E380: How Billionaire Family Offices Actually Invest

Summary

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Episode Overview

Podcast: How I Invest with David Weisburd
Episode: E380: How Billionaire Family Offices Actually Invest
Date: June 1, 2026
Guest(s): Eric Becker (Co-founder, Cresa), Doug Becker
Host: David Weisburd

This episode explores the inner workings of billionaire family offices: how and why they invest differently, the structural and psychological factors behind enduring generational wealth, the pitfalls of traditional wealth management, and actionable insights for entrepreneurs facing liquidity events. Eric and Doug Becker, entrepreneurs-turned-family-office founders, share candid stories, frameworks, and paradoxes from decades of experience building, selling, and stewarding family and client wealth.

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Key Discussion Points & Insights

1. Why Start Another RIA? The Founders’ Entrepreneurial Origins

• Eric Becker shares his journey from humble beginnings in Baltimore, selling his first tech company as a young founder and navigating the wealth management world with "unsophisticated and poorly advised" decisions—like immediately buying new cars after the exit.
• Realized through experience that traditional wealth management options and wirehouses failed to deliver a tailored, full-service, transparent offering for entrepreneurs and early-stage founders, especially for those not yet at a liquidity event.
• The concept behind Cresa: a "fractional single family office" accessible to clients at various life stages—not just at exit.

“Most traditional advisors, they only want to call you right around the time of a liquidity event because they're looking for asset gathering.” – Eric Becker [02:37]

2. Wirehouse Frustrations: Conflicts, Vanilla Portfolios, & Lack of True Family Office Services

• One-size-fits-all portfolios: Traditional 60/40 stock-bond allocations, little customization.
• Lack of transparency: Opaque fees and unclear advisor incentives; difficulty discerning whether advisors were true fiduciaries.
• Private markets ignored: Despite Eric and Avi amassing wealth through private businesses, wirehouse advisors had limited understanding of private assets.
• “Window dressing” family offices: Big banks claimed to provide family office resources, but in practice, these services were “almost impossible to find.”

“The firm I was with for 25 years as a client, I think I saw an estate tax attorney one time in 25 years. I wouldn’t call that a family office.” – Eric Becker [05:21]

Fiduciary vs. Suitability Standard

• Explained the difference between the suitability standard (broker-dealers: “Is it suitable, even if conflicted?”) vs. the RIA/fiduciary model (“Client first–no commission or hidden incentives”).

“The RIA world that we’re in, we view ourselves as a true fiduciary where we absolutely put the client before ourselves and do not take any kinds of incentives or other fees.” – Eric Becker [06:15]

3. Family Office Services: Beyond Investing

• Definition: Extends far past portfolio construction—encompasses bill pay, tax planning, asset location, estate planning, charitable giving, education and governance.
• Family office services designed to give founders back time and help preserve wealth across generations through professional-grade support.
• Education and governance are crucial for long-term wealth: “How do you talk to your kids about money? How do you get them ready for the responsibility of taking over…? What are your family philosophies around philanthropy?” – Doug Becker [10:48]
• Cresa employs ~160 full-time family office staff, including ex-attorneys for estate/tax planning, to deliver single-family-office caliber support.

4. Competing with Big Bank “Balance Sheets”

• Common belief: big banks claim their large balance sheets enable superior client lending.
• Eric counters: Cresa’s ~$235B AUM makes banks compete for clients’ loans, yielding better terms and no hidden advisor compensation from banking affiliates.

"It was actually a conflict more than an advantage. I think that actually making banks compete for our clients' business is a much better model." – Eric Becker [13:48]

• Custody is outsourced to large custodians (Fidelity, Schwab, Pershing), providing safety and scale.

5. Sustainable Wealth: The Myth and Challenge of Wealth Preservation

• No “forever” portfolio: Eric and Doug assert that avoiding loss across generations requires more than clever investing—tax and legal structuring (asset protection, LLCs, blocking companies) and family governance are foundational.

“Thinking of your wealth like a submarine and having these different compartments that you can seal off so that if you end up with either a bad investment…all you can lose is the equity that you invested…” – Eric Becker [17:32]

• Most threats to wealth: not markets or taxes, but poor governance, education, and “the next generation changing the plan, fighting, or excessive spending.”
• Tax and structural alpha: These “unsexy” aspects are powerful and underutilized sources of outperformance.

6. Alpha, Venture, and Private Markets: Where Real Wealth is Created

• True alpha comes from: Owning/building businesses and making private investments, not day-trading public markets.

"My alpha before I even learned about great planning was in starting and building companies. And that is an opportunity to compound wealth over time on a tax efficient basis..." – Eric Becker [21:28]

• Institutional players dominate public markets—tax and structure are “alpha” available to individuals.

7. Underrated and Emerging Opportunities (2026)

• Multifamily real estate: Attractive entry points due to construction slowdowns, rising demand.
• BDCs (Business Development Companies): Portfolio discounts present value.
• Private credit: “Given a really good drubbing right now and it's probably overdone…tax awareness, like equipment leasing" offers deferral opportunities. – Doug Becker [28:41]
• Lower middle-market PE: Still strong for alpha, per Steve Kaplan’s research. Large buyouts’ alpha has eroded.

8. Cyclicality and “Second-Degree” Investing

• Asset Class Flows: Out-of-favor asset classes regain attractiveness as capital flees—contrarian opportunity is created when "the baby goes out with the bathwater."

"Some of the best asset classes are below the headline..." – David Weisburd [30:54]

• Example: Office space, multifamily real estate maintain cycles of disfavor and opportunity.
• Families who become true experts in select asset classes have generational edge.

