I was the youngest person they’d ever hired at DARPA at the time, which again, it was a total divine thing. I’m pretty self-confident guy, but I told my wife I’m like, Honey, there is no way I get this job unless God is divinely orchestrating something to put me in this position. So I’m commuting from New Hampshire every week […] To my house and my mother in law asked my wife, do you still feel God called you to Virginia? Now you got the job and he has to commute and she’s like, Yeah mom, I do. It’s not always works is doesn’t always go the way you want but we will prioritize our family. I was gone Monday, Tuesday, Wednesday nights. I was a geo bachelor and ended up going down. And then Thursday night, Friday, Saturday, Sunday, I was home and I just cancel everything I was becoming an elder in our church. And I stepped out of that and said, I’m just gonna be a family guy for that time. I did that for two years. I ran the portfolio transitional program, airports, Army, Navy, CIA, NSA and other groups and then […] said, I can’t do two more years. It’s only a temporary job. And then I started my own company, Siege Technology in 2009, 2010, we did a million in revenue and we just kept growing from there in cyber warfare, technology, R&D were mostly government contracts for defense companies and other […] clients and paid us to build technology and find problems. It’s all about the capabilites response and tech venture backed firm, and then we scaled up and wanted to build a couple more and I was like, You know what I skipped to that point. I can’t be a good husband, Dad, run this company and run two more companies. So we ended up selling to somebody called Nehemiah Security. The founder is also a Christian. I think guys at Nehemiah called Farrell. I think. Yes. I think he has some exposure in Sovereigns and that great guy. We prayed together after the acquisition every week and I left in 2019. My wife and I had a double digit exit we basically had committed before the company started that we were going to take all we needed to just what we need to live on. So I enjoyed the conversation that earlier about financial disclosure. So I lived on my 12 grands a month And have six kids and we’re joining the rest of the foundation. So I work with the National Christian Foundation and put […] Into the nonprofit. So that’s kind of what I’ve been doing. So that happened 2019, went into full time investing and I also end up running for Senate because I really felt like God was pushing me to do that. I did not want to do it, but I felt like Jonah […] go to, Niniveh. And I was like, I’ve read that Bible story and I know what happens if you don’t get into Niniveh. So I guess I going to go to Niniveh. I did that and did not win lost by 3%, but I had a chance to share my testimony to a bunch of folks and then this past year decided to start new company.

Henry Kaestner: Gosh there’s just so much there. There’s so much that a part of me wants to go all the way back to a startup and selling government contracts is you hear that the sales cycle with the government is just really really really long maybe just very quickly hit on that.

Jason Syversen: Yeah it is long but you know so much of it like anything is relationship driven so like found is by you know if you have a high end team and a great reputation, which I was very blessed to have coming out of DARPA, we were able to get sub contracts under bigger companies and cut off that process of the long sale cycle. We didn’t win a lot of prime work, but we just were able to come in and help them find some work that they had with our team. And then we got on the process that long cycle and it can be long but sometimes I can sort any other group like tactical customers, like special ops guys. I’ve been privileged to work with groups across the gamut from intelligence and defense and some of those to move pretty quickly. If you have a capability, they can they can make things happen.

Luke Roush: So when you first get going with kind of that company, it was very much kind of a founding moment. Yeah, there’s some great stories around just bootstrapping and what that looked like for you and your family. Maybe to speak a little bit more about those early years.

Jason Syversen: Sure it was actually really cool faith building experience for me because I actually started the company in 2005. So before I went to DARPA, I really was feeling led to kind of start this company. And I prayed about it for months I said God, like, I’m not going to start this company unless it’s for you, because I don’t want to be an ego thing for me and I’m just too good for this company and I’m going to be an entrepreneur. So I prayed for months and I was like, I’m not starting it until I feel like you’re telling me to do this. And it took three or four months and I kept praying. I didn’t ask God if I starts company, which is kind of weird. I was asking would it be successful if I did? So it was like a foregone conclusion and I kept praying and finally I felt like God said, yes, it’s going to be successful. I said, okay, I’m going to do it. So 2005, I started the company Siege Technologies Inc and wrote a proposal, submitted it to […] Because I didn’t want to do anything competitive with my current employer and a year goes by and I didn’t win sales cycle to go on did not win, okay, God, I still trust you. You said it’s going to work. Maybe the next one, right? Wrote another proposal, throw it out off the wall, six months or whatever go by. I don’t win and my buddy who started it with. said, you know what, you really need to go and do this full time. But I was like, I have the money, I have the big enough reputation. I don’t think I […] in my twenties. And I kind of gave up like, you know, like this just isn’t going to work out, I guess. And so it kind of cost me question my faith. Not that I didn’t believe in God, but I was like, maybe I just have no idea how to pray, right? I think that you’ve shared Henry about listening, sometimes being challenged in prayer, and I definitely do. I talk too much when I’m praying and don’t listen enough. I was like, I actually sound like I thought, God, really told me something and it didn’t happen. So I have no idea what I’m doing. It’s clearly I have no idea how prayer works. And then suddenly I get this offer to go to DARPA out of the blue, they call me at my desk. Would you consider come to DARPA? I’m like, Yeah, I would so I go to DARPA I get this job came to DC, so I can’t take a job at one of these other places. I’m back in New Hampshire. Not really an opportunity to do cool cyber warfare technology work in New Hampshire outside of my old job, which I didn’t want to take. And I’m back in and I start this company, Siege Technologies, LLC, and we take off, right? We do a millionaires and scale up. And I realized, like, God had to do some things right he wanted to say, Will you trust me and move out in faith and start this company. Despite the fact that […] New Hampshire And I did and it didn’t work out. And he’s like, Do you still trust me in the middle of that? And I did. And He was like, All right, well, I got to move some things around to make this work. He has me go to DARPA, then he puts me back. I can’t move down to New Hampshire then I start the company and it takes off and I totally could look back. It was like, Oh, I asked if we were going to be successful. I didn’t ask when. I just ask would it? And as long as I stayed faithful and kind of trusted him, he made things happen. So that way we were able to be very fortunate and take off after I had that reputation. So it was amazing. It was scary, right? We bet everything we had and part of it was that difference of doing it part time the first time around, the second time I put all the chips and I saved up some money, I had 30 grand in savings and took out a home equity line of credit for 30 grand to put in company. And I said, All right, God, this is it. And I have to say, my wife was a key part of that. I’ve heard people share and hear one of the other guests who had talked about the wife not being supportive but my wife was all in the whole time. It’s like, I believe in you. It’s like, what’s the worst that happens? We lose our house, we go back to rent and it’s like, I don’t care. Like I have your back. I think this is going to be tremendously successful.

Henry Kaestner: And that’s awesome. That’s a special gift.

Jason Syversen: Having that support for me was like, All right, I don’t have to worry about her because I’m not planning on losing the house like I’m going to do everything I can, which doesn’t happen. But knowing she was willing to go there took a lot of pressure off of me. I just felt completely supported throught that journey.

Henry Kaestner: Yeah. Okay. So a bunch of other things you mentioned along the way. One is running for state Senate in New Hampshire and sharing your faith along the campaign trail going and I know you well enough and we talked about a little bit before we went on air, but part of that means door to door campaigning. What does that look like?

Jason Syversen: Yeah, during the pandemic. Right. So that was an extra twist.

Henry Kaestner: Yeah.

Jason Syversen: So yeah, 2019 in one day, you know, just getting some started. Why I ran once again, I had zero interest and I’m reading this paper from a group called Founders Pledge, which I’m part of. So Founders pledges this group of entrepreneurs who have pledged to give some portion of their proceeds of their company to charity. It was actually it’s not a Christian group. It’s just a group of folks, Christian or not, that I felt strongly about having a public declaration about something around giving. Right, you have heard about the giving pledge. The billionaires have wasn’t anything really like that beyond that. And founders pledges is cool because it’s a contractual commitment, you actually sign a contract saying you’re going to give whatever amount you’ve determined. And I wanted there to be something in a public declaration and a community that was part of that can connect others. They also have a free donor by fund and they have free researchers. So they will make available to help you make informed philanthropic partnering decisions. So I did that. I was getting to know the head of research, another random topic we could talk for hours about is. I’m pretty passionate about effective altruism and this concept of giving wealth and how do you do that and how do you research and build randomized controlled trials and counterfactuals and how the nonprofits measure impact. And they have a great research team. So I was talking to their guys about how do you do that? I don’t know this. I am new that having any money, right. I came from nothing. I don’t have a network of people. I can just figure out how the rules work. And I’m an engineer, so I want data. I want understand the logic and the system, the rules, how does it work. And so they’re giving you some feedback. And you wrote a paper on government and said, look, if you actually care about impact, you should think about influence and government. And it gives examples of China and Vietnam, India, South Korea and how when they embraced capitalism, open borders, they lifted literally a billion people come out of poverty. And he’s like, if you can influence economics, people that write a paper, it influence, a government leader that can change policy in a nation, you could have hundreds of millions of billions of dollars in impact very quickly and affect millions of people in a way that your orphanage and your microloan program is just not going to have. So I am reading this paper. And I was like, Wow, this is really make sense to me logically, but I don’t understand how it applies to me personally because it feels a little bit like playing pool, like it’s going to be like a four ball combo. Like I’m going to fund the economist is going to do a study, is going to write a paper that maybe a bureaucrat reads and maybe changes law. Maybe four people get help from like, I don’t know. And I want to read the gospel message. A very much point in the sphere. You’re helping someone who needs help. So I go to talk to my wife about it and she’s on the phone with someone saying, Hey, this person do you want to run for Senate. I was like well, that’s crazy. And that’s never going to happen. But that’s funny. So we’re talking and my wife have done some work to start a group fighting human trafficking. So she’s done some work working with the state and governor trying to help legislation to help protect women, and we were joking about maybe I can run and you can serve and you know, you can do that thing because we like to state our self and I don’t. But while we’re talking I look at my phone, I had a voicemail from an unknown number and there’s a guy saying, hey, do you want to run for State Senate for District 16. And I felt like that kind of a booming spotlight moment. I’m like, Okay, wow. So in a period of 3 hours, three random people are now convincing you the logic, the impact you can have in government and pushing me to run for this one specific seat and I’ve never had anyone asked me to run for town […] all the way to governor before. Kind of feels like it. Maybe God is pushing me in this direction. So I said, okay, I’ll look into it and I talk to people that all pushing me to go and I prayed about it, and alright God a little fleece out on the ground like Gideon, I’m only going to do this if all four of my older kids and my wife are all 100% in because it’s going to affect them. And of course, I laid out for them and they also yes dad that you should do it. So yeah I ran for Senate went door to door, had to wear a mask, ran around and was very challenging, lost by 3% to the incumbent, which sadly I learned in New Hampshire. You actually work for a special interest group that paid him a full time salary while he served as a senator. And New Hampshire is unique in the […] World. They only pay $100 to our state senators, even though it’s a full time job half of the year. And so he had an arrangement where they paid him, but then he voted on issues related to the special interest group and the press for bragging about it. That was part of what got me fired up and part of my campaign message. Wow, It doesn’t matter what party you are in, that seems like something we shouldn’t do and part of something I hope to change if I got elected. But I didn’t which I was totally fine with because God you ask me to run, I did. I’m totally fine not winning. And you had a plan. I got to share my story and background with dozens and dozens of people along the way.

Henry Kaestner: Yeah. I love that entrepreneurship investor, politician. We get an investor side, but we’re going to try something we haven’t tried before because I’ve got all these notes, all these things I wanted to ask you, maybe because you have this experience and all these different things, we’re going to bring up a bunch of different topics, 32nd responses to each one and we got to go rapid fire kind of like I love watching ESPN’s Pardon the interruption and just go through okay so first one. Effective altruism.

Jason Syversen: Effective Altruism was started by Peter Singer, he is an atheist. And the idea is like if you actually care about doing good and not just feeling good about yourself by giving money to someone, then you should do some research on where you’re giving. And as a Christian, I think that is a parallel to parable talents about giving well.

Henry Kaestner: Okay. Number two, talk to us about capping your lifestyle. You mentioned before 144,006 kids.

Jason Syversen: Yeah we live in one of the wealthiest countries in the world. My wife and I went to Haiti with our olderst kids and we saw people living on $3 a day. We saw someone getting robbed over a $10 that we bought in wristbands from a local there. And you realize that how much wealth we have, the poor people that we serve sometimes some of the nonprofits we work with are richer than middle income people in Haiti. And we have our comparing ourselves to […] model in the U.S. So we felt strongly that once you get to a point where you can pay your bills, you have a house and go on vacation once or twice a year you don’t need anymore. And anything else, for giving us something for us to use exclusively for charitable purposes. I think it’s all about money, obviously, but that particularly should be allocated to funding high impacts charitable activities that are Christian. But you want.

Henry Kaestner: Okay, correlated to that, what do you feel about leaving kids money?

Jason Syversen: We’re not giving any of our kids money, so we think that they’re growing up in incredible home. They can do a travel basketball, they get to travel internationally. We took them to Australia, New Zealand after I sold the company. They go to a private Christian school or homeschooled. I’m going to introduce them to my network and give them every opportunity I can see my network. I’m going to help them get a great college education, but I’m not giving them checks like they had to buy their own car they bought on iPhones and if they ever hit hard times, I’m always going to be here to support them and back them. But I think that it’s damaging and harmful to kids to give them handouts and have them just live independently.

Henry Kaestner: Okay, next one up evangelism within the investor community. You live in a place like Boston. That can’t be easy.

Jason Syversen: Yeah, it’s challenging and I don’t have it figured out, which again is part of my enthusiasm for embracing what you guys are doing trying to learn best practices and I lots of friends often about being in some in your faith so the porch I’ve taken, which is what I learned on the campaign trail, is, you know, I’m just naturally a fairly transparent guy. Like, you know, I’m the kind of person I’ll tell you what I need. I’ll tell you what’s going on. My kids will see on what issue, and I try to balance that. And social media is the same way. Like, I’m the guy who puts awkward pictures of failure and not just, you know, I don’t hear someone shaking vice president hands or whatever, but also a picture of like, oh, here’s some drop in on my stuff all over the floor looking like an idiot, clinging to poopy diapers or whatever.

Henry Kaestner: What did you say, you’re posting picture of you with poopy diapers on Instagram?

Jason Syversen: I didn’t post the picture, actually I did post a long story about cleaning up like a diaper explosion when I was, you know, solo dad or whatever. So I.

Henry Kaestner: You may or may not get more followers after this.

Jason Syversen: Yeah, that one was kind of gross. But that that’s kind of how I decided to just be open about my faith. It’s like, look, I’m not going to try to push what I believe on other people, but I’m just going to be super transparent, honest about who I am, what I believe. And if someone wants to learn about that or engage or find that attractive, then I’ll take that opportunity. But I don’t want to take up a strategy or try to manipulate someone into taking a perspective or whatever. So I’m just like, Look, this what I believe this is why I do the things I’m doing. The new company is I want to make as much money as possible in that company that I can drive into helping charitable causes. And that’s kind of a purpose for me is take the wiring that I have. I’m not the most touchy feely guy. I’m not always the most empathetic. When I work with these nonprofits and serve the soup kitchen or food pantry, I do what I can, but I’m really good with math, I am good with number, I am good with engineering and technology and risk taking and vision, if I take those skills and drive that. To create capital, I can drive into high impact charities, then that’s a way that I can feel. I love that quote from Chariots of Fire. Where he said when I run, I feel God using me or God purpose through me. And when I’m doing those things, I feel like I’m operating with gifts and the talents that I have and I can use that in a way that doesn’t make me feel like a failure, because I’m not the most warm, compassionate person who can help administer someone on a street. But I have other gifts that do have value that I can use to fund people that do have those frontline talents. And that’s super exciting.

Luke Roush: Hey. Okay, bootstrapping or resourcing, what do you prefer for companies that you start?

Jason Syversen: Yeah, great question. I think it really depends on the type of company. So some businesses lend themselves while bootstrapping and others, especially for second time entrepreneurs, are better for taking outside capital. But I think to cop out the real answer is it really depends on the situation.

Luke Roush: Got it. All right. That is a cop out, but I’m gonna let you get away with it this time. Having worked for intelligence agencies and the defense sector, make a biblical case for some of the work that you’re a part of DARPA.

Jason Syversen: That’s a great question. So I think one of the things that I shared and I got quoted in Bloomberg, I think on this I think particularly cyber weapons and non-kinetic options provide alternatives to kinetic warfare, which actually can produce saving lives both for US, obviously, but also for people overseas. Right. Because you don’t have collateral damage. If you use electronic measures to shut down a power facility remotely, you don’t have to worry about the plant operator or the civilian who’s nearby and killed in the kinetic strike. So for me, I was always excited to provide non-kinetic options and alternatives to dropping bombs and shooting bullets as a way of having projecting national power and kind of hopefully saving US. And that’s.

Luke Roush: Okay. That’s good. That’s good. Waterboarding or sleep deprivation? Favorite torture style. Go

Jason Syversen: Neither of those would be ones I would try. I’ve never done waterboarding. It seems kind of interesting, but sleep deprivation is definitely a measure for me. I sleep almost 9 hours a night, so I probably might go to the board.

Luke Roush: All right, last one. Negative screening. Positive screening. We should invest in things that we really love and think are redemptive, or we should avoid things that are actually putting sin into the world. Which one is your preferred style of investing and deploying time ,Talent, Treasure?

Jason Syversen: That’s great question I started with negative screen, but as I’m growing in my faith and acting, the FDI and other groups and excited about embracing some screening abilities. So I’d love to have kind of a holistic model that look at both sides of the coin.

