#94 - Fail Fast, Succeed Faster: Wealth-Building and Investment Strategies with Christian Schiller

[00:00:00] Welcome back to Passive Income Pilots, everyone. Tait and Ryan here on another week of financial education. Ryan, how you doing, man? Got big plans for the weekend? Massive plans for the weekend. Okay. You guys are listening to this podcast on Tuesday. And by now I will either have break in the curse or I'm going to just give up. So I'm a Lions fan. Guilty as charged. Last 40 years, we've been awful. We've been 0-16. We've been just terrible.

[00:00:30] My whole life. And fun fact, I've actually, as a kid growing up in Michigan, I never actually went to a game where they won. And then in my adult life, they started to get good. And I've gone to, I went to the championship game last year against San Francisco. They lost. I went to another game this year when they played Buffalo, they lost. So my hope is that when this is airing, they beat the commanders in Detroit. So I'm flying with my son to Detroit. Nice.

[00:00:54] Super fun. His first game, he's five years old. So this is what passive income allows us to do. I'm going to Detroit with Rowan. We're going to spend the weekend in Detroit, go to the auto show, go to the game and really just enjoy ourselves and hopefully see my very first ever in-person Lions victory. So hopefully when this airs, it's all good news.

[00:01:15] So that's fantastic, man. That sounds like a blast. I might actually have to watch the game. I've watched one football game this entire season. I've been working so hard. I've just been heads down, man, but that's all right. Yeah. Well, we just had an amazing conversation with Christian Schiller. He is an investment banker, unbelievably intelligent guy. I think one of the best little nuggets from this episode is that he invested once when he was very early on in his career and young. He invested in 27 early stage deals and 26 of them failed.

[00:01:45] Yeah. So when you think about quitting before you're done investing on something, you always hear about people say, yeah, I invested in one syndication and it went bad and let me tell you all about it and why you should never do it. And it's like, this guy is highly successful. He invested 26 times and only succeeded, well, 27 times and only succeeded once. So you could be interested in gold on anything you do and maybe you partner with the wrong person or maybe you just get the wrong deal wrong or whatever it is. Great advice.

[00:02:14] You know, an investment banker, it's kind of interesting. Like, you know, why should a pilot care, you know, about this episode or what's interesting about it? You know, I've learned a lot about kind of what investment makers do over the last year and it's kind of fun. Like they help you buy companies. At the end of the day, that's what they do. They help you buy a company. They help you sell companies too. So if you're like, I want to buy a landscaping business or I want to buy a home services company or I want to put in a bid on some franchises or something like that, investment makers do that.

[00:02:41] Yeah. And so it's kind of interesting, but that's not all we talk about on the show. We get into his investment philosophy, how you evaluate different businesses, his personal investment philosophy and his strategy around things. So it was just a great episode. And I think, you know, you should have investment makers in your vernacular as your investor and kind of just be aware of what they do and the value they can provide and how they could fit into your potential investment strategy.

[00:03:05] If you're, if you're trying to buy or sell or get a valuation of your business, like they would come in and say, Hey, your business is worth X amount. You could, you know, and then they go out and make a market around it. Right. So, um, they go out and get what's called a strategic and a strategic is essentially somebody in your business. So if you have a wine and spirits business and you're trying to sell it, there might be other wine and spirits businesses that would want to buy it. That's a strategic. So that's kind of cool. Or they'll go out and try to find a private equity company to buy or sell a business.

[00:03:35] You position your, your company that you build or a company that you want to buy for success. And there's investment bankers for literally every type of business, small, medium, large, all over the industry. Yeah. Really great context and some really nice wisdom in terms of what he invests in and what his investing philosophies are. So I think people have quite a bit to take away from the show. Yeah. And one, one thing he does leave you with too, is kind of how to pick some of these companies to invest in and how you can be kind of a smaller investor and make

[00:04:05] investment decisions in some of these pools and some of these funds. So stick around to the end. I think you'll really enjoy it. Let's get to the show. Welcome to passive income pilots where pilots upgrade their money. This is the definitive source for personal finance and investment tactics for aviators. We interview world renowned experts and share these lessons with the blind community. So if you're ready for practical knowledge and insights, let's roll.

[00:04:35] Christian, so nice to have you on the show. Why don't you give us a little bit about your background, especially your traveling, which is just very admirable that you can do all those vacations. I love that. Thanks, Ryan. Actually, this being a podcast for airline pilots, I have you all to thank for taking me to a lot of different places in the world. But I actually was born and raised in Sweden and grew up there until I was six, then moved to the U.S. Dad, Swedish mom was American. So traveled a ton to Europe growing up and always considered myself a citizen of the world.

[00:05:04] And then when I was starting to raise my family, I thought a lot of people wait until retirement to start all their big travel. But I thought, wouldn't it be great to take my kids instead of just going to Hawaii all over the world and treat that as part of their life education. And so we've had amazing family trips in the Galapagos Islands, for instance, which was just an epic life experience. You know, how close you can get up to all the animals and that. We've done Paris and London and Sweden, taking them home to see all the family and all of that in Sweden.

[00:05:33] Asia did Thailand in an elephant camp. And we actually a lot of people say, no, you can't. We started to say, yes, you can. So even when my kids were five years old, we thought of what's the craziest, longest trip we could possibly do. So we went 31 hours one way into the jungles of Borneo to go see orangutans. And, you know, three flights, a bus ride and then a about a one hour boat ride down a river into a jungle eco lodge.

