Episode 38: $18B Value Investing Portfolio Manager Jim Falbe on Founding His Own Investment Boutique | Why AI is an Amplifier of Classic Value Investing

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Can classic value investing, and AI coexist? Today, Jim Falbe is coming on the show to share his playbook for blending timeless strategies with AI WITHOUT losing the personal touch allocators love. 

In this episode, Jim and Stacy cover:  

• His backstory

  o How losing his mom at 13 sparked his passion for financial management 
    o Why he left an investment giant to follow his dream of building his own firm 

• Why AI isn’t just a trend: What he’s learned from 10 years in the data science game

• The secret sauce to building a company culture that’s built to last through challenging seasons 

Grab your popcorn and your Kleenex because Jim isn’t holding back in this episode. He’s sharing the raw emotion involved in foundership, and As you listen, you’ll feel like you’re talking to a friend that’s not afraid to dive into the real talk about life. From navigating grief to leading the charge in modernizing value investing – this episode will solidify one thing for you – you’re not alone in the ups and downs of entrepreneurship and life.

About Jim Falbe:

Jim is passionate about mentorship and investing. As the Founder of Saguaro Capital Management, he lives these passions daily.

Jim was previously a Principal and Portfolio Manager at Vulcan Value Partners. With the Senior Investment Team, he was responsible for portfolio management, coverage of both portfolio and watch list names, and seeking out new investment opportunities. 

Before Equity Research, Jim was a humanitarian worker in the Middle East/North Africa region. Starting as an English teacher in Jordan, he taught over 800 students and finished by helping run a training center that educated over 1,500 students per year. His team of fourteen was on the ground during the Arab Spring and helped build a network for international aid efforts in Egypt and Libya.

Jim is a CFA® Charterholder and earned his MBA in Investments from the University of Notre Dame. He also holds an MDiv in Theology and a BA as a University Scholar from Baylor University.

Married with four energetic kids, Jim loves science fiction, history, long walks, chess, and Baylor Football.

Transcript

Below is an AI-generated transcript and therefore it may contain errors.

[00:00:00] Jim Falbe: And when you zoom out and take that long term perspective, all of the shorter term trials and tribulations don't matter. What matters is, do you have that DNA? Do you have the right soil, uh, to build something for the long run? And that's what we're trying to do. We're trying to instill the values and the culture that we think are going to get us through the good times and the bad.

[00:00:18] Stacy Havener: Hey, my name is Stacey Havener. I'm obsessed with startups, stories, and sales. Storytelling has fueled my success as a female founder in the toughest boys club, Wall Street. I've raised over 8 billion that has led to 30 billion in follow on assets for investment boutiques. You could say against the ads.

[00:00:37] Stacy Havener: Yeah, understatement. I share stories of the people behind the portfolios while teaching you how to use story to shape outcomes. It's real talk here. Money, authenticity, growth, setbacks, sales, and marketing are all topics we discuss. Think of this as the capital raising class you wish you had in college, [00:01:00] mixed with happy hour.

[00:01:03] Stacy Havener: Pull up a seat, grab your notebook, and get ready to be inspired and challenged while you learn. This is the Billion Dollar Backstory Podcast.

[00:01:15] Stacy Havener: There's a great book called The Hard Thing About Hard Things, and the title says it all. Building a business and living a life, it's not all rainbows and unicorns. We have to do hard things. The struggle makes us stronger and shapes our story, which means the struggle is also part of our success. Meet today's guest, Jim Falby, founder and portfolio manager at Saguaro Capital Management, a specialist in value investing.

[00:01:47] Stacy Havener: After eight years at Vulcan Value Partners, a double digit billion dollar asset management firm, Jim decided it was time for him to set up his own shop. He and his team are building a [00:02:00] modern value investing firm, one that uses AI to amplify the classic value investment discipline. I know AI is buzzy and trendy, but this isn't new for Jim and his team.

[00:02:13] Stacy Havener: They've been in the data science game for about nine years now. What they're doing is different. Their philosophy, approach to value investing, and yet it has all the hallmarks we've come to love about value investors and investment boutiques, alignment, passion, and for me, story. As a member of Saguaro's advisory board and a friend of Jim's, this podcast hits a little different.

[00:02:39] Stacy Havener: You definitely want to grab the popcorn. And while you're there, you might want to grab the Kleenex. We hit the real talk in this episode, and real talk sometimes comes with raw emotion. I'm proud of everyone who comes on the podcast, their bravery and courage in sharing their story. I'm incredibly proud of Jim, [00:03:00] and I know you will leave this episode impressed by what Saguaro is building.

[00:03:05] Stacy Havener: And inspired by the founder who is leading the charge. Meet my friend, Jim Falbi. Hello everyone. Welcome to Billion Dollar Backstory Podcast. I am thrilled to have Jim Falbi of Saguaro in the studio with us today. And in full disclosure. Sure. Not only are Jim and I friends, but I'm actually a board member of Saguaro and honored and thrilled to be one.

[00:03:33] Stacy Havener: So this is especially fun for me, Jim, because I know you and I know your story, and I'm thrilled to invite other people into the conversation with us.

[00:03:42] Jim Falbe: Well, one, we're honored to have you on the board, and two, I feel very fortunate that despite how well you know me, you're still willing to have me on the podcast, so.

[00:03:50] Stacy Havener: Uh, that's great. Okay, so let's start with my favorite thing, and that's backstory. And because I know your backstory, I'm not [00:04:00] gonna guide you, but I will tell you some of my favorite parts as you think about which parts to share with the group. A lot of people work into their backstory, their mentor or who inspired them, and they think it's really special that your mom is such a big part of your story, so I'd love for you to talk about that if you're comfortable sharing, and not only her inspiration for you, but also I think how she's actually influenced the creation of Saguaro.

[00:04:27] Jim Falbe: Sure, that's uh, okay. Wow, that's big question heavy question to start with but uh, you know, thank you.

[00:04:33] Stacy Havener: Yes. Sorry We're diving right in.

[00:04:34] Jim Falbe: No, so just anyone who doesn't know my mom passed away when I was 13 So she was a big inspiration, but it's also uh, you know, it's a little bit tender So mom was a huge inspiration, you know growing up.

[00:04:43] Jim Falbe: She was Incredibly talented. I mean, my dad actually stayed home. Uh, he did kind of a radio gig. So he, he'd do that once a week, but he would stay home, take care of me and do, do things around the house. And my mom was the primary breadwinner. I thought that was totally normal. So this is the 1980s and I didn't know any different, but my mom was the [00:05:00] treasurer for Carl Karcher Enterprises, uh, which owns Carl's Jr.

[00:05:03] Jim Falbe: and Hardy's restaurants across the United States. And primarily what she was responsible for was corporate cash management. She did a phenomenal job for them for a long time. So there's actually A book written by Carl Karcher, who, of course, was the founder of CKE. And in it, he mentions Carl's Jr. 's first expansion into Texas, where they tried to go big into Texas, and it almost bankrupted the company.

[00:05:24] Jim Falbe: And in fact, he claims that the company would have gone bankrupt, had it not been for the excellent capital allocation and kind of cash management of my mom. To where she generated such a significant return, they were able to make it through that disastrous decision. And so, you know, my mom had like, 10 copies of the book at home.

[00:05:40] Jim Falbe: And

[00:05:41] Stacy Havener: that's amazing.

[00:05:41] Jim Falbe: I remember growing up. My mom's famous. She's in a book, you know, but I have been told and I cannot confirm this, but I have been told by several people at one point. She was actually the highest ranking woman in the restaurant industry. And. Well, I think that's I don't know if it's a negative thing on the restaurant industry or a real positive thing for my mom.

[00:05:59] Jim Falbe: I did not [00:06:00] appreciate that at the time. You know, now today, looking back, I go back to old 10 K's of C. K. E. And I can see my mom is one of the main executive officers. And that's kind of a cool thing. You know, when I was growing up, we always had Louis Rukeyser and Wall Street Week on the TV and my mom at night, which she tell me that all these crazy things she was doing, which I don't know.

[00:06:19] Jim Falbe: Cool. One, why she told me and two, how I can still remember what they were. But you know, I'm holding my stuffed animal and she's talking about, I'm writing covered calls to try to earn excess yield on these stocks that we own. And you know, I own this little avocado grove and here's what I'm doing with all these various credit cards.

[00:06:32] Jim Falbe: My, my family actually had like 200 credit cards, which is insane. But my mom, every time there was an offer on like, you could get capital for free, she would take it. And so the same kind of corporate cash management stuff she would do for the firm, she was doing for us personally, as a family, she had to have the lowest possible cost of capital and enter in kind of that excess yield.

[00:06:47] Stacy Havener: Thanks. And I really appreciate your willingness to talk about this. I can only imagine how difficult it is to have lost your mom at a young age and, and to relive that. But what I want people to take away as we continue this [00:07:00] part of the conversation is that, A, the bravery to confront things that are challenging.

[00:07:05] Stacy Havener: And also that sometimes the messy parts that we try to hide are where the magic is. And so with your mom, so she was at it. The restaurant, the Carl's Jr. Restaurant biz. And then she turned more to the investment management side, right? Because that's where the WCM connection comes in. Can you talk about that?

[00:07:28] Jim Falbe: Absolutely. So, um, interesting that she was at Carl Karcher for a long time and probably would have stayed there her whole career, but Carl Karcher, who was the founder had ended up, he tried to do some big real estate deals in Southern California, and he had. He had pledged all of his Carl Karcher shares as collateral against some of these loans and some of his other business deals ended up not working out.

[00:07:47] Jim Falbe: And so you had these banks that came in and actually took over Carl's Jr back in the early 1990s. And when they did that, they cleaned house and obviously being a bank, they're like, we don't need an internal treasury department because we can manage that ourselves. And so my mom was looking for [00:08:00] something else and she had never thought she was going to look for something else, but she had a couple opportunities to pop up.

[00:08:04] Jim Falbe: One. It was to go be CFO of a large steel company. And she's like, Oh, that's interesting. And then there was this other retailer out of Bentonville, Arkansas, uh, that was looking at her and she's like, Walmart, I don't, I don't want to live in Arkansas and it didn't go that direction looking back, maybe that wasn't the best decision.

[00:08:22] Jim Falbe: She ended up instead going and trying to start a corporate cash management fund at a little firm called Winrich Capital Management, which was a tiny, it was a 200 million boutique. It had recently experienced kind of a change in ownership where the son had bought out the father and she loved it. She was there for a little while and we got really connected kind of with the community and it was a very different feel from the corporate environment.

[00:08:44] Jim Falbe: Of Karl Karcher Enterprises, and unfortunately, I think probably about six months after she started, um, 44 perfect health went to a conference in New Orleans, came home, got sick, it was some kind of virus, and you know, I got it, my dad got it, we all kind of went down, and, um, [00:09:00] unfortunately, the medicine that was prescribed for my mom, which, you know, why would you prescribe something for a virus, but she, she had an allergic reaction to it, and ended up going to the hospital, and kind of, Unfortunately, medical malpractice.