Henry Kaestner: You started an Angel Network in New Hampshire. What’s one thing that you’ve learned that you hadn’t expected in doing that.

Jason Syversen: I think, how many people are accredited investors and honestly, a passion project of mine. Is that question your answer? Just legalized sports betting online. The governor has even pushed it as a way of getting state revenue and it really upsets me that it’s legal to bet your entire paycheck on sports teams, but it’s illegal for non-accredited investors to invest in private companies. We’re worried about people losing money. And I think it’s a travesty that great people who I know who are excited about growing and getting out of poverty or getting from the middle class to upper class levels, and have the connections of interest and passion and investing are legally prohibited from doing that. But they’re actively encouraged by state representatives and others to go get a paycheck in a gambling casino. I think that’s a travesty.

Henry Kaestner: Artificial intelligence, does it create more jobs or does it take them away?

Jason Syversen: A phenomenal question. I think artificial intelligence is trying to make a dichotomy, too. I think it’s kinda create more jobs, but I don’t know that for sure. But the history of our planet has been new technology. Disruptions have always produced more opportunity than less. And although AI naively, on the surface, it does look like it’s going to be another thing that takes more jobs, and it certainly will. Any time we have efficiencies in society and technology creation, we’ve always seen wealth grow and opportunities created every time. So using that historical narrative, I have to believe that that’s going to happen again even I don’t see how it’s all going to happen.

Luke Roush: Universal Basic Income. As a native of New Hampshire, how do you feel about that topic?

Jason Syversen: So it’s a great question. As a technology person, I appreciate it. That being part of the discussion in politics, I do think that dependency cycles and you know, Henry, you and I are both fans of Hope International and some of the work they’re doing. I’m a fan of programs that help create opportunity for people. I’m not a fan of things that builds just the dependency cycles. And as someone who’s come from poverty to the middle class, who’s and moved from middle class to different financial layer, I’m super passionate about helping people who want to move up the social ladder do so and maybe within government resources to do that like public education. But I don’t think three checks for nothing is a great idea. But I also think that we do need to do something to try to provide those opportunities to help pull people out, which we haven’t done a good job at.

Luke Roush: That’s good. Hey, Jason, one of things we’d like to do at the end of every episode is just close out by hearing what God is teaching you now. So what do you found in God’s word lately that stuck out to you?

Jason Syversen: Yeah. I mean, it’s not something. I’ve read lately, but I’ve been sharing it lately. James, where he says religion, your father in heaven accepts, is pure and faultless. It’s this look after widows and orphans in their distress and keep themselves from being threatened by the world. That’s a verse I’ve literally shared with some non-Christian investors we see the other day. That’s my message of why I’m passionate about philanthropy, and I think it’s a restating of Christ’s commandment to love your God with all your heart, soul, mind and strength and love your neighbor like yourself. And I think that loving your neighbor out by yourself, your neighbors, the person, the marginalized, those who experience persecution and injustice. That’s what I’m excited about in trying to formulate my life around how do I do that? And frankly, loving God is usually done by loving. James also says, I can see you love God. See if you can’t love a person, you can see. A lot of that message is encapsulated in loving those who are marginalized and how we do that. And as entrepreneurs, we do that in our business, our customers and all. That’s great. You also have a philanthropic side as a way to really get to those who need help.

Henry Kaestner: That’s such a great word. And what a great word to end on. May we all keep ourselves from being polluted by the world. May we also just not be held back from an investment return of 160 or 30 fold by the worries of this life and the deceitfulness of riches. And you spoke to all that today, and thank you. You blessed us all. Jason, that was awesome. Grateful for you. Our friendship, our partnership in the movement you hold now out the standard out in New Hampshire and beyond and really appreciate your time.

Jason Syversen: It is awesome to be here and enjoyed talking and I look forward talking again.

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman and I’m here with my partner Luke Roush in beautiful Wilmington, North Carolina.

Luke Roush: We are on the campus of Live Oak Bank, which is quite the place and it’s great to be back in North Carolina.

John Coleman: Absolutely. And we are privileged to have with us the founder of Live Oak Bank, Chip Mahan, who’s going to talk to us today about his story and about the variety of businesses he’s had the opportunity to kind of create and steward over the course of his lifetime. And the way that that intersects with a view of investing, I think that’s different than normal. So, Chip, thank you so much for being here today.

Chip Mahan: Delighted to be with you guys. It’s been fun so far for sure.

John Coleman: Well, maybe if you don’t mind just to get us started, tell us a little more of your personal story and how you came to found Live Oak Bank.

Chip Mahan: Well, I think, you know, to begin from the beginning and you guys cut me off about ramble too much, right? So an interesting turning point in my life was September the fourth, 1962. It was the first day of the sixth grade in Orchard Park, New York. And my dad worked for a oil company, the Ashland Oil Company in Ashland Kentucky. And regrettably, 13 men died on a company plane crash that night. and I’ll never forget. So my next door neighbor our next door neighbor was a senior executive at American Airlines. And I remember him poking me on the chest as my mother told us what happened that night and said, you know, now you’re the man of the house, which you’re 11 years old. Right. Like, ma’am. So my mother would tell you that that was a bit of a change. Apparently, prior to that, I was just kind of a happy go lucky little kid and then became maybe a little bit different after that moving forward, which also has to do with faith is. So we had to move back to the family farm at Frankfort, Kentucky. My grandparents had a 300 acre soybeans, corn, a few cows, tobacco, kind of scrub family farm. So my brother, my mother and I moved into that house, which was 800 square feet. Wow. And went to church that first Sunday. And I met a girl named Peggy […], whose father was in the civil engineering business. And we were 14 and high school our wrote in her capital in high school yearbooks that I was going to marry her. And she went to Highland college.

John Coleman: Did she know that prior to that point?

Chip Mahan: Yes, she did. She went to Highlands College in Roanoke, Virginia, I went to Wesley university in Lexington, Virginia, 45 minutes away. Yeah, I did marry her two weeks after college in 1973, and she has been the beacon of my life and ups and downs, a devout, great Christian.

John Coleman: Next year, 50 years.

Chip Mahan: Next year, 50 years, 50 years together.

John Coleman: Amazing.

Chip Mahan: Really more than that. So she turned 71 on May 5th last week. I’ll be 71 on May 26. Married a younger woman. So you really need to go back to 11, right? So it’s been 60 years, right? And, you know, we’ll talk business, all that kind of stuff. But at the end of the day, if you’re an entrepreneur, there are going to be ups and downs and the downs can be tough if you are not. What’s the purpose of this podcast? It’s all about. When you focus on Him and your life is dedicated to him. None of those things mean anything. Yeah, you go right to sleep. People ask you, what is your worst day? Everything that we do is for him. None of this is ours. You guys know that, right? The money, the stock, the equity. If you can just build something in his honor, then great things just actually happen. And then, you know, back to all that other mess, right? So I went to work at the Wachovia Bank when I was 22. The two presidents of the fraternity before me went to the training program. So I did that for a while. And then, you know, at some point life you got to decide you want to be an employee or do you want to be an owner? So I decided at 28 I wanted to be an owner, and that led to going to work for a guy in Lexington, Kentucky, who had bought a bank that was in serious trouble. It was actually bankrupt. Bankrupt the butcher, the brothers of Tennessee, Jake and C.H. Butcher. And that’s a whole another story. I got ran for governor, but so we took the bank. He hired me to run the bank, and then he ran out of money. So Saturday was the Kentucky Derby, a very exciting country derby.

Luke Roush: What a year.

Chip Mahan: This year I was something like 81. So Mickey Taylor was a lumberjack from Yakima, Washington. Jim Hill was a veterinarian from Miami Lakes, Florida, and they bought a racehorse for $17,000 by the name of Seattle Slew. Wow. And he won the Triple Crown. Wow. And when you syndicate a stallion, there are always 40 shares do know why. Those are the facts. So they kept on usually 20 to 40 shares. Wow. So I wanted to buy the bank. From this guy that was in trouble and I had no money. But since my father was a veterinarian and knew Dr. Hill, I was able to meet with Dr. Hill and Mr. Taylor. So I’ll remind you that at that time they were breeding that racehorse about a hundred times a year. So 22/40. Times 100 times $750,000. No laugh, old guarantee. So if you brought your may Seattle Slew, that’s an aging machine.

John Coleman: That is. So that’s a new fun strategy right there.

Chip Mahan: That’s what that is. So they staked us. We borrowed money against our houses and put up not much money. We had 25% of the bank and then all the banking laws changed. So you could now buy banks across state lines. So Bank one corporation and John Lacroix came to us before we actually closed. Wanted to buy that bank. Wow. So they bought the bank from us. And I’ll never forget having a conversation with him about no contracts. So we don’t believe in contract. So about two years into another, oh I can’t do this for the rest of my life? So what took the profits from that? Started our own banking company. So we bought banks in the middle of nowhere. Kentucky, very highly capitalized banks, a lot of core deposits, but no loans. That our thesis was to start banks in Lexington and Lowell make the loans in the city deposits in the country. And it worked out pretty well. And then in 1993, my brother in law, who had a security software firm in Atlanta, said to me over multiple glasses of wine one night, the Internet is going to be a big deal. I had no idea what the Internet was. I said, Why don’t we advertise CDs and savings accounts on this Internet thing to see if we can generate core deposits? And he said, You’re an idiot. We ought to put clicking on the web.

Luke Roush: What year is.

Chip Mahan: 1993? Wow. And. Okay, great. What’s Quicken? I want Quicken Loans. So this is this actually this kind of interesting thing. I said, okay, because he was kind of a genius. Stay at home guy. Got out of bed at 1030 in the morning right here. Puts where’s all this? It’s all happening. San Francisco, Palo Alto. All right, let’s go. Let’s get on a plane. Let’s go out there. So we met with Marc Andreessen.

John Coleman: In 93.

Chip Mahan: When the browser was Mosaic. Wow.

Luke Roush: And you are pretty old and all that.

Chip Mahan: And so they had just hired Jim Barksdale, who was the chief operating officer of FedEx, to run Netscape. So they changed Mosaic to Netscape. And he said, We’ll build that Internet bank for you. And said, what was going to cost? And he said, a million bucks. Then I got in a car with my brother in law. I said, That’s great, let’s get them to do that. He said, No, they want the source code. I said, What is source code, I do not know what source code was? And he said, I’ll do it for you. So we ended up. I moved from Lexington, Kentucky to Atlanta with my brother in law. He and his engineers built the first bank on the Internet, which was Security First Network. Wow. We beat Wells Fargo Market by month in October of 1994, I believe 1995. And it was a stock market, darling. I mean, we had a market cap of like six or $7 billion. Wow. And then one turning point, back to your comment about the way you run your businesses capital we kept saying that your capital is king. So I was sitting on the runway in 1999, I think it was before the crash in 98, May in Atlanta. And we were number 31 for takeoff. And the value of our business was in excess of Delta Airlines. Wow. I was flying to Amsterdam to meet with the number two guy at the ABN Amro Bank to sell software and Schiphol Airport, Amsterdam. Beautiful, beautiful place flying there. All the flowers in the tubes. Right. And so we met in a conference room there, and I was getting on the airplane, the same airplane once they cleaned it to go back. So I flew over for just 2 hours. And I got to thinking about that, like, this is wrong. I mean, we’re losing large amounts of money. We need to raise more capital. So I called the board from the airport and said, I want to raise $300 million from our customers.

John Coleman: What year was this?

Chip Mahan: This was 98 99 before the crash. So my brother in law and I went to State Farm in the early days, said you ought to have it back. So I did the State Farm Bank to these $20 billion bank. And we did a lot of work with them. So I called them and they wrote a check for 100. Zurich Insurance was their customer. They wrote a check for 75. Wow. This collision, I like to say I never know about life and where it’s going. Brian Moynihan was general counsel at Fleet Bank and he was a big fan of ours. He wrote a check. He’s now the chief executive officer of the Bank of America. Right. So had we not raised that capital, that $300 million, I don’t think that company would have made it. And that’s a little bit of a reflection of this bank. We have probably the highest capital ratio of any bank in the country. We really peel the Union Bank and see the amount of capital that we have versus the risk that we’re taking, because most of our loans are guaranteed by the United States government. And then, you know, it’s like my wife is like the most unbelievable human. You know, anytime you come up with an idea, you know, let’s sit down and talk about […]. Legal […]. Yeah, right.

John Coleman: Yeah.

Chip Mahan: And the things I heard, you guys probably […] tear it up throw it into the trash. You know, I couldn’t live with myself, if we don’t try.

John Coleman: Yeah, that’s right.

Chip Mahan: And she always says, How long do I have? And where are we going? Yeah, well, we’re moving from Lexington to Atlanta. from Atlanta to […] And she literally, you know, she live in a mobile home. Right. So when you have faith in him and you have a spouse like that and you think about the journey of life in general. Like it doesn’t get any better than that and you just spend time with my daughter. So she certainly reflects her most.

Luke Roush: Extraordinary, you.

Chip Mahan: So anyway, like I told you, I was going to ramble too much because.

Luke Roush: I want to take a little detour, I want to get back to your decision because. So when we pulled into the parking garage this morning, I was quote, over top. And when you say you flew to Amsterdam and back for like a two hour meeting that says something, but like do you do that often? Get on a plane for an hour, a two hours meeting, come back and maybe just dovetail that into what it says in that parking garage?

Chip Mahan: Yes. I mean, that’s why I’m so blessed to have people like [..] that you met earlier that can deal with regulators and compliance and all those things that are not fun. What’s the most fun for me to get on a plane without having to go see a customer and see if we can do some business together? Right. And I think, you know, it’s a little bit like sports. I mean, you guys probably played sports, you know, a hundred years ago. I played basketball. And it’s like you can say you hustle and you can say you are pretty good at customer service. But did you did you treat that customer like the only customer in the bank? Yeah. So when you put your head on the pillow at night, did you give it your all? So the basketball analogy would be it’s like you didn’t say it was like you’re under the basket and that dude elbows you in the jaw and now the adrenaline’s flowing out and you’re going down on the other end and you’re jumping as high as you jump. But maybe just the fingernail touched the ball that it allowed a teammate to tip it in at the buzzer. There’s that level of effort and it’s not. It’s binary. So if, in fact, everyone here has fun putting capital in the hands of small business America, which in my judgment have been a bit orphaned by our industry, I think the big banks do a wonderful job and retail and credit cards and all those sort of things. I think they do a fantastic job for the larger companies. I do not think they do a very good job for a 35 year old female veterinarian who happened to break her arm. And she’s a single mom. And are you going to do everything you can to help her staying in her business? Because she really didn’t have the right disability insurance or there’s construction in front of her place. So we have built probably 100 websites for veterinarians. We go to 450 trade shows a year to say to that industry and to those people. We are here for you. And when you’re young people, you know, sitting behind me here are 55, 22 year olds that are responsible, giving a financial statement every 90 days on 5000 customers. If you love what you do, then you will treat every customer like the only customer. And I said earlier, I mean, you know, it’s kind of like the airline business. Remember couple of years ago, they punched that guy in United Airline.

John Coleman: Oh, yeah, yeah. Oh, yeah.

Chip Mahan: Like, what do you people do it? I mean, like the banking business is.

John Coleman: Well, they didn’t punch everybody, though, just out.

Chip Mahan: But it’s just like, you know, what do you do? You really care like and that’s right. I think by and large, that is the difference in this place.

John Coleman: Well, and that brings us to Live Oak. I mean, what I love about your story is there is this kind of glamorous sort of meaning marketing […]. And in 1993 and learning about the Internet and launching the first Internet bank and then with Live Oak, you almost went the other direction, which is to take an overlooked segment like veterinarians and begin to just dominate the way in which you work with them. Talk to us about that transition and founding this bank and the desire to work with small businesses in these overlooked niches.

Chip Mahan: Yeah, that’s a good question. So I think that if you ask most bankers historically, they would say the SBA division is more or less the portal out of the banking business. So if the commercial lending dudes can’t make a big time commercial loan, send it down to Mikey in the basement of the SBA […] And slap a government guarantee on credit. So that’s kind of what that was. But the interesting thing is that if you delve into that, as we did in the early days, if you understand that you can lend money to 1100 different industries, and then if you look as we did. In the early days of the Freedom of Information Act data and veterinarians pay their loans back. Chicken farmers pay their loan back. And you focus on different segments where you understand at least the historic payment records of every other bank in the country in the Portland Banking Department. And then if you add to that, the fact that we are going to hire a domain expert. Domain experts are pretty simple definitions, like if you run one of those businesses. So we would hire people like that. Put people like that on our board. An example of that, and I think it may be an interesting one, I believe perspective is the chicken business. So Dan Jackson’s a friend of mine.

Luke Roush: Not a hypothetical example. You guys are actually in chicken, but in business.