[00:06:02] And so that was amazing as well. And then kind of capped off. Now my kids are older, 22, 19, 18, and I worry that I might not get a lot of family vacations. So we did a epic family vacation last summer to Zimbabwe, South Africa and Botswana on a safari. And that kind of was a capstone for us that that we also enjoyed. And that was only a 15 hour flight direct to South Africa. So that was pretty easy. Nice. Nice. Okay.

[00:06:28] There's a lesson here that I want to unpack, and that is prioritization. Can you speak to that? Because I think that airline pilots have it pretty easy. We can get a lot of time off. But, you know, in your profession, I'm sure it's not always as easy. Can you tell us how do you structure your life in order to make that a priority when you have responsibilities and things that need to be done in your professional life? And you just say, I'm sorry, this is taking precedence.

[00:06:57] And we're going to get to that afterwards. How do you work through that? That's a great question. And it does go just to be true to prioritization. My family was important. Travel was important. So everybody gets busy and says they don't have time. And I just guarded in May time. And so I read a book, A Thousand Places to See Before You Die. I highlighted everything. I'm a nerdy investment banker. So I set up this huge Excel file between that was 2010 and 2030.

[00:07:24] And I organized all the trips in the Excel file by kind of like Thailand and Borneo, things you could do together and then age appropriateness. And then just started knocking them all off like that. And basically, I just said, I'm going to have it on the calendar. I'm going to guard that calendar. And we're going to make this happen. And then, you know, I think in business, it was relying on a great team. Like even I was just at Bandon Golfing with a former client that we closed his deal in 2011. And I was recounting that wasn't that interesting. His name was Gary Rubens.

[00:07:53] And I was like, wasn't that interesting, Gary, that we closed your deal. And I was in the jungles at an eco lodge in Costa Rica that had no Wi-Fi or phone or anything. And I finally got back to Manuel Antonio like three days later. And I saw, hey, you know, Gary Rubens closed this big deal. And I just relied on the team. And the team was fantastic. And, you know, I think a lot of us kind of feel like we can be self-important, that nothing will get done without us. And, you know, I think there's true that certain things have to be done by you.

[00:08:19] But, you know, like our CEO has this great saying, best and highest use. Like what is your individual best and highest use? And you focus your time and your life on that. And then you have great teams and other things to orchestrate all the things that don't rise to that, that execute. And you can kind of have your cake and eat it too. You can be successful in business and have a lot of time to make great trips happen and do other things in life. So good. That's a lot of wisdom there. Appreciate you sharing that. You mentioned investment banker.

[00:08:47] For those that didn't go to Yale, Harvard, Princeton or one of the Ivy League schools, can you explain that like you've never heard that term before what that is? Like what you actually do? Sure. Sure. I mean, the real easy way that I do that usually is I just say like a real estate agent is to your home because everybody knows what a real estate agent does. They help you buy or help you sell your home or that to your business.

[00:09:09] And so essentially we, you know, it's maybe a bit more sophisticated with more zeros behind it, you know, because we usually sell businesses like a hundred million to a billion in value. And so that's what an investment banker does is they get hired by you to run a competitive process to maximize the value of your business, just like you'd like to maximize the value of your home. They collect a fee for doing so upon success. It's vastly success oriented fee.

[00:09:36] And, you know, what you get is a benefit of that is that competitive process drives a higher valuation, better terms, better buyer, a lot of qualitative aspects of, you know, a lot of people know certain buyers. But we have a lot of industry specialists where they know your industry really, really well. And so they can bring in qualitative buyers that add a lot more value to your business than just the money as well, too. So, you know, because these are transformational life events to sell your business.

[00:10:02] You know, they say you have get married, you have your kids and, you know, probably one of the next one, you know, for people to think about is, you know, what do I do to sell my my business, my life's work? You know, for a lot of family businesses, you know, they have three or four kids. I say, you know, the business is they have three kids. The business is the fourth kid. So it's an incredibly important qualitative thing that's impactful in their life. And we help to guide them, you know, to and through that process. That's great.

[00:10:29] And you have the experience of getting into the financials of large companies, smaller companies, evaluating what they're worth and probably seeing a lot of great things that they're doing, a lot of bad things that they're doing. How has that helped shaped you on your personal investment journey and evaluating companies to invest in or not to invest in? Yeah, it's a really good question. Yeah. Um, yeah.

[00:10:55] The colloquial thing we say, maybe not a, maybe not as, uh, sophisticated as you'd like to say, but they say we kiss a lot of frogs in our business. So, um, to find that Prince business and yeah, the numbers are very, very low. Like I was just talking to a private equity guy today about a deal we closed and he said, you know what, if you kind of think backwards to all the things that have to go right in terms of actually a deal closing, you know, we would never do it. Cause the percentages are so darn low that this would ever actually happen, but it happened.

[00:11:24] And it's kind of a funny way of thinking. And so the sorting, you know, I think you ask kind of on a personal basis, you know, I think you like a lot of investing, you have to be who you are and not be who you aren't and not try to be all things to all people is probably the best advice. Um, so you need to brand your style of investing with what you do. And then importantly, and this is the part that most people mix miss is what you don't do. So you have to bookend it, you know, what do I do?