9. Enduring Family Businesses & The “Long Game”

• Eric shares lessons and inspiration from his book, The Long Game, examining companies surviving centuries.
• His own family’s business (Santa photos in malls) didn’t survive generational transition due to succession planning failure.
• Interviewed leaders from 200+ year-old companies (Lone Brothers Tent, Frescobaldi family vineyards, Biltmore/Vanderbilt).
• Lessons from longevity:
  • Stewardship, patience, teaching responsibility to future generations, holding long-term vision
  • Business as something to nurture, not just own or sell

"They treat this as something that's not even theirs for their generation…they are taking care of [it for] future generations." – Doug Becker (re: Biltmore) [39:41]

• Paradoxes:
  • The more you think long-term, the faster (paradoxically) you often grow.
  • True succession and independence for the next generation come not from control, but from empowering autonomy and education.

"The more long term you think, the faster your growth, the more short term results you will have from the long term thinking." – David Weisburd [45:53]

• People celebrate the liquidity event but fail to apply the same rigor to managing the resulting capital.

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Notable Quotes by Timestamp

• On the problem with big banks:
  “Many of the traditional wirehouses will say, we have a family office embedded within our firm. Well, go find it. Because we were looking and we didn’t really find those resources. The firm I was with for 25 years…I think I saw an estate tax attorney one time in 25 years.” – Eric Becker [05:21]

• On the value of transparency and alignment:
  “We pass that benefit directly through to the clients that are participating in that investment. …We don’t take something from the bank. So it’s a different model.” – Eric Becker [08:19]

• On generational risk:
  “The threat to the wealth isn’t bad investments or bad asset protection or inefficient taxes. The greatest threat to the wealth would be the next generation or the generation after that…” – Eric Becker [19:22]

• On unsexy, high-impact strategies:
  “Tax and structuring are some of the last sources of alpha as an individual investor.” – David Weisburd [20:21]

• On learning from enduring family businesses:
  “We have this amazing fascination…around technology, innovation, disruption…But we’ve put almost nothing into what are the lessons we can learn from companies and organizations that have stood the test of time.” – Eric Becker [36:32]

• On legacy and stewardship:
  “They treat this as something that’s not even theirs for their generation, but something that they are taking care of for future generations.” – Doug Becker, about the Cecil family/Biltmore [39:41]

• On the paradoxes of compounding and independence:
  “The more you love your children, the more you would want to hold them so close…but if you want independent children, you have to allow them to fail.” – Doug Becker [46:08]
  “The more long term you think, the faster your growth, the more short term results you will have from the long term thinking.” – David Weisburd [45:53]

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Segment Timestamps

• 00:00–03:42 – Eric’s entrepreneurial roots, early investing mistakes, why Cresa exists.
• 03:45–07:16 – Wirehouse critique, fiduciary standards, transparency, conflicts of interest.
• 09:30–12:29 – What are family office services? (bill pay, tax, estate, education, philanthropy, credit)
• 12:58–15:01 – Competing with big banks on lending and custody.
• 17:02–22:29 – Wealth preservation, compounding, tax structure, governance, the real threats to generational wealth.
• 25:24–27:05 – California tax riddle, effects on billionaire wealth, and business formation.
• 27:13–29:17 – Underrated assets in 2026: multifamily real estate, BDCs, private credit.
• 30:10–33:16 – Cyclicality, asset class ebbs and flows, “contrarian” investing.
• 33:20–38:40 – Stories from The Long Game: building, losing, and studying enduring family firms.
• 38:45–41:18 – Lessons from Biltmore; stewardship, educating next generation, roles in family enterprise.
• 41:23–46:39 – Do family business lessons translate to non-family firms? Paradoxes of long-term thinking.
• 46:01–48:39 – Final paradoxes: child-rearing, post-exit investment mistakes, focus versus neglect.

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Memorable Moments

• Eric describing how, post-liquidity, founders often put insufficient rigor into managing liquid capital compared to the businesses they built:
  “You know, they had a board of directors, …talent and culture and all the things it takes… Now suddenly… it’s like one guy and a dog.” [46:28]
• The story of the Biltmore estate and Frescobaldi family as case studies for multi-generational stewardship.
• Doug’s observation that the “greatest threat” to generational wealth is not financial, but psychological/governance-based—succession, education, and family unity.

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Tone and Takeaways

The tone throughout is candid, accessible, and a little self-deprecating—cast in the language of founders who learned most of their biggest lessons by living through them, not from textbooks. Eric, Doug, and David share a deep respect for the “unsexy” parts of wealth that make the biggest difference (structure, education, stewardship).

Listeners will come away with:

• A clear sense for why most family offices fail over generations—and what to do about it.
• Specific strategies around governance, tax, private markets, and education to actually compound wealth.
• Paradoxes and mental models that flip conventional wisdom on its head.
• The insight that, to play "the long game," you must build both for today and for generations yet to come: in business, investments, and family.

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Transcript

[Interviewer]

Cresa, which is an RIA that you co founded, latest number 235 billion AUM and AUA. Why did you find the need to start another RIA?

[Doug]

Sure.