Chip Mahan: And I’m going to tell you why. And I think this would be a typical of other banks. Right. So Dan was the former COO of Foster Farms, a privately held company in California’s largest chicken business west of the Mississippi. He was also the CEO of Pilgrim’s Pride. So you see like. Tell me how the chicken business operates. And there was one bank in Eldorado, Arkansas, that did almost all the SBA loans. And Dan explain the business. Here’s how it works. You really need to have six chicken houses to make the numbers work. And this is where we got into the business for 2013, these chicken houses, 660 feet long, 66 feet wide. The big chicken companies are going to bring 42,000 chicks to each house. They’re going to bring you the feed and in 39 days if it’s a Chick-Fil-A chicken at four and a half pounds. They’re going to come pick up the birds and they’re going to send us the flock chick. So the grower. I either baby sitter at the birds. It’s his money after we get our money. And so what are the real risks? Generators, chip you need to […]. Most chicken houses are in the south. Georgia is a big state. You got a thunderstorm, everything goes out. Birds are dead in 30 minutes. Yeah, that’s it. So tell me about the first national […]. So, you know, they’re little white guys that are older, you know, 75% loan to value. So let me ask you a question. Like what happens if we loan to 100% or the two and a half million dollars to get started to a 28 year old guy are mostly guys, not gals really in this business that wants to be in the chicken business? What’s the debt service coverage ratio? 125 to 135. Done. Yeah. Let’s go do that. So we’ve loaned over $1,000,000,000 until the SBA changes over 10%, down to 28 year old guys. And hey, Howard, Georgia. So it all works. So Matt Anglin, which we have a video of, was one of our first customers. Veteran Iraq, Afghanistan, several tours was a welder, $35,000 a year. We now know he need money for his second set of houses. He makes $300,000 is a chicken farm. Yeah. And has something to give to his children. So I think, you know, if you think of that and then the other thing that we do that’s quite a bit different is this. I think it’s part of the culture, too. So. Every SBA lender in the country is paid the same. Typically. So if you make $1,000,000 loan, let’s use that example. You package up $750,000 for a bow tied around that package guaranteed by the government. Sell it a bank makes 75 grand, gives a third of that to the […] commission. Mm hmm. So we thought, like, how is that going to work? We going to pay? we have $25,000 day one on a 25 year chicken. Mm hmm. That are making sense to me, because if he’s trying to sell the credit guy, he sits at the door of the vault. Yep. And transfer that risk to him so he gets a check and the credit guy gets the risk. It’s like, man, this is a bank. Yeah, we can’t do that. Well. Okay. So that has a lot to do with the culture here. And when we hire other people from other banks. This is an interesting situation that is taking place beginning at 4:00 today. No name but an average SBA lender in this country does that 8 to $12 billion of loan production per year. Our guys do over 25. Wow. We are interviewing a guy this afternoon did 200.

John Coleman: 200 million? Wow

Chip Mahan: On commission. $2 million a year. Wow. That’s going to be an interesting negotiation, etc..

John Coleman: How do you. I mean, because what you describe, though, for those of us less familiar with banking. You’re describing an underwriting process that actually knows the industry and the counterparty better. And yet you’re also doing more volume. How does that work within the context of the bank to be able to do greater diligence and know it better, but also move greater volume?

Chip Mahan: Well, I think, you know, it does get back to shoot letter. It does get back to treating every customer like the only customer. It does get back to go into 450 trade shows a year. But it’s deja vu all over again. I mean […] I mean lending money to get there it’s not rocket science. It’s not like we’re lending to a multi national conglomerate. Right. It’s a services business. It’s $1 to $2 million revenue business. It’s not rocket science. We just do it again and again and again. And the same is true of most every industry. It doesn’t take that long to figure out the few home business. Right. So if you have the domain expertize and you have the right people and you have the technology to answer the question, as we discussed earlier, am I approved and when I’m going to get the money, it’s relatively simple, right? And I think the other thing that’s so different is if you think about the banking business, right, it’s usually a bank in a geographic area. So you have the bank of Wilmington in New Hanover County where they branches. Right. So you take deposits from the butcher, the baker, the candlestick maker, and you lend money to the same. And if things are going well in that geographic area, things are fine. Are they growing? Are they not fundamentally. Most banks or real estate play. And we basically said we’re not going to do that. I mean, it was hard to get this charter approved because if you think about the FDIC who writes the deposit insurance, they’re saying, let me see if I got this right. You’re going to start a bank in Wilmington and you’re not going to have branches now. We’re going to pay up for deposits. That’s not we don’t want proper deposits. And you’re only going to lend money to veterinarians. Yeah right don’t like concentration. That’s it. And you’re going to lend money all over America and not geographically to where you’re located. That’s right. We don’t like any of that. So it took us a long time to get that approval. So we got that approval on May 12, 2008. What happened in this time? You remember what happened in September? Yeah. Okay, great. So in March of 2009, the FDIC called me to Atlanta and I had Neil Underwood with me, who is a brilliant technologist, been with me since day one. He’s one of these guys who has to have instant feedback after every meeting, like, man, seriously on a 1 to 10, how did we do? So she looked me in the eye and let me describe banking regulators. They have a unique characteristic. They’re masters of the pregnant pause, which is what that was. And they don’t blink. They stare at you.

John Coleman: Yeah.

Luke Roush: It makes me uncomfortable. That’s even right now.

Chip Mahan: They just stare at you, and they don’t blink. And she looked me right in the eye and she said, Mr. Mahan, I want you to sell or liquidate this bank.

John Coleman: Wow. This is six, eight months after you founded it, basically.

Chip Mahan: Prior to that, we started Live Oak Lending Company. So under special approval by the SBA, you can start a lending company fundamentally a broker. So we had parked $140 million of pawns at a bank in Hendersonville, North Carolina, in anticipation of selling those loans. We got our charter and I told her, I said, No, ma’am, we can’t do that. We have commitments to $140 million worth […], primarily the female veterinarians. And you got to do what you gotta do. We got do what we got to do. And then we got in the car and Underwood said, Well, how do you think the meeting works? Like, what are you talking about?

John Coleman: What meeting were you in?

Chip Mahan: Well, what are you. What are you talking about? My gracious […] life. She told us to liquidate or sell the bank.

Luke Roush: So I said finish the story. Because, I mean, you know, the critics, right? Not in the arena, but the critic outside the arena would say, well, your NPL rate is going to be way high. I mean, you’re going to have all kinds of charge offs that concentrated, you know, goodness gracious, these people don’t have any assets. And that’s why they’re looking for an SBA. They don’t have any assets,.

Chip Mahan: That’s for sure.

Luke Roush: And how that turned out.

Chip Mahan: Our loss ratio over 13 years is 30 basis points. Wow. So Wells Fargo was historically the number one SBA lender for many, many years. Their losses were two and a half percent.

John Coleman: Wow.

Luke Roush: How has it been eating their lunch?

John Coleman: Well.

Chip Mahan: You know, look, here’s the deal on that, right? So Wells Fargo. I remember when Carl Reichert used to run that place and they had a great reputation and Kovacevich came in and they had a great reputation. And, you know, their challenges have been well documented. But of all the Wells Fargo lenders that we’ve hired here are just fundamentally, extremely well trained. Most of them have been with Wells for 20 plus years. Most have started in the branch and worked their way up and are just wonderful human being and just it broke their heart to leave. Right. They had the stagecoach coming out of their veins until the place just ran them up. And then fundamentally the regulators were running it, plants was running it, and it was just they couldn’t get an answer to their customers, which are paid on commission, and that’s where that goes. They had to do something else. Yeah.

John Coleman: Well, one I think one of the more fascinating aspects of your story and I want to come back to this scaling the client service mentality, because now the bank is publicly traded, $2 billion market cap. 800 people everywhere. It’s clearly outgrown just loaning to veterinarians. How do you scale that mentality that allowed you to succeed? So you obviously have it. You were probably able to hire a few people who had it at the beginning, just this dedication to that segment, a real purpose and meaning and serving them as you expand in the bank’s remit expands. How do you scale that culture of client experience or customer focus?

Chip Mahan: You know, that’s a good question. So I get asked that all the time, and I think I’d come back to this. Right. So the American banker has been around the magazine. They have been around since like 1837, and they do the best banks to work for every year. And we won it like four years in a row. So they would ask all of our employees 100 questions anonymously, and I’d be happy to give that to you guys. Okay, so we start the bank, we got eight employees, right? And we do the same thing and it goes to 50 and 50 goes to 100. And then we run into Evan, right? It’s like so every time you add another human being, you’ve got to be the same. And if you are hiring the right people that have the right heart and have the right desire to help the customer overwhelmingly set it right, there is three legs to this, that’s your customer. You have folks, you have the shareholder and you hire the right folks and you tell them what we talked about. Like seriously treat every customer like the only customer all day, every day less. But you get to do, what we got to do is do everything we can for you in every way. Yeah. So is that a nice place to work these buildings in this camp? Is it a 6% […] payment? Is it paying 100% of your health care? Is it have three jets that can go to the West Coast flying 800 hours a year with normal corporate travel? 300? Yeah. Is it? So in the early days, we think wellness is important. So I think what we’re going to buy a individual session for all of our people three days a week. So if you’re making 50 grand a year and you get a personal session one on one with a trainer, $60 each, 180 bucks after tax week, you’re making 50 grand a year. Let’s say you’re a closer. Toughest job on the bank. You got 148 documents for every SBA loan and you’re closing 12 deals all at wow. Lawyers, paralegals on both sides. I need the money, construction draws, all this kind of stuff. You might need an hour for yourself, but I want you to know that it’s not necessarily bad. What I want you to know is, like you are important to me. You are important to building that business. Not necessarily me and my role, but for us and our role, us meaning all of us. And if you do that right and you make it fun and every time, you know, as we discussed earlier, we invest in these companies. And so far, these companies have done well. And then when you make a profit and you sell those business and you let everybody participate the profits. We do that also in the early days before we were public or private, just I went to the board and Tim and I got all the data of every bank in North Carolina. In 2009, and only 5% made more than 10% on equity in that year. A lot of them off. We were making 35% on equity, 4% of assets on the board and said, look, here’s what I want to do. I want to do 10% return on equity, which is better than 95% of the banks in North Carolina. We get all the shareholders above that. Let’s give $0.25 of every dollar to our employees.

John Coleman: I love that.

Chip Mahan: Exclude the senior management team, all the original shareholders and just your one 55% of base.

John Coleman: Wow.

Chip Mahan: And after that, it was 33 and 18 and 33 until we were public. Kind of too hard to manage it that way. But again, it gets back to, you know, we talk about it, we talk about trust and we talk about love. If you love your folks, all of them, and you trust your folks, they’ll do the right thing. Yeah, they’ll take care of the customer. And here we go.

John Coleman: Maybe. Well, I was just going to pivot a bit because you know we’ve heard about chicken farms and veterinarians, but there is a secret about live open, about some of the work you do that you haven’t told us about, which is, I mean, you had incubated and launched a number of extraordinarily successful technology companies on the back of the bank and then have also invested in technology companies. Would you talk to us a little bit about that component of the work and where it started and how you manage those two things alongside each other? A very analog kind of old school banking business right alongside a very successful financial technology enterprise that you’re building.

Chip Mahan: Well, I think it kind of gets back to the story about my brother in law and how smart he was technology and how dumb I was. Right. So Neil Underwood’s been with me since the beginning, back during the S-1 days, and he is a technologist and he was working at S-1 at the time when I said, Neil, I need your help, but we’re trying to lend money in 50 states and we got 150 documents in this government guaranteed loan, and we’ve got a hand-off problem. So the lender, the architect of the deal that understands safety, soundness of debt service coverage ratios and understands all the nuances of the government guarantee 550 pages SOP, works with an underwriter, so they architect a deal. Now you got to get all the documents. Then you got to get it approved by the credit department, right? So you have an underwriter and then you got a closer. God love their soul. And that’s a huge challenge because you’re juggling all those things we talked about before. Well, then you got to service the long run. You got to get financial statements every 90 days. Are you doing what you said you were to do relative to the budget and all that? And how are we going to perfect that hand off? So back during our S-1 days, we had 650 folks in India. Mm hmm. And I spent some time over there. I know some of those fellows. So I called them and said, Can you help me this way? I flew over from India so we can build this. And that didn’t work out very well. And then Neil was still in Atlanta, the other company. I said, Neil I need some help on this. We got to scale this thing. So we had another guy from Atlanta who was a software architect. That didn’t go so well. I said, Neil, buddy, I’m serious about this. We got our fixes on the charts, graphs and flowcharts and all these sort of things. So he and his brother on one rainy weekend in December, interviewed a ton of different companies, and they picked Salesforce when Salesforce market cap was $2 billion. So we started writing code. And then another guy that worked at S-1 about the new appeared all day. They were in the process of selling that company, so we convinced Pierre to come run that business. And I said, This is great. And really what happened before? that was Neil sneaked off and made a presentation at the Mosconi Center in San Francisco at the annual Salesforce User Conference, where they fundamentally take over all of downtown that, you know. And it was in the financial services segment of the Salesforce.

John Coleman: Dreamforce, Dreamforce. He was doing that big deal.

Chip Mahan: And then he gets mobbed afterwards when he showed what we had already built at the bank and he Mahan Let’s go back in the software. I don’t want to back in the software business. It is just too hard. No, seriously Mahan. And this is different. This is cloud based. We can get this code, we spin up an org, we do this today. I said, All right, let’s just see if we can get a small bank to use it. And then they ran up to try to sell US bank. I said, It’s not going to go well. This is a nascent software company in Wilmington, North Carolina, inside a bank. They’re not going to fool with it. And they did. Right. And then one bank bought it another bank also. Look, we got to get this out of the bank because we’re a federally regulated bank with capital ratio challenges. So if you’re going to scale this, but it’s going to raise more capital. So we did. The rest is history.

Luke Roush: So, Chip, one of the things that you’ve talked about today is seeing a problem and then being able to step in and solve it with technology. And so nCino came out of that public company that has grown quite large. You made a bunch of investments, green light, fintech, others. Maybe just speak a little bit about how you’ve thought about active investing from the platform it’s been built in and through a lot of.

Chip Mahan: I think it goes back to, you know, the Force.com cloud based discussion. I mean, you know, the estimate is that there are 280 billion lines of code in the financial services business. And just having watched this over the years, I think it’s all going to get swamped out. Right. So a very well-known, unnamed banker recently, relatively recently, used the term cloud blast. Right. So if you think about all those companies that serve all the smaller banks in the country Foster, Jack Henry and I asked them lots of data centers. Yeah. So you’re going to be more efficient than Amazon Web Services, whose data centers run at 119. And yeah, go back and look, over the last ten years, how many banks, Internet banking systems have gone down? So if you think about the market cap of Amazon, Google and Microsoft who are dramatically trying to solve this problem, I mentioned this in the earnings call. I’ll scrub the numbers. I think in the last quarter, Microsoft made $17 billion on 49 billion in revenues for the quarter. They now own 20% of the cloud based business. Amazon Web Services owns 40. Yeah. And their business last quarter grew 46%. And I don’t know if you split out AWS and ran it as a separate company, you’d still be probably worth $1,000,000,000,000. Yeah, I know all stocks are all down a lot this is going on, but it’s like no individual bank is going to be more efficient in a cloud based environment than those three companies. And they’re making it better every day. Yep. So we started a company, to your point./Luke better go call payrails the next generation build peak company where you give the banks the data which currently competitors do not. So we have received 40 price decreases since we started that business. For me now, because more people that use the system, the more that they can improve the product. So when do you buy a product from a company and expect the price to go down next year?

Luke Roush: Maybe it doesn’t happen.

Chip Mahan: It just doesn’t happen. Amazing. Right. So that to me is pervasive. And so if we look at each little subsegment cybersecurity, defense store, bill pay, pay rails, internet banking, front end aperture, we’re moving everything as fast as we can to the cloud, much more efficient. And that gives you the ability to do other things like we’re doing at this company, which is if we’ve bundled together 14 separate vendors to get where we are at Lavo, can we sell those services to others? Other banks only branches, so we don’t have a teller application. So we’ve got to fill this out of that out. But I think we have the ability to do that over and over again.

John Coleman: And you’ve started to find effectively to support that model, correct?

Chip Mahan: Correct. So we made like six investments and in Lava Ventures at the Holding Company, but we’re a small bank, so, you know, we had a runway quickly there. So Gene Ludwig has been a friend of mine for years. Gene went to Yale Law School with the Clintons and President Clinton made him Comptroller of the Currency in 1992. He then started a consultancy called Promontory prior to the Great Recession. And of course, after 2008, every bank CEO was interested in talk, in the Gene, because he hired all the most senior regulators from every branch of the government, from the FDIC, even back in the ALTS days, to the LCC. And he built a very wonderful business there. And he came and sat in that chair one day and said, Let’s do a fund. Let’s do a venture capital fund to do this thing. He was a seed investor at […]. So he saw the power of the cloud nCino. You know, in the early days in Force.com an all of that. So we did we went out to 45 banks. That a simple thesis, as you could possibly imagine, to say, you know, we’ll be your venture capital arm. It’s all about looks at the basket because, you know, all these fintech companies that raise unlimited amount of capital, a low interest rate environment like nCino, did they know nCino is now doing $250 million in revenues, but still losing like $40 million a year where you can’t do that inside a bank holding company. But if you get many, many looks at the basket of companies like that, it would allow you to serve your customers better. That is the thesis of Canopy, right? So we raised $650 million from 45 banks we’re closing fund to which are probably 700 plus million dollars, maybe 50 banks this time. But if you were a white hot fintech entrepreneur in the Silicon Valley and you want to sell your software to a bank, it is highly likely you’re going to call us.

John Coleman: When.

Chip Mahan: We get a call Andreessen, Horowitz and Sequoia and all those big shots. But if you want customers, you’re probably going to call us. And, you know, so far so good. They’ve done quite well.

Luke Roush: Yeah. Maybe just speak to one of the things that many of the listeners of Faith Driven Investor and we’ve all talked about a lot is that at times the financial services sector has not earned a reputation of truth and transparency and real customer engagement and care. Maybe speak to your faith and how that affects the way you see yourself as a change agent in financial services across the breadth of how God is using you today.