[00:11:50] And then it's got to stop somewhere, what you don't do, because otherwise you're going to look at everything and waste a lot of time. And so what's the core investment lens that I'm going to look through? Am I going to be a value investor? Am I going to be a growth investor? You know, am I going to be an industry investor? Or, you know, am I going to be a size investor, you know, around types of businesses?

[00:12:10] But you got to think of all the attributes of investments and start to work through a process of creating investment criteria of what you like, what you don't like, what fits, what doesn't fit and build yourself a personal investor criteria sheet. And then that kind of helps you, you know, equate it. Like I always like sports analogies, but it's, you know, like trying to throw a pitch without a strike zone. You know, the strike zone is your investment criteria and you got to have a strike zone to know what you're going for, right?

[00:12:37] So that's kind of the way I would typically explain it. Can you give us an example of what that looks like for someone who, you know, is not at the level of sophistication as you are, maybe is saying, well, how do I determine that? What does the strike zone look like for the average guy that, you know, understands a little bit about business, but, you know, is not an expert in it, understands the stock market, but isn't an expert in it, has done some real estate deals. What does that strike zone look like for someone?

[00:13:07] How do they build that for themselves? Well, it's an interesting guess. One is you can go the financial advisor route and hire a wealth manager. And I think most wealth managers always say that, you know, allocation really drives most of your return, right? So it's not so much what you pick as an individual investment stock, but more how are you allocating? So, you know, I'm not going to pretend to be a wealth manager because I'm an investment banker. So I work for companies, not people on their personal investments.

[00:13:35] I do a lot of personal investing, but, you know, I would say at the tip of this theory, kind of think about your whole investment holistic picture and then your risk appetite. And, you know, that should build out at least the allocations. And that's a little bit of do, do not then, you know, do I want to invest in real estate? Well, maybe I do. But if I invest in real estate, I have to realize that I've got to have a lot of cash that is illiquid and I'm okay with illiquidity, you know, versus if I'm not okay with illiquidity, then I need to be all in, you know,

[00:14:05] publicly tradable stocks and bonds. So, you know, that's one of the big kind of demarcations is are you interested in getting into the world of alternative investments, which usually means potentially higher returns, but also locked up liquidity. So and if you do too much of that, you know, then you can get in trouble. That's what's happening to a lot of people these days is that denominator effect they talk about because there hasn't been a lot of liquidity and private investments over the last three years.

[00:14:31] So, yeah, I hear a lot of people in a lot of endowments and all of that are complaining, you know, that we just don't have any liquidity, so we can't even continue to do our investment cycle. So that's kind of the issue and the danger for an individual around starting to weigh down a world of alternative and illiquid investments unless they really are ready for it and have kind of thought.

[00:14:51] So I guess to summarize that, I'd start thinking at the umbrella 30,000 foot level, you know, around allocations and things that you're willing to do and then kind of drill down, you know, from there. It's a process. You know, don't treat it as a one off. Like, don't just take things. Oh, that looks interesting. And, you know, kind of be a shiny object. You know, kind of chaser. You need to really be strategic and top down. You know, no one's ever really done a great job of explaining that.

[00:15:16] And I know it's such a simple concept of, like, if you're going to make investments into alternatives, again, you're not going to have that liquidity. So don't put all your money in alternative investments. Like, have a good allocation to other things that provide liquidity during a crunch right now or maybe like a lot of real estate isn't trading. And I think that's really important to your overall investment thesis. You know, you mentioned when we connected, we actually got to play a round of golf together, which is super fun, that you've done a lot of investing in different things around town.

[00:15:44] And you failed a lot, which is what sparked my interest to have you come on the show. No, I'm just joking. Kind of. But, you know, you've evaluated tons of businesses. You've helped people buy and sell their companies. And you've done a lot of personal investing. I'd like to change to what for you hasn't worked. And is there any commonality in the things that have gone wrong that you can share with our listeners that would really help them kind of gain your wisdom in this show? Yeah.

[00:16:12] No, you always learn more from your failures than your successes. And, you know, I think if you end up succeeding, then it's OK. But, you know, you got to fail fast and learn. And then I tell my kids and I try to live by this, I guess, and then I'll get into specifics. But, you know, investing is like life. You know, make a ton of mistakes. Don't be afraid to try things. You know, just fail fast, learn and never, ever, ever make the same mistake twice. Nice. That's what I tell my kids.

[00:16:41] So, you know, as long as you've got that kind of ability to make a mistake, fail fast, you know, don't lose your whole net worth. You'll learn. You'll be fine. Just don't do it again, ever. Like, you know, 30 years later, you should remember that mistake and just do not do it again. So you have to remember your mistakes and you'll let those be your fuel to your successes is how I think of it. And so, like, one specific, for example, was I think I told you when we were golfing that I was in my young 20s as an investor in the NASDAQ days.

[00:17:10] And, you know, I had it's like, wait, you know, I was reading like The Motley Fool or something about stock picks. And I was like, I don't know, that's too risky for me. So I'm going to be really safe. I'm going to diversify. And I put all my stocks in the NASDAQ, you know, 100 or whatever it was. And, you know, we all know what happened there. I had everything in the NASDAQ and it went down, I think, 85, 90 percent. And, you know, did I have any stop losses or anything? You know, I was like, oh, it's going to come back. It's going to come back. It's going to come back. And so I wrote it all the way down and lost like 85 percent of my investments.