[Eric]

So my background and similar with my co founder Avi Stein is really the life of the entrepreneur and CEO founder. So my background isn't in traditional wealth management or the RIA world. I came upon this from a need for my own family and for Abby's family. I started off in Baltimore from humble beginnings and started my first company when I was a student at the University of Chicago. I dropped out of the university one semester before graduation to launch a healthcare technology company called the Lifeguard. I sold that company a couple of years later to Blue Cross Blue Shield. It was a great experience. My younger brother Doug, who was a high school senior, the two of us literally took our proceeds at closing in a cashier's check. We were so unsophisticated and poorly advised and we went to the bank and deposited in our checking account. And then with all of this extensive planning we had done, we went to the Audi and Porsche dealerships and we purchased new cars. So we really didn't have access to the amazing talent that say, a firm like Crescent has to advise and plan. And that led to a career of, of starting and building companies and investing in companies. But I never felt that I had the support of a firm like Crescent, a multi family office that was really a fractional single family office where we had all of the things that say, the Walton family or some of the largest families in North America have with these large dedicated teams and the resources that go with it. So I had retired from my business in 2014. Avi and I had become friends. And after a few years in that stage, we were talking one day about our experiences in wealth management with our own advisors. I had been a client of a wirehouse for 25 years. I had an advisor in San Francisco, a guy I had met in my 30s. Avi had been with another wirehouse here in New York. And it just was really disappointing when we were comparing notes on a lifetime of working with a traditional wirehouse advisor. And then on top of that, I'd had my own family office for 15 years, spent about $3 million in overhead, six or seven employees. And looking at that, it was the burden of responsibility, of managing it and having its own culture and everything that goes along with it. And so when we were talking about it, we're like, why isn't there a platform that would be for all the phases of a CEO founder's life from their 20s and 30s when they're starting and getting traction and scaling to their 30s and 40s when they're hopefully having their liquidity event, to then as it goes on with life, family, philanthropy, all the things that go along with this. Why wasn't there a platform like that? Because it seemed that we only heard from the very large firms right around the time of liquidity event. Most traditional advisors, they only want to call you right around the time of a liquidity event because they're looking for asset gathering. So we said, you know what, let's put some analysts on it and let's spend some time and see if we can find a place that we can become a client of. So we took our two families and two analysts, we spent a year looking, we met with some really interesting firms, all names that your audience would know.

[Doug]

And at the end of that year

[Eric]

we looked at each other and like,

[Doug]

you know what, it's just not that great.

[Eric]

So let's start our own. So we decided to launch Crescent.

[Interviewer]

When you say wirehouses, it's the largest investment banks in the world, these ultra high net worth private banks.

[Eric]

And broker dealers.

[Interviewer]

And broker dealers. And you and Avi both extremely independently successful before you started cross it. You think that you would be able to be satisfied by these wirehouses? What exactly made you so unhappy about their service?

[Eric]

The first would be almost in a sense like one size fits all, whether it's the traditional 60, 40 portfolios that typically we were seeing back then. The second would be a lack of transparency. You know, I'm sure that if you, especially now with Claude, you could probably really dig into the footnotes and the filings. But back then it was really hard to understand how these traditional wirehouses operated and to understand all the ways in which we were being charged and all the fees that are associated with the investments that you're making and understanding whether your advisor was truly a fiduciary, holding your best interests always at heart, or were they conflicted in some way? So I would say a lack of transparency, a bit of vanilla, if you will, certainly back then, a lack of participation and awareness around private markets. And of course what's so ironic about that is that Avi and I and many others created all of our wealth by investing in private companies and private assets. So how can you really work with an advisor who doesn't understand that at a very deep level as you go forward from your liquidity events? So it was just a whole variety of things. I'd say the last One is, I would call it family office window dressing. Many of the traditional wirehouses will say, we have a family office embedded within our firm. Well, go find it. Because we were looking and we didn't really find those resources. The firm I was with for 25 years as a client, I think I saw an estate tax attorney one time in 25 years. I wouldn't call that a family office.

[Interviewer]

You use this word fiduciary, a lot of people don't know. And this isn't, let's not just blame the wirehouses, the entire wealth management industry, the lobby of the wealth management industry, when the SEC wanted to create this fiduciary standard for their clients, they pushed back and lobbied against it. So it was supposed to be put in on the SEC level. It was fought against. So it's literally encoded into the very DNA of the industry.

[Eric]

Yes. I mean, as I understand it, in the wirehouse world they use something called the suitability standard, which is, is the investment suitable for the client, even if the advisor might be getting some sort of a fee or commission or incentive or bonus by you investing in it. So that's called suitability standard. The RIA world that we're in, we view ourselves as a true fiduciary where we absolutely put the client before ourselves and do not take any of kinds of incentives or other fees. We have a very simple model. We charge one fee for traditional wealth management, an AUM based fee. And if you are a family office services client, using all of the things that we can talk about that are in the family office services, you pay for that in a separate fee the way you would for professional services, and that's it. And everything is completely disclosed and very transparent. So I think that's a big difference between the RIA world and the broker dealer world.

[Interviewer]

On the wirehouse side, there's a lot of conflicts, some explicit, some implicit. Obviously you have hidden fees. So sometimes you're getting charged for something, sometimes, for lack of a better word, there's commission sharing on the back end. All this is permitted. But there's also implicit issues where if you're at a large bank and even if you're not getting a cut of the fees, you have a lot of pressure when it comes to bonus time to be pushing the bank's products. To be fair, you're also not a charity, you're a for profit business. Of course, how is it that you're avoiding these principal agent problems?

[Eric]

Sure. So getting back to what you were describing, I think that the challenge is all the Ways in which, in that model, the ways in which clients can ultimately be charged and you described a variety of them. Our model is really simple. It's the AUM based fee on wealth management and it is a professional services fee for family office service or for consulting. And so I think that is just a very transparent model. The other big difference and something for people that are looking for a service provider to consider is the idea of is the firm that you're considering using their scale to benefit the client. So if we're able to negotiate better terms with a manager, whether that's a public or private manager, we pass that benefit directly through to the clients that are participating in that investment. If a client asks us to go and find a mortgage or a loan for them and we're able to get two, three banks to compete for that and provide term sheets, we help the client negotiate the best deal and they get the best deal. We don't take something from the bank. So it's a different model. But the RIA model is a profitable and sustainable business model. Firms in the RIA space can easily have margins on an EBITDA level of 25 to 30%. So the model works. I don't know what they make in the, in the traditional wirehouse world, but it must be a lot.