Chip Mahan: Well, you know, I think that just gets back to our folks. I mean, I can’t speak for any other bank I, you know, as I mentioned earlier, Brian Moynihan is a good friend of mine. How in the world somebody runs the Bank of America is beyond me. He’s done a fantastic job with probably 300,000 employees or whatever they have today. But I think if we just stick to our knitting and maintain the culture that we have, caring about the customer and caring about each other. Right. I mean, treat folks the way you want to be treated. And, you know, it’s hard. And heaven knows, as we’ve had this conversation, it’s hard in a federally regulated institution from the FDIC to the SEC to the SBA to the state of North Carolina, and the SEC being a public company for me to preach. Right? Mm hmm. But every chance I get, I try to let our folks know that this is all because of him. Mm hmm. And Peggy and I feel that way about whatever capital we’ve developed there. We’re just going to make sure it all goes to him and do what he wants us to do to help those less fortunate. And I think that’s been, you know, our major focus in terms of education here in Wilmington. I know you talked to my daughter earlier about Glo. We went to New York City and met with the Tisch family seven years ago and they started a school for minorities in every minority on the planet is in New York City. And, you know, there are 100 girls in each class of 600 from sixth grade to 12th grade. And I was blown away that 100% graduated and 100% went to college. So we’re now in our sixth year here. And we’ll have our first graduating class here this year and hopefully can replicate that model. Now, that said, we uncovered a challenge here in Wilmington, North Carolina, with 125 thousand, who we get our girls in the sixth grade. They’re three grades behind. Mm hmm. So what are you going to do about that? Well, our research indicates that we probably need at least ten child care centers for six weeks to pre-K. Mm hmm. So Peggy and I have bought a building, renovating that building to take care of 180 kids. Wow. And then, as a quick aside, we live in. The most interesting place in the United States of America. We just sold here Wilmington, the largest private hospital in the United States. 4,000,000,006 billion; a billion four of the billion six sits in a foundation. Now, New Hanover County is a second smallest county in the state of North Carolina, and 100% of the investment proceeds need to be re channeled in New Hanover County. Wow. Wow. We have gone to them and said, we’ll pilot your riskier projects and if it works. So maybe we’ll do to our families. Then you come in behind that with that massive amount of capital you have and really, really help. You know, Wilmington, North Carolina, is no different than Nashville. It’s no different than Charlotte. I mean, we all have the same challenges and the poverty level and the crowds shootings and things like that. But we actually have a chance at a town this small with that and capital the no way solve it. You have to have the right people in these positions. And I know that you guys know Casey and you know what he’s doing with schools and you bet his team when you meet his team that is running that show, it’s like they’re going to win. Yeah, I don’t know how they’re going to win, but they’re going to win. they are driven driven people to educate those people. That to us is the answer. Well, I mean, I don’t know how many times in the Bible I you know, that I listen to Tim Keller every day of my life and I sit down every day listening Tim Keller’ sermon in the morning.wow. And his people will be here in this room Wednesday for lunch. Yeah. Yeah. I met him one day in a zoom call for about an hour and a half. But it’s like I’ve read every book that he’s written. He’s had a dramatic effect on the way.

Luke Roush: I think our co-founder Henry Kaestner would say the same thing about Tim’s teaching. He spoke at our annual meeting a couple of years ago when Extraordinary Guy got in.

Chip Mahan: He is a modern day C.S. Lewis period in the story. Full stop.

John Coleman: Well, Chip maybe they close us out. We do like to ask folks at the end of these conversations just what are you learning from scripture right now, potentially from the sermons you’re listening to, what God teaching you right now that you might want to share.

Chip Mahan: To help those children tell the children, to help the children. To help the children. And if we can help the children in Wilmington, if we could come up with a plan, then can that be scalable? Like everything else we’ve talked about the rest of the end of the day, it’s about if you’re not growing your diet. So it’s always about scaling the business. If we can scale like actually wants to do with the schools that he’s investing in that we maybe can have effect on those that can’t help themselves.

John Coleman: It’s a good word Chip. This was fascinating conversation all the way from your elementary middle school love story. I guess you’re working with Mark Andresen on Netscape and launching the first Internet bank to serving chicken farmers, now serving the educational community in Wilmington and beyond. We’re really grateful for the work you’re doing in the financial services sector and beyond, and also grateful for you for sharing this story with the listeners here at the Faith Driven Investor podcast. So thank you so much for come.

Chip Mahan: I’m honored. Yes, I’m truly.

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman. And today we have our monthly marks on the Markets podcast where we find experts from around the industry to dig into the most prominent trends in the markets and the underlying economy as well as within faith driven investing. Today we have three extraordinary people on the call who can guide us through this. The first is Matt Monson from Sovereign’s Capital. Matt leads the public equities capability at sovereigns and has a long and distinguished career at other equity managers around the United States. We have Daniel Phillips from Eversource Wealth Advisors. Daniel is the director of investments at Eversource. He helps to position individual portfolios as well as to select and screen investments for Eversource and also has a long and established track record in the industry and a deep understanding of financial markets and the instruments that access them. And then finally, our dear friend Ross Roggensack of Oak City Consulting. Ross is a founder and the leader of Oak City. He advises large institutions about their portfolios and selects investments on their behalf and has been a longstanding not only participant in the financial markets, but also a real pioneer and longstanding contributor to faith driven investing. And someone I know a lot of other folks in the industry look up to for his innovation in that space. So thanks so much for joining us, gentlemen. And we’re excited to dive in.

Ross Roggensack: Good to be here.

John Coleman: So just to start again, we are living through exciting Financial Times right now and sometimes rocky Financial Times. Matt, I was hoping you could kick us off with just your opinion on what the latest is in financial markets, what’s driving that declines this year and what do you see happening in the remainder of the year?

Matthew Monson: Thanks for the question, John. Good to be with you today. So if we rewind and start back on January 1st. What we’ve seen is that January 1st through the recent trot on June 16, the Russell 3000, you know, broad market indicator for market returns was down 24% and 24% is a big number. In fact, it was the fifth worst pullback that we’ve seen in the last 32 years. And so for perspective, the Great Recession, back in 2008, 2009, we were down 56% over a year and a half. And when COVID started, we were down 34% over two months. And the two other large pullbacks we saw were 2000 and 2002 connected to the tech bubble and 9/11. And those were also down in the 36 – 30% range, both of them. So that leaves this 24% pullback that we saw through June 16 as the fifth largest since 1990. So since June 16, now the market’s been up 6.7%, which leaves us now year to date, down about 18 and a half percent. And no one really knows whether the recent trot on June 16 was the bottom of this pullback or if we have further down side to go. If we look at the data, though, there’s two key things that I look at just to assess where we’re at. First is the multiple on earnings and then second is the absolute level of earnings. And so if we look at the multiple on earnings in over the last 20 years, the S&P 500 has traded at about 16 times forward earnings. And as of January 1st, when we were at a peak in the market, we were trading at 22 times forward earnings. And since that time, we’ve fallen down to 16 and a half times today. And so now we’re back in line with the historical earnings multiples. In terms of where earnings are at, you’ve seen a really nice run up in earnings. You know, pre-COVID, when things were, I think I’d say fairly normalized in 2019, you had $138 earnings in the S&P 500, whereas consensus earnings for the 12 months forward today is 237, which is a big number. So if instead you take that 138 pre-COVID number 2019 and you were to grow that at something normalized, call it 8%, and then layer in all the incremental inflation we’ve seen above and beyond normal run rates. You know, that would put us at a number about 15% lower than where consensus is today. So is there about 15% lower earnings that could roll through consensus? I think there is. You know, could we see that as an incremental draw down in markets? I think so. But that doesn’t mean that markets will get all the way there. It’s possible that they do. And it’s also possible that markets won’t go all the way there and people start buying and buying the dip. So we don’t know what’ll happen. But as we try to gauge what our downside looks like, that’s what we think about. One thing that I think is interesting is that off a trot there’s usually a really fast recovery. So within the first 90 days after those big seven trots that I just mentioned, you know greater than 20% drawdowns in the market, that first 90 days out of the trots, markets are up 27%. And so investors are really rewarded for being fully invested. At the bottom. And so as I just think through markets, if the draw down feels significant and if we feel like the multiple is a reasonable multiple on a normalized level of earnings, I’m focused on assessing how much more downside there could be, but also thinking through how much upside there’s going to be coming out of the trot and not wanting to miss those first few days and weeks of it.

John Coleman: And Daniel and Ross, just building on what Matt saying there, obviously a couple of fears that he’s highlighting are that this inflationary environment, which has got people scared, will be doubled with a recessionary environment, one in which the economy contracts. We had a little bit of contrary news this morning where jobs are actually looking better than anticipated. As you hear what Matt said with, you know, as much as 50% additional downside in the markets, although that’s certainly no guarantee of that. How are you thinking about the remainder of the year? Do you see those risks as high or are you keeping an eye out for a recession right now? I would love to get your thoughts on what you think the potential risks moving forward for the rest of the year are.

Ross Roggensack: I think that we never really know. I’ve been around for all of the dips that Matt was talking about. So I’m the old guy on the call. So I’ve seen all this before and you never there is no bottom, you know, we don’t know the bottom until well after. We don’t know if we’re in recession until well after. I think the biggest surprise for us this year, not surprise, but the biggest pain point for us has been the bond market. The bond market is usually the way that we can lever against a big drawdown and the bond market through June 30th. Just to Bloomberg […] is down over ten. Corporates are down 15% and emerging market bond funds are down over 20%. So this sort of free lunch, we’ve always been used to where we can put bonds up against stocks and it will ease some of that pain. It’s only made it worse. And so, you know, with positioning is pretty hard right now unless you’re already in cash, unless you’re already in something else, it’s really difficult to, for example, pull money from bond funds or bonds to put in stocks because they’re already down a lot, too. So it’s a tough position if you aren’t already ready for it, if you’re in a tough spot.

Daniel Phillips: Sure. So I would just add to that that just given where we are following up on Matt and Ross’s comments, it’s just going to be very difficult for the Fed to manage inflation back 600 basis points or so to their policy target without creating a recession. And that really hasn’t been done before. And I just think the real question is how long does it take us to enter a recession and then how deep is that recession going to be? We know it’s coming at some point, but timing is always just the big variable. We’re in the late part of the economic cycle from all of the coincident indicators, and the Fed’s just using very blunt hammers of monetary policy to create enough demand destruction to cool the economy off. And we’ve seen the market’s response today, but the Fed isn’t still halfway done, given their guidance at the same time. On the other hand, corporations and households are overall in pretty good shape, strong corporate profits, strong cash balances. And the employment numbers that, John, that you mentioned, we had a great employment number this day, although initial claims are starting to lift off again. So that’s the counterbalance. And so the question, of course, is when inflation is stretching everyone, especially those in the lower incomes that are most impacted and haven’t recovered from COVID, but I go back to it would be really helpful if you guys could let me know when and how deep.

John Coleman: So yeah, we’d all like to know that maybe just to pick up on what you’re talking about, Daniel, because I think this is a really important topic and then we’ll circle back to how you all are thinking about positioning your clients portfolios, which I think is an important thing to touch on. Obviously, the question right now is how the Fed and the federal government in the US can implement their tools to try and tame inflation while preventing a severe recession. You know, the danger whenever you’re trying to raise interest rates and tame inflation is that you go too far, too fast and tip us into a more dramatic recession or that you don’t go far enough and we end up with both an inflationary and a stacked environment. Stagflation like the late 1970s. I would love your perspectives on just how you think the federal government and the Federal Reserve are responding right now and what tools you would encourage policymakers to use to ensure that we do tame inflation, but do so in a way that’s not too dramatically impactful to the underlying economy. And maybe, Daniel, would you mind starting there?

Daniel Phillips: Sure. So the two big policy tools you mentioned are monetary policy and fiscal policy. And on the fiscal side, the Biden administration has been noticeably silent about any new stimulus measures really for the last several months after pushing very hard last year. So they’ve gotten the message and they’ve pulled back. And so don’t expect support from the economy on that side or more stimulus on that side any time soon. On the monetary policy front, the Fed is now aggressively raising rates and some people would argue that they’re already going too far, too fast. But they are really trying to avoid a situation in which inflation expectations get ingrained in the consumer psyche and corporate expectations. And we have a runaway situation like we had several decades ago. And so they’re moving fast. We’ll know in hindsight, with the bit of hindsight, whether they were right or wrong. But it’s hard to differ with them for that aggressive response that they’re now having after being very slow and claiming it was a transitory problem for the last 12 months leading up to their more aggressive stance earlier this year.

John Coleman: When it is, you know, and Matt, I want to get your perspective as well. But it is such an interesting confluence of events right now. I mean, we had almost a decade and a half, actually very low interest rates with fiscal stimulus at various times. COVID obviously led to a ton of fiscal stimulus, even though employment recovered very quickly out of that. And then we’ve had these supply chain problems, whether in gas and oil or in other parts of the economy, which are also inflationary. They raise prices. And so there has been this confluence of easy money, fiscal stimulus and supply chain disruptions that have really ratcheted up inflation. And it was unfortunate that it was thought of or characterized as transitory for so long when it did seem to be structural earlier and earlier, action might have been helpful. Matt, as you think about that question of the tools that our policymakers have at their disposal, what do you hope to see from the Federal Reserve or the federal government moving forward in order to manage this problem?

Matthew Monson: I think the Fed will be able to accomplish demand destruction through raising rates. The other side of the equation, though, is supply. And as the both of you have already commented on briefly, if we see China move away from a zero-covid policy and start putting people back to work and delivering goods, then that starts to ease supply chain issues. And we’ve also seen through just a really strong economy over the last couple of years. There’s a number of businesses, both domestically and overseas, that brought on more capacity. And some of that capacity has already come on. Some of the capacity, you know, like semiconductors, everyone sees on the headlines. Some of the capacity is coming on in a year from now or whenever that might be. And so both sides of that equation are important, because if you destroy demand but supply is going down, then you could still see high prices. Whereas if you destroy demand and you see supply neutral or going up, then I can see inflation coming back in check. And as Daniel said, I think that a recession is not just an obvious conclusion, but it’s probably a necessary conclusion to bring inflation back in check in. The faster we can do it, the better. Because otherwise you can enter this death spiral of, you know, picture it where there’s high prices of goods on the shelves. And so the worker goes to the employer and says, I need higher wages because I’m getting pinched on what I’m buying. And next thing you know, they make higher wages so they can afford higher priced goods on the shelves. And it just goes in cycles because if there’s no obvious end to that.

John Coleman: Ross, I want to come back to you because you were talking about the fact that, you know, with bonds also suffering right now, there hasn’t been an easy answer to positioning client portfolios. You advise sophisticated institutions with large pools of capital. How are you helping those institutions weather this period of volatility right now? And how are you positioning their portfolios to do that effectively?

Ross Roggensack: Well, like today’s news so often and again, I’m the old curmudgeon in the crowd here, John, it’s often just noise. And you have to be careful to differentiate news from noise and what makes you do something. And so this spring, we finally had enough news that it felt to us like it was time for us to make some adjustments. The Federal Reserve kind of reversed course. Inflation was not transitory. And then the Russian invasion of Ukraine, all those three things together made us stop and finally reduce equities a bit. Pullback, fixed income as much as we could. It was already at a minimum level, so we pulled the bed more, we raised cash and we added to our allocation to real assets dirt, oil and gas, things that are inflationary in that way. And so we’ve already made those changes. So we have a lot of cash and a lot of real assets and less equities. I think if you’re scrambling now to adjust your late, it doesn’t mean you can’t do it. It just means it’s a lot more difficult because of what I said before with with just a 50:50 allocation is down 11% through June. That’s a really hard time to try to reallocate those assets. So that’s what we’ve done. I do think, as Matt was saying before, equities are getting a lot more interesting. I think that if you look at stocks over five and ten year rolling periods, if you are a long term investor, it’s very seldom that you lose money over a five or ten year rolling period. It’s really hard to do. And so we think you don’t want to panic here. Certainly you should be eyes more wide open to adding to, especially to US small caps, value oriented companies that are much cheaper. They’ve gotten beat up a lot worse than large cap even. So, we’re looking in those kind of areas right now.

John Coleman: Daniel, any differences in the way that you’re thinking about advising individuals right now? Obviously, you have the opportunity to speak with a number of individuals. What are you advising them during this period?

Daniel Phillips: Right. Well, just for context at Eversource, Wealth Advisors obviously were asked allocators for private individuals and families. And we really allocate to three major asset classes, equities, fixed income and then the private markets section of a broad alternative space, which would include private credit, private real estate and private equity. And so when we’re thinking about the big themes we’ve all mentioned that are impacting markets that our clients lives, it’s just very important to us that we have a thorough understanding of each client’s objectives, that risk tolerance and their time and liquidity constraints, because that’s what really dictates how defensive or opportunistic we can be in this environment. So back to your question. Headed into 2022, we saw very elevated valuations in both US equity and fixed income markets and sectors and many of our clients were under allocated to private markets. So we were taking advantage of the opportunity to allocate to more defensive strategies that would perform well and a already very inflationary environment. Those included private market strategies like adding to core or value add real estate, primarily focused on multifamily or direct lending to US middle market companies primarily and senior secured floating rate debt funds. Now, as this correction in equity and fixed income markets has continued, that opportunity set, I would say, is shifting. And as a general rule, private markets tend to lag. Public market valuations and public markets tend to recover more quickly, as already been mentioned today, as this correction continues, if it continues in a significant way, we would probably shift our capital allocation focus back to public markets, equity and fixed income on the margin.

John Coleman: That’s super helpful. Daniel. Ross, I want to come back to something that you touched on earlier and then maybe also ask Matt to comment if he has anything to add. As we zoom out from the U.S. economy. You talked about emerging markets earlier, Ross. I know that you watch those markets closely. You talk about the impact of the Russian invasion of Ukraine on global markets. If investors are thinking about their international exposure, what are the similarities and differences between some of those international markets right now in the U.S. markets? And are there opportunities or risks that you see abroad that are very different than those we’re facing at home?