[00:17:39] And then I sold. That was stupid. So I learned that, you know, diversification doesn't mean and especially now everybody's looking at, you know, NVIDIA and the Magnificent 7 and all that. And I would say the worst thing you could do is, you know, riding that train, you know, to say that, yeah, I'm going to put all my money in the MAG-7 or the NASDAQ, right? Yeah, because right now, I mean, history is going to repeat and those will be good for a while until they won't. And if that's your entire investment strategy, you're going to, yeah, you're just taking undue risk.

[00:18:10] And so that was a big learning around real diversification of taking it into, you know, other like Russell. And if you just want to invest indexes, just make sure you're in S&P, NASDAQ and Russell and, you know, some other diversified indices that you're not all in tech. So that was one good example. I think the other good example I gave you was in privates where I had a lot of people that I knew that would just reach out to me and send me an email or call and say,

[00:18:35] hey, I have this great investment and, you know, there's this great guy or great team or great something. You know, it's all these embellishments and excitement and all that, the people selling you something. And, you know, so I had a bit of the shiny rock syndrome back then, again, in my 20s. And I would just say yes to these things that they would call me a hell. I have to go in and whatever amount is meaningful or not meaningful, I put in amounts that weren't that meaningful in the individual amount. But I think I invested in 27 investments and I lost all my money in 26 of them.

[00:19:04] And I was like, looking back at that, I said, whoa. Okay, now I put a bunch of small money into any one individual investment because I was like Jim Carrey in that movie, The Yes Man. And I could only say yes, not no. And so, you know, I had to learn to say no. And I had to learn back. That was kind of when I started to learn, well, what do I want to see? What don't I want to see? And I started in the early part of my own personal investment criteria back in my 20s and early 30s.

[00:19:31] And so there, to be specific, and then we can stop and go to either more on that or something else. But I basically went kind of mother goose and apple pie. I'm a pretty simple human and I'm very relational. And so I said, you know what I'm only going to invest in is no like trust. So number one was this got rid of 98% of all that noise that I was having is if I don't know you firsthand, I'm not going to do your investment.

[00:19:55] So it was friends and people that I worked with and former clients and people that I then got into that I trust, right? Because if you know somebody and you know them over a long period of time, that's how you build trust. So and then the like came in that kind of when I had fun in life. I mean, why? You know, it's work, but, you know, work doesn't need to be work. It can be fun. And I have to like the people that I invest with or behind. And I got to want to have a beer or play golf or spend time with them.

[00:20:21] And so I just developed this very odd kind of relational investment criteria saying no like trust. And the no part was key because then I never even looked at it. I just delete, you know, like somebody cold emails or somebody cold calls me. I just delete it and I don't even think about it. You know, so it took out all the 80 to 90% of the white noise got taken out of my life.

[00:20:44] It's easy to know somebody, but what characteristics in that knowing them do you look for that makes them a worthwhile investment? I mean, obviously, we all know people that we wouldn't invest with. We might like them. We might actually even trust them. But there is that no that I know that this person can produce and is going to make a good investment decision.

[00:21:08] What are some things that you look for inside of that no that would be redeeming qualities of I would move forward with that person? Sure. Well, I think the theme is going to come. I'm a pretty simple person. I try to keep things simple. So back to like my mother goose and apple pie kind of scenario, I kind of think about what would you give your kids coaching about? Right. Yeah. I coach my kids to say, you know, surround yourself with people that you want to be like, because that's what's going to happen. You're going to be like the people you surround yourself with.

[00:21:37] And so, you know, the no is, you know, I try to surround myself with people that are smarter than me, better than me, have done more than me. You know, it's like if I played tennis when I was growing up in high school, you know, you could play tennis with somebody that you beat all the time. What are you going to get out of that? I always try to play with the guy that was just going to absolutely kick my butt, you know, 6-0-6-0 and just get whapped off the court. And then I would learn and, you know, I'd be excited when I would win that first game and the second game. And so investing is the same way.

[00:22:05] Just have superpower people that you surround yourself with that have done great things and are doing great things. And, you know, just soak up like a sponge, you know, kind of what they've done that and then try to figure out, well, what, you know, not all of that's going to apply to you. You know, like I've got plenty of friends that have built, you know, unicorn or public companies or so. I'm not going to go do that. But, you know, at least if they're doing offshoot investments of things, I should probably be thinking about what they're doing, you know, because they've been successful, you know.

[00:22:32] And there's that saying that historical success isn't an indicator of future success. And I think that's a good disclaimer in the public markets. But I think that's absolutely wrong in the private markets, for instance. I mean, historical successful people are probably going to be successful again. So I follow successful people onto their next success. So that's another example. So, you know, your investment world is, you know, you're going to surround yourself with people that you want to end up like. Yeah, no, that's great.

[00:23:01] Going back to the 26 out of 27 ducks, what type of investments were those? Can you walk us through a few of those? You want to take me back to my pain period, yeah. Yeah, I know. This is a painful recount, but let's learn. This is therapy. They were, you know, they were the small investment, you know, amounts. I don't really want to state amounts, but it was just small relative to my, you know, investment numbers, you know, whatever that is for you. And they were mainly tech and startup and early stage companies.