[Interviewer]

It must be more than 25 to 30%.

[Eric]

It must be a lot.

[Interviewer]

You mentioned this term several times, family office services. Double click on that. What do family offices need that's outside of investing?

[Eric]

So family office services. So if you think about wealth management, developing portfolios, setting goals around those, and then basic planning, financial planning, we'll put that in one bucket. Now let's think about all the other things that someone who's either exited their business and now is living off of the proceeds, or let's say a CEO founder who's driving a company forward and they have some liquidity, but they also own a business. What are all the services and things that you need so that you can stay focused on your mission and what is most important to you and give you your time back? And I think this is just a huge issue that is not talked enough about. What's so interesting about family office services is it probably starts with things like bill paying and fractional CFO services. So having a CFO who's taking care of all of your personal things outside of your core being, let's say being a founder, being a CEO who's taking care of all of that for you, all that reporting, making sure that you understand your asset location, where Everything is your estate planning is correct, just all the things that are around having wealth, your tax efficiency, everything that's with that. And then you have other services like governance and education.

[Doug]

So when your wealth is going to be managed and our time comes when we're very, very old men and now someone else is taking over, what's the governance structure that you have so that this wealth can continue for generations and then education. How do you talk to your kids about money? How do you get them ready for the responsibility of taking over this at some point? What are your family philosophies around philanthropy?

[Eric]

We find a lot of families are

[Doug]

you an inch deep and a mile wide. And when we get with them, with

[Eric]

our philanthropy resources and family office services,

[Doug]

we're able to help them focus and have much greater impact and satisfaction and happiness from their philanthropy. Family office services is credit services which we touched on a few minutes ago. That would be you need a line of credit. Who's going to go out and negotiate with banks and get you the very best credit line possible for whatever that need might be. Family office services includes we have a staff of estate estate tax planners who are all ex attorneys from wonderful estate tax firms and they're helping reviewing all of our family's estate tax planning, making sure that their wealth is going to go where they want it to go down the road.

[Eric]

So it's a whole host of services.

[Doug]

It's a professional services firm within a firm.

[Eric]

You know, think of McKinsey, think of

[Doug]

an accounting firm, think of a law firm. But it's all the services that you would find in a full at scale

[Eric]

enterprise class single family office for one

[Doug]

of the largest families in the world.

[Interviewer]

And these are crested full time employees.

[Doug]

Full time.

[Eric]

There are probably, I think we're up to 160 full time team members who are just doing family office services.

[Interviewer]

Just to play devil's advocate. I agree fully a lot of the conflicts that you see at the large investment banks but they also have seemingly a huge benefit which is their balance sheet. Jamie Dimon likes to go around say we have one of the world's largest balance sheet. I believe it's over 4 trillion AUM. Why does that matter for then clients as they're able to borrow money and borrow against their assets at lower rates. How does CRESA compete with that?

[Eric]

Sure it really does not come into play. It's so interesting because lots of people say that what you just said, but we don't find it to be an issue. Here are the reasons why. The first is at 235 billion of AUM and AUA. We're able to bring banks to the table for our clients needs and we're actually able to get the banks to compete. So like in my own personal circumstance I was with a traditional wirehouse that also had a Bank affiliate for 25 years and at one point I needed a mortgage. My advisor arranged for a mortgage with the bank affiliate. I didn't think twice about it. Later on I asked my advisor, were you compensated on my loan? I'm just curious. And after fumbling and bumbling for a bit, he said yes, I was.

[Doug]

Which at the end of the day

[Eric]

made me think okay, I mean I did fine on the loan. I don't think I was paying credit card rates but clearly it wasn't competitive and clearly I wasn't paying probably the lowest rate possible. So it was actually a conflict more than an advantage. I think that actually making banks compete for our clients business is a much better model. And then let's talk about securities lending and let's talk about custody. So with custody we use Fidelity Family Office, Schwab Family Office and Pershing which is bank of New York. So we have, we think three of the best custodians anywhere in the world and will put their balance sheets up against anyone and their model by the way in these custody businesses it's designed completely around safekeeping of these assets from technology to not using leverage and all the things that I think are actually really inherently different in the third party custody model. So it's just a great question for you to ask but it doesn't affect us really at all. It's great for J.P. morgan, I think it's fantastic. And if J.P. morgan is the right place for you, then that's great.

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[Interviewer]

Let's say, as I'm sure you oftentimes have, you have somebody have a billion dollar exit, a once in a generation, once in three generation exit,

[Eric]

what would

[Interviewer]

you advise in terms of their model portfolio? One of the things that family offices and their CIOs have stressed to me is that there's no such thing as a wealth preservation strategy in the long term. Most family offices don't make it to the third generation. Even with great tax planning. You have the death tax, the estate tax that's constantly eating away, you have divorces, you have marriages, all these things. Do you think that this is a misnomer, this idea of a wealth preservation strategy?

[Eric]

I think that you can have a wealth preservation strategy and for me I would start with two things, tax efficiency and asset protection. So I would start with the foundational, most basic thing and that is making sure that what we're investing in, we're investing on a tax aware basis and we can talk a little bit more about that. And then in terms of asset protection, I think sometimes people don't realize some of the liabilities or things you invest in a building and then there's litigation associated with that. Well, did you have a blocking company that you invested in that then made that investment? Did you do that on a tax efficient basis? Are you protected if something bad happens at that asset? So I think thinking of your wealth like a submarine and having these different compartments that you can seal off so that if you end up with either a bad investment, that at least all you can lose is the equity that you invested in that or the capital that you put into it. So I would start with that and

[Doug]

then within the Portfolios themselves.

