Podcasts

Episode 6- Decoding AQ with Ross Thornley Feat. Richard Wilson - Founder of The Family Office Club

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Intro

Hi, and welcome to Decoding AQ, helping you to learn the tools mindsets, and actions to thrive in an ever-changing world. 

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Ross

Hi thanks for joining us, it's Ross Thornley again here from Adapt AI. And my guest I've got today is Richard Wilson from The Family Office Club, becoming a really good friend of mine. And I want to welcome you.

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Richard  

Thanks Ross.

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Ross  

Great. So we had an interesting day yesterday. We're here in Chicago, our quarterly meet up through strategic coach. And what I'm interested about is what actually led you to come and be part of coach?

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Richard  

I think just realizing I had hit a complexity ceiling, and I need to be around more really high quality business owners that were doing big innovative things was one big reason. I think also realizing that there has to be a way to make more progress with less chaos and stress, etc. So that's a more clean path to success.

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Ross  

Okay, and give us an idea really, of what The Family Office Club is, and the transitions and perhaps a couple of the big breakthroughs you've had the last year.

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Richard  

Sure. So Family Office Club was a media platform and community at the middle. So we have 30 events a year. And we've got 1,700 registered ultra wealthy investors and family offices, and our club. And we have, out of the 6,500 people that come to our events each year, we have people raising capital, and people with capital to allocate and our business's unique. And then we have the platform at the middle.

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And then we help those raising capital through familyofficedatabases.com, pitchdecks.com, our marketing agency for people raising capital, but then we don't do investment banking work, we really represent the investors and helping them start their family offices and get great deal flow. So we're stronger for those raising capital. Because we're always text messaging and calling and emailing the ultra wealthy investor clients, and are more valuable for the investor clients, because of a number of thousands of people that we're talking to raising capital each year gets this great deal flow.

Ross  

And one of the things I'm a great fan of Peter Diamandis, and I go to A360 Abundance, and he talks about the abundance of capital, there's never been a better time for either raising capital or that it's, it's everywhere. And where do you feel the shifts and changes have been since you started to now what are some of those significant transitions in terms of family offices and how they're managed? Or what they're looking for most?

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Richard  

Right? And here's a great point. So we had a workshop last week called Private Investor Advantage. And it's about 18 different strategies that private investors can use to have an advantage. And a couple of them revolve around what you just said, there's capital everywhere for the best ideas. And so when people fight over the ability to invest in a company, then the company is to decide who they want to allow into the company, NAC has decided based on the strategic value, valuation, the relationship with the investor. What I found is that investors can have a marked advantage if they really position themselves as the number one strategic investor, or manufacturing companies in Texas, or consumer product companies, or stem cell companies, whatever family's biggest strength is, knowing that strength and wearing it on your sleeve.

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So people find you first and hear you first means that you'll get to see more deal flow, you'll have faster, better, more specialized due diligence, you'll get exclusive deal flow, you'll get better valuations, and you'll get opportunities other people just wouldn't be able to see. And even if none of that was an advantage, once you get into a deal, you're gonna be able to help grow the value of that deal faster. Because all you do is invest in deals in that space. And you probably have distribution, you can open doors, give strategic advice. So I just see that as such a Core Advantage that most investors aren't really pressing the gas on or even acknowledging that they could be using as that's the biggest thing I'm seeing right now.

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Ross  

So if people take that advice, and they go, Okay this is something I either care about or I have a strategic knowledge or advantage that I can discern good investment or I want to be involved in that sector. What do you feel investors are really looking for once they've narrowed down to that niche, other than going at other people like know or investing in it? So it then becomes person raising is the buyer. Right? What is it that you've seen that really matches up those relationships well?

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Richard  

I think one thing is long term commitment consistency. They want someone who's been doing self storage, investing or stem cell work consistently over a long period of time.  Not someone who was selling a blockchain app last year, and now a cannabis fund. And next year at some other hot thing that's up and coming. I then want someone who's really committed to their craft and taking a long term view and ironically doing things like you don't care what happened short term will actually speed things up for you and making progress because it always takes four months, nine months, a year and a half to really build trust with an investor. And when you try to take shortcuts, you're always changing paths, and it kind of ruins the whole thing.

