The Distribution by Juniper Square
00:09:25 · Nick Shalek
[00:09:25] S0: I don't know that it's that rational. We lived in Los Angeles. My mom ran an advertising agency. And I just remember being a young kid and going to her office, and they had a pool table and a great vibe, and they produced really interesting media and commercials. And we got to go to the studio and just this feeling of the community and shared sense of purpose. I, yeah, played a lot of sports growing up. I was a hockey player for many, many years. And I think that team orientation, that, like, desire, you know, that having a goal and going out and doing it, I think combined with this belief, and this probably comes from my parents and something that, you know, I internalized over the years or intellectualized or whatever, but just that there's nothing better in the world than changing the world in a positive way, delivering value to customers, and in the meantime, employing people, you know, giving people a fulfilling, enriching way to live their lives. So I always had that idea in my mind that what what my mom was doing was a special thing, you know, building companies, employing people, making them happy, building a community around a shared goal.
00:10:34 · Brandon Sedloff
[00:10:34] S1: That's awesome. So fast forward, you're off to Yale, and then you're working in at Yale University in in the endowment and and under David Swenson. I guess, you know, a lot of our listeners will know, you know, know of David and know the Yale model for kind of transforming how endowment... You know, endowments invested into alternatives. But I guess what what was it like during the period of time that you were there and kind of where were we... You know, where where was the... Where was Yale in relation to kind of this idea that, you know, alternatives needed to be a, you know, a a, you know, a higher percentage of a portfolio's allocation in order to drive best in class investment outcomes.
00:11:12 · Nick Shalek
[00:11:12] S0: Yeah. I I mean, Dave, this really amazing person was a really inspirational leader, and and Dean and Tim Sullivan and Al Foreman and other people who were there for a long time built a a really amazing investment portfolio and and organization. But it was it was great. You know, you walked into the office, and the office was lined with investment committee books going back, you know, to basically when Dave and Dean had taken over, which I I think was 1986. So you could go and look at every investment decision and every, you know, memo about each manager, and it was just an incredible place to to learn. There was so much data about the practice of investing. You know, there's a lot you could say. I mean, re... Reading Dave's book is... His first book about institutional investing is really worth it. His second book, actually, he was finishing when I started. And that book is interesting too because, you know, Dave talks a lot in that about, you know, how individual investors are different than institutional investors. And, actually, he didn't recommend that individual investors go and invest in alternatives. I think he would have pretty strong views about some of the alternatives that are being marketed today. You know, rightly or wrongly, that was, you know, where where where he netted out on on things he didn't think that alternative investments were were necessarily for everybody. But there were a bunch of, you know, bunch of general principles and and things I absorbed from that period. Mean, the most obvious is just they always thought for themselves. You know, there are some... The the endowment model was, you know, famously kinda sixty forty equities, fixed income. And Dave and Dean, when they started, I think, just asked some really basic questions or started some from... You know, now people talk about first principles a lot in Silicon Valley or or maybe more broadly. That was a term I first heard from them. And one of their first principles was, for example, like, liquidity has a price. And, you know, if you should match, you should think deeply about the structure of your liabilities. And most people, even if they had very, very long term liabilities or they had funds that were meant to live in per...
00:13:10 · Nick Shalek
Perpetuity, they they prioritized liquidity even where there were was a huge opportunity for excess return if you're willing to go into more illiquid asset classes. And, you know, that that or equity orientation was always a really big thing that Dave talked about, just the long term evidence that being on the same side of the table with builders was a good thing to do. Tied to that, you know, second thing that I I learned from them was just always thinking about incentives and that all of business and all of investing is about alignment. And, you know, you pay... You you look at the incentives, and you'll find the outcome. You can't be sure. You know, you often make the right decision and get the wrong outcome. But if you think about incentives enough and you do really, you know, good diligence on opportunities and people, you'll end up in the right place over time. You know, third thing I I learned from them was you can be, you know, analytical until your face turns blue. But at the end of the day, it's all about people. And I think one thing that doesn't get talked about much, you know, from the outside of any investment organization, but I saw it at Yale was they were so so attentive to personal relationships, and it was always about how to be partners to people over a long period of time. And partnership didn't always mean being nice. It meant being honest and being... You know, making sure that your partners knew where you stood and backing them, being prepared to back them through tough times, and being prepared to be, you know, honest and hard on them in good times because sometimes the bet... That's what the best people need is a push to just keep getting better. And and Dave was great at that.
00:14:43 · Brandon Sedloff
[00:14:43] S1: When you look back on that time, is there anything that, you know, stands out as maybe, like, something that most people wouldn't know that, like, the the non obvious thing from, you know, being in the presence of what I think many would refer to as, you know, you know, to titans of the industry or investing greats or whatever moniker you wanna give to them. But just, you know, you are you are inside the room for for some... You know, for a few years at a really pivotal time. Kinda anything non obvious?
00:15:10 · Nick Shalek
[00:15:10] S0: There are lots of non obvious things or things that, you know, I now know that people just don't realize. Like, this is a ticky tack example. But, you know, Yale and a few other institutional investors made an enormous amount of money investing in timber. And timber is an asset class people don't talk about very much because it's not that broad, you know, well distributed asset class. But they they... By by thinking for themselves and by, you know, looking at... By being curious about spaces, I think they found places to invest that other people, you know, just didn't... And ways to invest in them that other people just didn't. But... No. The the thing I I learned that maybe is... It's it's true everywhere, but it was a great it was a great lesson of being there, You know, because Yale was fortunate to be invested in so many of the world's best investment managers, you know, you just learn that they're just people too. And same with getting to work with someone like Dave. I mean, you know, there's the... That's a privilege of working with someone who's considered a legendary investor as you realize, you know, they put their pants on one leg at a time too. And they have their personal, you know, foibles and challenges and and points of ego and and places where... You know? So that... I think that is is humbling because, you know, it gives you the the sense that no matter how hard you work, no matter how, you know, how many great investments you make, you're you're still... You you... Yeah. You're you're still always a work in progress. But it's it's helped me a lot in my career as I've interacted with people to realize that nobody's got the answer ever... You know, but the best people just need to be in constant search of, you know, more correct version of the truth.