[Eric]

I do believe that a well constructed portfolio that's highly diversified include say, global equities and exposure to private equity that we're just talking about. And a good portfolio of income producing things like treasury bills and municipal bonds. Something that's really well diversified and has a global aspect to it. And you're investing for the long term and you have sufficient liquidity that in

[Doug]

a drawdown you don't panic and do panic selling.

[Eric]

I think that you can actually compound your wealth over generations, but you have to also match that with the right planning around the psychology of money. And, and you have to match it

[Doug]

with the right education of the next

[Eric]

generation because the threat to the wealth

[Doug]

isn't bad investments or bad asset protection or inefficient taxes.

[Eric]

The greatest threat to the wealth would be the next generation or the generation after that, changing the plan and losing the money through excessive spending or bad investments or fighting over it. And there are just so many ways in which people can lose their capital and really ruin an incredible plan.

[Doug]

So I think you have to match

[Eric]

a well architected plan with the right family, education and governance so that future generations can actually take that responsibility and be successful.

[Interviewer]

I love that you went there structuring. Perhaps the only thing that's more boring is tax structure and tax. Yeah, probably the two least sexy parts of asset management. But that's where I would argue. I would argue, yes, that's where you begin. But also I would argue that they are really the some of the last points of alpha as an individual investor.

[Eric]

Absolutely.

[Interviewer]

For several reasons. One is so much of the capital markets is you are betting against somebody else. So if you are day trading in your basement on the public markets, who is your counterparty? It is Baliasney. It is 0.72. It is Ken Griffin, the smartest people in the world with the smartest people working for them in the world with the smartest technologies and oftentimes literally literal wires going into the New York Stock Exchange for trade execution. That's your betting guns. When you talk about tax alpha, tax aware strategy structuring, nobody's taking the opposite side of that bet. Nobody's saying don't put an LLC into your structure so that you have unlimited liabilities. The IRS might not love some of these strategies, but there are some regulatory ways to look at it and, and legislative things that have been passed for better or for worse. So these structural alpha and this tax alpha also on top of it being not sexy, it's a difficult thing to sell when you're a large bank trying to win business, structural alpha is not really the thing that you tout certainly

[Eric]

in the traditional model. My own experience is that family office services were hard to find, hard to pay for. Sometimes it was like, well, if you put more assets with us, then we'll provide this service. So it was really not transparent in the price. And you know, you bring up a really good point in terms of are those services really available and will they make a difference? The whole trading explanation you gave I think is a great explanation. And you know my view. If you're a young person and you want to be a day trader, go get a job in one of the places that you were mentioning. Go learn how to do it and make that your business. That never was my business. My alpha before I even learned about great planning was in starting and building companies. And that's how I created wealth for my family. And Abby Stein, my co founder, the same. My brother Doug, the same. We all were cut from the same cloth. Business builders. And that is an opportunity to compound wealth over time on a tax efficient basis because you're not trading and you're not selling your business every day. So it compounds on a tax deferred basis over a long period of time.

[Narrator/Advertiser]

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[Interviewer]

It's the riddle I used to ask people. If the taxes are so bad in California, why are there so many billionaires? And the answer is if you pay one time tax, even if it's 38% versus 25% in another jurisdiction, you have compounded that oftentimes for decades and decades until now. They're contemplating the wealth tax, of course, but could be different. But absent of the wealth tax, you're compounding over and over again you have these network effects we were talking about if you want to be in venture capital, the value of being around San Francisco and you keep on compounding and then, then once it's worth billions and billions and billions of dollars, you pay that one time tax. It's obviously painful and there's obviously structuring around that you could do if it's a public company and things like that. But that's the answer to the riddle, which is if the tax schema is so bad, why are there so many billionaires? And actually the opposite of that is also true. It's a very difficult state, some of these high tax jurisdictions, very difficult states to build traditional businesses where you're paying taxes on a yearly basis and that don't have this kind of, of losses until they're ten hundred billion dollars.

[Eric]

California is a beautiful place to visit. I mentioned to you earlier, I lived there for a few months over the summer to visit our kids. And it's a beautiful place to visit. It's most challenging for high income earners and for small business people. Exactly what you said. But if you have a very large tech company, you're in a whole different, it's a whole different thing. And that's why that riddle exists. But it is challenging for small businesses especially and for high income ear who don't have the assets that an entrepreneur would have in starting and building a successful tech company.

[Interviewer]

I'm going to put you to a specific asset class or sub asset class. What do you think is underrated today as an investment?

[Eric]

There are a few things that I think are interesting and underrated. And by the way, it is a fantastic question because so many things are so elevated in their valuation constructs that I think it's like, like not easy to find things that are truly out of favor. But I would say first, I've been an investor for years now in multifamily real estate. The last few years in real estate were really challenging. But as a result of that new construction slowed. There is a housing challenge in the US an affordability challenge. And so I do think that we're actually at the beginning of an upward period for real estate which would include certain multifamily for sure where we'll see more upward pressure on rents which will be good for real estate investors. So I think that's an interesting asset class to look at and to understand better the BDCs that we spoke about earlier, the opportunity to buy portfolios of loans where, if you go and look

[Doug]

at where loans are traded on tradable loans. And you can actually see that a

[Eric]

loan might be trading at a 5%

[Doug]

discount, but then the portfolio and a

[Eric]

BDC that that loan is in is

[Doug]

trading at a 17% discount and it's diversified.

[Eric]

If you can get a hold of

[Doug]

the loan portfolio, you can to EDGAR at the SEC and you can download

[Eric]

these reports and you can really dig into it.