[00:09:08] Jim Falbe: She passed away over Thanksgiving holiday, and it was really quick. I mean, it was four days from she was sick till she was gone. And, um, just an unbelievable kind of experience, but you know, uh, the WCM people came to my mom's funeral and it was, um, it was tough. Uh, but yeah, after that happened, I mean, we ended up moving to Texas cause we had family there.

[00:09:26] Jim Falbe: And so left California where then born and raised up to that point. And, um, yeah, started, started kind of a new life. So, uh, the WCM connection comes back later in this journey.

[00:09:35] Stacy Havener: Yeah, so tell us about that because then you went over and did some humanitarian work and got away from finance and when you think about that, what do you think pulled you back in?

[00:09:47] Jim Falbe: Well, what pulled me back in is straightforward. I got married and, you know, I met my wife. Overseas in Jordan and Janelle, my wife and I actually went to Baylor at the same time. We had the same friend group, but somehow we never met. And [00:10:00] I, you know, maybe we met and Janelle just doesn't remember it because I wasn't her type or I wasn't, it wasn't cool enough, but while we were overseas in Jordan and we were in a city called Zarka, we were, there were like 14 Westerners and I was the only, Single American and she was the only single American female and she got lonely and I was there and I married way above my pay grade.

[00:10:17] Jim Falbe: So kind of, you know, hey, the stars are aligning, this is fate and it worked out. So, um, I'm very happy and I think hopefully she's very happy too. Oh, you got four kids and I'm loving that. But when I got married, it really, it sparked something in me. I'm like, I'm okay. Eating rice and peanut butter, doing that whole humanitarian thing.

[00:10:35] Jim Falbe: But if I want to think about paying for college, or I want to think about retirement and caring for a family, I need to think about investments. And so I actually found a book on a shelf at my mother in law's house called a random walk down wall street by Burton Malkiel, right. When I'm thinking about this and got very excited about it, I'm like, Oh, wow.

[00:10:49] Jim Falbe: I can do index funds and passive investing, probably earn a, you know, 12, 14 percent return just by kind of allocating to whatever's down. And before I jumped in wholeheartedly, I'd also heard about Warren Buffett. [00:11:00] And I probably don't need to give you a whole Buffett story because there's so many investors that go through that.

[00:11:04] Jim Falbe: But his wit and wisdom on life really impacted me again and again. And again, he says, the Bible of investing, the only book you need to read is the intelligent investor. And so if that's the case, maybe I should listen to him. And I've, I've shared the story a lot of times, so people probably heard it before, but I actually took the intelligent investor on my honeymoon.

[00:11:22] Jim Falbe: And so the joke was on my wife that the man she married was very different than the guy who came home from the moon. And I was like, you know, I think I could do this. Like, this sounds like a lot of fun to investigate these companies, et cetera. And so Uh, we go back to the Middle East and, you know, by day I'm helping run this English and computer training center where we're educating up to 1500 students a year.

[00:11:42] Jim Falbe: You know, I'm teaching in classes and then helping do admin at the same time. But in the evenings I started investing and, you know, fast forward about a year and I was investing money for myself, a couple of family members, the parents of a few friends, and then a couple other members on the team were getting investment advice from me.

[00:11:58] Jim Falbe: And so here I am kind [00:12:00] of in the middle of nowhere and I'm managing over a million dollars and I was a lot of fun with it. I kind of looking back, I'm like, well, maybe I was the one eyed man in the land of the blind because the people I was working with didn't really understand investments or retirement savings or anything like that, but really enjoying it.

[00:12:15] Jim Falbe: And one of the things that Charlie Munger, Warren Buffett's partner, always points out, he's like, it's not about your intellectual makeup. To determine whether or not you're a good investor. Because I thought I'm smart, I'm intelligent, I'm reading finance and accounting textbooks for fun. My, you know, my wife's like, wait, you want an accounting textbook for Christmas?

[00:12:32] Jim Falbe: And I'm like, yeah, I really do. I'm excited about it. Read the whole thing. But I was like, I have the intellectual makeup. The question I really had was, do I have the emotional makeup to do this at a high level? Can I truly be greedy when others are fearful? Fearful when others are greedy, you know, can I have that long term time horizon and sure enough, the financial crisis rolled in and I actually ended up making a lot of money for the people that I was advising and working with and coming out of that, they all sat me down, including my wife and said, Hey, listen, I [00:13:00] love what you're doing.

[00:13:00] Jim Falbe: You know, this humanitarian work is teaching this training. It's great. But think about the value that you're adding to our lives and potentially the value you could add to other people's lives. Doing this professionally, like you're one person, but think about how you could amplify. Your own impact by going after your proclivities, your giftings, and then using the results of that to make a bigger difference.

[00:13:21] Jim Falbe: And I was like, okay, you know, I don't know how to fight against that. I'm in these classes every day telling people, you only live one time, go for your dreams, do something big, don't hold back. And I was like, maybe I need to follow my own advice. And so that led to some introspection. And I said, if I'm going to do this, if I'm going to try to manage money and start my own firm one day, I think there's three things I need to do.

[00:13:43] Jim Falbe: One, while I've read a lot of textbooks, I probably need to go back and get that foundational business education because that's not what I did as an undergrad. As an undergrad, I was kind of a glorified, just liberal arts, do what you want major. And then. I also thought I need to get the highest kind of certification possible.

[00:13:58] Jim Falbe: So the CFA, so let's go get an [00:14:00] MBA, CFA. And then finally, I want to try to apprentice for a truly world class firm. That way I can determine whether I'm actually doing this at the highest level, or if I'm really just. You know, kind of a garage level hedge fund doing it on my own. And so that led to a journey, uh, to try to go back to school.

[00:14:15] Jim Falbe: I really wanted to go to Columbia because that's where, where Buffett was.

[00:14:19] Stacy Havener: Yeah. Yeah.

[00:14:20] Jim Falbe: They, they looked at me and said, well, one, we think you're too old and two, you've done humanitarian work. How are you going to compete with someone who's been on wall street for six years? Cause they're really thinking about once people matriculate, how likely is it that they're going to be able to get him, get employed.

[00:14:32] Jim Falbe: And they didn't think that. I had it. I mean, my test scores were great. My GPA was all those things, but they just said the background. No. And so the school that was willing to take a chance on me was Notre Dame. And I very specifically remember the director of admissions, Brian, Laura, we're talking on the phone.

[00:14:46] Jim Falbe: You can hear the call to prayer going off in the background where I am in Jordan. And he's like, you know what? We don't just think you're gonna be a good student. You're gonna be a great human being. We think you're gonna be a great alumni, and we want to invest in you as a total person. And what I didn't know at the time [00:15:00] was how well regarded Notre Dame's investment office was so Scott Malpass and his crew and just by serendipity or dumb luck.

[00:15:09] Jim Falbe: I show up and I get connected to Scott Malpass and he passes me on to his number two in the public equity area, which is called his name is Rick Berman. So Rick Berman and his partner, Paul Abuser, uh, they actually started a new firm called Seder Grove down in Florida where they're a permanent capital vehicle.

[00:15:23] Jim Falbe: It's amazing what they're doing. But Rick had spent the first part of his career actually traipsing around Africa, doing some humanitarian work.

[00:15:28] Stacy Havener: Wow.

[00:15:29] Jim Falbe: Real connection. That was kind of a big, big step for me. So.

[00:15:33] Stacy Havener: Isn't that amazing? It's okay. This is so good. And this is, you know, this is like we were saying in the green room, this is just a chance.

[00:15:39] Stacy Havener: It's like, we're having coffee together and people are, are with us, um, in that room at that table. I mean, I got emotional listening to you say what that admissions counselor said to you ahead of admissions, because that's what it's about.

[00:15:54] Jim Falbe: I mean, I

[00:15:55] Stacy Havener: mean, that's what it's about, like taking a chance on people and like, Sorry, [00:16:00] Columbia, but you missed out on one of the great ones just because on paper you didn't meet the criteria.

[00:16:05] Stacy Havener: I love that Notre Dame saw through that and saw to who you are as a person. And that's what this whole podcast is about. So it was perfect. So, okay. So you work at you or you go to school at Notre Dame and then when, so now you've ticked, you know, a couple of the boxes on your three point checklist that you had in a very left brain way of how you're going to make this move to the investment management world.

[00:16:27] Stacy Havener: How did you end up? With the third piece, which was, you know, kind of apprentice or work for a world class investor.

[00:16:34] Jim Falbe: So the connection with Rick Berman was actually really important there because one of the things I learned in the Middle East was how to network. And I've spoken before about the big learning for me was this idea of, of wasta, which is, you know, who, you know, really matters.

[00:16:47] Jim Falbe: Your network really matters. You get a job because of your uncle or your aunt, not necessarily based on meritocracy. And so when I came back, I was very focused on networking and did everything I could to kind of, you know, talk to everyone in New York, everyone in [00:17:00] Boston who was doing what I was really interested in, in doing, which ultimately were.

[00:17:03] Jim Falbe: Boutiques focused on long term value investing and not from the sense of we're looking for value stocks, but from that sense of philosophy. This is how I live my life and I believe in paying less for something that it's worth. And if I do that again and again, it works out really well for me.

[00:17:20] Jim Falbe: Unfortunately, I had a lot of the same issues that I had with Columbia where people were just saying, well, we not sure you're the right fit or the right person and happy to give you a little advice, but not sure I want to take that next step. And getting connected to Rick. Changed all of that because he said, well, let me make an introduction for you.

[00:17:37] Jim Falbe: And to be frankly, he represented about 5 billion in capital from an allocator. And so when he's like, well, Hey, would you be able to talk to this person? They're like, sure. We would love to talk to him. And so that really helped me get my foot in the door. And I had tons of interviews that got lined up almost every Friday.

[00:17:51] Jim Falbe: And so at Thursday evenings, I'd travel up to New York and do these interviews. And yeah, it just kind of, that network kept expanding. And what ultimately happened was I got a. I got a [00:18:00] final round interview at Fidelity. And so, you know, they have 1500 applicants. They have like two spots on the NBA track to bring in someone from an analyst, uh, from the analyst side.

[00:18:08] Jim Falbe: And so if you make it to the final round, it's kind of a big deal. And once people heard I'd made the final round at Fidelity, I got an offer from Putnam to do like an internship. And I started getting offers from all these little boutiques. All your final round at Fidelity. We'd love to have you. And I'm like, that's really interesting.

[00:18:19] Jim Falbe: I'm the same person that I was three weeks ago. It's just that I got a final round in one place and suddenly everybody's interested. But the specific connection with Vulcan that really. I went ahead and actually did my internship at Notre Dame. So I had the opportunity to do an internship over the summer at multiple different hedge funds.

[00:18:35] Jim Falbe: And I said, you know, instead of doing one, why don't I stay someplace where they're doing manager selection and I can really get a broad swath. It was kind of a good fit because Notre Dame wanted to move into the frontier markets specifically in the middle East. So the GCC MENA region. And they know how to do manager selection, but they didn't have anyone with the cultural expertise to really understand that region.