[00:23:29] That was probably the number one issue that I did was it was business plan or slight companies that are growing. You know, one thing I did to fix that is that I invested in early stage adventure. I only invest through funds. So that allowed me to save me from myself, so to speak, where now if like anybody comes to me with an early stage deal or any kind of venture deal or pre-revenue or anything like that, I say, hey, I'll introduce you to the one of three funds or all three funds that I'm invested in.

[00:23:58] And then, you know, it's kind of a win-win, right? Because then if the fund invests, I'm invested because I'm in through the fund. But if the fund does the diligence and doesn't invest, then, you know, I've guarded it from myself saying yes, not too much. So that's some example. It was a lot of the tech and early stage. That's the most dangerous part of investing. Would you mind sharing what those funds are that you like to invest with? Sure. Yeah. Locally here, there's Fuse. Fuse. So, you know, those guys are in a spinoff of Ignition. They're forces of nature.

[00:24:28] They're some of the hardest working best people I've ever seen in investments and, you know, back to surround yourself with winners. And they've got a great LP network. So the Fuse VC folks, there's Unlock Venture Partners, Andy Liu here locally, who was a tech entrepreneur, very successful built and sold companies. And now he's taken that to various investment funds and earlier stage companies. And then, you know, a few others that are like that, that I invest in.

[00:24:54] So, you know, very successful funds that are doing these deals. And I still do some early stage deals, but it just takes the bar way up. Makes a lot of sense. Nice. What other private investments do you do? Do you do anything in real estate or is it all just kind of pre-revenue, like you said, through the fund, tech startups? So good question. So I did real estate. I don't really do real estate much anymore. I can explain why. I make company, direct operating company investments.

[00:25:23] So like one example was I sold a business for a guy and his son back in 2016. And they had a 94-year-old owner that owned a third of the business. And he wanted to clean up his estate. And so I bought that 30% of that private business in leasing. That was one example. Or, you know, recently I acquired a company with some other partners here through a smaller investment banker that had tried to run a process to strategics. That didn't work. He called me up, said we want to do a management buyout.

[00:25:51] And so it was a 109-year-old family business. And they really wanted to keep a continuity in the business, the management team, and all the ownership. And so we bought out one of the partners. But then the CEO and his son and others, you know, remained on as equity partners. And so it was a kind of a partnership-oriented deal, something like that. I still invest in a lot of public equities and things. And I can talk about that and how I do that, if that's useful. What else?

[00:26:18] And then, yeah, private equity funds, which are much less risky than venture capital funds. So private equity funds are those that you can put money into that you're expecting two and a half to three, three and a half times return in five years. Versus like a venture fund is, you know, you're hopefully expecting like five times to eight times to ten times. So, you know, back to that allocation, you know, kind of layering venture and private equity and then some direct private real estate I used to invest in a lot.

[00:26:46] I just, I ended up, you know, kind of that's a little bit of know thyself. And, you know, real estate just ended up being a little bit tricky for me personally. So I exited most of those investments. Makes sense. That's great. You said a whole bunch of stuff just a minute ago, and I wanted to make sure the listeners can follow along. You mentioned investing in the operating company. Can you kind of explain that as it pertains to maybe my company?

[00:27:12] Like, you know, just for what I do, just to kind of make it relatable to some listeners. I have a property management company, a construction company, and then I invite investors to participate in the LP interest in like a special purpose. Vehicle, like the actual real estate itself. When you say you make Opco investments, can you kind of explain what that would mean for a company like mine? Yeah. Well, so yours would be less in my vernacular.

[00:27:41] It'd be less of an Opco because that would be more of a fund co, right? Right. So the Opco, and that's a little trickier. I mean, now keep in mind, I'm an investment banker and I see a lot of flow and I have a lot of access to these kind of things. Right. So an Opco is like, this was like this business that's a manufacturing company that makes stuff. Right. And so there are ways to get into that deal flow. However, you know, through private equity fund investments, through independent sponsors, fundless sponsors, it's called, that do these deals.

[00:28:11] And then, you know, there's lawyers and accountants and, you know, other kind of professionals. Doctors are big investors in these and airline pilots, you know, could and should be investors in these. But, you know, there's plenty of independent sponsor type of connections where you can get into Opco investments, you know, through those types of things. You can even invest in private equity funds. Like if you have a wealth manager, you know, like I have a manager and I invest in private equity funds still through that.

[00:28:39] So because otherwise, sometimes they're harder to access, but you can do that. To your situation, you know, that's in my mind, a little bit more of like a fund. And I think that's a great way to go. Like, for instance, you know, I don't do real estate on my own because, you know, I just decided that I'm not that good at it and I don't know it and I don't understand it. And that's not my flow, my knowledge, my relationship set. It's, you know, it's on the opposite side of no, like, trust of where I'm at. And so I'm not going to be the best at that.

[00:29:04] And so there I would say, you know, to, you know, be true to yourself and look at that, to invest with people like you that, you know, are experts. You know, we live in a world of specialization, right? So you should find the specialist that has a fund like you in real estate and invest in that. And that would be a lot better served than me trying to, you know, look around like a blind man in a forest trying to figure out my way through that. So I think you have to be humble enough to know what you're good at and know what you're not good at, too.

[00:29:32] And, you know, focus on direct investments and what you're good at. And then, you know, focus on fund investments and things that you're not good at. Like I said, venture capital, I'm terrible at it. Early stage, I'm terrible. So I went through funds, right? Or real estate, I'm terrible. So I would go through funds. But, you know, Opco's, you know, I've proven to be pretty decent at that. So I can do that on my own. That's great. Where would one go to learn more about Opco investing? Google? No, I'm being fissing. Or give it. No, and that's good.