Ross Roggensack: Well, they’re certainly they’ve been exposed in Russia and in China. Those have been terrible markets to be in. It’s been a real focus on U.S. equities for so long that you have to wonder just a reversion to the mean will international and emerging come back? And we’ve avoided international markets mostly were in U.S. and emerging. We’ve avoided Russia and China as we have a freedom waiting to our emerging markets investment. But I’m certainly curious about emerging markets. We’ve also had at the same time, we’ve had this profound rally in US stocks. We’ve had a profound rally in the dollar, which is really hurtful for international and emerging market equities. And so should we get a situation, for example, like China, who is about to really stimulate their economy? I don’t know when it’s going to happen. We all know it’s going to happen. And when that happens, we’re probably going to see the dollar go down a bit, which would really be helpful for emerging international stocks. So we’re sort of keeping our eye on China right now. We’re not investors in China, but we certainly think that can drive returns going forward in emerging. So I would certainly keep my eye on that happening. And if it does, you should start to see some money flow back to emerging international equities for sure.

John Coleman: And before I ask Matt to pick up on that comment, Ross, one thing I love that you mentioned in passing is that Oak City incorporated, is this idea of a freedom waiting and monitoring the ethical behavior of countries outside the United States to determine whether you have exposure. And, you know, for a long time, people have argued on two fronts. First, that that’s the right thing to do from a values perspective. And secondly, that long term that’s actually a financially beneficial thing to do, and that you have higher hopes for countries that are respectful of human rights, that are more prone to democracy, etc., than you would have autocracies or countries that are disrespectful of human rights. And I think certainly that Russia in particular has proven an affirmation of that thesis right now. And and I think a lot of the same risk factors are at play in China right now, not just with some of the ethical lapses that people rightly highlight, but also the risk factors that if they were to invade Taiwan or if there were other international disruptions, that they could face a similar contraction or dynamic like Russia. So I think that’s something that Oak City has done that I find really interesting in both a line from a values perspective and also from an economic perspective. Matt, are you seeing anything substantively different in international markets right now or do you have a sense for other factors that might be at play?

Matthew Monson: Yeah, I would say I’m in full agreement with Ross. His comments about those were spot on. A couple of those that really resonate with me are just kind of waiting for some of that mean reversion and non-U.S. equities to occur and any of the strength in the dollar to unwind. But in general, we’re domestic equity investors and at these valuations we’re excited.

John Coleman: I want to pivot a little bit now just away from the pure economy. One of the benefits of all three of you is you’re not just really smart investors. You’re also deep in the faith driven investing movement, which is obviously important to the folks listening to this podcast. Daniel I might ask you to lead off and then Ross, I would love for you to follow. If you don’t mind, why don’t you just give us an update on the state of faith driven investing as you see? What progress are you seeing in faith driven investing right now? What trends are you most excited about and where do we need to make more progress?

Daniel Phillips: So in the public markets within the last year, I think the primary thing I’ve noticed is a marked change in the conversation, moving away from an emphasis on avoiding companies with objectionable practices to more of an emphasis on engagement. So John, I think your message than all investing is impact investing is getting through and investors are starting to wake up to the influence that they’re giving these large asset managers like BlackRock, Vanguard and State Street and the ESG practices those firms are pushing in boardrooms all across corporates in America. And some of those policies are good, they’re helpful. But others don’t align well with the Christian worldview, and they don’t value the flourishing of people, which is where God’s heart is. So I’m thinking of even that conversation this last week with a client who was just very focused on this just in an active, vocal way. So I think that there’s just going to be a growing demand for asset managers that will build excellent products like Vanguard and BlackRock to take their stewardship responsibilities seriously from a Christian worldview.

John Coleman: That’s great. Daniel. Ross, what are you seeing right now in the evolution of the industry?

Ross Roggensack: Well, usually the institutional market leads the retail market, but the opposite has happened here. We’ve seen the smaller retail market, individual investor, lion’s den sort of investor lead us out. And so we’re starting to slowly see better and better quality and think about people like Victor and James at Lumos and think about Patrick Fisher at Creation. I think of other people that are very high quality investors that are in our world now in the institutional space. And so what we’re starting to open up to is that there’s real quality in solving the problems like education and world poverty and other things that are in front of us from people that are well trained and well positioned, that are, you know, have excellent product to offer us to offer to our clients. And so it’s really exciting. The last five years and five years ago, we really didn’t have very much, to be honest, to offer. And it is exploding and getting better. And I think, you know, like Daniel said back to your all investing is impact investing. I think it’s getting through. I think the ESG movement is getting through to the faith led movement to say, hey, we can do this. And so really highly qualified people with pristine backgrounds are coming to the market and that’s very exciting for us. On the institutional side, for sure.

John Coleman: That is encouraging. And Matt, I know you’re very focused on the public markets and on driving faith driven, investing in the public markets, but aware of others doing great things as well. What’s your view on how the public markets are evolving and are you seeing the same thing that Daniel is in terms of engagement and more positive screening as well?

Matthew Monson: Yeah, building off of Daniel’s comments, which I fully agree with, you know, the market and public equities is really built on a foundation of negative screening and those tools have worked really well for us for a long time. But I see a transition towards, as Daniel mentioned, coming alongside companies and CEOs that are doing incredible things for the flourishing of man. And what we’ve found through data is that you can stand alongside companies like that and achieve investment returns that are very attractive [vis a vis] the market. And through strategies like that, you can also deliver impact, which is historically something that’s been difficult to achieve in the public equity markets, in private markets. It’s easier to achieve impact coming alongside companies, delivering them primary dollars they can put to work that you can see the impact on employees, communities, customers. Whereas in the public markets, impact has historically been more challenging because you’re buying secondary shares and the companies don’t really know who their shareholders are. But what we’ve seen is the ability for investors to come alongside CEOs to encourage them with the best practices they see from other faith driven CEOs, and to drive spiritual integration deeper across corporate America. So I think it’s a really exciting time for this next leg forward in what faith driven public equity can do.

John Coleman: That is exciting. And as Ross mentioned, you know, the space is evolved so much over the last five years, it still has further to go. You all highlighted some great progress that we’ve made so far. If you had a magic wand to kind of wave and introduce additional strategies or additional ways of approaching faith driven investing here, what’s the next horizon for the industry? What do you think are the big gaps right now and what are you looking for? And Daniel, perhaps you could start, if you don’t mind.

Daniel Phillips: Sure. So just back to just my earlier comment, I think we need to see more institutional level asset managers come into the public market space and create high quality product, particularly product that can gain scale on the index side and really compete with the high quality products that BlackRock and Vanguard have created. But product that really focuses on engagement from a Christian worldview perspective with U.S. corporations and really balances out a lot of the pressure that these corporations are getting from the other side of the spectrum. So we would be very excited to see movement on that front.

John Coleman: Ross, anything on your mind on that topic?

Ross Roggensack: Well, I was thinking the other day, I would really love to see somebody figure out how to invest in the ability to clean water across the world. I think that it’s really hard for us and if we can find a faith driven kind of organization that would try to tackle that, it affects so many people. I would love to see more things that affect human flourishing, like affordable health care and again, clean water, a better environment that can sort of love our neighbors in a way that’s tangible and also be good investments for institutions. So I would I would love to see that I’m looking forward. If anybody wants to holler at me, I’m glad to listen.

John Coleman: Well, as we conclude our podcast today, I want to ask a couple of questions here. First, I’m going to do a lightning round and put you all on the spot with a couple of basic questions about the economy. And then we’ll conclude just with a quick question to each of you about what you’re learning from God through his word right now that you think might be helpful to others just to prepare you for that. If you don’t mind, in a few sentences. But the lightning round first and maybe as we go through this, I’ll ask Matt to lead us off and maybe Daniel, you go second, Ross you go third. What do you expect inflation to be over the course of the next 12 months? If you had to put a number to it.

Matthew Monson: I would bet that we come down from the level of 8% we’re at today and we start to enter way down. We won’t reach all the way down to the Fed’s target, but I think that we’ll start making progress in that direction.

Ross Roggensack: Higher, I’d say 10%.

Daniel Phillips: So as the supply chain eases in China, we’d hope to see that trend down more towards 5% towards the end of the year. But it’s there’s still a significant part of that that’s structurally persistent. Still, without the Fed creating enough demand destruction.

John Coleman: I got a little divergence of views there.

Ross Roggensack: Yeah, sorry. I think I don’t think the Fed can handle it. I think inflation goes higher, oil goes higher, grains go higher, and they just can’t. But who knows? That’s why it’s a market, right? Yeah.

John Coleman: I’m a little nervous.

Daniel Phillips: God’s in control. The Fed is not.

John Coleman: Ross has seen more cycles than the rest of us, so that does give me pause. Similar question. Do you think we’re in recession right now? And if we slip into recession, how long do you think it lasts? Matt, maybe lead us off.

Matthew Monson: I don’t think that we are yet. And just my gut is that if the Fed could manage it and we slip into one, I think it’s a shorter term, more shallow recession. Maybe that’s too much of a glass half full kind of answer. I’d love to hear from Ross second, because he had a really good contradiction last time around.

Ross Roggensack: Yeah, I don’t know if we are in a recession. I think that I don’t really worry about it. I think we’re in a bear market for sure. And I think that we’re in a position where the government is not our friend and the Fed is not our friend. If they’re raising rates and if the government’s trying to figure out ways to spend more money, and then bode well for capital markets for a while until we figure out maybe we can get through the midterm elections and maybe there’s some hope that comes through that we can kind of right the ship. But for now, you know, and recession or not, we’re in a place where it’s usually not great for capital markets.

Daniel Phillips: Right. Well, the official arbiter of who decides when a recession starts will tell us, I’m sure, 6 to 12 months down the road. But my instinct would be just know from how strong current corporations and individuals are, financially speaking, that were fast moving in that direction. And inflation has really been like a rubber bands just stretching, stretching, stretching. And the Fed is trying to ease it back without popping it pretty bad.

John Coleman: Last lightning round question this time next year, is the S&P500 higher or lower than it is today? Let’s start with Ross.

Ross Roggensack: Well, it’s always a coin flip one year, right? So I think the odds are higher. 60:40 is usually the way it is, so it’s probably higher, although we’ll see how much higher.

John Coleman: Daniel, what do you think?

Daniel Phillips: So I have to contradict Ross just for the sake of argument and so probably lower, but there’s no confidence going into that answer right there.

John Coleman: Matt, any difference of opinion? You might be the tie breaker here.

Matthew Monson: I would place my bet on the same or a little bit higher.

John Coleman: Okay. Okay. So we’ve got a relatively optimistic view of the public markets over the next year. Just as we conclude, gentlemen, given that we are the Faith Driven Investor Podcast, I want to go around and just ask you for a brief word of encouragement, something that you’re learning from God through his word right now that you think might be useful to others. And Daniel, if you don’t mind, maybe you could start.

Daniel Phillips: Sure. So just most recently, I think I’ve been convicted for myself and our firm by passage from the end of Colossians, three, that’s addressed to servants that talks about working diligently to the Lord, not by eye service or people pleasing, but with sincerity fear in God, because it’s Him we’re serving and He is the one who is going to give us our inheritance or our reward. And it’s so easy in the business of finance and investing, I think, to get distracted and to pivot with people’s perceptions. But we do. And we serve the great perceiver who sees all and knows all our hearts and he is after our hearts. So I just want us to bring that mindfulness, myself and our firm, everyone who works there to work each day and serving our clients.

John Coleman: Awesome word. Awesome word. Ross, what would you offer today?

Ross Roggensack: Two things real fast. I’m reading a book called The Economics of the Parables by Robert Sirico. It’s really interesting, and it’s just it’s just a lot of moral, economic wisdom taken straight from the parabels that I would recommend to folks that haven’t finished it yet, to be honest, but just received it. And it goes through parable by parable. I think it covers 14 of them. The other thing just on my mind is the assassination of Shinzo Abe in Japan just kind of should remind us all. I was thinking about what would have happened if after Ronald Reagan left office, if he were assassinated. And that’s what the people in Japan are going through today. And so it should take our mind off of whether Elon Musk is going to buy Twitter or what the Fed’s going to do. There’s more important things to think about than those little things that really don’t affect us day to day.

John Coleman: Very true. Very true. And I know everyone’s sympathies are with Shinzo Abe’s family today and with the people of Japan. Thank you for bringing that up Ross. Matt, close this out. What are you learning right now that you want to share?

Matthew Monson: You know, I’ve just been drawn towards a bias to action. And there’s this verse. It’s a little bit of a life first for me and the end of Luke nine, where it says anyone who puts her hand to the plow and looks back is not fit for service in the kingdom. And, you know, every time I feel like I’m really being directly led, all assess it, but I’m not going to sit and wait on it. For 12 months, I really have been moving towards a bias to action. And and it’s just something that resonates deeply with me.

John Coleman: Well, gentlemen, an excellent session today. We have Matt Monson from Sovereign’s Capital, Daniel Phillips from Eversource Wealth Advisors and Ross Roggensack from Oak City. We are very grateful you joined us today and very grateful for the advice you gave us. Thanks so much.

Ross Roggensack: Thank you, John.

Daniel Phillips: Thanks, John.

John Coleman: Welcome to the Faith Driven Investor podcast. This is our monthly Mark’s on the Market podcast, where we hear from experts around the world who are leading faith driven investment firms, who are people of faith and who are intimately familiar with the operations of markets, and can help us to understand what’s going on day to day in the financial markets around the world. Today, we’re really privileged to welcome two legends in the space. David Spika is the CEO of GuideStone, the largest faith driven investment mutual fund manager in the world. And Bob Dole is the CEO of Cross Smart Global Investments. Faith Aligned Institutional Investor. And both of these gentlemen also have long and storied careers in the investment industry. Hopefully most of you have heard from them before and they offer a great perspective on markets. And we’re just so pleased to have the two of you with us today. So thank you, Bob and David, for joining.

David Spika: Happy to be here.

John Coleman: So we’re going to kick off. It’s been a busy week. It’s been a busy month and it’s been a very active month in financial markets. To start off, Bob, I wanted to talk to you. We actually just had the GDP numbers come out today as we’re recording. And the question I have for you is, are we in recession? Which used to be a simpler question maybe to ask. But we’ve heard recently from Janet Yellen in the White House that maybe two negative quarters of GDP wasn’t actually a recession. So in this context, how are you thinking about recession and are we in a recession right now?

Bob Dole: You make a great point. That is, we’re not sure about the future, but we’re going to argue about the past. I think the headlines have just started. Many will say two down quarters in a row. Well, that’s a recession. Other people say not so fast. The truth is, the National Bureau of Economic Research declares when we have a recession, typically months after the fact. So there is nothing magic about two down quarters. Although I went back in my history books and found out the last time we had two back to back down quarters and there was no recession was 1947. So it’s been a long time. So typically when you get a couple of down quarters, you know, somewhere in that zone there’s a recession. So my view is that the weakness we saw in first and second quarter were the most volatile parts of GDP. First quarter it was trade, second quarter it was inventories. And the more traditional, possibly more stable parts of GDP were okay down in the first quarter from the record. GDP we saw last year is strongest since 1984 and of course even slower in the second quarter. My guess is forget the numbers and recession or not, we will continue to slow. That was in place already after the strong year last year, aggravated now by inflation, interest rates and attempts to quell growth, if you will. Let me add one more point. The reason I think we may escape a recession or if we have it, is just going to be short and shallow is the strength of the things that make up our economy, the US consumer not perfect and weakening for sure, but still has lots of excess savings on the balance sheet as a result of COVID either money not spent or money nailed by the government. Secondly, the corporate sector. Cash. Cash flow. Balance sheet strength. All pretty good. Not uniform, but pretty good. Profit margins are still high, albeit under a little bit of pressure. And then most importantly, the job market, we still have twice as many job openings as we have people looking for jobs. That’s a very strong job market. We’ve never had a recession in the US before with a strong job market. Now it’s beginning to weaken. We’ll see where it goes from here. So weakening for sure. Recession. You tell me what the definition is.

David Spika: Can I? If I could jump in. I think we’re asking the wrong question. I don’t think the question is, are we in recession or not? I think the question is how are consumers faring? Consumer spending is 70% of our GDP and consumers are hurting today. No question about it. Just look at Wal-Mart’s results from this week. That really is the key. And if we’re not in recession today, we fully believe we will be, because the Fed is going to have to continue to be very aggressive in raising rates and letting the balance sheet run off in order to bring inflation down. We’ve never seen inflation come down meaningfully without a recession, and we’ve never seen inflation come down meaningfully if we didn’t have a real positive Fed funds rate. And we’ve got a long way to go before we get there.

John Coleman: I want to circle back to the inflation question, but before we dig there, assuming we are entering, Bob, as you said, a slow down or David, as you said, there’s a recession on the horizon. How are the two of you thinking about which economic sectors or asset classes are likely to perform well in that type of environment? And how are you thinking about those that you’re trying to avoid as we enter those two potential situations?