[00:18:54] Jim Falbe: And so it was a great fit where I'm like, well, I've been there for five years. I'm happy to help you guys kind of navigate this. And so [00:19:00] we did a big project looking at the capital markets in those different regions, which markets were investable. And then what managers were there were available who might be high class to potentially partner with Notre Dame.

[00:19:10] Jim Falbe: And they

[00:19:10] Stacy Havener: were

[00:19:11] Jim Falbe: really pleased with the result. I was really thrilled for the experience. Um, but Vulcan was someone who had. Reached out to Notre Dame consistently just saying, Hey, listen, here's what we're doing. We'd love to potentially have you as a client. And on one of those interactions, they said, we're looking for an equity analyst.

[00:19:26] Jim Falbe: And they said, well, we've got a guy who wants to do equity research and he did a great job for us. We think he might be a perfect fit for you. And so they made that introduction. And, uh, the rest is kind of history, you know, had a long phone call or two with them. And then he took me out to dinner at this nice restaurant in Chicago.

[00:19:42] Jim Falbe: And, um, yeah, it was great. Um, got connected. Some of the stocks that I had identified living overseas were things that, that Vulcan had bought in their Smith cap product. And, um, they were so kind of blown away by that. They're like, how did you source these things? The internet.

[00:19:56] Stacy Havener: Wow. That is such a [00:20:00] great story.

[00:20:00] Stacy Havener: There's a lot of nuance there that I didn't even know. So thank you for sharing that with us. So, and then you were at Vulcan for how many years?

[00:20:06] Jim Falbe: Almost a decade. So just, I think it was eight years kind of all in. So it was a great journey. And I'm really thankful for it. I think Vulcan is an amazing place, an amazing culture.

[00:20:17] Jim Falbe: I love the values. I love the way that they treat their clients. I love the way that they're really focused on trying to improve the process and just so thankful to CT and everyone there for one, giving me the opportunity to kind of the responsibility. The ability to go and run and try to build things.

[00:20:33] Jim Falbe: So it was a great time, great journey.

[00:20:37] Stacy Havener: And so, which is awesome because it kind of takes us a little bit to kind of where we are now in your story. And that is here you are as an entrepreneur, as a boutique founder yourself. And what do you think was the spark for that? Because as an entrepreneur, you know, I know that's, there's one thing to be a portfolio [00:21:00] manager and that's an incredible skill set.

[00:21:02] Stacy Havener: But then to take this leap and set up your own shop, I mean, there's a touch of rebel. There's a touch of a little bit of crazy in the very best way. And so what do you think was the spark for you there? Well,

[00:21:13] Jim Falbe: I think, you know, you've got that spark. I think anyone else who's who's done this entrepreneurial thing will tell you the spark probably didn't just show up one day.

[00:21:22] Jim Falbe: For me, I think the spark was always there. So, you know, in college, I founded a 501 C 3 started multiple organizations. You know, I have started a little business here, a little business there. And, you know, when I was in the Middle East running this English and computer training center at the end, I was really helping Manage it.

[00:21:37] Jim Falbe: I wasn't like the final person doing it by myself, but helping manage it. And, you know, helped kind of arrange a sale of the business. And that's kind of who I am. And so my initial plan was I'd love to run my own fund and probably a firm, but I want to prove that I'm capable of doing the business before I try to start a business doing something.

[00:21:56] Jim Falbe: And so that was the journey. And, you know, one of the people who joined us at [00:22:00] Saguaro, an early comment he made was, you know, I knew the day that you walked in the door at Vulcan, that you were on the way out. He's like, and it's not that I think you're gonna be here really quick. He's just I, I always saw that spark in you that you were going to want to go and build something.

[00:22:12] Stacy Havener: Oh, how cool is that that that people felt it and that that this person came with you on the journey, right? I mean that is so cool.

[00:22:21] Jim Falbe: Absolutely And I think the question to a certain extent is, you know, a lot of people say, well, why did you leave? And I think the real question for me was, why did I stay as long as I did?

[00:22:29] Jim Falbe: And I think it's a reflection on how great the people were, how great the opportunity was, and how much we all believed in what it is that we were really doing. And, you know, both of those are great things, I think, and we may talk about this more, but the real impetus was what we were doing on the AI and data science side.

[00:22:44] Jim Falbe: And it got to the point where we probably couldn't keep going on that journey. At Vulcan without changing some of the things that we were doing. And so that led to, if you're going to continue that journey, it probably needs to be in a new vehicle and in a new firm. [00:23:00] And that's the primary reason why we're here.

[00:23:02] Stacy Havener: Yeah. So let's talk about that because I think this is, you know, when people hear stories of breakaways and I, and I love a good breakaway story, I think certainly there are breakups that happen because of negative things, but more often than not, it's usually not a negative thing. It's the person who's leaving has.

[00:23:20] Stacy Havener: utmost respect for where they were, but comes to a pivotal moment where they realize, I love everything we're doing at my predecessor firm, but I really believe strongly in one thing that we're not doing or can't do that I want to lean into that makes me different. And so you mentioned AI. So let's talk about that.

[00:23:40] Stacy Havener: And also I'm going to ask you if it's okay, some challenging questions because AI feels new. To most of us, and I know it's not new to you. So talk about it a little bit like that. I think is a differentiator for you and a reason to set up your own firm. How so?

[00:23:57] Jim Falbe: Yeah. So maybe I give a little back [00:24:00] story on what we were doing.

[00:24:01] Jim Falbe: But it's just a firm and take a little bit of the fear off of it. Um, though I'll start from a from a high level. First off. I don't think AI is as scary as people think it is. Do you use Google every day?

[00:24:12] Stacy Havener: No.

[00:24:13] Jim Falbe: Does it scare you? I mean, I remember the very first time autofill popped in. I was like, Oh my gosh, it knows what I'm saying.

[00:24:18] Jim Falbe: That was, that was a little scary, but now I don't even think about it. Right. And I don't think about the fact that I can talk to my phone and tell it to do stuff. And it doesn't, it doesn't scare me. Even I have a Tesla and it doesn't really scare me to put autopilot on when I'm, I'm on the freeway. It's a, it's just ubiquitous.

[00:24:33] Jim Falbe: It's. It's a normal part of life. And I, I think for all of us, we couldn't imagine doing what we do without computers. We couldn't imagine doing what we do without Excel or word. And I think there's probably a lot of people listening to this, who use chat, GBT now in their daily lives, they're probably okay with that.

[00:24:50] Jim Falbe: So. I don't think it's as big or scary of a thing as, as we might imagine. I think really it's gonna be ubiquitous. And the big thing we talk about is we don't [00:25:00] believe AI is, is a differentiator in and of itself. We truly believe that AI is an amplifier.

[00:25:05] Stacy Havener: Okay?

[00:25:06] Jim Falbe: So the question for a firm or the question for an individual using AI is, is what you are doing to begin with adding value?

[00:25:14] Jim Falbe: So if you're an investment manager, is your process, your philosophy, and your team truly capable of generating excess returns? And if you are we believe AI has the potential to come in and help you amplify that process So help you do whatever you're doing at a higher level better faster Hopefully both and for less money if unfortunately you have a process or a philosophy firm team That is not capable of generating excess return.

[00:25:38] Jim Falbe: Then we do not believe AI is going to be a panacea. It isn't going to magically make you better at what you do. It's just going to make you more productive at what you do. And so it's really, you still have to have that kind of Promethean fire or that secret sauce that truly makes you great to begin with.

[00:25:55] Jim Falbe: And that's understandable. That doesn't change in any way, shape, or form. And so when [00:26:00] we talk about AI, and I'm going to go into exactly what we do here in a second. What we're talking about is taking your process. In helping you do it a better and higher level. So, for instance, to make this as simple as possible, I'm good at math and I'm very capable of building a DCF by hand on a piece of paper the way that was done back in the 1970s by some people.

[00:26:18] Jim Falbe: I wouldn't do that today because that's ridiculous. I'm going to use Excel so that if I update one number, the whole DCF updates instantaneously. And no one's going to question that the computer is doing that correctly. And so for us, any module or any capability that we build utilizing AI We're obviously testing it to make sure that it's producing the result we expect it to, and that part of the process, if we were to ever turn something over to the machine, and we have turned over parts of our process to the machine, not I'm going to talk about through all that here in a second, it's because we know, just like Excel retabulating numbers, it's doing exactly what we would do.

[00:26:52] Jim Falbe: It's just doing it much, much faster. So, for instance, one of the prototype things we're working on right now is creating histories of every company that we look at. [00:27:00] So for the last 20 years, the machine is going through and reading every single earnings transcript, every single 10 K, every single eight K, everything that comes out and we are creating a full kind of history of that, that corporation, who the CEO was, what decisions they made, what were the big things that happened in every given year over a period of time and for the machine to fully do this right now, it takes about 15 minutes using kind of the best than the, the awesomest, you know, LLM models running on the fastest supercomputers we need access to online.

[00:27:25] Jim Falbe: Okay. And in 15 minutes, it produces something that an analyst, it would take them at least eight hours to produce at least because they're going to have to go through and read all these documents and then come up with the summary of it. That's incredibly valuable because frankly, no analyst I know is going to go and take the time to do that probably for every single business.

[00:27:41] Jim Falbe: But we can do that in 15 minutes for any company that we're looking at. And it adds huge incremental value for us understanding the story and the history. And when you know the past, it kind of gives you some more indications of what's going into the future or what's going to happen.

[00:27:55] Stacy Havener: So can I ask some questions?

[00:27:56] Stacy Havener: No, that's super helpful. And I'm gonna, you know, [00:28:00] I'm not as scared of it as I'm going to talk right now. However, I do think that at least I'm going to kind of go back to when I was a little bit less comfortable. I've become more comfortable, you know, being around you and your team. At first, I got these, like, reverbs of long term capital management.

[00:28:20] Stacy Havener: I got all these black box biases and, and alerts, like, flashing in my head. So can you talk about that fear a little bit that investors might have that, like, I want people to be managing my money. I don't want a machine to manage my money. And how would you respond to that?

[00:28:38] Jim Falbe: I would say I 100 percent agree.

[00:28:40] Jim Falbe: And so for us, we believe that the best model is a hybrid. So it's really a fusion of the two. We're not a black box. We're not okay. We set an algorithm and it's doing everything from sourcing ideas to making trades. Not at all for us. What we're trying to do is utilize the machine to do what the machines do really, really well, which is consume a massive amount of [00:29:00] information.

[00:29:00] Jim Falbe: And then we're letting humans do what they do best, which is have creativity, have imagination, have judgment. And so for us specifically, I'll just give you an example. The way we've primarily used the machine in the past. And the very first thing we built here is a sourcing, uh, kind of a sourcing machine.