[Doug]

And if you do your homework, a

[Eric]

well constructed BDC that's trading at a

[Doug]

17% discount is super interesting, especially if

[Eric]

you can put together a portfolio of four or five of them.

[Doug]

Private credit as an asset class has been given a really good drubbing right now and it's probably overdone. And within private credit, I think tax awareness, like equipment leasing, because of the

[Eric]

big beautiful bill, you can turn around

[Doug]

and get nice tax deductions by investing in equipment leasing. And so it's not a permanent tax benefit, but you are deferring taxes and compounding your benefit on a tax advantage basis.

[Eric]

So I would say those would be

[Doug]

the areas right now that I see opportunity.

[Interviewer]

The asset classes that regularly come up with Single Family Office 1 as you mentioned earlier, Lower Middle Market PE previously Professor Steve Kaplan, I think a friend of yours, he showed that private equity has roughly a one beta. So you're not getting more risk than being S&P 500. But there's still that alpha. And that alpha is mostly in the lower middle market. Large buyout is just getting so big that it's becoming more and more difficult to generate alpha. But in the lower middle market, if you know what you're doing, you have the team and you have a smart way to access that. Second, perhaps extremely obvious, top quartile venture or top decile. Another Steve Kaplan research 52% persistence for many decades, top quartile, staying top quartile

[Eric]

venture will be an access class, not an asset class. You have to get into those best funds.

[Interviewer]

Absolutely. Also as just a general principle of how to invest, one of the things I think investing is very misunderstood about asset classes is the supply and demand dynamics in the asset classes. If an asset class, no matter how overpriced it was, if it becomes unfavorable for a long enough time, the capital and the demand goes away from that asset class and it reaches an equilibrium point where it now becomes favorable. The example I like to use is early stage venture capital. Let's say people think that's overpriced at 50 million. If the capital keeps on leaving that asset class and it keeps on going 40, 30, 20 at some valuation, maybe it's $5 million. It now becomes one of the best asset classes.

[Eric]

That's right.

[Interviewer]

But yet people like to pretend like these asset classes are fixed pricing. Early stage venture must be at $50 million. Oftentimes, some of the best asset classes are below the headline. I had the CIO of Texas Tech, Tim Barrett, and he was going after probably one of the most hated asset classes, office space, because the headline was so bad, nobody was investing. And he went one layer below that, and he looked at specific geographies, specific structures, where the baby went out with the bathwater. And he saw these great returns because not in spite of it and being unfavored, but because of the very fact that it was unfavored. There was the equivalent of free money on the floor where nobody was there to pick up it up.

[Eric]

Yeah, I agree with you. When I was in the ninth grade, I had a teacher, Mr. Reese, and he talked about the cycles of life and the cycles of business and boom and bust. And it's absolutely the same thing within asset classes. Asset classes cycle into favor. Investors get excited. There's a lot of press that supports that, especially now with social media. There's so many outlets that can get behind something and we get, in particular areas just get overheated. Valuations soar, and then eventually it changes. Having an understanding of the fundamentals of investing and having the ability to pick and choose certain asset classes that you want to become an expert in. And if it's two or three, great. And then your ability to watch those and to have a sense as to when to get in and when to get out. I mean, let's take multifamily real estate as an example. There are many. You're talking about family offices. There are many single family offices where the source of the family is wealthy, came from real estate. We're sitting in New York, New York City. Some great families that made tremendous wealth over generations here in New York real estate, they know about what properties you want to hold forever, what properties you might want to sell under certain circumstances, when to finance, when to refinance, when to recap and pull money out. They have such a great understanding of their asset class and they're experts in it. And that makes it hard for new people to come into it. But if you can do that in two or three things where you really understand them at a granular level, then you have a good sense as to when to double down and when to perhaps pull back and maintain more liquidity in your portfolio.

[Interviewer]

And on that vein, you wrote the book the Long Game. Why did you decide to write a

[Eric]

book so 30 years ago? I mentioned I'm from Baltimore. From humble beginnings. My dad was the first one who went to college. And he started a business in college to pay his way, where he hired his fraternity brothers to dress up like Santa Claus. He rented them to department stores, like a temporary service agency. And as only could happen in America, department stores became shopping centers, became malls. My dad did 400 malls in the U.S. that meant that for 53 years, if you took a child to have their photo taken with Santa, that everything around it, the set, the chair, the whole mall, that was our business.

[Doug]

And it was a great family business.

[Eric]

And my dad had that company for 53 years.

[Doug]

But my brother Doug and I did not want to go into the business.

[Eric]

We loved dad, and we loved the business. It was fun to grow up in it.

[Doug]

We didn't want that to be our careers. So my dad, unfortunately, didn't have a great succession plan. And eventually he was forced to sell the business into kind of an esop,

[Eric]

not a super successful employee ownership model.

[Doug]

And then eventually that was sold to

[Eric]

a large kind of convention company that

[Doug]

basically handles the really big conventions. And after working there for a year

[Eric]

for the buyer, my dad called my brother and me and said, this company that he sold it to, he goes,

[Doug]

they're bad at Christmas. They're bad Santas, and I don't want

[Eric]

to work here anymore.

[Doug]

And he quit. And it became such a sad chapter in his life. So the book, my very first inspiration for the book was my father. And how could I come up with some kind of a construct where his company could have continued beyond the 53 years that it stayed in our family and so that it could have thrived

[Eric]

for a longer time?

[Doug]

And one day I was walking in

[Eric]

downtown Baltimore, I picked up the Baltimore Business Journal, and there was the Book of Lists. And it was the oldest companies in

[Doug]

the state of Maryland.

[Eric]

And it was companies back then like Alex Brown, which was a great, great investment bank. They had lasted for 195 years. Johns Hopkins, a name everybody knows, and some defense companies.