David Spika: I think it is becoming a good opportunity to buy bonds, particularly high quality bonds and treasuries. Obviously, the first half of the year was absolutely horrible for bonds, one of the worst periods you ever seen for the Barclays AG. But with rates where they are and starting to go lower, they will continue to go lower as we move into recession. We’re going to have credit spreads widen. But if you own high quality bonds and if you own treasuries, you should be okay. We’re also going to see at some point an opportunity to see risk in the equity market. We don’t think that time is here yet, but at some point we don’t get these times very often. Very rarely do we get a chance to buy stocks 20, 30, 40% down. We’re going to have a chance to do that. But today, bonds and even cash, cash is yielding better than two and a half percent. What the heck? Let’s put some money in cash. Let’s increase our cash holdings, have some dry powder. So when that opportunity to re-risk comes, we’ll be ready. And on the bad side, I would be very leery of non-U.S. exposure, particularly risk exposure, whether that’s emerging market debt or equities, because the dollar’s likely to continue to remain high. That’s the flight to safety that we see in a volatile environment. And as long as the dollar remains high, you probably want to stick with U.S. assets. And the other thing I would be a little leery of is commodities. Obviously, energy has been great, but commodities are very economically sensitive. We’re seeing oil prices come down. Copper is down about 25% from its high. We need to be leery of those as long as we believe we’re going into a recession.

John Coleman: Bob. Anything you’d add to that?

Bob Dole: Yeah, largely in agreement. I’ll go in the same order. And our fixed income funds, we have length and duration. We’re still below our benchmark, having been way below our benchmark at the start of the year. So while we’re down for our clients, we’re down not nearly as much as the benchmarks. We think, as it sounds like David does that. At worst, we’re in a trading range for, let’s say, the ten year yield. It’s 280 ish as we speak. Could we move down that to 70 to 60? Sure. Could we move back to three? Possible. But the threat, the big negative sign in front of the bond mark is probably removed as the economy slows and we see less bad news on inflation, on equities. You know, the question is, was June 16 the low? It is the fifth close trading where we got a big bounce afterwards since the bear market started. I think we saw off that bottom the best news so far. But I still think we’ve not seen the capitulation that is typically as a bear market. I’m talking about, you know, volatility up the VIX over 40. A big explosion in put to call volume. We’ve not seen that a pick up in volume generally kind of, if I might, puking it out. We just haven’t seen that yet. So we probably have a lower low, but we are opportunistically and only on weakness beginning to accumulate some stocks, commodities. I agree. They had a huge run. Oil’s down. Copper is down for among the reasons we think inflation’s going to get less bad, if you will. And I guess maybe the only area I might put up a little difference is international. International stocks beat the U.S. by 300 basis points in the first half of the year. Very surprising to a lot of people. Despite the dollar’s strength, we expect there might be more of that to come. Non-U.S. markets are a whole lot cheaper than the U.S., although value never gives you a timing tool. And if the economy is weak, this flight to safety and the more defensive nature of the U.S. market could help us do better. So I think the jury’s out on that one. My guess is there’ll be some good stocks in both geographies and some bad ones in both, too.

John Coleman: And maybe before we move on just to zero in those, have you mentioned that there might be further room to the downside in U.S. equity markets? I think, David, you said you’re not ready to kind of start buying aggressively yet. Bob, you said something similar. I believe on our side we’ve been thinking the same thing. We’ve seen a lot of multiple compression back to more historical averages, but haven’t seen the weaknesses in earnings materialize, which could provide further downside if you have thoughts on it. We’d love to know. Maybe starting with you, David, just how much further are you looking for stocks to decline before you think it’s a buying opportunity? Is it 5% or 10% or more? And what would be your sign that we might be hitting the bottom of that trough and that it might be an opportunity to begin getting in more aggressively?

David Spika: Great question and several ways to look at that. We’re trading at about 18 times forward earnings today. Markets have historically bottomed at 11 times. Do I think we’re getting to 11? I sure hope not, because that’s a long way from here. But you hit it on the head. We haven’t seen earnings degradation yet. And if we’re going into recession, earnings are going to come down. So we need to start seeing earnings estimates go lower. Historically, in a recession, earnings fall by 30%. That will be the next leg down and that will create additional multiple compression. That 18 times is still not where we should be if we’re going into recession. So those two combined are likely to take us down further. The average decline for a bear market when going into a recession is 36%. So it wouldn’t surprise me to see us broach that 30% level. We’re down about 14 or 15 now. We did hit the 20 mark, so 30% would not surprise me in terms of when the bottom is in. As Bob referenced, there are certain signs, technical signs, 90% of the market trading above its 50 day moving average is one of those. But one of the things that we think will be a pretty clear signal is when the Fed has ceased raising rates. Now we’re not on board with the Fed cutting rates in the first quarter of 23, but if the Fed’s pausing, that means we’re likely at an inflation level that is somewhat palatable and the market will respond well to that. Now, that doesn’t mean we’re back off to the races, but it does mean that major headwind, which is rising interest rates, tightening financial conditions, is probably in the rearview mirror.

John Coleman: That’s excellent.

Bob Dole: Again, not a whole lot of agreement, maybe a little less bearish than that. I give it one in four, one in three that the June 16th low was the low. So the majority case by far is it wasn’t. And I have said that absent a significant recession, the risk is probably a 5% move below where we were then and we’re up ten since then. So that’s 15% from here. Kind of what we’re down from the high not too far from that. We’ve narrowed that gap. So I was saying the lion’s share of the bear market from a price standpoint is in the rearview mirror with this nice rally we’ve seen. Perhaps not now if we’re going to have a more significant recession with imbalances that we don’t see today, it could either be worse and or last longer. And I agree with David with those technical signs. Fundamentally, we’d like to see that we’ve had a peak in long term interest rates. Perhaps that’s in we’d like to see the end of earnings estimate cuts. We’re not there yet. We’ve only started. And I’d say the Fed thinks slightly differently, visibility on when the end of Fed tightening is likely, and I don’t think we’re anywhere near that yet.

John Coleman: I want to pick back up now on the topic of inflation. We’ve talked about it throughout here and obviously it’s high on people’s minds. There was recently a stop inflation bill. I think it’s come out in Congress, for example, or titled that, you know, as we think about this, inflation is obviously a policy issue as well as an economic issue. And I’m wondering if you could talk about what you’re looking to see from the Federal Reserve as well as from the US government as we seek to tame inflation and how you see that inflationary environment developing now. And perhaps, Bob, if you don’t mind, we could start with you.

Bob Dole: Sure. Be happy to. So, first of all, a little bit history. Put it in context. It seems like inflation was a topic we didn’t talk about forever because inflation was two or lower for years. And then all of a sudden, you know, we wake up and inflation’s, you know, eight, nine, approaching 10% because remember, inflation is transitory. That’s a joke, obviously. And we move on from there. Look, we have said since the first of the year, we think second quarter will register the peak in inflation. And I think that’s the case. Obviously, a couple of weeks ago, we got that June inflation number that was just so devastating after the negative surprise in the month before. So, you know, we’re at some levels that are reasonably high reasons. We think that we’re likely to have lower inflation in the next bunch of months. One, the slow down the economy. Two, as both of us have already commented, declining commodity prices, oil from peak to trough down more than $25, copper down 25%. Dr. Copper tells us a lot about both the economy and inflation. And then three, the supply chain problems. I’m not making the case for solving them, but I think they’re a little less severe and will be as we go forward than where we’ve been. All that takes the inflation rate down some. My guess and that’s all these things your hope, their educated guesses is by the end of the year, we’ll be registering monthly inflation numbers that annualized around four or 5%, down from your 8 to 10 where we speak. And that’s a problem because the Fed says they want too I think they’ll compromise at some point at three, but 4 to 5 is not two or three, which means there’s more work to do. And I think that could create problems for stocks and bonds somewhere down the line. Maybe not until next year.

David Spika: Yeah, I would agree with Bob that we’ve probably seen the peak a sure hope we don’t go above 9.1%, but I’m not quite as optimistic on the decline. You have to consider what the Fed is able to do to mitigate inflation. They have no control over the supply chain issue. The only thing they can have an impact on is demand, and they’ve got to take the consumer out at the knees. How do they do that? By reducing consumer wealth. We’ve already seen that financial assets, housing next and they have to reduce consumer incomes. We’ve got 3.6% unemployment today. Consumer real incomes are not good, but obviously nominal income is very good. Second quarter nominal GDP was over 9%. That’s too high. So the Fed is going to have to continue to raise rates until we start to see some weakness in the job market to really have an impact on consumer demand to materially bring down inflation. And we think that’s going to take a while. We think that could be another 12 months. The belief that the Fed is going to be cutting rates in the first quarter of next year, which is really why the market was up yesterday. And today they perceived Powell’s comments as dovish, which I don’t get. We just don’t think that’s likely at all. And if inflation’s running at four or five, as Bob says, if it’s running at six or seven, regardless, the Fed’s not cutting rates there. They may pause, but they’re not going to be cutting rates. And as long as they’re not raising rates, they’re not doing the damage to consumer spending and consumer incomes that they need to do in order to bring inflation down. So to us, it’s a longer cycle that we’re facing.

John Coleman: Just to pick up on a couple of those themes, because you touched on really interesting things there. One is just very simply, where do you see interest rates going over the next 12 to 18 months? Obviously, the Fed funds rate, but also how those filter out into the economy. What’s your outlook for the interest rate environment over the course of the next year, year and a half? And maybe, Bob, if you don’t mind, we’ll start with you.

Bob Dole: Sure. So let’s start with the Fed press conference yesterday. Chairman Powell, you know, if you read between his lines, he’s basically suggesting there’s 100 basis points to go. They have the luxury of no meeting for a couple of months here. And, you know, 100 basis points probably means 115 and 225. Reading between the lines, what David said, I think both of us believe that’s not the end. That’s just not going to do the trick. So I suspect the market reacting to all that positively yesterday and today probably get smacked across the face again at some point when people realize that’s just not going to do the trick. So I think the Fed’s got more to go. It’s going to take longer. I didn’t say it when I comment on inflation. I should have. David said it. Well, you know, the Fed has little control over inflation because they only can influence the demand side. That’s why the commodity price thing the of solving some of the supply chain problems is so key. If inflation is going to come down regardless almost of what the Fed does out the curve, I think that for now interest rates have found a level we got to that 349 intraday. A few weeks ago. I don’t think we’ll see that level any time real soon. But if I’m right, 4 to 5% end of the year, if David thinks six or seven, even more about what I’m going to say will come true, interest rates will head back up. It’s just not enough to have these big negative real rates in order to have an impact. David said this earlier Getting real rates to be positive is almost always required to tame the inflation. So I would expect they will have out the curve higher rates again starting, you know, months from now, but enough to be painful.

John Coleman: So, David, as you pick up on that question, I’ll raise a potentially frightening question, which is, you know, in some ways, this economic era looks a lot like the late 1970s, right, in terms of the rapid inflation, in terms of action in commodity markets, etc.. I know there are differences, but at that time, interest rates climbed to a truly phenomenal level. I think at some point we’re at 20% or something like that in the late seventies, early eighties. Do you see any risk of that type of interest rate movement? And if not, what do you think moderates this era versus that one?

David Spika: Yeah, I was in high school then, so fortunately I didn’t feel it as much as maybe my parents did. But my first mortgage was nine and a half percent and I recall being lucky that I got that. But in any event, I don’t think we get to that point. The economy, the global economy is much different today than it was then. The Arab oil embargo was a big component there. We weren’t producing the energy we produce today. We didn’t have the global trade then that we have today. And the Fed was, I think once Volcker took control, he really had to work hard because they were so far behind the curve. Now, this Fed’s behind the curve, too, but I don’t feel like it’s the same situation. All that said, one of the things that does concern me and I mentioned globalization, one of the things that is a likely byproduct of the war in Ukraine is the fact that countries around the world, economies around the world don’t want to be dependent on other nations for their needs, for their products, services. Look what’s happening in Germany right now. They’re in a world of hurt, given what the Russians are doing with regard to natural gas distribution. And so that reduction of outsourcing that becomes on sourcing, right? In-Sourcing producing more goods at home is going to create some structural inflation that we’re not used to. Now, that doesn’t mean we get double digit rates. I think the economy would react much more quickly today than it did then to a significant rate hikes. And again, we’re starting from much lower level today than we were there. I can’t remember where we started then, but we weren’t at zero. So on an absolute basis it’s not going to have to go as high. But there are some similarities between then and now that do give me a little pause. And it’s that globalization feature that has been a real positive for inflation over the past 20 years. That may be coming to somewhat of an end at this point.

Bob Dole: Yeah, the three reasons in my view that we had such low inflation for so long were technology, demographics and the issue of globalization. Globalization, as David has said, is disappearing. The nationalism around the world and lots of politics is causing that not to be the negative inflation pro growth thing it was before population. The all the developed world has dangerously low population growth, some places negative. And of course, a technology piece I think is alive and well. So that is among the reasons I agree with David that we’re not going to those crazy inflation rates that we saw before. This is a phenomenon that is painful now, but we should get it under some control. Doesn’t say we’re going back to 1% inflation, but I think we with a lot of work, probably a recession, we can get this thing back to three ish.

John Coleman: David and Bob, you’ve both touched on international markets. I think, Bob, you started by talking about some of the opportunities in international markets over the course of the year so far. And David, you touched on this idea of global supply chains, etc., in your recent comments. Obviously, the Russian invasion of Ukraine was a really negative shock to the global economy. China’s decision to pursue a zero-covid policy has been a negative shock to some extent, continuing to constrain supply chains. Just quick thoughts on what are the risk factors that you see now in the global economy that might impact investors here in the United States or around the world? And. Where do you think there might be opportunity in the global economy right now? And David, maybe you could start us off.

David Spika: Yeah. What’s going on in China is very curious and very alarming. The Zero-Covid policy, we’re hoping this is something that Xi is going to suspend once he’s reelected as lifetime ruler. But it just doesn’t make any sense for a country of a billion and a half people to expect a zero-covid. And that has that been a huge factor. You know, it’s funny. COVID was a black swan and it has spawned other black swans. Right. It’s born this runaway inflation. It’s spawned, I would say, to a degree, the war in Ukraine. It spawned what’s happening in China today. And so it’s almost like this continuous black swan. But to me, what’s happening in China is the biggest concern. China is the second largest economy in the world. They’re a huge factor in the global supply chain, a huge factor in production of goods and services. And to the extent they cannot get back to a level of production that is appropriate for the rest of the world, that could create some headwinds. The other thing to recognize when it comes to Russia. If Putin were to walk out of Ukraine tomorrow, the world not going to say all is forgiven. We’re going to start doing business with you again. He’s a pariah. As long as he’s in office, which is probably going to be an extended period of time. So those two things, which are a couple of the black swans that occurred this year, I think are going to continue to be headwinds to the global supply chain.

Bob Dole: I agree 100% with everything David just said. I’ll add just one point to it. That is a continued risk and that is a supply of energy. You know, I think one of the events I’ll call in an event that has not gotten enough attention is the curtailment of supply in the country that has the most opportunity to create incremental energy. And that’s the United States. If you go back to January of 2021, we were coming out of covid, the demand for oil was rising quickly. And in this country, we canceled the Keystone pipeline. We put a moratorium in many ways on new drilling and made it difficult on the permit side. So economics one on one demand for something. In this case, oil is going up. Supply has been curtailed. What happens to price? Definitionally, it goes up and we’re still struggling with just not enough of this stuff. As the global economy recovers, post whatever recession we’re going to be in. So that remains a risk, in my judgment.

John Coleman: And Bob, just to pick up on that briefly, you know, energy markets have been highly volatile recently. And to your comments, some of that is based on policy decisions. If you have a magic wand right now and could try and convince the federal government to enact policies that you felt like would restore a semblance of normalcy to the energy markets, what would you advise the current presidential administration or Congress to do in order to support energy markets?

Bob Dole: I’ll try not to be political in my answer, but, you know, I think, look, if I were the president and I believe big time in the environment and green this and green that, I think I would say, hey, folks, I believe in green just like you do. But can you give me a couple of years where I can address the problems we have right now, in particular inflation? And just I’ll put it this way, open up the spigots for a while and let’s let the supply try to meet the demand, bring the price down, and a lot of our inflation problem eases up. Not all of it, but a lot of it does. And then we can worry about the green stuff later. That’s why I would advise the administration.

David Spika: The only issue I have with that, Bob, I agree, but the only issue I have is if I’m an oil and gas producer and if I think it’s a two year window, I’m not committing billions of dollars of CapEx into development. Heck no. I produce tremendous cash flow today. My shareholders love me and I’m sitting right where I am today. I love $100 oil, so we need, quite frankly, a change in tone on the energy industry as a whole in the United States. We support you and we are going to we are going to provide what you need to be successful.

Bob Dole: You went one step beyond me. I’ll sign up for that in a nanosecond. Yes.

John Coleman: It’s really interesting and it will be really interesting to see how it plays out practically. Obviously, we’ve got elections coming up. There are two very different platforms at play and there’s the chance of a divided Congress and presidency. And I think that will be one of the interesting questions along with spending as we enter that potential environment, just exactly what happens. I’ll note that on the supply chain question you know in our firm will often be invested in or own companies that have supply chain considerations. One of the things we’ve started to look at with our CEOs, they’ve been struggling in an environment for two years where the supply chain was constrained and where it’s been very difficult to get inventory. Therefore, everyone’s been trying to get in the queue for additional inventory as they can. Everyone’s been ordering. They’ve been telling customers that they’re developing backorder lists, and we’ve been trying to get as much inventory as possible. One of the concerns we’re continuing to navigate is what if that supply chain can stretch and continues? The other, however, is what if that loosens more than we think in the near term and we actually get a glut of inventory, which I know is something that some consumer companies are beginning to worry about as well. And this uncertainty around supply chain could create problems in either direction. Right. You could see people with a glut of inventory with working capital management problems. You could continue to see people not be able to get the components or equipment or goods that they need. And we’re not certain which way that will go at the moment.

