How I Invest with David Weisburd
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?
00:36:05 · Christopher Donahue
[00:36:05] S1: Exactly. It begins at learning. One of the other little articles of faith that we had was that when you are doing something new, you are motivated because you're learning something. If you're in the financial service business, you're doing new stuff all the time. You can't avoid it. It's always working. So you have an underlying impetus to be learning and to be motivated. But it also begins if your philosophy is that each human being has dignity and is demanding of dignity and respect long before any of this fancy stuff became part of government regulations. This was a very important part of how we function. And that's why I said before that, you know, you don't enjoy this. Can we fix it? Well, no. Then we have something else. Well, then maybe we're not the right place for you, and so we call that graduation. So that's really what's what's going on is you've you've gotta have it be where you respect the individual, let them paint their own painting like I've told you, and you've gotta have comp programs and pleasant things. You know, in Pittsburgh, you can be full executive running money, doing lawyer line. You could coach your daughter's soccer team, and it's not a problem because it's a twenty minute commute. You know? It's not gonna take you two hours in a train. That's an important thing. We get a lot of people who come, to work for us, even if they work somewhere else. They grew up in Pittsburgh, and they realize they wanna raise their kids or they wanna come back. And we are a warm and loving home.
00:37:47 · David Weisburd
[00:37:47] S0: When I hear somebody that's worked at a firm for over fifty years, to some people that might sound boring or uninteresting. To me, it's fascinating because to me, that's fifty plus years of compounding knowledge and compounding experience within a single context. I'm curious in terms of how the organization has evolved and what advantage has continued to compound after five generations.
00:38:15 · Christopher Donahue
[00:38:15] S1: Well, not five generations. Two generations. Okay. What what has happened is the principles stay the same. They they don't really change. You get new people, and we just had a retirement of our head of equity. He came right at the beginning of this century and then graduated, now replaced by someone who's been here over twenty years. And that gives you an idea that you actually bring people in. They're not all the same for fifty years. We did hire a lot in the eighties and had a big growth spurt, so we have a lot of graduations coming up. But if the real question is, why do they stay and how does it happen? It's because of the community. It's because of the company, and it's because of all of these principles. Pittsburgh is not, exactly like New York. Nothing against New York. But it's not a lot of braggadocio. It's hard work, defense, things like that. And when you have $700,000,000,000 of money funds, and you go out say, well, we're going keep this dollar in, out. They go, oh, those guys, they're pretty straightforward on what they want to do. And then the customers are, oh, they do what they say they're gonna do. Then that's really good. And then that helps us with $100,000,000,000 in equities and $100,000,000,000 in fixed income and $25,000,000,000 in private markets.
00:39:44 · David Weisburd, Christopher Donahue
[00:39:44] S0: So this trust continues to compound. It it kind of goes back to the beginning. You you mentioned that, basically, all the competitors in this space have been there since since the early seventies? Yes. '72, basically. Because, basically, they're also compounding the same advantages, and and it's almost like this industry where it's a... Whoever survives the longest ends up winning. It's almost like a Highlander. [00:40:10] S1: That's a tontine scheme in Britain, and they're illegal. The guy who lives longest gets all the money because everybody tries to kill everybody else. But here, that's not what happens. What happens is the clients have different ways of dealing with different of the bigger money fund operators. Like I told you before, they wanna have three of them, and there's enough to make it go around. And you still get competition, and you still have rigorous desires of customers to have bigger share of what's available, and that has been constant for the whole time. What's in the plans for the next generation, [00:40:53] S0: the next twenty, twenty five years for FHI?
00:40:56 · Christopher Donahue
[00:40:56] S1: Well, twenty five years, I will probably have graduated by then. Nonetheless, when we went public in '98, we called ourselves a franchise for all seasons. And so as we go forward, I would expect the money fund to continue to grow. Why do you say that? How does that happen? If you have the money stock growing at like six or 7% a year, then that's what you should grow in your money funds, maybe a little more. So if you look at it for the last thirty or forty years on that kind of a scale, the money stock's been up 6%. We've been up like almost 9%. The industry's up 8%. And you look at that trade and say, oh, that's a pretty good engine as to what money funds should do. On the equity and on the fixed income side, you know, they should double every ten years. And that's how... If you we ask... If you ask me to... What's the growth fund? Those would be it. Now is that what's gonna happen? No. Then on the private market side, which we're 25,000,000,000 now, we bought a real estate endeavor a a real estate endeavor in Chevy Chase, Maryland, and a real... And a infrastructure endeavor in London. And so, we would expect that to grow at an even faster race. So, if you look at it as a horse race, the money market funds are kind of the Clydesdale and the equities and fixed income are more like quarter horses moving along, and perhaps our friends at private markets could be like the thoroughbred on a on a growth rate basis. Of course, it's a smaller base, so it can grow faster. So I would expect all that to continue, but mostly I would expect the principles and the code that we have to continue. I had the