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And then like we were speaking last night, I think the intersection of where there's growing inevitable growing demand big future demand, but there's currently very low competition in a space. And it's an area that you can do to really excellent work at. And it's playing for a coach term, you know, your unique ability, or something that you've got a real strength. And then at the intersection of those places is where if an investor can feel that, they're gonna say, hey, this sounds like a great investment.

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Ross  

That concept, also that we talk a lot about in terms of a free zone, frontier, and innovating in really pioneering work in areas. I wonder how that relates to maybe the balance in a sector, so a family office picks their sector that they want to have their impact with? How do they then diversify or balance those different pieces? We were talking earlier, and you made a great analogy about the chessboard. And I wonder if you can share sort of your thoughts of some stories about that, that you've seen of how that can work?

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Richard  

Sure, I think one of the most important things we try to communicate to investors that we work with or just hear our podcasts, etc, is just that they needed to design their own unique game, and design the new reality they want to live in. And they decide what pieces and how they keep score on this game board. But for family offices, usually by accident, but it can be sped up. If you think about it on purpose. You can have different business holdings that you had act in different ways.

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Some could be like a pawn or they just create cash, give you a little bit of market information that might give you talent, or access to deal flow, that might really boost your reputation like Mark Cuban being on Shark Tank. I don't think he makes a ton of money doing that. But it really grows his reputation. Some things might be passion things like owning a sports team as Mark does. And then that helps someone building relationships and also get some of the public eye more. So different things can act in different unexpected ways that nobody else understands, because they're not playing your game. And if you focus on your industry and your unique abilities, where there's big demand, a little competition, you might be the only family playing that game on planet Earth with those rules. That scorekeeping process.

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Ross  

I think is great. There was, I think, a couple of quarters ago, Nick Nanton, talked about playing the games, and the games he wants to play is the ones that maybe no one else is playing. Because then you're you're bound to win. Right? You know, so finding that area in that territory where it is still valuable, you know, you're not playing on your own. And there's no one watching and no applause or no reward or bit. But you're playing it in a unique way. I'm interested, because we've just completed and finished our first beat a study of a range of organizations and trying to understand a map of their adaptability. Right, and just that term of adaptability, you know, we're forging this new area of AQ adaptability question, how would you phrase and understand adaptability in your context?

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Richard  

For me, it just be the dynamic evolution, adjusting to the market dynamics so that you're playing your game in a stronger way based on the new realities that are constantly unfolding. I think that I love Peter Thiel saying that if you can have very high conviction on something that you think is inevitable, and everybody else seems to be missing it, not seeing it yet, or thinking you're absolutely wrong, that's where you should triple down. Like I was saying, this morning, I got a negative feeling feedback from one wealth advisor I was talking to, and I reflected on that. And I just thought many times in my past the things that people said, I was doing wrong, or they complained about a bit, the reason I was doing them, it was on purpose, it wasn't an accident. And I realized people don't like change a lot of the times if they're embedded in the space, and it ruffles their feathers, or they question it. But that's what you can triple down on sometimes.

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Ross  

And it's often the stalwarts, in an industry who are, you know, having this immune system response to change? So you come in and their antibody comes up and says, No, that's not good. And I'll tell you why. I know you don't understand it doesn't work like this, right. And for you, you see things very differently. And that's where real change comes from.

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Richard  

Two good examples of that just make it super easy to understand like, one is people will sit in my office and keep us gain. And they got there through social media and LinkedIn, and digital marketing are the books I've written better at. But they'll be sitting in the office. And they'll be saying, No, I don't think that social media works for attracting the ultra wealthy, or, you know, in this industry, and like they're literally only there because it does work. But they don't even realize that there are evidence of it.