Bob Dole: Yeah, I’ll comment and then let David pick it up. Look, the GDP report, we just got 200 basis points of GDP negative as a result of inventory. So it spoke loudly and clearly in the second quarter. I have to go all the way back to the pandemic. When the pandemic came, we shut down the economy. We turned it off. We’ve never done that before. And then we turn it back on. I think the assumption naively was I turn it back on and everything comes back to normal. Well, it’s just not the case. It created all kinds of dislocations that we are still dealing with today, and that’s going to take time to unwind. And my comments earlier, I said, I think some of the supply chain problems are easing a bit and I don’t want to be too Pollyannish here. So I think we’re solving some of them, but we got a lot of them left. Semiconductors, you know, a little less bad than it was, if you will. But we got a ways to go. And this is not going to be smooth and easy. And then if we try to layer a recession on top of it, it’s going to set us back a bit in figuring out how to balance supply, demand and lots of markets. So I think there’s a multi-year solve that we can’t underestimate.

David Spika: Yeah, I agree completely. Just like we’re feeling pain with regard to a significant increase in demand coming out of the pandemic. There’s going to be pain on the supply side and we’re just going to have to work through it. And quite frankly, I would just as soon see the supply chain issue clear up sooner rather than later and deal with those issues today as opposed to an extended period of stagflation.

John Coleman: Yeah, I agree with that, David, for sure. If I could bring it back onshore for a minute. One thing we haven’t talked about directly yet is the housing market, which is deeply related to interest rates. We were with Jonathan Reckford, the CEO of Habitat for Humanity International recently, who quoted a statistic that I hadn’t heard before. That right now is the greatest gap between median income and median home price in the history of the United States, that homes are less affordable for the average American than they have been at any point. And certainly we’ve been living through an incredibly hot residential housing markets. Interest rates are beginning to cool that, it would seem. What are your expectations, David, for the housing market over the course of the next 12 to 18 months? And what are some of the risk factors at play there?

David Spika: I’ll begin just by saying that my daughter is going to be 30 next month and her husband of two years are looking for a house here in the Dallas area. And I said, why don’t you wait another year? I don’t think the time is right yet, but I do think we’re going to see and we’re starting to see it. You’re seeing mortgage applications at 22 year lows. You’re seeing sales start to decline. Prices are leveling off, not falling yet, but with mortgage rates where they are and with the point you mentioned about the disparity between house prices and income, you’re going to see house prices come down. There is no question in my mind one of the good things about recessions that we all think recessions are bad and they generally are, but they tend to do a good job of reducing imbalances in the economy. That’s what recessions are for it’s like pruning the crate, modeling your front yard. You got to prune it back to get new growth. We need the same thing in the economy, and so that’s likely to happen. The good news is, in my mind, this is not like 08, 08 was a hugely demand driven run in home prices as a result of very easy credit. This run feels like, at least here where I live in Dallas, to be more of a supply issue, we just don’t have the supply that we need to meet demand today, and not just on the residential side, but if you look on the commercial side and talk about multifamily, my gosh, is there demand for multifamily? And so that demand is likely to keep a floor under prices for a period of time. But that’s a regional issue. I don’t think it’s going to be the same here in Dallas as it is and say, northern California or someplace else. There’s going to be some differences there. But bottom line, yes, there’s going to be a decline in house prices. It needs to happen. It’s part of the Fed’s plan to eliminate to reduce the wealth effect. But we don’t think it’ll be anywhere near what we saw in LA.

Bob Dole: I fully agree, a business cycle one on one. The most interest rate sensitive part of our economy is housing. And so it typically is the first to go this way and the first to come back out. It is part of what the Fed does when they stimulate to get us out of recession and you start seeing life in housing. So we are in the early days of the downturn, including the price of homes, as David said.

John Coleman: I want to touch on briefly. You know, we’ve gotten a lot of great macroeconomic thoughts here that you’re both extraordinary fund managers and you’ve been investing in companies for a very long time. David, I think it was you who mentioned up front that you were selectively looking at securities that might be worth investing in at companies that you thought were well positioned right now as you’re both looking at specific investments. What are the types of traits you’re looking for? Maybe starting with David that indicate to you that a company is ready for investment or something that you’re willing to bet on through this cycle. And what do you think our listeners should be looking for?

David Spika: I think if you’re going to be moving into the equity market, you need to be very focused on high quality companies, companies with good, strong fundamental characteristics, strong free cash flow, low debt. And really importantly today, pricing power, costs remain high, labor costs, input costs. Companies need to have the ability to pass those through to their customers in order to grow their earnings. Top line growth is great for everybody. It’s that earnings because we’re getting operating margin compression. So that high quality aspect to me is absolutely critical today. Being somewhat defensive makes sense, and that doesn’t mean you just buy health care and consumer staples. There are high quality companies with defensive characteristics in every sector of the market and companies that have good earnings visibility. Right. Not your cyclical companies, but companies with good earnings visibility. That’s where I would be playing today.

Bob Dole: We do not compare notes, but I would have said and I will say quality, quality, quality. And we define it three different ways. One, quality of the income statement earnings. Is it predictable? Are they measurable? Are related to cash flow? And we can call them quality of quality. The balance sheet. Can they service the debt that’s on their balance sheet? Do they have debt? Will it strangle them? The things really get bad. And the third and the hardest to measure is quality of management. Have they done it before, through a cycle? Have they demonstrated they know how to cut costs, the right costs when it’s time to reinvest? Can they do that intelligently? So quality, quality, quality. Now, I will say we’ve been on that theme for a while and as we approach a market bottom, we’ll have to root out some of that quality and with put some low quality in the portfolio, because when the market turns, you don’t want quality, you’ll be left in the dust. You want to own the junk too soon, but start doing your homework.

David Spika: Absolutely. Agree. 100%, Bob.

John Coleman: Yeah, we were just talking here. We’ve had the same advice to people with regards to fund managers quality, quality and quality. Because if you think about it, it’s been 15 years since we had some sort of dramatic correction. Obviously, we’ve had years where the markets were down marginally, that the last dramatic correction was the great financial crisis. And an extraordinary number of company leaders and fund managers really haven’t had experience at the top of the house in leadership positions with an economic cycle like this. And so you’ve got to look to your point to those leadership teams, both at fund management houses and at individual companies that have seen cycles like this before, are intellectually prepared for it, and know what types of steps to take and what type patients to have during periods like this.

David Spika: Can I make a quick comment on that? Because I think you struck a nerve there. It’s been 40 years since we’ve seen inflation at this level, so most people have not experienced this. But I’ll tell you what’s even more important in my mind, it’s been 12, 14 years since we’ve seen a market truly react to fundamentals. A lot of people in this business have only seen a market that’s been driven by monetary policy. They have no idea what happens when the Fed turns the other direction on monetary policy. They don’t understand about quality, as Bob saying, and that fundamentals should be driving stock prices. And to me, that’s a little concerning. And I think that’s one of the reasons why the market is rallying here this week. On something that I don’t think really has any merit. Oh, gee, the Fed’s going to cut rates at some point. Powell told us that. So let’s get back in. Well, that doesn’t make any sense. We haven’t even seen the earnings cuts yet. So to me, that’s something that I think we need to keep an eye on.

Bob Dole: I’ll extend that first of all with agreement. But we’re in an environment and should be for some time where fundamentals really do matter. We have basically a decade where all you want to do is buy high duration stocks with long tail growth. Because like in the bond market, when interest rates fall, you want to own the long duration paper. What’s a long duration equity? One that might earn some money and pay a dividend ten years from now. To exaggerate, to make the point. Now it’s which companies are delivering the goods? Which ones aren’t. And you know what the first outperforming the last don’t. But that’s not been normal in the last decade. It should be a year when those who do their fundamental homework have a better shot.

John Coleman: All right. I want to ask one final question before we move to our true final question about what you all are learning from scripture. Because in addition to being great investors, you’re great men of faith. And I know we would all benefit from hearing what you’re thinking about and what God is teaching you right now. Before we do that, I’ll just ask a 10,000 foot question, which is for those investors who haven’t lived through the cycle and for all of us who haven’t lived through it in a while, what’s your general advice to someone hoping to navigate this well and to steward their financial resources well over the coming couple of years?

David Spika: I’ll go ahead. Jump in. I would say, first and foremost, for believers remember who’s in control? The Lord’s in control. Don’t get caught up in what you’re reading on Facebook or hearing on Twitter or seeing in the mainstream media the Lord’s in control. The other thing I would say is recognize that it has been since 2008, since we’ve had a true recession. 2020 wasn’t a true recession. That was self-imposed. And as I said earlier, recessions do a modicum of good for the economy. They reduce imbalances and they cleanse the economy so that we can have growth again. The third thing is recognize that valuations were way too high and we’ve seen a significant decline in valuations. So we’re closer to the bottom, much closer than we were six months ago. And at some point, we’ll be there. And if you’ve got some dry powder, you can benefit from that.

Bob Dole: You prompt us on this question. So I made a list of five. One recognize that what we have is not ours. It’s the Lord’s. And not just our money, our everything, our minds, our bodies, our relationships, everything two. Therefore, it’s an awesome privilege, but also an awesome responsibility. You know, if the money is really mine. Who cares what I do with it? But if it’s God’s now, all of a sudden I better take care of it and be smart about it. Number three, don’t get caught up in the noise and the emotion of the day. If you name the name of Jesus, people are extra watching you in periods where it’s noisy and bumpy and controversial. Try to have that compass four this is for anybody, faith or not long term view. We’re talking a lot about the near term. But, you know, if your time horizons 20 years, there is no 20 year period in history where stocks haven’t gone up. So, you know, I don’t be stupid about it, but keep that sort of thing in mind. And finally, number five, sentiment. We haven’t talked about that at all. When everybody’s bullish is generally a good thing to be bearish. And when everybody’s bearish, which they have been being a little more constructive makes some sense. So they’re the five points I would consider.

John Coleman: That’s awesome advice, gentlemen. And before we wrap up, you’ve already started to go down this path. But even apart from financial markets, we’d really benefit from just hearing what’s on your mind and what God is teaching you through Scripture right now. David, I wonder if you could kick us off just any wisdom that you’ve encountered lately in your Christian walk?

David Spika: Yeah, this has been a challenging year for me, personally and professionally, and so there have been periods where I’ve gotten a little bit discouraged. But as I’m in my quiet time, a verse to come to me recently is Galatians six nine. Let us not become weary and doing good, but at the proper time we will reap a harvest if we do not give up. Now, that’s very encouraging to know that God’s there. He’s going to help me through the challenges I’m facing. And my part is to be obedient to him and to continue to strive to glorify him in everything I do. And I know that, GuideStone, we’re doing good. We’re serving those who serve the Lord. We’re providing retirement for people who spend their entire life preaching the gospel. And that’s important. And even when we have rough periods for 6 to 12, 24 months, it doesn’t matter. Ultimately, serving God will reap rewards for us as long as we continue to be obedient to Him.

Bob Dole: Mine’s not a whole lot different. I put it under the word patience in tough times. Personally and professionally, having perspective and having the patience. The patience of Job, as we often say. But even the patience the Lord showed us. I remember in the garden he was sweat and drops of blood. But, you know, he maintained his center Lord, not my will, but yours be done. So they’re the kinds of things we try to remember. Look things happen in markets very quickly, but in the real world they tend to happen more slowly. And I sometimes think those of us who are in the markets taking a patient’s pill once in a while will help us do a better job for our clients and not trying to anticipate every jot and tittle, but to get the longer sweep. So patients, my friend.

John Coleman: That’s a, I joke all the time. We’ve got a couple of our fund managers. The problem with the ticker moving every second there as you’re watching it is you can get tied up in the moment. And that idea that we’ve got faith obviously in something else and that we should be patient and think longer term is incredibly important. Bob and David, a tour de force. I would expect nothing less. I know that everyone benefited not only from your knowledge of markets, but just from your wisdom and maturity as believers. We’re grateful for the work that you do in markets and on behalf of clients. We know we’re stewarding resources for God’s kingdom, and we’re grateful to you, particularly for coming on today and sharing your thoughts. Thank you very much.

Bob Dole: Our privilege. Thank you.

David Spika: Thank you. Enjoyed it.

John Coleman: Welcome back to another episode of Faith Driven Investor. I am here today with my partner Luke Roush and we are soon to be joined by two incredible investors and folks who think about faith driven investing. Ben Erskine and Matt Miglarese. But before we do that, Luke, how are you doing today?

Luke Roush: Great day. It’s summer season, which means time with family, time outdoors and time cranking. And we’ve got two guys on the call today that are cranking in the realm that God has laid out for them. So I’m excited for this interview.

John Coleman: Yeah, me too. Me too. And you’re in Bear Lake today? Is that in Utah? Is that right, Luke?

Luke Roush: We are. It’s from the beautiful Bear Lake, 6000 feet elevation. And it is a great place to do remote work from, so I am greatful for my partners that let me to do remote work.

John Coleman: When was the last time you would say you worked, Luke?

Luke Roush: Well, I feel exposed. I feel exposed.

John Coleman: Well, indeed. We are privileged to welcome Matt and Ben today. Matt and Ben. Thanks so much and welcome to the program.

Matt Miglarese: Thanks for having us.

Ben Erskine: Great to be here.

John Coleman: So one thing we wanted to start with today, we’re going to circle back to Callis Capital with which you’re both affiliated. Ben, obviously, you were a founder of Callis Capital and a real estate investor. And Matt, you’ve come alongside Ben working with CallIs in an advisory capacity. But we wanted to start with this idea of the spiritual integration flywheel effect of the flywheel effect more broadly. You two recently wrote a white paper on this idea of the flywheel effect and how that applies to FDI. I was wondering if you could just take a moment to tell us what is this flywheel effect and why does it apply to faith driven investing?

Ben Erskine: Yeah, yeah. I mean, really what it is and there are probably a bunch of investors out there that are familiar with the term from Jim Collins book, Good to Great. And you know, before I forget, I always wanted to say this first time caller, longtime listener. I think that, so really it’s just an application of that idea that Jim Collins kind of gets into in his book, that lasting success is not the result of a silver bullet, but rather the result of consistent input over time. And sometimes that input might even seem insignificant. And so as we have been wading through the ecosystem out there of different operators that are doing great things with real estate business plans across the country and across different asset classes, we’ve noticed time and time again that it’s very much a process and sometimes things that feel insignificant are really the meat and potatoes that get you there on the spiritual integration side. And we really bucketed those things into three different categories that kind of fit into this flywheel.

John Coleman: It’s great. And Matt would you say more about what those three different buckets are and how those might apply practically to some of the ways in which people invest?

Matt Miglarese: Yeah, yeah, for sure. So we kind of assign the term like practice of the first category. Translation is what we’re calling the second category in purpose, really. I mean, Ben touched on a little bit where we want to be in a position where we get to look back and kind of say across this landscape, what’s the pattern that’s leading to all the things we really hope we want to see? Right. And so those are kind of it’s just our terms of trying to test that, but really describe it. And so the idea about two of this very simple, faithful but consistent and intentional practices that folks are doing that in the moment, you know whether it’s weekly or monthly prayer for their tending to their vendors or whatever it might be, or whether it’s, you know, just welcoming with a very like hospitable strategy like that. It might seem fairly repetitive and insignificant, but it’s done consistently, faithfully over time. And that practice then kind of jumps in to be able to share the why behind it and then jumping into if folks into internalize the purpose behind the integration you’re going for.

Luke Roush: So Ben and Matt, I want to jump into some specific examples of how you guys are thinking about incorporating your faith in the work that you do as a real estate investor. But first, I want to go back in time to the origin story and maybe take us back to the beginning. In 2020, Callis Capital is being formed. Help us understand from where you came in terms of form in the firm.

Ben Erskine: Yeah, yeah, sure. So like you said, we were founded in 2020, but it was really years of conversation and idea generating and prayer that led up to that moment. And so I’ve spent my career on the transactional side, the brokerage side of commercial real estate, usually working for the users occupiers of real estate and sometimes the investors into real estate as they manage portfolios around the country in different commercial asset classes, office, industrial and the others. And so as I was in that phase of my career, I always had an eye towards getting closer to the principle seed in transactions. And it really coincided with as that was starting to come into more focus. It coincided with observation of everything else that was happening in the faith driven investing sphere. So I had some exposure into that sovereigns with a part of that Sovereign’s Capital seeing what was happening in venture and private equity. I couldn’t help but ask questions about, Hey, what could this look like? What should this look like in the real estate asset class? And I’m biased. I love real estate. I have an affinity for real estate. But, you know, one of the distinctiveness of the asset class is just this power of place. When you control real estate, you control space in places where people live, where they gather, where commerce is conducted. And so there is a power to place the design of that place and the operations that drive the functions within that space. And so I was very much inclined to think, hey, if there’s ever been a phenomenal asset class for spiritual integration, it feels like real estate could be at the top of that list. And so, like I said, those conversations really evolved over the course of five or six years. And in 2020, we formed the fund that we had a few closings and took on some outside capital. And today, you know, we’ve been invested with nine different operators across 17 vehicles and had exposure to thousands at this point of multifamily units and a few hundred thousand square feet of other commercial real estate space. So it’s been a journey, and I’m grateful for all the support and encouragement today.

Luke Roush: So when you guys think of actually the problem that you’re trying to solve is the problem more around managers that just need to kind of be pushed to lean into their faith in how they do their work. Or is the challenge more of how do you actually help managers understand the tools that are at their disposal to be able to more clearly reflect their Christian faith in the way they manage real estate?