[00:29:17] Jim Falbe: And at Vulcan, we were trying to find really high quality businesses that met a certain benchmark. And if they were above that, we'd put them on a list. And if they got discounted, we would then purchase that, that stock. And so At Vulcan at the peak, we had, I think, like 12, 13 research analysts digging through ideas.

[00:29:32] Jim Falbe: And a large part of our workload was kind of keeping up to date all the companies we'd previously identified. And we could look at a certain number of new ideas in a given year. And realistically, we were probably looking at about 50 new ideas in a given year on top of maintaining what we already had.

[00:29:45] Jim Falbe: Well, 50 new ideas in a given year, that's a lot of work if you're truly doing initiations, but there are 60, 000 publicly traded companies in the world. And there are more than 50 companies that are created or destroyed in any given year. [00:30:00] So your ability, no matter how good or capable your team is to consume all that information, it's impossible.

[00:30:07] Jim Falbe: And so what we were trying to do was say, is there a way to train a machine to identify quality the same way that we would and set it free on the other 59, 950 companies we can't look at? In a given year and have it prioritize and say, Hey, here's one. I think there's a very high probability that it is going to qualify for your process.

[00:30:27] Jim Falbe: And you know, our first proof of concept on this. We did it back in the day when we're first teaching machines. How do you tell the difference between a picture of a dog and the picture of a cat? Right? And the way you would train a model back then was you take a 10, 000 images of a cat, you label this as a cat, 10, 000 images of a dog, say this is a dog.

[00:30:42] Jim Falbe: You put it in, you train the model, and then you could show it new pictures of a dog and a cat. And lo and behold, it could tell the difference. And we thought, well, surely if you can train a machine to do that, you could teach a machine the difference between a truly high quality business and a terrible business.

[00:30:55] Jim Falbe: So we took the 15 years of data that we had at Vulcan on. These are great ones. These are bad ones. Fed it [00:31:00] in and built this model. And obviously it's really rudimentary at the beginning, but it worked. It could go through and identify. this is a high quality business. This is a low quality business. And we did kind of three proof of concepts where we skated up over time.

[00:31:12] Jim Falbe: We did a greenfield study. We looked at other countries. What we consistently found was we had kept meticulous records on all of the companies we look at what percentage of them end up qualifying for our process. And, you know, these are grizzled veterans, analysts, they're going out and picking things.

[00:31:27] Jim Falbe: And it's not just all I, I, you know, this is a terrible company, but I'm going to spend my time looking at it. No, I think this company has a chance of qualifying, but our hit rate for every 10 companies we looked at only. Two of them or 20 percent would make it over that quality bar and get on the list.

[00:31:41] Jim Falbe: And with the very first iterations of this machine, that hit rate was always north of 50%. And so that was a, you know, that's a two and a half times uplift in productivity of your most expensive analyst, which is your human analyst. If you're saying, hey, just restrict yourselves to the ideas the machine is putting out there, which is easier said than done.

[00:31:59] Jim Falbe: A lot of analysts [00:32:00] don't want to do that. They still want to go look at what they want to look at. But you know, when we built out full global capability at the end, the hit rate on that machine was it was north of 75%. And I'm not going to pretend that that hit rate could stay as high because over time you take the low hanging fruit off and the machine while it can identify great businesses, it's not creating them.

[00:32:17] Jim Falbe: So there's a limit to it. But we have rebuilt that same capability here in a totally different programming language and everything is different, you know, from the way we we build our database, et cetera. But. It works. And the nice thing is if people think, oh, this is a black box when people come into the office, we say, well, tell us what kind of company you would look for.

[00:32:33] Jim Falbe: Like, what do you want? And we can customize a little bit. I mean, obviously, it's trained on our information, not their information, so it's not customized for them, but we just have the machine produce a list of kind of what they're looking for. And when they look through it, the consistent response we get is, Wow.

[00:32:47] Jim Falbe: Either this is already everything I already own, or this is unbelievable. I can't believe the machine can, can do this and look at these odd ones. Like, you know, I wouldn't have expected it to pick up Walmart because it has really low returns on tangible assets. And I'm like, well, yeah, of course it doesn't [00:33:00] necessarily get negative working capital that Walmart has, but we can see all of the other wonderful things about the company that make it great.

[00:33:06] Jim Falbe: So, you know, a lot of people compare this to a stock screener. And the two things I point out really quick is number one, a stock screener today, they don't, yeah. Include textual information. So it's just quantitative. And then two, I'm not sure you know how much you've spent time with the stock screen or not, Stacey, but you have to put in some variables that you want to look at.

[00:33:22] Jim Falbe: And if you put in more than six or seven, you almost always get no results. Like there's just nothing left because every company gets excluded. And the nice thing about machine learning or data science is we can put in as many variables as we want. And it's still this mosaic of all those variables to tell us this is quality or it's not.

[00:33:38] Jim Falbe: And so even if it's bad on one particular thing, that company doesn't get excluded. And so that's the low hanging fruit. That was the first thing that we built. And it's been tremendously valuable. I mean, here we are, we're a year and a half into our journey with our funds and on our lists. So we have what we call the SCM 100 list for each of our market caps.

[00:33:56] Jim Falbe: These are the 100 best businesses in the world that we've [00:34:00] identified. And I can tell you 55 percent of the names on those lists were originally suggested by or co suggested by the machine. So, and when I say co suggested, it means that some human analyst was aware of it, but it was the machine saying, hey, we really need to look at this now.

[00:34:12] Jim Falbe: And so we can see the tangible value just going through our process. And when people come in, they're like, well, it's black box. I'm like, well, look at the result. And the nice thing about computer code or programming is it either works or it doesn't, right? If you boot up Windows and it doesn't load, something's broken.

[00:34:26] Jim Falbe: But if it loads and it works, then you're happy. And most. Professionals in the investment space, they know what they're looking for, and they can, they can see that result.

[00:34:35] Stacy Havener: So thank you for that. And I hope that helps people, you know, like me who maybe don't live and breathe AI the way that you all do in data science, just kind of start to build a comfort level for it.

[00:34:46] Stacy Havener: And I love the word amplify because I think. At the core of what you're doing, it's still value investing. It's still fundamental research. It's still being a stock picker and [00:35:00] looking to generate alpha. All of those things are still there. You're just figuring out, well, what parts of the process can technology actually do as good or better job and help us get more efficient?

[00:35:12] Stacy Havener: I love the one about like, letting the humans be the creative minds and, and do the things that the, the data science can't do. So that was great. You know what would be helpful, Jim, if you could, can you kind of show us the AI amplification, so to speak, at work? Like, is there a stock that you could kind of take us through to show us how the machine helped?

[00:35:38] Jim Falbe: Oh, yeah, absolutely. There, I mean, there are a ton of stocks and we, you know, I've talked about some on, on different, different podcasts or we've written about them. I mean, some of the big ones that are associated as we talk about games workshop, or we talk about Masonite. But maybe if I talk about one that, uh, you know, we're looking at right now, I mean, we're looking at a company called LKQ and, you know, LKQ is really interesting in that it's a sleepy business.

[00:35:58] Jim Falbe: Like they buy cars that [00:36:00] have been totaled or been damaged and they kind of, you know, this whole thing of they, they suck in all these automobiles that are damaged and What they do is they then strip off the parts. Now, obviously, it's a bit complicated business. I'm not going to talk about the whole thing.

[00:36:11] Jim Falbe: I started the primary business, but they strip off those parts and then they resell them basically to people who are repairing cars. And so, you know, like kind and quality is what LKQ stands for in the automobile insurance. Industry. It's like, okay, if you look at your insurance policy closely, it basically says that if your car gets repaired, they don't have to buy a new part from the OEM.

[00:36:31] Jim Falbe: They just have to get a part that is comparable in like kind and quality. And so what that means is you could be getting a part from a car that was totaled, but that part is just fine. It wasn't damaged, et cetera. And so LKQ is the largest Player in this space, and they sell to everyone who then distributes parts onto the mom and pop repair shops or some of the big corporates.

[00:36:51] Jim Falbe: And the thing that really gives them this huge advantage is because of their scale. The insurers love to deal with them because they know they're getting this great price. They're available all over the country, and [00:37:00] it's very consistent. So it's just kind of wonderful. They're building this network effect, you know, type business.

[00:37:03] Jim Falbe: And this is something that the machine was just screaming like, Hey, this is everything you're looking for. Yeah. But for us, when we're looking for truly high quality businesses, I'm not out there looking for something. I think, Oh my gosh, is this in a declining industry where maybe vehicles get more electric or maybe as again, autonomous driving because of bigger thing, accidents go down and it's not the first thing that comes to our mind.

[00:37:23] Jim Falbe: But the machine it doesn't have those preconceptions. It doesn't have those biases. And it's like, look, this is an absolutely dominant business that has economies of scale. It has network effect and the returns are just better than everybody else. And frankly, other people in the industry are completely dependent on them, whether that's the insurers, whether it is actually people doing repairs.

[00:37:39] Jim Falbe: And so it just screamed at us and we went and we took a look and we're like, yeah, This is a truly amazing business that does possess the characteristics we're looking for, despite the fact that is not sexy. It is not exciting. It's not whatever. It's just this great little business that it run by great operators.

[00:37:54] Jim Falbe: I mean, when someone names their business, what they do LKQ for like kind quality, you know, they're very focused on the core mission [00:38:00] as opposed to doing something bigger and better and trying to sell. And so they just continue rinse repeating doing what they do. They've expanded into Europe and there's a whole bunch of great things which I could get into, but I think it's a perfect example of, you know, what I like to tell people.

[00:38:12] Jim Falbe: is the machine really helps us the most in three areas. One, looking in geographies where we don't necessarily have the expertise to go and look. And so we found some great businesses in Scandinavia that we simply wouldn't have gotten to because it's not at the top of our list. Two, it helps us find things in niches where we're not necessarily.

[00:38:29] Jim Falbe: That familiar. And so then we want to get up to speed because, okay, this is really great. We understand it. And I could give examples of, you know, again, there's you go out of the UK where they're more than just online surveys. I mean, they've become kind of the go to source for survey information or information on like Gen Z and below.

[00:38:44] Jim Falbe: And they've really built something tremendous, which it identified first. Like, okay, that's great. You know, we found another another business, which basically does surveys and hospitals, which is not something that we would have. It's called National Research Corporation. Again, it's just something where there's two competitors, them and another company called Press Ganey based out of South Bend and not something we would have found.

[00:38:59] Jim Falbe: But it's [00:39:00] like, Hey, you need to look at this. It's really tremendous. And I'm not saying that all these businesses necessarily qualifier will make it into our portfolio, but it's things it's screaming. And then the third one is really, we might have a bias against something where what we thought about that company.

[00:39:14] Jim Falbe: It's no longer true. And so the one I talked about a second ago is this, this company called Masonite. And that's really a great example of that, where they make doors and houses and specifically they make the skin that goes on the doors. And when we looked at it, we're like, ah, this is a terrible business because we had these preconceived ideas about it.