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The other is that when I was first hosting Family Office workshops and conferences, I was doing some consulting work, but not much other work at the very beginning, that Family Offices would come up to me after doing like a workshop at the Harvard Club in New York. And they would say, Oh well this isn't obviously the only thing you're doing. So I counted the people in that room and it's only this much to come and you seem like a smart guy. You obviously have a way that you're leveraging all these relationships flowing through the events, right? And it was interesting because the most wealthy people would say that, assuming I had some master plan that was like genius behind the scenes, and the people who were not too successful would say, Oh I hear that you might be starting to do this other thing, you should really just focus on one thing, only do one thing.

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And I realized that the Family Offices were the ones encouraging me to have a more multifold intelligent model versus saying, I'm a conference provider robot, or I do consulting work. And that's all I do. And I really appreciate that guidance from the Family Offices along the way, even if sometimes it came as kind of a light criticism.

Ross  

I think that's the balance for a lot of organizations that they're facing is, do they focus on their core hoping that that value will maintain and sustain. And so they'll look for improvements on productivity and efficiency to say, Okay we're going to expand that core. And at the other side, you have these sort of breakthrough innovations, which are maybe high risk, they're the experiments, or the multifaceted aspects that could come in the future to replace that core. What we've seen historically, is that happened over a long period of time.

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That might even be multi generational, and take decades for that shift for a lot of companies, whereas now we realize change is accelerating. And the pace at which an organization can be agile, or adapt or take new technologies, and what historically might have been unsuccessful. And the gap between success was great determination, all of those things and the fortitude to stay in it. Whereas now we're seeing such creation so quickly. And such disruption so quickly. How do you navigate that kind of environment, even if you know, this is my sector, this is what I care about. I'm playing my game. But when everything in the market is at such rapid change, how can you help people in that kind of world.

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Richard  

And the way we look at it, we find like a sandbox, like Verne Harnish would say that we want to dominate over the long term, but then there's little mini sandboxes within the sandbox, where we find a funnel, and there's funnels within the funnel. So it might be that we have a single family office, educational funnel, and we help people start their own single family offices. But then within that is a sub funnel of how to start a family office, but a ton of content and creation into that.

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Another sub funnel might be incentive millionaires, etc. The way we look at it is innovating within something that's already making money. But they're always experimenting with things that might be a little bit horizontal or vertical from it, like your history and past and selling your marketing agency. We have pitchdecks.com we don't do any advertising for it because in our workshops there are people that are looking to connect with family offices. And it's just an experiment and idea in Q4 last year, they attracted half a dozen clients, almost an accident this year, we're up to 52 clients. And it's just a experiment, and we see if it survives in the wild on its own and grows some legs. And if it's able to walk, then we'll inject some more capital and energy into it, and have it run.

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And I think that from a adaptability standpoint, that's why a lot of family offices unless they made their money in manufacturing, they don't really want to invest in a manufacturing startup. They want to see that someone has had an idea of breathe some life into it. And the thing has came out of the ocean and taken some steps on its own. And then they'll go and give it physical therapy and capitalize it so it can run and then sell the private equity versus they owe less as fast only in startups, most family offices don't have that mindset because of the adaptability thing they want to know the CEO is capable to adapt and their model is relevant in the world. Because otherwise, with a startup you have operational risk, at team risk, market risk, pricing risk, all these different risks going on, right?

Ross  

I know somebody from Silicon Valley Bank, who looks at the adaptability of the founders being of key component at to whether they invest right at startup. And knowing that what they're doing today is going to be different to what they're doing in a year's time. They still be might be working on the same mission but who they attract the type of people, the types of technologies is going to go into change.

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I'm interested about this aspect and this sort of tension point between experimentation to find new revenue streams and happen to be multifaceted versus laser focus. And you did a nice little cartoon sketch yesterday in the session. Whilst I thought it was some kind of spider or tarantula, you told me it was actually some other animal. I wonder if you can just tell me about that. And what the thinking was.

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Richard  

Very well, drawing is not my unique ability. But it was a drawing of an octopus. I always explained in our workshops that you need to be a different type of animal in the jungle, and then you're going to be able to adapt and move more quickly or moving away that's effective for the unique type of organization you are.