[00:30:02] That's fine. I mean, give us some prompts. Like what would be a good prompt to put in Google? No, I mean, I was just joking. Honestly, that's not the way to do it. I think, you know, if you're serious about that, you have to figure out your ecosystem, right? So a lot of this goes by geography. So like we're here in Seattle. And like, for instance, I host a dealmakers dinner every quarter with about 60 different family offices and investors and things like that.

[00:30:27] And that's part of the community, the ecosystem that we've created to bring everybody together that does all of these kind of things, largely Opco investments. You know, family offices invest in Opcos and then the independent sponsors go acquire them and need the family office money. So, you know, and that's all kind of a localized ecosystem. So if you truly are interested, you know, you can figure out who are the players in my localized ecosystem that are funds, venture, private equity, growth equity, who are the independent sponsors?

[00:30:57] You know, you can go get coffees with people. You can reach out to me. You can reach out just networking, right? Good old networking. I mean, I think that kind of is lost a little bit and people, you know, they don't network enough and everybody loves to talk about themselves, right? So if you bring somebody to coffee and say, talk about yourself, you know, you're probably going to do pretty well listening and getting a lot of information out of that for a cup of coffee costs, right? So you can hyper-localize it like that. And that's an easy way to take a bite.

[00:31:25] You know, like I said, you can go through a wealth manager that has access, you know, to a lot of these really good funds. And that's another thing. And, you know, you're going to pay more fees doing that, but that could be okay. That's great. Bringing it down to, you know, a level that is digestible for a lot of our listeners, I think, how would you find a wealth manager that has access to this kind of stuff? Because I think for our average listener out there who has a 401k, a stock portfolio, is

[00:31:52] starting to invest actively or passively or both into real estate deals and couldn't agree more with you in terms of, you know, being the limited partner position on things that you don't understand. And this is why I'm such a big proponent of limited partner positions in real estate, because you can diversify across all sorts of different asset classes. But not to get off track here, how do you find a wealth manager that actually knows where these great private equity deals are?

[00:32:20] Because to me, it seems like the vast majority of wealth managers have a basket of stock bonds, mutual funds that they get paid a percentage on that they usually keep very shrouded in mystery. And that's it. And, you know, if somebody starts talking about, oh, I want to do 50K in this illiquid real estate deal, they go, eh, I don't know, eh, because they're not getting paid on it. What are the questions you should be asking your wealth manager to know whether they're

[00:32:48] sophisticated, diversified, you know, worldly enough to understand things beyond just the public markets? Sure. Yeah. I mean, your main interview question would be, tell me about your alternative investment strategy and access and resources, because that's the universe that we're talking about. So public stocks, public bonds are the non-alternative, and then what the use of the word is just alternative investments. So tell me about your network track record of alternative investments. That's excellent.

[00:33:18] That would be the question to ask. Like, you know, specifically, again, in the Pacific Northwest and Seattle, you know, I just know this because this is our community. So if people wanted to follow up, I guess I don't want to be deemed as advertising for anybody right here, probably. So I'm not going to name names. But, you know, there are certain wealth managers of three that I can think of that are incredibly good at alternatives and have access to the best in class kind of funds, which is that's also the thing.

[00:33:45] When you get to the alternative universe, if you look like, I think you can Google CalPERS, you know, California pension, and they actually publicized, you know, much to the chagrin of so many of these funds, you know, all of their fund investments. And who was doing it? It was shocking because, like, literally all the return comes in the upper 25 percent quartile and most of the long tail is terrible. So if you're not in the right alternative investments, you're going to get smoked. You know, it was kind of so you need to get access to the right funds or the best in class funds.

[00:34:14] And there's certain wealth managers that have that. And then also the large wire houses. Again, we'll name names for favorite. But that's, you know, any name you heard of the big, big. They have access to like, you know, here I will name names just for example. But it's not, you know, just you could name any of these, but Blackstone or KKR, you know, those huge funds, they actually get allocations from those funds across their huge platforms. And then they dice it into retail sizes that you can invest in.

[00:34:43] What kind of net worth would someone need to have in order to start a conversation with one of the more upper echelon of wealth managers like this? Yeah, that's the trick. That's a great question. So I think the ideal number is 10 million of liquid net worth, which is a big number. And I think the bottom number to make it worth your while is probably 1 million of liquid. You know, liquid means investable. So your net worth is your house and other things.

[00:35:11] Maybe you're 5 million, but you have a million in the bank that you want to invest. So somewhere 1 to 10 million. Why the rich get richer. Why do you think that is? Why is it? Why is the system set up that way? I may be asking a too broad question, but why is it? This is so generally inaccessible and elite, so to speak. Well, because most of them have minimums. So you kind of go bottoms up just with the math. So if they have, most of these places have minimums of 500,000 per investment.

[00:35:39] And if you say you don't want to put 10 million in, or you don't want to put more than 10% in any one investment from just an allocation, you know, then you do the math and all of a sudden you have to have 5 million just to start talking about it. There are plenty of the minimum of 100,000. I think the most minimum minimum I've ever seen is probably 50,000. So, you know, you just do the math on whatever the minimum number is and then having 5 or 10% allocation.

