How I Invest with David Weisburd
00:27:13 · Christopher Donahue, David Weisburd
So don't let them escape the next time. [00:27:17] S0: One of the industries that I'm really fascinated by right now that I think is undercover, cybersecurity. How much are you investing to cybersecurity, and how much more of an issue is that today with AI? It is a huge issue and very big. And how much investing? A lot of [00:27:36] S1: our investing is done with our custodian banks and transfer agents. They are all on the glass wing operation where they're studying what has happened with that release of the Mythos. Mythos. And they are putting the big money because we don't do the custody, the handling the money, the transfer agency work. And that's where you really need the good... Now we have our own cybersecurity. We get attacked all the time just like everybody else, and we have the concentric rings of defense just like everybody else does. But I can't tell you how much money we're spending on it. I don't know. [00:28:23] S0: You're known in the industry as, if not the longest serving CEO in the mutual fund industry, certainly one of the very longest serving CEOs. What's been the secret to your tenure?
00:28:36 · Christopher Donahue
[00:28:36] S1: The founding of the company was by my father, and two of his buddies went to the same high school I went to. In Pittsburgh. In Pittsburgh. So I cheated. Okay? On the other hand, I started working there in 1972 or so, and I've worked in a lot of different positions. And it's the culture that really drives the truck. And it is preserving the culture established by those founding fathers that I am very articulate with and very comfortable with, and it helps a lot. Like, for example, we had several big changes in people succession this past year and a half, where we were replacing forty year people with twenty five and thirty year people. Now, how does that happen? It's because of the culture. And the culture can be made up of a lot of things, but maybe the way to talk about it is in terms of some of their rules of thumb. My dad's one rule of thumb was, we want everybody to enjoy coming to work. Well, that's a good rule of thumb. If don't, then can we fix it? Well, if we can't fix it, maybe you should graduate. And then by the subtraction method, you get a lot of people enjoy coming to work. That makes everything a lot better. Another one of their statements was, You know what? If you get hired at Federated, you get to paint your own picture. You just have to stay on the canvas. What does that mean? That means that you as an individual have dignity and respect because you're an individual and because you have this position. So the PMs and their team have the paintbrush on the portfolio. Salespeople and others can say, well, you know, you need some more red in that or more yellow. And they could say, well, that's a very good idea. No. Because they have the brush on painting that picture. Sales individuals can say the same thing. This is my territory. I got it figured out. The M comes and says, Look at the record. This thing is terrific. You ain't selling nothing on it. You say, Well, yes, but the customers don't want that yet. And so, you can see how that kind of culture allows the thriving of People
00:30:57 · David Weisburd
[00:30:57] S0: are essentially CEOs of their own position.
00:31:00 · Christopher Donahue
[00:31:00] S1: They are. They are. And that makes for longevity. The customers like it. Now, we bring people in. Nothing's perfect, and it works like that. But another one of the ones that I like is, since I did time in law school, that there's no dying for the wrong reason. My dad was a West Pointer class of 'forty six. There's no dying for the wrong reason. Now, dying for the right reason isn't all that good, but dying for the wrong reason is stupid. Dying for the wrong reason is messing up on compliance, or with the SEC, or doing some stupid deal that may turn a switch on for five minutes that you know down the road it doesn't work. When we do acquisitions, we do them for the long haul. We don't want to just spread pixie dust over the marketplace and say, Oh, this is this whoop de whoop. We're to live with it for a long time. So we want the cultural fit. And I'll tell you one more that's very interesting. When we bought Hermes in '18, they had a code that they... An honor code, a code that they agreed to. And they said, Well, you guys should have this. We said, We don't need no code. We're Americans. We don't need a code. Then we read it. So, we'll just read it. So, we read it. We go, Well, we agree with all this stuff. And so, what happens is over 95% of their people just sign up voluntarily, and we don't use it against them. It doesn't get weaponized. So he said, okay, we'll do it. But there's two things you you... We're gonna, comment on on that. Number one, you're gonna put the word fiduciary in your code, which it wasn't in there. We thought that was important. And the other thing is we're going let you spell behavior wrong with an IOUR. So that was our deal. And now we have their code as part of our deal. We have over 95% of our people looking at it, sign up, say, Yeah, that's kind of like what I do. And it and it is customer focus, be nice, dignity and respect, respect even the regulators, improve the community, improve your activities, be working on... You know, that that kind of thing.
00:33:09 · David Weisburd, Christopher Donahue
[00:33:09] S0: What's downstream of having employees sign the honor code? [00:33:13] S1: Nothing. It doesn't... Hopefully, it doesn't change anything. Hopefully, it's just an endorsement. They understand what the culture is at Federated Hermes and now they're part of it. They go, yeah. But we don't go after because they're, woah. Woah. Woah. Woah. Right here, says this. No. It doesn't get used like that. It's it's just part of the deal. [00:33:33] S0: Reminds me a little bit about how the North Vietnamese turned some of the captors against the Americans. Have you heard about this? No. Would have them... Every day, they would have they would have them just... They were starving, and they they would starve them. And then they would have them... They would give them food, which is very scarce, just for writing certain things, and they would say something. And they started very light. They would just say, capitalism is not a perfect system. And then next one, they would say, America is great, but not the best country in the world. And by then, they were saying, we are communists. Like, you know, several months later, sometimes getting people to do things that you want. Obviously, in this case, it's a very positive thing. But sometimes just having people sign something and write something is extremely powerful, powerful psychological. We call
00:34:24 · Christopher Donahue, David Weisburd
[00:34:24] S1: it repeat the sounding joy, repeat the sounding joy. And the things that are in there are not with the nefarious end. The other thing I would say about the prisoner of war camp is that there are things that happen, like when the markets shut down for an extended period of time on 09/11. Okay, or when 'eight happened or when COVID hit. And so everyone said, when is this gonna be over? And our attitude about it is we go day by day, we make it work, we do everything we can, but I can't give you a deadline. And this is what ruins guys inside prisoner of war camps. They make their own deadline. I'll be home by my daughter's birthday. I'll be home by spring. I'll surely be out by next year at Christmas. Expectations. And it's a revolution of rising expectations, and it diminishes your ability to survive. Now, today, we call that sustainability, but owner operators call it survival on account of we don't want to be dead. And this is the message, and and you brought that up about the prisoner of war camp that we try to preach when there really, really are difficulties. We're gonna do everything we can right now, but we're going day to day on this, and we're not gonna tell you when it's over. Oh, Chris, tell me it'll... When it'll be over. No. I can't tell [00:35:50] S0: you that. I don't know when this will be over. I could count on a small handful of companies in the world that the majority of people really love coming to work. How do you get people to love coming to work?