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But then the more I thought about it, because of our different divisions, we have seven or eight different lines of revenue now, I just naturally thought about an octopus and how the tentacles can't be moving in opposite directions and have one tentacle trying to go up near the surface and other one trying to go to the bottom of the ocean. And you know octopuses can be camouflage, they can be smart, they can be patient, they can guard themselves with rocks, and fit through small spaces, they can adapt in many ways. And the core part of the octopus, I mean the brain of it has to navigate to a nutrient rich part of the ocean, and then coordinate its different tentacles. And it doesn't really help to have a bunch of tentacles unless they are, they're not really well coordinated. Even if you're doing one thing, and two is doing another, it should all come together and bring things you know, to the center. And so I think that is a good analogy for someone who has a multifold business, just kind of navigating the landscape.

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Ross  

I think it's really interesting when we talk about the future of work, and where if all of those tentacles in one part of the analogy can be the different revenue streams, there could also be different lines and divisions and teams of people. And hiring the right people, rescaling certain ones to behave in different ways is super relevant when things change. So if your great octopus is moving around, and it's always in water. And it's finding the nutrient rich places and doing those things. It adapts, but still on its terms, it knows itself, who it is and it can survive in that. If now we're faced where the market is changing so radically, something comes along and say the temperature of the sea changes, or there is no water or various things, we're seeing sectors that are being so transformed, that what used to be super helpful for them now becomes what kills them.

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And so we're interested in terms of the adaptability in selecting individuals to rescale them that say, you might have had a big workforce that was customer services. And now technology can do that. Sure. You know, 24/7, doesn't take sick days, doesn't say I've had enough or I've had a bad day. And so treat somebody really poorly. You've got the the best of what artificial intelligence and robots can do. And there might be, you know, tweaks in the empathy and emotional level, but we're getting there. How important do you feel it is for Family Offices and investments to really understand that the types of people they need in and around them to surround themselves with, and the balance between sticking or experimenting?

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Richard  

I mean, it's interesting, the first part of what you said made me think that someone shouldn't get thrown off by thinking about all different forms of revenue might not be your company. But you can think about it about forms of distribution, or product, or forms of how customers find you, a book, YouTube, Twitter, Google, etc. And just innovate in that way. And if you have nine legs to your stool, and one or two get cut off, and like Google AdWords doesn't work anymore, Amazon doesn't work, then you still are stable on your stools.

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I think that's important. And the second point about evaluating people, everyone in the investment industry says the team is most important. But you know, everyone looks at these hundred checkboxes. How much Alpha do you produce as a hedge fund? What was your 2x or 3x returned as a VC a private equity fund? What's your IRR as a real estate fund? What's your LTV percentage on a real estate lending deal? I mean, everyone looks at tons and tons of numbers. They see the buy of a person to think does that look somewhat credible? Oh, I went to high school or not. Okay, maybe slight bonus, how many years we've been doing it? Okay. They meet with them seems like a nice guy. I think I trust Ross. You know, it seems like someone like me and someone that investors like me should be trusting. And they do reasonability checks. But many times investors spend all this due diligence time on hard facts that seemed measurable.

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So they measurable something be objective. But then it's like only a gut reaction on the person. I think 95% of Family Offices who invest in teams and individuals ever do an IQ test, adaptability tests, Colby test. And it's really interesting, because everyone says it's most important, but they rely upon just this wishy washy kind of gut check. And you know, I think especially at the institutional level, or where there's $5-$10 million for the time being put to work or even a million dollars put to work. Why not spend $1,000 just having five or 10 or 20 objective measures, that when it gets narrowed down, like right now we're hiring someone new, for example, and there's 11 prospects all look pretty good. Yep. But it says spending our time to interview each of them. We first would rather have more data points, we narrowed down from 11 to nine. And I think like investors, they really do believe that the talent that goes is most important than they should be investing just a thousand or a couple of $1,000 and at least measuring.