Matt Miglarese: I would say to some extent it is understanding tools. What are some opportunities? We have a lot of conversations with managers trying to sort of discerns and best practices and say, Hey, I’ve got this opportunity, I’ve got, you know, these types of properties or whatever it might be, you know, how could we best […], you know, somebody who has seen some success in this kind of a property of this kind of an opportunity? So there’s definitely a need for that as well. I think there’s also kind of the need for a vehicle that can help marshal some investors who actually care to come alongside those folks and are aligned in faith and values and want to pray and support and partner with those folks and give them a pathway to do that or vehicle to do that. It’s kind of two things at the same time. It’s almost that intersection of those two groups is the maybe the problem with I would say it that way. Ben, you’re jumping as well.

Ben Erskine: Yeah, that’s great. And just to elaborate on that, on both sides of the fence, both the operator side, so the folks that are out there driving real estate plans in the market and the investor side, we’ve seen an incredible amount of activity and progress and even mature plans. You know, we’ve talked to hundreds of operators out there at various places on the spectrum of spiritual integration, but all intentional about how they are already or how they want to incorporate their faith into the stewardship of their properties and their real estate companies. And, you know, in terms of room for growth, less than 1% of apartment buildings have any form of intentional faith integration at the ownership and asset management level. And that number drops off dramatically when you get into other asset classes. So there’s huge opportunity. There’s there’s opportunity for existing operators to scale and grow with the right encouragement and capital and for new operators to innovate and apply spiritual integration plans with the right encouragement and leadership and example. And on the investor side, you know, there’s room for existing investors to expand their allocations in a faith driven operators and for new investors to get better exposure and education. As to the excellent business that is being done without compromising on values and in fact being very intentional about the application and integration of those values. So if you think about values aligned investing as a chain, we see ourselves as a link in that chain. And if we can cultivate really strong deal flow and we can work through and apply professional diligence to all of that access to construct a diversified portfolio with preferred terms in many cases, then we can deliver to the investor side of the fence a really attractive offering that is distinctly aligned with our values as Christ followers and also positioned for excellent performance. And that should in turn allow us to expand the financial capital that we can make available to those operators out in the market, those existing in those that are ready to stand up. And that is really the role that we see ourselves filling in the problem that we are aiming to solve.

John Coleman: Love those concepts and I can see how there’s a great need for that, I think. Ben You touch on this idea of a sense of place which we’ve talked about with others before in this space, and how important that is to people’s lived experience out in the world. Maybe to make it more concrete, I’d love to hear you guys talk about a couple of specific examples. Either of things that Callis has done or of things that you’ve seen that you’ve just been really inspired by, that begin to incorporate some of those concepts. You’ve talked about how those play out, real world developments.

Matt Miglarese: Yeah. So maybe I’ll take one on the Callis side and then one from our partners and we’re going to start there. Right. On our side, we want to model as well. Both be good partners on the capital side, but also model a spiritually integrated company as well. And so one of the things we try to do to keep ourselves accountable and intentional about you’re kind of going back to that concept of there’s practices that you implement faithfully over time. Ben and I, we’ve got a cadence where we will make sure we’re praying by name for partners, manager partners and things to do, and we’ll check in with them. We also have a tool. We’ve dealt with a couple of different tools that we kind of are trying out that might help us partner with them better. So we utilize something we call a statement of intentions that we will use just to help outline, kind of like, hey, you know, the intent behind this partnership is that we could come alongside you and pray and support you as well. And so, you know, tell us what God’s called you to do. Tell us how your how you’re looking at that, what your opportunities are, and then tell us how we can potentially partner or resource you, you know, certainly capital. But maybe even beyond that, maybe it’s an introduction or something like that or just prayer. So that one thing on our end, we’ve had some great conversations. The point of that has been a tool to generate conversations and a fruitful conversations where some of our partners are just call Ben or call me out of the blue and just say, Hey, you know, we got this going on. We’d love for you to pray with us. We’re dealing with this issue. Do you have an idea? And even sometimes if they want an idea, they just want us to pray with them. That’s been pretty powerful, I’d say. You know, I think of a couple of different stories. You know, one of the groups we have that they kind of own operate immigrant refugee housing. I think they’ve probably been on here previously and they’ve got just a really unique way that they manage their properties and that they engage their tenants and they take what is a normal business operations and workflow, and they just tweak it a bit to make it redemptive where they will train their staff members to show up and welcome folks in and just spend a little bit of extra time asking a few extra questions and establish a stronger relationship for the purpose of helping their tenants understand that this is their place, this is their home, right? The way that they’ve set up their operational system is designed to kind of accelerate that sense of place. […]. It’s kind of so strategic.

Ben Erskine: Yeah. And I could build on even that example, maybe with a little bit of an illustration of kind of what does that look like and feel like in the apartment complex in the apartment. And so using that same example of a group that really is aimed towards refugee and immigrant housing, you know, they have families that are coming in from overseas that have never navigated an American grocery store before. Right. And so is there an opportunity in that to pair up a refugee family with a local family that’s tied in to the local church to navigate the grocery store, probably share a meal together, perhaps operate a stove for the first time. I mean, there are there are stories around, you know, large fish on an open flame in the kitchen, in the stove, because, you know, that was the path of least resistance. They’re cooking the fish, right, and setting the fire alarm off day after day after day. And so practical little things like that. But then how does that tie into the business model? So, you know, part of what we believe is that this kind of integration, this kind of intentionality and accountability in terms of values and faith alignment can be should be synergistic with excellent business practice. And so you look at that same example and what does that kind of love and care ultimately translate to in terms of a real estate business plan or a PNL or, you know, what we call earnings net operating income. And the reality is that you can achieve incredible improvement in terms of retention, which drives down costs. You know, one of the biggest costs in most real estate models is turnover. So taking care of the capital improvements that are required when potentially even new tenants come in and all of that work comes at a cost. And if you can avoid that, if you can crank up your retention from 55% to 58%, that’s meaningful savings. And so as a result of that, you’ve created real value at the asset level. And so these two things, this intentionality and the impact side and. The business plan can very much be accretive. And we’ve seen that time and time again.

Luke Roush: So when you think about engagement with residents in a multifamily context, is it more about actually just engagement broader or going deeper with families that are really in need? Like have you seen one or the other actually be more impactful or more in focus for for Callas as an investor?

Ben Erskine: Yeah. You know, I mean I think that there’s an array is the easy answer right is not one size fits all for certain. And there are several spectrums that we see spiritual integration kind of play out on internal external word and deed, whether or not it’s pointed at the organization itself or kind of the outside community and tenant base. And so and there are lots of things that influence that, right? So depending on the nature of the organization and even how it’s capitalized, there’s sensitivity around how things are manifested at the property level. And so some groups are very, very much focused on community care and they will absolutely seek opportunity to share the word, pray over people, enter into spiritual conversations, make invitations to church when they present themselves. But, you know, kind of the starting point for all that is just love thy neighbor, you know, care for your neighbor very, very well. That relational platform will afford opportunities to more evangelical activities versus other groups are very, very focused on, hey, you know, we feel called to share the gospel and that’s really at the top of our minds all the time. And how do we, you know, get there faster? And so the short answer is it looks all different kinds of ways and we see beauty in that diversity.

John Coleman: That’s awesome. You know, we are living through a very interesting moment right now, let’s say, and particularly real estate has come under a microscope just because it’s typically viewed as an inflation hedge. There’s a lot of market volatility, though, right now where housing prices are viewed to be inflated. There’s a ton of uncertainty around commercial real estate given return to office. And then retail has also been a consistent theme for years, but has taken some twists and turns given. COVID would love to pivot and just get you all’s reflections briefly on the current market for real estate, how our investors should be thinking about real estate in this environment, and where you’re seeing the greatest opportunities and risks.

Ben Erskine: Yes, the affordability crisis in the housing space is real. Certainly when looking at lower renter income levels and is more pronounced in certain cities and markets than in others. But it is something that we should all be focused on and we should be putting time and energy and resources into solving. It’s also worth taking a step back to look at affordability more broadly across market rate apartments. And that conversation has often started recently with a look at the steep rent growth that has been reported, driven by a shortfall in supply and continued demand that is outstripping even historically high levels of new construction delivery. But on the renter income side, there’s also been pretty incredible growth. So since March of 2020, new renters signing new leases. Those renters have reported more than 25% growth in renter income. So again, without discounting at all the affordability problem that is very, very real in certain segments of the market that we need to work to solve. We do believe that there is actually still a very healthy and robust demand supply profile that supports investment opportunity in the multifamily space. And it’s been true for years that you need to be thoughtful and buy smart it’s been very easy to buy bad as more and more capital has flowed into the multifamily category in recent years. And that is a big part of why we are focused on the operational component of value add business plan. So our strategy is not to buy assets at a cap rate in today’s environment and hope for compression in the capital markets to sell at a reduced cap rate in the future. We rely heavily on the operational expertize of our sponsor and operating partners and whether that is physical improvement of the asset, operational improvement of the asset or some combination of the two. We’re relying on that expertize and that excellence in the marketplace to deliver the returns that we’re seeking. And spiritual integration can be a huge component of that operational component. So I’ve been focused on multifamily because that’s where we spend a lot of our time. But back to your question, to quickly touch on other asset classes, industrial has been another darling in the market alongside multifamily. So not only on the demand side, as there’s continued to be significant demand growth for industrial space supporting e-commerce, there’s also been a lot more attention from the investor community, again, putting downward pressure on cap rates and pushing up pricing. And on the other side, again, broadly on the other side have been office and retail with less investor attention, less capital flow into those asset classes and questions about demand going forward. Although the retail category is very nuanced, depending on whether you’re talking about neighborhood retail, big box mall, etc., and all of these shifts present major opportunities for adaptive reuse, you know, whether that’s of big box retail into industrial space or of traditional office to more flexible workspace mixed use or even residential.

Matt Miglarese: The only thing I’ll jump in real quick for tacked onto that is Ben kind of alluded to it. It unlocks this whole new category almost of spiritual integration with the concept of redemptive imagination. A lot of the beauty of real estate is it’s just very personal, relational. There’s a lot of on the ground stuff you’re doing with ministry activity, but then you go into imagining what a space should be or could be if it was the way God designed the world to be. And that’s just a whole new category, a whole new opportunity you can open up. So it’s kind of cool in that way.

John Coleman: Guys as, we’re going to switch now to a segment of the podcast we like to call Lightning Round Sometimes, where we pose a simple question to you and you give us your gut response to that in kind of 60 seconds or less. Okay. Now, what we’ll probably do is slide a few fun questions in there alongside some of the more serious questions. So beware because you never know what’s coming first. Luke Roush, do you want to start us off in The Lightning Round?

Luke Roush: I’m happy to do it. So I’ll give you two scenarios and you get to pick one and we’ll go. Ben, then Matt. Office occupancy is going to stay stable or go down by 30% in the next 12 months. Pick one. Ben.

Ben Erskine: Occupancy as measured by leased space, is going to go down. Occupancy as measured by butts in seats. People actually returning to work is going to go up .

Matt Miglarese: And I think it’s going to down. I think it’s a new era.

Luke Roush: Yeah. I mean, arguably, there’s kind of a hangover effect, right? Because you got multi-year leases, you can’t really get out of it. And yet actually people realize they need less. So that’s a hangover that comes due over the next two, three years. John, over to you.

John Coleman: Yeah. Ben So you’re a Chicago man, as I understand it. And so very serious question for you. Top three locations for Chicago, deep dish style pizza.

Ben Erskine: Giordano’s, Illuminati

Luke Roush: That was conviction. That was conviction on the first one. I want to go there.

John Coleman: Yeah.

Ben Erskine: Yeah. That will never change for me. And I’m I have to think about the third one […]. Might be on there.

John Coleman: Okay. Excellent. You were waffling on the third, so I think we’ll stick with those top two probably. Matt, any favorite pizza places on your end? Any style. Any city style, if you prefer.

Matt Miglarese: So my kids have a favorite just down the street. There’s a local spot, but we don’t have the best pizza in Raleigh, North Carolina. I’ll admit that.

John Coleman: Any letters and complaints can be directed towards Matt Miglarese for that response. Luke, back over to you though.

Luke Roush: I’m curious on New Single-Family housing starts, are multi-family housing starts, which is going to grow or shrink in the next three years, is one going to outpace the other?

Ben Erskine: Good question. I mean, it both starts and deliveries are at elevated levels right now as measured against history. It seems like they could both probably ember in the years to come based on construction costs being one thing and maybe just perception as we kind of get into the front end of a recession.

Luke Roush: Do you think it’s a tale of two cities where, you know, places like California, the Northeast struggle and other geographies thrive? Or is it sort of a kind of a across the board move?

Ben Erskine: Yeah, I was reading an article yesterday that kind of pointed to, to your point, Northern California, some of the expensive gateway coastal cities in terms of single family homes that the movement in interest rates has already translated at reduced velocity in the housing market out there in a way that it hasn’t, at least yet in some of the other markets. But I think it’s you know, it’s too early to tell. I think that prices on the single family home might be buoyed for a while, as so many people are locked in with attractive financing, but they’re just not going to put their houses on the market because it’s just hard to go replicate the cost of occupancy that they have through like 3% debt. So I think that could be a real artificial bouy potentially for pricing for the next little while.

Luke Roush: Yeah, it’s good Ben, thank you, Matt.

Matt Miglarese: Yeah. I don’t have a data to back me up that Ben is whipped out here. But I would say, I’ll tell you from my area, I think we’re going to see a lot more single family homes in the southeast. I think that’s where our pace is better. Yeah, that’s good.

John Coleman: So quick question for both of you kind of pivoting on what you just mentioned there about the southeast map. If you had to pick two cities to invest in right now for multifamily, where you all spend a lot of time, what two cities do you think you’re most interested in?

Matt Miglarese: Two cities. Just two. I’d say I’m a little biased here. The triangle area is pretty hot, right? So that’s one Raleigh-Durham area. That area, pretty good interest. And Charlotte though. Charlotte’s grown pretty strong too, obviously. Raleigh and Charlotte. And that’s not totally location bias.

John Coleman: Ben what do you think?

Ben Erskine: I think I maybe be a little contrarian, and I’d say some of the Southern Midwestern cities that have not gotten the attention, you know have not gotten the same attention that the Sunbelt has. And historically, the Midwestern cities typically don’t offer the same explosive growth in boom times, but they also don’t drop out when things get really slow. They’re just a little bit more steady, Eddie. But if you look at a Columbus or a Cincinnati or a Memphis, like some of these cities, they’re a little bit off the beaten path. I think there’s a lot of merit there for families and people that want affordability and can work from anywhere. You know, I think that that could be a wave of the future.

Luke Roush: Okay. I’ve got one. How many years? I just need a number. That’s all I need. How many years? Until the market realizes broadly the benefits of things like chaplaincy for multifamily complexes. Our apartment life.

Matt Miglarese: Six.

Ben Erskine: Six. Okay.

John Coleman: I love the conviction. He actually listened to the instructions there.

Luke Roush: I’m so grateful.

John Coleman: Matt and Luke

Ben Erskine: Ten.

John Coleman: Luke, you answer that one.

Luke Roush: I think four or five. And the reason is that I think that tough times reinforce the need to really care for people and care for people. Well, I think the data that apartment life has put out, among others, I mean, there’s a bunch of other programs as well, but clearly demonstrates less turnover, better satisfaction, things that are actually even more important in a down market, which I think we’re going to enter. I think it’s going to be more quick, but I’m an optimist.

John Coleman: Awesome. Well, we always close these discussions, guys, by asking the same question, which is what is something that you’re hearing from God in his word right now? So kind of something for inspiration for the audience that you’re hearing in your own life in your study of his word right now, Matt, if you don’t mind, we might start with you.

Matt Miglarese: Sure. Yeah. I think what comes to mind, I’m almost I feel like I’m relearning it right. Like so much we relearned over and over again. Maybe it’s just me. I’m hardheaded, but at my church, we’re going through a study right now to the book of Galatians. And so we’ve just been reading that book and fot the last couple of weeks, Galatians 525 has just been stuck with me. If we live by the Spirit, we should also walk by the spirit. You know, I feel like God has impressed on me that the phrase If we live by the Spirit, it means our life, our eternal life, is completely dependent on the power of the spirit and therefore our walking day by day, week by week, the stuff we do in Callis, whatever you know our work activity, our daily activity, that also ought to be by the same power. And it’s just been a conviction for me to turn around, say, God, you know, this is yours. I might have a lot of plans right now I might make. This day is yours. So I’ve just tried to implement a few, you know, kind of habits and practices to remind myself of that. But that’s really been the thing. God has re impressed on me in the last week or so just how important it is to rely on the spirit and walk by his spirit, led by it.

Ben Erskine: That’s great. So I was thinking about this and my pastor had incorporated Micah six eight into a sermon a couple of months ago. And it was timely because Matt and I were in the thick of working through this flywheel concept and kind of fleshing out this idea in a paper. And so Micah six eight is he has told you, Oh man, what is good and what does the Lord require of you but to do justice and to love kindness and to walk humbly with God. And I think that I like the word require in there just because it is clear instruction is required of you. I take that well. And just the notion that, you know, through our actions loving is doing and if you act and do loving things that your heart will produce loving feelings. And it just really resonated with me that there is this interconnectivity between actions and words and translation, and then ultimately posture, our posture and what you might call culture or purpose or identity for an organization, and both things feed each other. And so that was really what we were observing over the past year or two, and it resonated with me when I heard it from my pastor a couple months ago.

Luke Roush: It’s a good word, Ben and Matt, we’re grateful for the work that you guys are doing. Keep going. Keep getting after it. I think this is a sector that absolutely is ripe for transformation in terms of how investors think about deploying their capital in ways that are both responsible and also faithful and intentional. So grateful for the work that you guys are doing and grateful for your taking time to be on the podcast today. Blessings to you

Matt Miglarese: thanks for having us.

Ben Erskine: Thank you so much.