[Doug]

I think Lockheed Martin was maybe on it back then. And then I see this name, the Lone Brothers Tent Rental Company.

[Eric]

And I look at Lone Brothers, and

[Doug]

they were like 200 years old. And this is years ago. I'm like, oh, my gosh. How does a small business, kind of like my dad's business, how do they last for like 200 years? That means that they lived through pandemics and, like, the Civil War. And I mean, I'm just making a list of all the things in my mind. So I went and I go look the company up and I find out that Joseph Lone left England in like 1815. There had been a volcanic eruption and there was darkness kind of around the earth, so it was cold everywhere. So it was dark and cold in England. And he's like, I'm going to leave. And he picks Baltimore because it's a great port back then. And he makes his way to Baltimore and he opens up the Joseph Loan Sail Company, making sales for the clipper ships that are going back and forth doing trade with probably Alexander Brown that becomes the Alex Brown Company. And I'm like, wow, what an incredible origin of that company. How did they last for? So I ended up calling Brian Loan and interviewing him, learning his lessons. And that became a hobby of mine where we would travel as a family. I'd bring my kids and my wife Jill. If we were in Italy, we're meeting with the Frescobaldi family, 33rd generation. Think about that. That means that they bought land in the center of Florence in the year 1500. So this is a family that's lasted for 33 generations. And so we sat with Lamberto Frescobaldi, his two sons and our two sons, and we had a great conversation about life, about succession, about family education and family values. And I just did that over and over again. And then finally about two years ago, I was talking to my co founder Abby Stein about our hopes and dreams for Crescent. We want Crescent to be a 100 year business. And Abby said, you know what, take those interviews, put them together in a book, let's put that out, out to our team. So originally the book was going to be written for the team at Crescent. And then my daughter in law was talking to me about it and some other friends and they were like, this could really be a book. Like, you should put this out here. And the reason you should put it out there is because there's this amazing fascination that we have as a society around technology, innovation, disruption, you know, what's new, how fast can we get to the exit? All that's great, super cool and we should celebrate it. But we've put almost nothing into what are the lessons we can learn from companies and organizations that have stood the test of time. And it could be Hasbro or Whirlpool, or it could be Ferragamo and Frescobaldi in Italy. These are companies that have stood the test of time, that have survived moments of truth where if they had taken the Wrong turn. We wouldn't even know their names anymore. But they were able to make the right decisions over the scale of 100 years. And that's probably 15 or 20 moments of truth where they were able to get through the pandemics and the wars and the recessions and depressions. Having a bad generation. I mean, 33 generations for the Frescobaldi family. They said to us, not every one of us was so great. Over 33 generations. There were a couple of not so good ones in there. But the business was resilient enough that it could even survive a bad generation. That's pretty cool.

[Interviewer]

What was the most surprising lesson you learned from interviewing these organizations that have been around for hundreds of years?

[Doug]

So. So one that I absolutely love, especially spending time visiting Asheville, North Carolina is the Biltmore, which is the Vanderbilt family. So the Cecil Pickering family. They're a sixth generation family now in Asheville, managing this American treasure, The Biltmore House. 8,000 acres, spectacular beauty. And they have been able to survive from George Vanderbilt, who built this all the way now for six generations through great family planning, through a family culture of conservation and preservation and of stewardship, where they view this amazing again American treasure. Of this home that we have here in America, that was George Vanderbilt's home. They treat this as something that's not even theirs for their generation, but something that they are taking care of future generations. And it's powerful.

[Eric]

It's really powerful.

[Doug]

And they've proven that they can do it. They've been very successful.

[Eric]

It's a great place to visit.

[Interviewer]

I highly recommend it said another way they bought into the vision. Multiple generations have bought into long term vision.

[Eric]

And each generation has taken the responsibility

[Doug]

of helping the next generation to come

[Eric]

up to speed on what all of that means. So like G5, you know, they spent a lot of their youth on the property, working the farm, working the house, working the hospitality. One, you know, one gentleman, his background, he worked at Disney and learned hospitality at Disney. He also was in Africa with Jane

[Doug]

Goodall and learned about conservation. And so he's running part of the business. And then another gentleman spent his time in investment banking and learned about capital markets and investing. And so he's helping and working that

[Eric]

part of the family. So you've got operators and investors, you've got entrepreneurs. There's a family member who started a

[Doug]

jewelry business, which is fantastic, taking some

[Eric]

of these inspiring pieces that previous generations

[Doug]

had and then bringing her design ideas to make them contemporary and cool and

[Eric]

has really created a wonderful jewelry business.

[Doug]

So there's innovation, entrepreneurship, operators, investors, but they all share this passion for the

[Eric]

property and this tremendous responsibility of stewardship

[Doug]

and making sure that it's great for

[Eric]

future generations of Cecils and Pickerings, but it's also great for those of us

[Doug]

that want to come and visit this

[Eric]

property and experience it.

[Interviewer]

Do you think those lessons can, could it be applied to a company that's not family owned?

[Eric]

Yes, I do think that these ideas

[Doug]

around stewardship, around thinking over the long term.

[Eric]

You spoke about balance sheets earlier.

[Doug]

How you manage your balance sheet, how

[Eric]

much leverage you're going to put onto

[Doug]

a business, how much you're going to invest in the future, all of these decisions. I think that whether it's a family owned business or whether it's a business that you are running for somebody else,

[Eric]

that you can use these same principles to allow a business to be a

[Doug]

whole lot stronger and very successful over

[Eric]

a longer period of time.

[Doug]

And what I find with a lot of short term thinking is if you're a buyer of a business that's been

[Eric]

built for the short term, you better

[Doug]

do your diligence because you'll find in many cases corners that have been cut. And so if we use a real estate analogy, you're walking around a property and it needs paint and it needs

[Eric]

work and you can just tell that

[Doug]

someone hasn't really been taking care of it. If it's an operating company, you can see that they're short staff.