[00:39:29] Jim Falbe: But the business has really changed and it's fundamentally better. And I would say LKQ is kind of both the niche and maybe a bias against where we just would not have gotten to it. It would have been. Years from now, if ever, and instead the machine is saying, no, this is truly one of the greatest things out there.

[00:39:42] Jim Falbe: And you really need to take a look. And we did. And it changed our mind. And so to me, that's inaction and adding value to our team.

[00:39:49] Stacy Havener: I love that. Thank you for that. It brings it to life. I think to see how that amplification plays out, because it's not just sourcing things you wouldn't have found on your [00:40:00] own.

[00:40:00] Stacy Havener: I love the part about how it's actually mitigating your bias. That is great. We all have these biases and to have some way of checking that with AI is super powerful. So thanks for showing us the process.

[00:40:18] Jim Falbe: What we do is right now the machine helps us source ideas and we still take those ideas through our full artisanal human process, right?

[00:40:26] Jim Falbe: We use the machine to help us do quick looks at all the financials, and then we kind of do the deep dive where needed and when it comes to our qualitative workup, while we are using AI to help us move through the information more quickly, and what we're really working on, where our data science team is spending their time right now is helping us consume that long tail of information.

[00:40:45] Jim Falbe: And it's making sure that, you know, any human analyst, while they're going to go through, they're going to learn from the last two, three years, what that business is really doing, they don't have the time to consume the full 20 or 30 years of information that's come out on that company and what we're trying to do.

[00:40:59] Jim Falbe: And what we hope to kind of [00:41:00] have up and running by the end of the year is to ensure that all of that long tail of information is being processed by the machine and saying, Hey, here are the green flags you need to look at here. The red flags you need to look at and ensuring that we're incorporating that into our analysis.

[00:41:14] Jim Falbe: Again, we're using AI to try to speed up what our analysts do, but also amplify it. So we can be confident that while a human may not have looked at every 8k that has ever come out, the institution has, at least on the AI level. And then the last two, three years, we're still doing exactly what you would expect from a world class institutional grade investment manager doing the process.

[00:41:35] Jim Falbe: By hand. And I think over time, if the machine gets to a certain point, we're going to spend more of our time out there doing investigative journalism type work, trying to get that incremental information, pounding the pavement. And we do that, but we'd love to do even more of that, knowing that we're going to spend less time sitting in rooms reading 10ks, because I'm not sure that the differentiator is going to be over the next 10 years.

[00:41:54] Stacy Havener: Thank you. And I'm glad you, you said, let's stay on in a minute because my next question was going to be, you know, [00:42:00] when you think about value investing, an allocator might say, well, that's what I, like, I want classic Val. Like, if I think of value investing, I think of classic, like what you did at Vulcan, what Warren Buffett does, like finding these great companies at a reasonable price.

[00:42:18] Stacy Havener: And so do you still consider yourself? Like a classic value investor. How do you talk about that?

[00:42:24] Jim Falbe: 100%. Uh, we think value investing as a philosophy and it is the base or the underpinning of everything that we do. So the way we describe ourselves is we're modern value investors. We are this fusion. Of classic investment discipline coming from Warren Buffett, Southeastern Asset Management, Vulcan Value Partners to Saguaro today, where we're truly looking for the highest quality businesses on earth.

[00:42:52] Jim Falbe: We put them on a list. And we wait for an opportunity to buy them when they're selling at that once in a decade type discount. Once we own them, [00:43:00] we want to hold them as long as we possibly can, allowing them to compound and for that thesis to truly play out. We're ultra concentrated. Can we talk about that?

[00:43:09] Jim Falbe: Yeah, we can, but we're, we're very much value investors, but we're also this fusion of hyper modern technology where we're trying to conform ourselves and our process to be on the edge of this. I mean, the way we view it is AI is coming. It is a wave and the people who are going to succeed over the next 10 to 15 years are those who catch it and learn how to write it.

[00:43:32] Jim Falbe: Those who do not. Are going to be left behind because I mean, look at chess. Magnus Carlsen is the best chess player of all time. He cannot hold a candle to a piece of chess software running on my phone, let alone the best supercomputers out there. And people would tell you this is the same thing when it comes to searching information.

[00:43:53] Jim Falbe: Nobody is going to go to the person that has an encyclopedic photographic memory. They're going to go to Google or they're going to go to some research thing that [00:44:00] can go through the full library very, very quickly. And to think that this exponential curve of improvement in AI isn't going to continue.

[00:44:08] Jim Falbe: It's just wrong. And so we're trying to prepare ourselves for the future that's coming as opposed to optimizing for the way the investment management industry worked over the last 10 years. So it's the fusion of both.

[00:44:17] Stacy Havener: Yeah, that's very well said. And I also want to make a point because you said A. I. Is coming, which is what I think, you know, the average person.

[00:44:25] Stacy Havener: feels like it's here, but it's like we're just beginning. But how long were you? I mean, you were doing a Vulcan. So how long have you actually been kind of tinkering and sort of quote doing data science? Would you say?

[00:44:38] Jim Falbe: So I think we've been tinkering and doing this at this point were just under a decade.

[00:44:43] Stacy Havener: Yeah, that's crazy.

[00:44:45] Jim Falbe: It really is. It's insane to think about it. And what's also insane is just how far the tools have come. You know, when we first started, it took us three years to figure out how to build our database. I mean, we had to go out and scrape things from the web. [00:45:00] So I literally had an under the deal table with CapIQ to where they were turning a blind eye to us using their web based platform and scraping, pulling all the 10Ks, 10Qs, uh, earnings transcripts, et cetera, and putting it in our internal database.

[00:45:12] Jim Falbe: And they were, they were okay with that because they were doing R and D, but they didn't have a product. And today everyone has an API. Where, you know, you can just ping a line of code. It hits their database directly, pulls the information you need, puts it in your database. And so what took us three years to kind of clean and get ready, then we were able to do here in a month.

[00:45:29] Jim Falbe: And it's just because the technology has evolved so much. And I mean, again, we go back five years for us to do anything textual. We were building these customized dictionaries to try to define here's economies of scale, here's network effects, here's et cetera. And today the large language models are so good.

[00:45:46] Jim Falbe: You would actually prefer to use them versus a proprietary dictionary just because their understanding of the English language is comprehensive. And sometimes they can read meaning behind the words as opposed to just what's on the page itself. And so, you know, on all of our models and, you know, kind of [00:46:00] feature engineering, et cetera, we've replaced the old school natural language processing we were doing with the new large language models.

[00:46:05] Jim Falbe: They specifically use the llama one from Facebook for most of our stuff. And then if something's really large, we can spool it up in the cloud and use, you know, quad API or, you know, 3. 5. And obviously whenever the new one comes out, we replace the model we're using with the, the newest one and kind of have it up and operational within a week.

[00:46:21] Jim Falbe: So that's, that's the way it works.

[00:46:23] Stacy Havener: It's so cool. Also, everything you just said went like this. No, just when you're like, well, obviously we use llama and I'm like, llama? The llama I know is llama llama, like the kid's book that my daughter reads at night. So, um,

[00:46:41] Jim Falbe: Large language model that meta puts out. Um, so they're building the tools and we're customizing the tools for finance, which is the really great thing about A. I. Is it's the big players who are building these tools and then it's up to the leaders in each individual niche to take that tool and customize it to their use case.

[00:46:58] Jim Falbe: So you have a lot of these [00:47:00] A. I. Startups and really what they are is an app. That's built on top of the models coming out from the big shops. And the big shops are motivated to do this because if they can get you running their, their models at scale, you're going to want to do it in their cloud.

[00:47:12] Stacy Havener: Yeah, totally.

[00:47:13] Stacy Havener: Right.

[00:47:13] Jim Falbe: So if you're Amazon, you put this stuff out there and obviously your AI models are tuned to operate the most efficiently on AWS, and then you're going to pay for, for AWS. And so, you know, Microsoft does it, Amazon does it, Facebook does it, Google does it. And, um, yeah, the, the Facebook stuff though, it's more kind of small, small people and it's, it's, it's interesting, but yeah.

[00:47:35] Stacy Havener: There's one more differentiator I want to dig in a little bit, because concentrated investing, again, another like classic stock picker, you know, alpha generator kind of term that we've all come to look for when we believe in active management. We all define concentrated differently. I would like [00:48:00] you to talk a little bit about how you approach it because your definition is very concentrated, and I wonder why you chose that type of, uh, construct.

[00:48:12] Jim Falbe: Well, I think there's a couple of reasons. One, we're not trying to define or build a product that's for everyone. We think that our product is for a specific subset of the investing universe. Either wealthier individuals who have a very high risk tolerance or specifically we've tried to build our product for the ENF space.

[00:48:30] Jim Falbe: So endowments, foundations, very large single family offices. Maybe a few sophisticated, you know, players in the pension space, et cetera, but we don't think we're going to be a core manager. We think of ourselves as a satellite manager, and our understanding of the way public exposures have evolved is you either think, well, I want exposure to the market as a whole, and I want the lowest possible fee, or I'm really trying to generate alpha with something that is out there and esoteric.

[00:48:56] Jim Falbe: And that can be, it's very focused on our particular niche. Like you have a great [00:49:00] energy manager or you have a great biotech manager, but we think there's also place for someone who says, you know what we just truly believe. We're exceptional at identifying the highest quality businesses on earth. And if that's what we do, and we are a satellite and we're designed for institutions that have a very long time horizon, perhaps even a permanent time horizon.

[00:49:19] Jim Falbe: Well, one of Charlie Munger's big sayings, which I believe in deeply is I would rather have a bumpy 15 than a smooth 10 for my return. And that's what we've done. We're trying to find these great businesses that if we hold onto them, they can compound over a very long time. But we understand that if we're concentrated, It's not going to be as smooth as the market as a whole.

[00:49:40] Jim Falbe: And we're, we're okay with that, right? We're not trying to run a market neutral fund right now. We're not long, short, we're just, this is who we are. We're trying to identify those great businesses. And if you have a long time horizon. Over the full cycle, we believe these competitive advantages will continue to grow.

[00:49:54] Jim Falbe: The returns on invested capital will show through in the long run, and you're going to earn a return in excess of the market. I mean, [00:50:00] why would you want, you know, the average RLIC on the market when you can have an RLIC that's much, much higher if you run this type of concentration? So

[00:50:08] Stacy Havener: what's the number of holdings would you say that you look for?

[00:50:10] Jim Falbe: Technically, our funds can be 5 to 20. But we tend to be in that 7 to 14 range and, um, it's based on our kind of core position sizing. I mean, I will say, I believe that when you're looking for the advantage from diversification, you're getting about 80 percent of it at 10 names. So going much beyond that, I'm not really sure what the benefit is, uh, unless you can truly identify uncorrelated income streams in the public markets.

[00:50:34] Jim Falbe: And that's, that's hard to do. Uh, some people do it. It's not necessarily our forte.