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Ross  

I think it's fascinating because whilst you have timing as being crucial, you know, team, you know, the business model, is it scalable, all of these different components to it People often assess other people based on a rearview mirror approach, right? What's the history? What have they done? You know, are they credible, all of these things because they're visible. We can see them. And then we can check whether they're true or not, because they're things in the past was much harder to do is predict how they might behave in the future. So a key component we've been looking at is, for example, resilience as an ability, things are going to go wrong. How do we bounce back? We bounce back stronger and better, you know, in terms of a rocky moment, you know, whatever doesn't break us makes us stronger.

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But did they do that in a way that cultivates and inspires their team? Or does it kill their team when they bounce back? You know, are they constantly a way of predicting the behaviors and the sort of outcomes of those behaviors? So for example, we're seeing so much around wellness and emotional health and the impact of all of this change. How does one deal with that? How does one deal with going from marginally successful to being invested in? How do they mobilize that? How does that change the behavior of the organization? And is that stressful for some or Is that exciting for others? And we've seen some amazing correlations between the level of resilience and imagined measurement of emotional overwhelm, and stress in teams. Also, things like the compounding effect of teams in the quote that are whether some of the five people we spend the most time with.

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We're finding a similar kind of thing about adaptability. So if you're around people that are highly adaptable, you're more likely to be adaptable, embrace change, you know, and perceive a need for change. So whilst you might be super adaptable as the CEO, but the rest of your team are just concentrating on business, as usual, and every time a new idea comes in, the immune system kills it. And vice versa, you know, so this opportunity to get more data around predicting how people are going to behave? Are they able to unlearn? Can they embrace a mindset of rapid shift and change? Or do they say, No, no, we're doing it, we don't need to change everyone else is wrong.

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So the opportunity to kind of bring us to a crux and close this, getting the pursuit of knowledge of understanding people, whether it's Colby, you know, there's thousands of assessments out there. And many of them grounded lots of science. And what we're doing with our adaptability piece is not saying this replaces everything else. But it's a new, important thing relevant for tomorrow. And I think it's more about the timing of the market requiring us to be more adaptable. And yet, there's no way of measuring it. So that's where we think there's an opportunity,

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Richard  

For sure, Warren Buffett says, sometimes the tide matters more than the swimmer, like the trend, and then where the momentum is going. And I say that in my workshops, I have to have a caveat, it doesn't mean give up spending 20 years investing in manufacturing companies to now switch to some new hot thing like, now only investing in AI, all over the place that has nothing to do with manufacturing, it would be adapting and saying, Well, we don't only do manufacturing, but we do manufacturing tech, and we apply those tech investments across our manufacturing portfolio.

And I think that the key insight related to what you're just talking about for investors listening to this could be that, I think the most important thing for success of business and investing is integrity. If you know who you are, as a family office, and everything is aligned with it, you're not looking at deals that are bad for you, you're not invested in things that aren't strategic for your portfolio.

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And I think that integrity goes down to what you eat you meet with and what you spend money on, and where you vacation, and where you live, and where your office is, who's on your team. You know what clothes you wear, all of that comes down to integrity. So if you can be highly innovative, but have an end goal and a sandbox, you're trying to dominate over 20 years. And along the way, you can be innovative as long as you're not breaking your principles and your values. And people will see that you're a committed consistent person that they can trust, they see consistency, but you're also successful, because you're always changing while keeping the core really strong.

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Ross  

I think that's the balance right is at what point is it really important to never change? You know, our values, our integrity, our morals, maybe even the challenge at hand. I know Bill Gates, we were talking about the documentary that we watched, you know, and eradicating polio, the way you do it, how you do it, you embrace new technologies, new innovations, new people, all of these things.

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And so what we're looking for now, I mean, this is the first company that I've started with raising investment. And so I was really scared at the beginning. You know, do investors just come in and then want all the control not able to give us freedom about what we care about and how we want to do it? So we wanted to make sure it was really strategic investment that cared about the problem, leaving no one behind in the fastest period of change in history. And so the balance is that philanthropy is an impact investment, we're a for profit company doing things that matter. 