[Eric]

On the capital equipment side, things are falling apart. You can just tell when something has

[Doug]

been well taken care of and someone has created a very powerful cash flow machine that is built to last.

[Interviewer]

Before me and my business partner who's sitting here, Curtis, before we started Westward Capital, we sat down and we used this framework that, that I learned from my mentor Eric Anderson, who's now on his fourth unicorn. And he's learned through his experiences that he's only interested in building the business he wants to work in for the rest of his life. And it sounds trite or it sounds like a slogan or something, but if you truly embrace it when you're building the business, you fundamentally build a different business. And it's in the DNA, it's in the values, it's in how you hire, it's in how you incentivize. And I think there's something to this whole aspect, and maybe it's the asset management business in itself that's turned everything to these three four year cycles. In fact, we're so short term focused as a society that the public markets are Day to day. So when you have a private equity fund holding for three to five years, you're like holy crap. They're so long term thinking. But if you take a step back and look at the original businesses, these family owned businesses, there is something to holding these assets for 10, 20, 30 years. I had a guest on the show, Brent Beshore, who's in the Midwest and He has this 30 year fund. You mentioned this concept of leverage. He oftentimes buys companies and waits for this once in a decade opportunity where shit hits the fan and there's a buying opportunity and by not having leverage, he's the only one that's not like a chicken running around with its head kind of. I think there's something to this compounding. And the thought experiment is if tomorrow you sell your company, what are you going to buy?

[Narrator/Advertiser]

If you're just going to put it

[Interviewer]

into a 6040 portfolio, if you're going to buy the S&P 500, why, why not compound what you know, your asymmetric information, something that you control in order to compound your wealth. That way people are just so incentivized to just get that mark, get that pat on the back that they over index on that and under index on what are they going to do the next day.

[Eric]

Yeah, I think that's a great concept. I totally agree. I have a saying which is you should run your business like you're going to own it forever because you just might. I mean we have long periods of time sometimes where for whatever reason, capital markets, you can't sell something at what you might think is a fair price. And I actually think that what is, is counterintuitive of say the long game, a 100 year business or in your example of owning a business for decades is that a lot of times people think that that means like never selling. And certainly that is a possibility. I mean looking at this fantastic Biltmore property, never been sold and probably never will be.

[Doug]

But what it means is you're building a more valuable business, a more durable business and that makes it more desirable. And so when you were talking about your friend's concept, I think that what's

[Eric]

so interesting about I'm going to run the business like I'm going to going

[Doug]

to own it forever.

[Eric]

Or in his example, I guess it was run it for decades.

[Doug]

This idea that you're thinking more over the long term and you are building a better business, a more durable business, a more valuable business. And that is something then that ironically

[Eric]

and interestingly acquirers will desire even more

[Doug]

and at some point they're knocking on your door.

[Interviewer]

The paradox. I've also found the paradox. The more long term you think, the faster your growth, the more short term results you will have from the long

[Doug]

term thinking we should collect these paradoxes. So I think of like having been a parent and now becoming a grandparent.

[Eric]

You know, one of the great ironies

[Doug]

is how independent are your children. And this is so ironic because the more you love your children, the more

[Eric]

you would want to hold them so

[Doug]

close and protect them from every little bump and bruise. But that's so ironic because if you want independent children, you have to allow them to fail. You have to allow them to do their own thing. But that is, that's kind of a paradox.

[Eric]

You'd think that actually the people that

[Doug]

love their children the most would actually be holding them so close. But that's exactly the opposite of the outcome you're looking for. You want independent children that are capable and can carry on their own lives without us. That's the highest thing that a parent can do. Another great paradox and irony is the sale of a business. The exit of a business to be celebrated. Now you have a pile of capital, but the funny thing about it is that capital will not manage itself. And so someone thinks that, hey, I worked so hard to build this business and take these risks and now I'm going to diversify. But the pile of capital is sitting there and they're not putting the same level of expertise and effort into managing that that they did in their business. You know, they had a board of directors, they had top leaders and executives in the company. They had talent and culture and all the things it takes to build an organization. Now suddenly you get a pile of capital and it's like one guy and a dog. And that's just an unbelievable and kind of funny paradox that people don't always put the same level of rigor into how they're going to manage the capital after they have that exit. And the last one that I think is a funny par paradox is around great leaders, CEO founders, or really leaders in any particular field.

[Eric]

It could be a great professional athlete or entertainer. Anyone who's great at something, they're able to focus on it with a level of intensity. And as a result of that, everything else is excluded through the focus. And then if they're a family person

[Doug]

and they want to stay married, they're

[Eric]

going to have to be investing in putting time into their family.

[Doug]

And if they're a good citizen, hopefully they're doing some good works.

[Eric]

In their community. Community.

[Doug]

Is there any time after that for like deep planning around estate tax and

[Eric]

some of these other things that we talked about.

[Doug]

And what I found, which I thought was just my secret, that I didn't put time into those things until eventually

[Eric]

we created something like Crescent and I

[Doug]

could become a client of it. It turns out that every high performing CEO, founder that I've met, they all have the same thing and that is that they were focused on their main thing and their family and then hopefully the community.

[Eric]

And they all actually had this drawer where they put everything in it, statement,

[Doug]

plans, all this other stuff. And they've just closed the drawer and once a year they'd send it all to their accountant.

[Eric]

And so that has been a very funny paradox.

[Interviewer]

On that note, Eric, this has been an absolute masterclass. Thanks so much for stopping by.

[Eric]

Thanks for having me.