[00:50:39] Stacy Havener: Well, and the other thing, too, that I like about that is you hear managers talk about, well, I want to be in my A names. I don't really want to be in my B names. I definitely don't really want to be in my C names. However, if you're good at what you do and assets start flowing in, there's a strong temptation from sort of asset gathering standpoint to build [00:51:00] a portfolio that's slightly bigger.

[00:51:01] Stacy Havener: So it's like, can I say concentrate and still be at 30 names? And that drift, in my opinion, Has something to do with the business side, which is like, well, I can go into some names that maybe are a minus B ish and still get small cap exposure and still get kind of my alpha generating names by increasing the number of positions and spreading that money around.

[00:51:26] Stacy Havener: So I think there's, there's a lot of things at play. What you're creating is a very pure expression, in my opinion, of a, of an alpha generating strategy.

[00:51:35] Jim Falbe: And we've tried to structure the product itself to again, amplify this or encapsulate it in that we have written into our legal documents. Here is kind of the hard cap on the amount of assets that we'll take and then we'll close.

[00:51:48] Jim Falbe: And our management fees decline over time as AUM scales up. And the reason we have a performance fee is so that we're incentivized to not need to grow AUM or not want to grow, but [00:52:00] instead to perform for the clients that we have. And we believe that obviously we need some kind of management fee to keep the lights on and pay people.

[00:52:07] Jim Falbe: But beyond that, it's not about gathering AUM. It's not necessarily going to drive the bottom line. What's going to drive the bottom line is if we continue to perform.

[00:52:13] Stacy Havener: That's great. It's alignment.

[00:52:15] Jim Falbe: I totally agree. And so We understand that in the institutional space, it's always a negotiation and we're willing to do a straight management fee or we're willing to do a straight performance fee, but we truly believe the best way to do it is this proper alignment with some management fee, though, one that declines as we scale and then a performance fee that says, Hey, listen, we're still incentivized to try to do the right thing for you.

[00:52:35] Jim Falbe: And again, we also have this thing where everybody here, we eat our own cooking. Our public equity exposure is exclusively through our funds or it's in something that's, you know, totally passive if they have a 401k, et cetera, et cetera.

[00:52:45] Stacy Havener: Fabulous. I mean, that's what you want. That's to me when people think about boutique these, it's not just that you're, you know, specialized or, or have a unique ability to niche.

[00:52:56] Stacy Havener: It's also about some of this qualitative [00:53:00] alignment of interests. Like that's why people still love boutiques. That's one of the reasons why you just described there that alignment. So that was great. And I want to stay on qualitative a little bit because As we talk to boutiques and as we talk to founders, one of the things we hear often is how difficult the journey around authenticity can be that, you know, you grow up in the investment biz, so to speak, and there's like, there's a certain way, you know, you address, you talk, there's a certain way you pitch, there's a certain, you know, you say you got the universe, it's a, you know, you screen it, and we laugh because that's what everyone says.

[00:53:40] Stacy Havener: And so I just wonder what that journey has been like for you, and have you found more freedom now as a founder? Or is it still hard to break maybe those old habits of doing what the industry says is the way?

[00:53:53] Jim Falbe: Well, that's a great question, and I think there's two ends of the spectrum. There [00:54:00] is full and complete authenticity, where if we were our total private selves in public all the time and said everything we thought, we would be pariahs.

[00:54:09] Jim Falbe: And so, you know, it's always this balance between how authentic do you feel it's acceptable to be versus what's really asked for. And I do believe one of the things I learned at Vulcan is it's important to have a consistent. Message, right? And if you're, you know, humans, we evolve, we change over time, we learn new things.

[00:54:31] Jim Falbe: And what we are offering to the world is it's a product to a certain extent. And so that product does need to be consistent. It's this is the process. This is the philosophy. And while we're always going to be improving, https: otter. ai How we execute this philosophy, and we're always gonna be trying to improve that process.

[00:54:48] Jim Falbe: So incremental changes, et cetera. It's not. Oh, well, you know, this year we think that going into energy stocks and being an energy manager is the right thing. That's that's not acceptable. So there is some consistency that [00:55:00] has to happen over time. And I think for me, the great thing was learning. Okay, well, here's how we communicate that.

[00:55:04] Jim Falbe: And, you know, there's authentic stories that go with it. Like here's why. Here's what worked, here's what did not work. Here's why. Who I am fits in well with this.

[00:55:14] Stacy Havener: I love that. Although I'm gonna challenge you. My challenge to with peace and love. 'cause I was with peace and love and we're friends. Is that yes, right?

[00:55:23] Stacy Havener: There is a product, so to speak that's at play here and you want that consist. You want that consistency. I also believe. That people are hiring humans.

[00:55:36] Jim Falbe: Oh 100

[00:55:37] Stacy Havener: and My hope is that as an entrepreneur and it took me a long time So I understand that this is a journey but as an entrepreneur and as the founder That this is an incredible opportunity to sort of put A face and a heart and a soul on your business and that you find kind of the freedom to be [00:56:00] not like your authentic self in terms of like how you are with your friends.

[00:56:03] Stacy Havener: So, so to speak, but just more you. And that's the piece that I think is super hard for fund managers to really step into.

[00:56:12] Jim Falbe: Well, thank you for reframing it a little bit that way. One, I obviously believe the values that we have as a firm, they're my personal values. And you know, each one of them is so deep.

[00:56:23] Jim Falbe: So, you know, building trust. That's like our first and first and foremost, we want to do business with people that we trust. We want to say what we do, do what we say. We're trying to pursue joy on a daily basis. We're trying to act courageously. We're trying to live generously and we're trying to be better tomorrow than we are today.

[00:56:40] Jim Falbe: It's this idea of continuous improvement. And those are kind of the five big values of the firm. And then the way that we live that out. I mean, I think the pursue joy one is really interesting in that our day is different than most managers. We tell people, we really want your high value work. So kind of four and a half hours a day of maximum creativity, maximum focus in the morning when you're fresh and, you know, come in early, [00:57:00] let's grind.

[00:57:00] Jim Falbe: And then at 11, we tend to do this kind of break in the day where it's like, okay, this is your hour to go work out, go to the doctor, go to the dentist. We're paying you to do that. We want you to take care of yourself because this is a marathon. It's not a sprint. And I'll tell you in our office, a lot of people, we actually go outside and we'll play sports.

[00:57:17] Jim Falbe: We'll throw a frisbee around and we'll play football or whatever we're doing for 34, 45 minutes in it. One builds the culture to it's keeping everybody in shape. And so they're physically happier, healthier, et cetera. And then, you know, at noon we encourage people. To go to lunch, not just with people in the office, but to network in the greater community.

[00:57:33] Jim Falbe: So let's, you know, if you're an ops, go find an ops person who works at Smead Capital Management or RA Capital and get out there and do lunch with them to build that network. Or if you need to get a lunch date with your family, do that and make sure that you're living this kind of holistic, holistic life.

[00:57:48] Jim Falbe: And then in the afternoons, we really encourage people to do what we call, it's not lower value work, but it's not as strenuous. It's like respond to your emails, the organizational admin type stuff to set up Tomorrow's high intensity, high [00:58:00] active work. And so, you know, those are values that really come from me.

[00:58:02] Jim Falbe: It's how I think it's, it's a good way to try to live a consistent, disciplined, you know, lifestyle. And we've been able to live that out here at the firm. And I think some people really love it. And there's a few people where it's, it's been hard to adjust. They're like, no, I just want to come in and grind from eight to five and go home.

[00:58:14] Jim Falbe: And I'm like, okay, I get that. But

[00:58:16] Stacy Havener: I love that. That's such a great glimpse of just the behind the scenes. And I appreciate you sharing that. And actually. This kind of takes me back up to your story. If we can come back to your story for a second and maybe end with this, because there's something really special we haven't touched on yet.

[00:58:37] Stacy Havener: It goes back to your mom and it goes back to the firm that she was at when she passed. And can you kind of take that thread that you, you know, sort of wove a bit at the top and pull that down to how that story played out in the founding? And and kind of go forward of tomorrow.

[00:58:57] Jim Falbe: It's actually hard for me to believe that it's true.[00:59:00]

[00:59:00] Stacy Havener: Me too. When I heard it, I was like, this is like a movie.

[00:59:03] Jim Falbe: Well, it really impacted me because it's like, you know, this is such a risky thing. But, um, when I first had this idea of going and trying to start a firm and breaking into the investment industry while I'm in the Middle East, my first thought was, well, I'm going back to business school.

[00:59:15] Jim Falbe: I'd love to have a mentor. I'd love to have someone who could help me on this journey. And I did not know anyone at that point With an MBA, which maybe that's hard to believe, but I'm in the humanitarian circles I ran, nobody had an MBA and my thought was, well, you know, my mom worked at that firm called Winrich Capital Management.

[00:59:32] Jim Falbe: Maybe I could reach out to those guys and get advice. And so I looked up Winrich Capital Management online, knew at the time that they had been, you know, in Southern California. And I was like, well, I looked for him. I honestly couldn't find him. I was like, well, I don't know what happened to Winrich Capital Management.

[00:59:44] Jim Falbe: I guess it didn't make it. I don't know how I didn't find anything, but I didn't fast forward a couple of years when I was finishing my MBA program and I am looking for a job. I thought. Maybe I should try one more time, see if I can find any of those people. And it'd be great to network and talk cause I'm trying to be exhaustive.

[00:59:59] Jim Falbe: And [01:00:00] so looked again for win rich capital management and. Couldn't find anything. I'm like, okay, well, you know, I guess I guess that is that and, you know, go on and so go through my full career at Vulcan and after I had made the decision to kind of move on and, you know, CT and I had great conversation. I said, Hey, listen, I respect you.

[01:00:17] Jim Falbe: I think you're amazing. I want to be more like you. And the only way for me to do that is to go and do what you did. I'd love to start my own firm actually, you know, was able to work at Vulcan for another nine months after telling him that I was going to go off and do this and finished up some of the things on the AI side.

[01:00:28] Jim Falbe: So it was a really, I think as far as partings go about. The best it could have been at the very kind of tail end of my time at Vulcan. I was listening to these podcasts on capital allocators with Ted Cites, and he had done, you know, he had this podcast with a firm called WCM Investment Management. And I listened to this guy named Paul Black.

[01:00:45] Jim Falbe: And I'm like, wow, that's just really familiar. There's something about this that it hits me. Um, and then a couple of weeks later, I listened to another one with Paul Black and Mike Trigg from WCM Investment Management. I'm like, man, this just feels familiar. And [01:01:00] I had the thought go through my head. I was like, WCM, that couldn't be Winrich Capital Management.

[01:01:04] Jim Falbe: Nobody would name their firm Winrich Capital Management Investment Management. Really? Winrich Capital Management Investment Management? No way. But I decided, let's look it up. So I go to WCM Investment Management. And lo and behold, there's Kurt Winrich. And I was like, Kurt Winrich. It is Winrich Capital Management Investment Management.