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And the phase that we're at at the moment is going into our next beat around. So we've had some initial traction with some good companies, you know, Strategic Coach being one of them, IBM, Singularity University, maybe more of the pioneering types of organizations that's seeing that change over the horizon. And wanting to do something about that. We've got to very specific opportunities here is that we're looking to collaborate with the market. You know, this is not just born out of an academic science research endeavor. This is wanting to solve real problems for real people, and real organizations in the world.

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But we need help in that, we need to find the ones that are really aligned to valuing people's data and information about how adaptable they are using it to solve real jobs and real problems that they have and grow new opportunities. And we're going to be going into a seed round, again new territory for us. And it's critical that we are aligned with who we bring into our fold. Reaching those tentacles out of those things. What advice would you give for us that could be shared by any other startup in the same sorts of situations in terms of navigating that kind of investment area?

Richard  

Sure, I would make a list of 30 to 100 investors that created their wealth, an area related to what you're doing, they created their wealth and investments, they created their wealth with HR solutions, they created their wealth, maybe something related to innovation. Adaptability isn't talked about a lot. There's some innovation related think tanks, and there's some Silicon Valley types of like we were talking about this morning might have to rapidly be changing. They might be willing to over invest in this before others have and kind of take the lead on that because they know how important this is to the future of the tech space, that I would try to go to people where you don't have to educate them on adaptability. You're educating them on who Ross is, what your team is, and what your solution is.

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And I think that every investment deal gets done with three trust curves at play. There's the trust curve of was Ross and his team at leadership, there's a trust curve of the industry, they understand the broader industry of manufacturing, or stem cells of self storage, and then is there a trust curve around the company and what the solution or the product or piece of real estate is. And I think if you're very high on one of those, other ones go a lot better. But I would never go to a meeting where you're at ground zero on all three trust curves, you're never gonna get it done. Or it's going to take three years, and by then it's too late, the company has shut down because you only went to investors who have no idea who you are or what your industry is.

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Ross  

I've got a fun and kind of question for you in terms of unashamedly bit of advice. We have found some early traction with our beta clients. So they're the ones who've gone inside what we've built, you know, our actual system, it's an assessment by a conversation at a chatbot. You know, we're using some innovative experiences to engage people in that way. And we're finding that they're the ones who are potentially interested also in investing. So some of our clients, you know, there's a retail company, they don't directly retail themselves, they have a workforce of about 3000. And they serve the retail industry, which is going through massive, massive transformations. And they're interested in, they recognize themselves of the changes that they're going through, and wanting to build case studies of how we help them. And then they also have an arm that invest, that can be part of their ecosystem.

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And so it's smart, for everybody involved, as they can, you know, introduce us to their distribution channel. So it ticks our boxes if they care about it, it matters to them but they're using it in themselves, as well as not just say a pure investment play. Would you say that is a strong opportunity at our phase and stage to work? Or should we keep a Chinese wall between who clients are and who investors are?

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Richard  

Now really I think that is a strong opportunity. And I think sometimes even just meeting with someone and saying, Do you have any advice for us as we raise capital, even though you know, they might invest, but once they've invested their energy and helping you with advice, if they like what you do and how you react to that advice, they might invest down the road, they've gotten to know you and they've invested their time in your success. And then also they've shown in influence and persuasion that as soon as somebody has spent or bet even $1 on a horse and a horse race, they're much more confident that that horse is going to win the race.

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So whether they paid for an assessment or whether they have invested just $10,000 they are now going to create word of mouth to other investors and they might reinvest themselves because now they're more confident. So finding strategic investors who maybe have a top HR blog or a innovation podcast and getting them to just invest $1,000, or to pay for one assessment, or just asking them for help, might lead to a domino effect. Or they might tell other people or give exposure on their show for it, though, I think that could help with building momentum as well.

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Ross  

That's really great. And it's an area where we're pioneering new bits. Assessments aren't new but what we're assessing is. And our prediction and hypothesis is that's going to be even more valuable in our future to understand that. So I want to thank you for sharing some great insights. We've got now our free zone frontiers session, which I'm looking forward to spending some more time with you. And yeah, thanks again.

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Richard  

Great, thank you, Ross. Appreciate it.

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Voiceover  

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Outro

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