[00:36:07] You got to multiply times 10 or 20 and you got to have that amount to play it. If you're not doing that, then you're going to wade into some pretty dangerous territory for yourself. Because if the minimum is half a million and you're taking your half a million and you're putting it into one investment, that's not very smart because you're not diversified. Great advice. You talked about layering, you know, from high risk, you know, VC to private equity to some illiquid, you know,

[00:36:32] maybe real estate deals down to your publicly traded equities and the difference in liquidity scale there. Can you talk about the difference between risk and volatility? I don't think we've talked about this on the show yet. And it's a very important point that I think we need to discuss. Sure. Well, simply stated, and then I can talk about layers to that, you know, the higher the risk, the higher the volatility. And so, you know, essentially what that means as a practical investment side is, you know,

[00:37:02] the way I look at it or like back to, I always like to go to my kids. So I taught my kids investing. My parents never taught me that. And I taught my kids investing, you know, first with like CBS MarketWatch game and then into other things. But, you know, kind of in this vein, I always told them the golden rule of investment amount to figure out how much you have to invest is what amount of money do you have that you don't need for at least the next 12 months. That kind of starts like you're OK, well, now that's investable.

[00:37:29] And that goes to risk and volatility, because if you need some money in three months, you could put it in the market now and the market could be on 20 percent. You need the money. So you've got to sell it. You've just lost 20 percent. It's a terrible outcome. Right. But if you have that longer two years or something and the market goes down and you don't need that money for two years and, you know, let's say that you put in half the money and the market goes down 20 percent. Well, what should you do? Now you've endured a lot of volatility and the paper of that half your money has gone down.

[00:37:57] Well, the best thing you should do is actually put the other half in right now. Right. You know, because you're buying a 20 percent cheaper. Right. So you kind of, you know, can take advantage of that. And why can you do that? Because you can withstand the volatility because you've got that duration of time that you don't need the money. And so, you know, you could take higher risk and higher and then withstand volatility for money that you don't need within a year or two. So that's kind of how I view risk and volatility.

[00:38:23] And then, you know, like, I mean, the golden rule is, you know, you never sell in a down cycle. Right. Right. So, you know, the number one thing you should do. And I tell my kids this and it was funny. My kid now is like 19 and he was telling another kid in the car about investing and dad's investing. And he was parodied back. He's like, the markets go down. You should get excited because then you start shoveling in money that you could buy, you know, but you don't sell. You never sell in a downturn. And I was like, oh, bravo. Way to go. You did it, dad. I was like, he listened.

[00:38:51] You know, it's like the last thing you ever do is sell in a downturn. But to do that, you know, you have to be able to endure that volatility with, you know, liquidity. Right. And so I don't know. I hope that answered your question. But that's kind of risk and volatility. Absolutely. I mean, volatility being the, hey, as long as you don't sell it, it's going to bounce back versus some riskier investments that, you know, you actually do have the chance of losing all your money.

[00:39:17] And that value is just eviscerated versus, hey, as long as you have a long enough time horizon, this is, you can ride out the storm. Yeah. One good thing. I mean, you didn't ask this question, but I'm going to proffer it right now because this is my number one thing I wanted to get out in this actually is that investing in a public sentiment is the easiest thing on earth. It's so easy. And why do I say that? It's because you got to get rid of all the white noise and just simplify it.

[00:39:45] And if you look at the way I explain it to my kids, again, was look at the S&P, you know, since right after World War II. And, you know, we've all looked at the graph, right, Everett, and you can publish it for all of your listeners, you know, because you're going to see a lot of up and down. But if you draw that line through it, it just goes straight up and to the right. And so, you know, kind of looking at the simplification, we all worry about the public stock market and know,

[00:40:11] should I buy stock A or stock B or stock C or should I do this or should I do that? And it's just the way I play it. So, you know, take it if it's right for you. But I get rid of all that with just saying in my public investments, all I do is indexes. And why am I comfortable with that? Because, you know, the math is about 70 or 80 percent of all these, you know, really wealthy hedge fund or other kind of fund people don't outperform the S&P 500 in the long run. So to me, that just kind of simplifies it.

[00:40:41] If I got to pay somebody millions to invest and they're not seven or eight times, they're not going to beat the S&P 500 over the long run. Why would you do that? Right. And so the index funds and that's why the indexes have gone so crazy, you know, in terms of just the volume of dollars into that and it's low cost. And, you know, back to volatility, you know, you got to look at that chart and you got to be able to withstand the ups and the downs and maybe even buying the downs, which even increases your returns. You know, but to me, my public investing is is KISS.

[00:41:11] Keep it simple, stupid. It's I buy, you know, S&P and Russell and NASDAQ and I don't buy the NASDAQ like I used to as my only index. You know, I kind of I diversify indices and that's the way I play the public markets. And I miss out on a lot. And you kind of sit there and you think like right now I'm missing out on a magnificent seven around. I'm catching a little bit in the NASDAQ and a little bit in the in the S&P. But, you know, versus like if I just put it in the mag seven of the last two years, it would have been great. Right.

[00:41:39] But then, you know, the other thing that you should hear and they see, you know, because I think investors think short term a lot. And if you back up and think long term, you know, all these things cycle. Right. So everything cycles and everybody kind of pretends and says, no, tech's going to be great for the next 20 years or it's not true. Everything. I've seen this for, you know, 30 odd years of investing. Everything cycles. And if everything cycles, what what are you going to say that you're going to be smarter to pick the next 12 months hot thing versus not thing?