[01:01:24] Jim Falbe: It's when it's Kurt Winrich and Paul Black. And not only did they make it now, they're not a 200 million boutique. They're 100 billion investment firm based in Laguna Beach. Are you kidding me? And so, um, Funny enough, the story is even more complicated because there was a boutique manager that WCM investment management bought.

[01:01:43] Jim Falbe: I think they were, they were called Opus. And three of those guys now worked for WCM. Interestingly enough, when they were trying to find a home, they had approached Vulcan to potentially be a, You know, an add on to Vulcan and Vulcan was going to handle the back office, et cetera, and we had gone through this process with them for a long time.

[01:01:59] Jim Falbe: So I [01:02:00] become very familiar with those three guys and Vulcan also made a different decision not to do these spinoffs or Tiger Cubs or whatever you want to call them. But when I realized that this was Paul Black and Kurt Winrich, who I had known as a teenager. When my mom worked there, I reached out to this individual who, you know, I'd gotten to know and I told him the story.

[01:02:18] Jim Falbe: I was like, do you think, you know, Paul or Kurt would be interested in reconnecting with me? He was like, Oh, yeah. And so I just sent an email to Paul and to Kurt. And I said, Hey, I don't know if you remember me, Jim Falby. My mom worked there like, sorry, my mom worked there like, you know, 30 years ago. And, uh, it was a really meaningful part of her life.

[01:02:37] Jim Falbe: And, um, yeah. You know, you guys, you guys came to the funeral and just want you to know, I've always, um, you know, I've always kind of carried like the, the firm that you had was really meaningful to me and it's kind of an ideal I carried from, from being a kid. And so, you know, I just told him, I'm really sorry, Stacey.

[01:02:55] Stacy Havener: That's okay. Hey, now I'm crying. So, I mean, sometimes you [01:03:00] cry, that's how it is. And this is, this is how it shows up. And you know what, Jim? Why the part of this part of the story is so special. And so it's almost unbelievable. Actually, it's almost unbelievable that you couldn't find them. And then you found them.

[01:03:16] Stacy Havener: And it just speaks to the way God, the universe, whatever you believe works because everything in your story was meant to be. Really, really, it's really there. I'm talking also just to like, to let you gather yourself, but you know, it's, so let's keep going. Cause I'm so proud of you right now. I want you to know that I'm so proud of you.

[01:03:40] Jim Falbe: Well, hopefully I don't cry when I'm, when I'm talking to an alligator, I'm surprised. I'm, you

[01:03:44] Stacy Havener: know what, they probably would start crying and that would, might not be a bad thing. The thing is, Jim, people have lived through hard things, not exactly the same hard things that you've lived through, but. We all have parents.

[01:03:57] Stacy Havener: We all have, you know, heavy emotions from [01:04:00] our childhood. We've all lived through things. Maybe they're different, but it's a shared experience, a shared connection. And that's what allows people to connect with each other. So the fact that you would reach out to Paul says so much about you and the fact that he said, so yeah, keep going with the story because this is, this is people doing business with people right here.

[01:04:23] Jim Falbe: I just sent the email and said, Hey, it was incredibly meaningful. And I'd love to, I'd love to, you know, reconnect sometime. And, you know, it was no time at all. I mean, a couple of hours and I got a response from Paul and he's like, Jimmy, which is what my parents called me. He called me, he's like, Jimmy, he's like, you just made my year.

[01:04:40] Jim Falbe: Like you just made our year. He's like, you don't understand. He's like, this got totally internally circulated double WCN. People were so excited to hear about the culture we had and how that was a meaningful thing you carried with you. He's like, but holy moly, We can't believe that you went on to become a PM and a partner at one of the greatest firms out there, and we didn't know anything about it.

[01:04:57] Jim Falbe: Like, we lost touch, and then, lo and [01:05:00] behold, you show up. It's like, how did we not connect? Before now, and that just led to this, this conversation and this connection. And, and, I mean, frankly, WCM has offered several times to be very supportive of us. And, uh, you know, we invited Paul to join our board and not just from the sense of they've built a really successful firm, but the sense of it's this culture that they had years ago.

[01:05:21] Jim Falbe: That was the DNA, uh, that, you know, it's been through, listen, WCM has had some good times, some hard times and some really good times, but the culture Is what has enabled them to make it through all of it. And the thing I truly appreciate is interacting, dialoguing with Paul. He continuously reminds me, he's like, you're not building something for one year, three years.

[01:05:39] Jim Falbe: You're building an institution for the next 20 years, the next 30 years. And when you zoom out and take that long term perspective, all of the shorter term trials and tribulations don't matter. What matters is, do you have that DNA? Do you have the right soil to build something for the long run? And, um, that's what we're trying to do.

[01:05:55] Jim Falbe: We're trying to instill the values and the culture that we think are going to get us through the good times and the [01:06:00] bad. Um, and that's what's hopefully going to produce the amplification we want for our clients, for our colleagues, for the community, et cetera. So just, um, you know, it's really amazing to kind of think I'm on this, I'm on this journey on my own.

[01:06:11] Jim Falbe: And then suddenly somehow my mom from 30 years past when she'd moved on, there was still a part of her story that was, influencing mine and um, you know, incredibly grateful and I'm like, I couldn't have, I couldn't have written it any differently. You know, I, I know they would have helped me at any point in my journey, but I don't think there's any point in my journey where I needed to help as much as I do now.

[01:06:29] Jim Falbe: And so really, really thankful for it.

[01:06:31] Stacy Havener: I almost can't even talk. That was the best part of this whole thing. And if I have your permission, I'm not going to edit it out. It's that good. It's that good. And you know what it reminds me of? Something you said at the beginning, which is you asked yourself, do I have the emotional, I can't remember how you phrased it, strength or the emotions I'll need to be able to do this job well.

[01:06:56] Stacy Havener: And I'll tell you, it's

[01:06:57] Jim Falbe: the emotional thing.

[01:06:58] Stacy Havener: Do you have [01:07:00] it? You just shared it with us. And that is a real gift. It's a real gift, Jim.

[01:07:05] Jim Falbe: Thank you.

[01:07:05] Stacy Havener: So thank you. I need a Kleenex now, but we're good. We're going to

[01:07:11] Jim Falbe: keep going. I'm excited to see the edited version, and I'm, I'm, I'm, this is, this is going to be very vulnerable if we're going to put that out to the world.

[01:07:17] Stacy Havener: Oh, I'll tell you.

[01:07:20] Jim Falbe: In an allocator meeting of my life. So the fact that I'm doing it in potentially a podcast.

[01:07:24] Stacy Havener: I mean, here's the thing. It's snowing, which is also really magical. I just love all of that. It was so good. You know, there's some questions at the end I want to do, if it's okay with you, like the Proust questionnaire stuff.

[01:07:36] Jim Falbe: You can edit out the stuff you don't want, or things you thought were okay versus

[01:07:40] Stacy Havener: Okay, we'll do that. Let's do So, let's take a deep breath. Maybe, like, do a little Shoot some calisthenics. Have a sip of water. So, here we go. These are, these questions are designed to give us a glimpse into you just as, as a person, although I [01:08:00] think you've done a phenomenal job of sharing that with us today on many levels.

[01:08:04] Stacy Havener: I'm going to start with one that hopefully is kind of easy. What book inspires you?

[01:08:09] Jim Falbe: Well, there's a ton of books that inspire me, and I think this one may not be very popular, but um, a book that really changed my life was actually The Fountainhead by Ayn Rand.

[01:08:17] Stacy Havener: Oh, I love that story, and I can't believe that's the first time someone said that book.

[01:08:23] Stacy Havener: What a great one, Jim. Tell us why.

[01:08:25] Jim Falbe: I agree. So I'm not, I'm not as big into Atlas Shrugged. I think that's too long of an exposition of her ideas, and her ideas have been taken to the logical extreme. It's like, well, what do you do with old people and children? It's not really great, but just the core idea, which is that everything we see In society and civilization, it was ultimately an idea that inspired one person and they had the conviction, the courage, the fortitude, the perseverance to do it regardless of what, you know, what people said on the outside.

[01:08:51] Jim Falbe: And it's this idea that there are so many people who they don't really want to do something new. They just want to kind of live off of the things that have been created. But [01:09:00] who do you want to be? Do you want to be someone? If you have that idea, you then live it out to its fullest expression. It unlocked something in me where I realized I had more power.

[01:09:07] Jim Falbe: Then I thought I had, I had the ability to create. And that creation in and of itself was valuable, not just for myself, but for others. And it really kind of changed my trajectory a little bit. It wasn't just, I want to do investment management, but I think I can do it at a high level for other people and build something.

[01:09:22] Jim Falbe: And so it was a big part of my journey from the middle East back into finance. I recommend it to other people who I think maybe are a hair more, they're waiting for life to happen to them. So what I've told people before, when I was going through college, I had this idea of meritocracy. If I performed well, eventually someone would come along, identify me and then help catapult me into something else.

[01:09:40] Jim Falbe: But that's not the way the world works. We have to create our own opportunities. And when I realized that I was the captain of my own ship or the pilot of my own airplane, and I am the one writing my story, that really helped me to say it's on me and I need to keep going. I need to make it happen. And so it gave me a level of motivation and purpose I didn't have prior to reading it.

[01:09:59] Jim Falbe: So [01:10:00] huge influence in my life.

[01:10:01] Stacy Havener: That's great. You're making me want to reread. That is so good. Okay, let's go from books to places. What place inspires you? What's your happy place?

[01:10:11] Jim Falbe: Um, well, I love getting out in nature. You know, that's wonderful. I love taking walks. It clears my mind. I think right now my happy place is just being with my kids.

[01:10:20] Jim Falbe: I love coaching, which is something we'll probably talk about here in a second, but I love spending time with my kids out on the athletic field and being able to kind of emotionally bond with them. That's a happy place for me. And so, you know, we've gone through some easy things, some hard things. And through it all, my wife is like, you got to keep coaching because it's really good for your soul.

[01:10:34] Jim Falbe: And it's great connection for you, the kids. And right now, you know, one of the big things I've said is I don't want to sacrifice my family on the altar of work. I don't want to do it. I don't want to wake up and have a successful capital management firm, but be divorced and my kids hate me. That is not an acceptable outcome for me.

[01:10:49] Jim Falbe: And so the best way I've found to consistently connect with my kids is I schedule in coaching and I am there no matter what. And it's, uh, we can, we can find ways to work around it. So that's, that's been a happy place.

[01:10:59] Stacy Havener: I [01:11:00] love that. That's fabulous. Coach Jim. Okay. Coach Jim. So what? Let's pretend. You're going to give a talk.

[01:11:10] Stacy Havener: It's going to be inspirational because this has been very inspiring. By the way, you're going to have a talk at a big stadium. And before you walk out to give this inspirational talk about this wonderful business that you've built, they're going to play a song. What's your walkout anthem?

[01:11:25] Jim Falbe: I will admit. I don't know.

[01:11:27] Jim Falbe: I have, I'm trying to think this. I'm like, what's my, what's my walk up music? Everybody in the office has one. So we, uh, we actually, um, we thought we joked about it. We did the AI guys wanted to do a thing where we detect who's walking in based on the camera and they would start up your, like your walk up music.

[01:11:41] Jim Falbe: And so everybody comes in and everybody picked a song and we're like, well, what's Jim's song? And I was like, I don't know. I'm just not, um, I like classical music. I listen to some other things, but I'm not, uh, I don't have a bit. The only one that comes to my head is like the Matrix theme song, but I'm like, that's from

[01:11:54] Stacy Havener: the

[01:11:55] Jim Falbe: 90s.

[01:11:55] Jim Falbe: And it's just, what, what's the connection? It's like, oh, well, Neo for the Matrix. [01:12:00] You have a God complex or something. That

[01:12:01] Stacy Havener: is the funniest thing, Jim, that you said. I don't know. I mean, Okay, well, that can be your homework. We're going to have to come up with something. But I love, so right now we're going with the Matrix theme, and who cares why?

[01:12:14] Stacy Havener: That's just going to play when you take the stage. But I'm going to give you a chance at our next board meeting, you can tell me what your walkouts are. I want to know everyone's in the office. It's going to be hilarious.

[01:12:24] Jim Falbe: It's actually pretty, they are hilarious. So it's good.

[01:12:27] Stacy Havener: Isn't it funny? I was just saying to our team.

[01:12:28] Stacy Havener: I'm like, it's so funny when you have like, you have someone and they, and they just come with this like banger rap tune or something that you're like, I can't believe that you just said that or some heavy metal thing. And you're like, I just would never have guessed that's your song. Okay. What profession other than your own, would you like to attempt?

[01:12:46] Jim Falbe: Definitely would love to try to coach. So I think I had a long term desire to try to be like a high high school basketball coach. Um, I enjoy it. And I think the reason I enjoy it is it's both. You get to have the same kind of like strategic mindset, dig into data, try to [01:13:00] find these incremental improvements that, you know, you get two plus two equals seven or two plus two equals eight.

[01:13:04] Jim Falbe: And you can make a team perform at a higher level than individuals can love mentoring. As you can probably tell from interacting with me, I do have Greek emotional makeup to me, which I've had to learn to suppress when we're actually doing investment management decisions. So we record all of our research meetings and if you watch them, I'm like, I've learned to be very monotone and kind of just logical and focused.

[01:13:26] Jim Falbe: We used to do 360 reviews at Vulcan. The feedback I always got was please don't bang the table when you're, you know, making a case. It's like when you get emotional, we don't appreciate that. And it turns the tenor of the discussion from Actually arriving at reality to can feel like an argument. And so I had to really learn.

[01:13:42] Stacy Havener: Oh, interesting. That's great. Self awareness.

[01:13:46] Jim Falbe: Well, it isn't. And you guys are giving me feedback. They're like, Hey, listen, you know, if they think I'm getting too emotional to say, Hey, let's take time out. We feel like you're emotional. And I actually, if you go back, I think I've really improved on that to where I don't do it in our research meetings.

[01:13:57] Jim Falbe: However, Being a coach, I love it. [01:14:00] I get to be as emotional as I want and try to inspire people at halftime or at timeouts. And the feedback from the parents is, it's not just, Hey, we, we like the fact that you're emotional or we don't mind it. It's thank you for being the one who's emotional with my kids.

[01:14:12] Jim Falbe: So I don't have to be. And it's just, it's nice to be able to have that, that part of myself. I get to express it and its value at a negative, negative value.

[01:14:20] Stacy Havener: I love that. That's awesome. And kids need inspiration as do sports players of, of every level. So I think that's a great place to have that your Greek, you know, it'd be able to express.

[01:14:32] Stacy Havener: Okay. What profession would you not like to do?

[01:14:35] Jim Falbe: Oh, that's easy. I don't want to be a doctor. I mean, the reason is simple. Both, both my parents died in hospital and it just kind of left me

[01:14:41] Stacy Havener: with real

[01:14:42] Jim Falbe: fear of hospitals. And it funny enough, or not funny when I was in grad school, One thing I did not know was for my first grad degree, one of the requirements was I had to serve as a chaplain in a hospital for a semester, and they did not tell me this prior to me signing up, so I'm getting, it's my final year, I've been there, you [01:15:00] know, three years, it's my fourth year, like, oh, well, yeah, you got to go be a chaplain.

[01:15:03] Jim Falbe: I'm like, what? Wait, what do you mean? I have to be a chaplain. You don't understand. At that time in my life, if I walked into high school, like my legs would stop working. I mean, I just, I'm sorry, but that's not my life. If I couldn't do it, like I still had this kind of,

[01:15:13] Stacy Havener: you walked into a hospital.

[01:15:14] Jim Falbe: If I walked into a hospital and I was like very, very fearful of it and like, you have to do it or you don't, you don't graduate.

[01:15:20] Jim Falbe: I'm like, uh, is there anything else I can do? No. And so. I go to the hospital and they end up putting me on the heart ward. So this is people who have, or they're about to get heart surgery or they've, they've just had open heart surgery and it's my job to go in and talk with them and potentially, you know, pray with them and just, just be with them.

[01:15:36] Jim Falbe: And you know, my dad, he actually died of congestive heart failure and whatever. And so this was, it was a challenge, but I really had to overcome that. Um, but I can tell you as much as I'm in a much better place now, I was in a hospital and things are great. It's, it's, I faced my fears and the only way Out of something is through it.

[01:15:53] Jim Falbe: If you have a fear, you have to face it. You have to walk to the side. Otherwise, it's going to control you the rest of your life. But that being said, I still think [01:16:00] being a doctor would be a really challenging, uh, profession for me. I love helping people, but that's one area where it's just the is too much.

[01:16:07] Jim Falbe: So. Wow.

[01:16:08] Stacy Havener: Thanks for sharing that. I mean that is. Mother in

[01:16:10] Jim Falbe: law is the doctor in the family. And so that's. There you go. You have that, but it's not me.

[01:16:14] Stacy Havener: Okay. Last one. What do you want people to say about you after you've retired or left the industry?

[01:16:22] Jim Falbe: Well, I really hope, I think for me, the way I'm going to define success is it's not about me.

[01:16:28] Jim Falbe: Like, I don't really care. It's like, oh, Jim Falbi is great, whatever. That's not lasting. I think what I really want is people to say, look at these people who are under Jim. Wow, what a great group of people. And look at the success that they've achieved. Like, what I love to do is, Mentor someone and see them that kernel or what that potential that I see there and really see that flower and develop.

[01:16:47] Jim Falbe: And my hope is that when it's all said and done, it's like, you know what, Jim, Jim had a monochrome of success. That's great. But more importantly, look at what the people who are under him, what look at what they've gone on to do. It's like Jim found people earlier, [01:17:00] help them kind of accelerate their curve based on the things he learned in his life.

[01:17:03] Jim Falbe: I think the ultimate potential for my personal success, like my first 10 year career was, was being a humanitarian worker and everybody understands compounding. You take out that kind of 10 year chunk and what you're able to do relative to someone who starts it at 18, 20 years old is going to be very different.

[01:17:17] Jim Falbe: And so for me, I'm saying, let me identify people that this is what they really want to do, help them shape their philosophy, help them shape their curve. And then I want to see them go on to do great things. And one of the big things we're focused on at Saguaro is we believe that world class talent, the best people.

[01:17:31] Jim Falbe: They don't just want to have a career at Saguaro for 30, 40 years. They probably also have that spark you were talking about at the beginning. They want to go on and build something. And if we can bring someone in, mentor them for seven to 12 years, help make them independently wealthy enough, and then set them free to go do what they want, whether that's build their own investment management firm, or if they're on the client side, they want to go start a third party marketing firm, or if they're on the data side, they want to do a FinTech.

[01:17:55] Jim Falbe: Let's empower them to do it. And then if they go on and they're successful, [01:18:00] that to me is going to tell me. I did a good job with my life. If I'm successful and everybody under me doesn't go on to do anything, then that's, I was a taker. I was a taker. I was a taker. And I didn't do something that really reproduced and multiplied impact.

[01:18:11] Jim Falbe: And our, our big thing, our core value is we want to amplify the impact of our partners. And it's just goes back to me being a humanitarian worker where people said, Hey, listen, if you go after your proclivities, you can amplify your impact in life. And for me, I believe our values are worth reproducing. I believe that our philosophy is worth reproducing.

[01:18:30] Jim Falbe: And that's what I want to see is that philosophy and those values spread in the industry. And that's why I think we need to exist. I mean, the world does not need another investment manager. They're more investment managers than there are stocks, but I think we need to exist because of the values that we bring.

[01:18:45] Jim Falbe: And I think the people who are coming in agree with that, the right type of people, the right type of values, and they want to see that spread out. So that's how we're going to over the very long run.

[01:18:53] Stacy Havener: So great. You know, it reminds me of two things. One is how much the [01:19:00] industry and the world really need people who will support other people's dreams and businesses.

[01:19:08] Stacy Havener: I think the investment management in particular is pretty bad at this. It's like zero sum game. And what you described right there is very much like, you know, empowering people and seating them and have them be able to do, you know, their own things. So I love that. And the other thing that really hits for me there is, is what leadership really is being a leader really is.

[01:19:30] Stacy Havener: And they say, it's not about you as a leader. It's the people that you train, how they become as leaders and the people that those leaders train to become leaders. And that's legacy.

[01:19:42] Jim Falbe: I love what you're saying. And it's this idea of Training for training trainers, like it's the idea of trying to a big part of the DNA is not just teaching them to be a Leader but teaching them to also then go and do the same thing which is raise leaders And that's how you multiply something.

[01:19:55] Jim Falbe: That's how you make it big.

[01:19:56] Stacy Havener: You're already doing it. Jim. You're on the path Thank you so much for [01:20:00] being with us today I'm honored to be a small part of your journey and i'm also very honored to be your friend. So, thank you

[01:20:07] Jim Falbe: Stacy thank you for being an example for doing this and um for helping give your wisdom and your guidance to our firm You That's part of the board and thank you for having us on.

[01:20:16] Jim Falbe: I really appreciate it. And uh, they I don't know how to say Thank you for making me cry in front of everybody You know

[01:20:23] Stacy Havener: what here anytime anytime, um, it was just very very special It really it was and the thing is you couldn't design it that way things like that just have to happen and i'm just Grateful that I was here to be a part of it.

[01:20:38] Stacy Havener: So thanks jim. Thank you This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. The information is not an offer, solicitation, or recommendation of any of the funds, services, or products, or to adopt any investment strategy. Investment values may fluctuate, and past performance is not a guide to future performance.

[01:20:59] Stacy Havener: All [01:21:00] opinions expressed by guests on the show are solely their own opinion and do not necessarily reflect those at their firm. Manager's appearance on the show does not constitute an endorsement by Stacey Havener or Havener Capital Partners.

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