[00:42:08] You know, if seven or eight of the guys, you know, that are getting paid millions of dollars can't do it, how can you do it? Right. And so that's kind of where I dumb it down to just playing the indices in the public markets. And it's boring, but it but it works and it's worked over the long run. I'm not going to catch the high. I'm not going to get the low, but I'm going to get most of the return. Well, I think you've provided some clarity to me, at least like if you're going to do the public market investing, just do the index funds. Right.

[00:42:35] And you don't need a wealth manager necessarily for that, but maybe the wealth manager really helps you play in the private markets more and pick those private funds. I mean, is that what I'm kind of hearing you say? Yeah. Yeah. And you might have to give the wealth manager your index business just as an access point. I mean, it depends on how much liquid you have. If you have enough liquid that you can just play alternatives through wealth manager, then sure, that's probably the best way to go. But if you don't, then you might have to pay to play to give them your overall business.

[00:43:04] But that's your access point to the alternatives. Got a question for you. Pilots have to retire at 65. We have a huge, normally huge exposure to the public markets because we have very generous 401ks. So from what I see in my career, most pilots have a massive exposure to the volatility of the overall stock market. Now that we've been on this massive bull run for over a decade now, but that is not the historical norm. There are ups and downs.

[00:43:33] What are your top favorite ways to generate cash flow so that you don't have to be reliant on liquidating assets in order to live on the value of those assets during retirement? Basically, how do you like to generate passive income? Well, I'm not the best to answer this necessarily because I mean, I'm 51. I'm not 65. So I'm still all in like, you know, I just had this discussion with my college buddies and they're a third in bonds. And I'm like, that's stupid.

[00:44:02] Why would you be a third in bonds? You know, just go with all the stocks because, you know, if you can withstand the volatility, you're going to get a much better return. Right. So you're asking me a question that I might not be the best to answer. Now, with that said, I can answer, you know, if I was going to look for income return, I would do it mainly in real estate. You know, but I think that's a good safe spread where you get a higher return, you know, than straight bonds.

[00:44:29] You get a lot of tax advantages and depreciation and other things like that that can shield your income so that you actually get a higher net, you know, kind of cash flow because of that depreciation that you don't get in bonds or other things like that as well, too. So if you're willing to take a little bit more risk investing in real estate, I've done that before and I like real estate investing and I made good kind of current cash income and it's a nice passive income. It just, I decided that I can do better in my company stuff than I can, but I think I

[00:44:58] would answer it that real estate would probably be the best place to look for, for good passive income. I like that better than bonds. I mean, I think bonds, unless you're going to hold them to maturity can be pretty dangerous, you know, because people forget that bonds prices don't stay, they, uh, you know, static in the bond market. Right. So if you're going to put your money in a bond fund or in a, uh, in a bond and you need that at some point in the prices, you know, are off, you could get hit pretty hard. Right. And so what happened to Silicon Valley bank? Yeah.

[00:45:28] Yeah. So that's just my personal thing is I, I hate bonds. I, I, I just, I'll take a position. People don't take positions in life. I hate bonds. I don't do bonds and we'll never do bonds ever. And I do stocks and, and if I wanted income, I would do real estate. There you go. Well, that's great. You heard it here. Yep. Well, Christian, that's a great place to leave off. I know we want to be respectful of your time. You offered a kind of midway through the show. If people wanted to get in touch with you, maybe they, they want some guidance on where

[00:45:54] to go to find some of these investment opportunities that you're, where you're hanging out. That'd be great to get your contact information for that. And also, I know you're part of Cascadia does like a lot of family, you know, investment baking and, and sale of businesses. So I know that you're very well-versed at that and appreciate you coming on to the show and kind of explaining what that is and how it works, but how do listeners get in touch? Sure. C. Schiller at CascadiaCapital.com.

[00:46:21] C-S-C-H-I-L-L-E-R at C-A-S-C-A-D-I-A-C-A-P-I-T-A-L.com. Probably the best way. And, uh, you know, just for the record, you know, because I, I'm sure I should do this from a compliance standpoint and otherwise too. I'm a registered FINRA and other things that, you know, not, none of this is, should be deemed investment advice. You know, I'm sharing my historical and personal experience and experiential learnings and things like that.

[00:46:50] But yeah, investing is all individual and you need to be your own fiduciary and make your own decisions based on, you know, what's right for you and your situation. Right. So I'm happy to make connections and introductions and be a conduit. You know, I obviously I'm a connector. That's what I like to do. And, uh, but you know, I'm not ever giving advice. We never give advice on this show. Just friendly conversation. Exactly. We think we say that every episode, but, uh, thank you so much, Christian, for your time and appreciate you coming on the show.

[00:47:20] So, yeah, thank you. I really appreciate it, Ryan and Tate. This was fun. And, uh, you know, thank you again to all your airline pilot constituents for taking me all these amazing places in the world. And I look forward to continuing to hit more of my list on, uh, on more of your flights. So thank you. Right. Well, we, we always say thank you for paying for the gas. So there we go. Well, I appreciate it. Thank you very much. Thanks, Christian. Thank you, sir. Take care. Cheers.

[00:47:50] Cheers. Thank you. No. No. No. Thank you.