The Secret To Success: Trust & The ONE Thing Nobody Tells You About Achieving It!

0:00 and I always say they're trading relationships but then they're real partner relationships a trading relationship is just very transactional you really don't know the other person's just a trade but a real relationship a partnership is hey we know each other yeah we got contracts we have agreements but we trust each [Music] other if you want to build lasting success there's one resource you can't afford to overlook and it's not money it's not talent and it's not time welcome to how leaders lead I'm David Novak and every week I have conversations with the best leaders in the world to help you become the best

0:46 leader that you can be my guest is Ken bacon he's the co-founder and managing partner at rafield Partners a multi-family investment and asset management firm and before that he was an executive EP at May Ken has built an incredible career in real estate and I've had the pleasure of seeing his leadership firsthand as we serve together on the Comcast board you know one of the things that makes kin so successful is this understanding that trust isn't just a Feelgood concept it's a real form of currency it's something you earn something you give and if you're not careful something that you can actually lose and just like Financial Capital Trust compounds over time as you're about to see the more you

1:33 invest in it during your career the greater the returns so here's my conversation with my good friend and soon to be yours Ken bacon you know give us a snapshot of of rafield and and the business that you lead today well by way of background I used to run a division at Fanny May that provided loans for apartments so 12 12 years ago when I left another guy and I were doing some advisory work and opportunity presented itself to manage some money for a pension plan and I remember a friend said oh you're GNA get just enough money to go broke he was right uh so I had never been on the equity side of the

2:19 business I had always been on the debt side I had never been a borrower and for years I said that's something I wanted to do so when opportunity presented itself I got some guys that used to work for me and 10 years ago we started rafield uh we invest in existing Apartments uh we manage money for some family offices and several pension plans we're in Six States and 12 different markets biggest Market being Texas where we're in Dallas Fort Worth Austin San Antonio and my hometown of Houston um and what we try to do is uh by um kind of what I consider some conservative operating principles make a good return for our investors while making the a good place to live for the tenants of our apartment buildings uh and that's

3:05 kind of our Mantra you have as I understand at a couple of other co-founders that are in the business dayto day what's the Rhythm that you have Ken to to stay aligned and and on Mission as a leadership team I'd say there a couple of things number one I had managed a large Organization for you know over 20 years and so when I started my second career I wanted to be uh I guess it's the model I consider like the Orthodox Church I wanted to be first among equals so to speak I didn't want to be the leader uh I was a person with gray hair I was a person who could bring certain things at the table but I really wanted it to be uh more of like a confederation in other words we each have our swim Lane we each

3:51 do our thing and uh it's worked beautifully because uh these guys once worked for me they left Fanny May built their own business but we trust trust each other we like each other we have shared values we enjoy each other's company we agree on what we wanted to do with the business so it's it's it's made it a fun thing to do you know you you you mentioned that you you spent 20 years at Fanny May which provides you know Equitable access to to affordable housing and and there you you you oversaw a portfolio of nearly $200 billion dollar you know what are the biggest lessons you learned in in that role that you've carried with you well one of the things I've learned is that know your partners know who you're

4:37 dealing with you know I always distinguish in business between what I used to I used to be an investment banker and I always say they're trading relationships but then they're real partner relationships SO trading relationship is just very transactional you know you do something uh you really don't know the other person you really don't care it's just a trade but a real relationship a partnership is hey we know each other yeah we got contracts we have agreements but we trust each other uh we're working towards the same goal and uh that's what I did at Fanny May we did our business through a network of 25 lenders uh I made it a point to get to know each and every one of the lenders uh I often knew something about their families and even my biggest borrowers

5:24 the people who borrowed hundreds of millions of dollars like Sam zel uh Steve Ross uh I made it a point I would go out went to baseball games with samel uh I went out to dinner with Steve Ross because uh and people said well why did you do that you know you've got all these contracts I said yeah but if I have to resort to lawyers to do business with somebody that's not a good place to be in you know the legal documents add Clarity but the legal document should be built on a a foundation of trust where does that trust really come from Ken when you're when you're you know you have to meet these people and you you got to kind of have your speller out to a certain extent you know how do you how do you smell or sniff out the people

6:10 that you really really know that you can Bank on you know you got to spend time with people uh and and get a feel for their sense of integrity and what they're doing look real estate is a tough business it's a sharp elbow business and you understand that right I mean everybody's trying to make money if you're a lender they're trying to get the best terms possible but I won't mention one company but Sam zel's the re he had eqr there were a couple of big reads and the way I used to contrast it one one the big REITs would say Ken we need $200 million and here the terms we wanted and i' bust my butt I'd have my staff work and then I get to the table and they'd say well Freddy Mack is five basis points cheaper or credential will give us more

6:55 money and so I learned I said okay these guys just want to they're going to try to pick me off Sam's people were tough they'd asked for something I said guys that's that's hard that's impossible they said that's what we want I said okay I'm gonna bust my butt to do it but if I did it they were good so because of that I always said if they ask me for something I will overextend myself because they set the bar high but I know if I clear it they're not going to retra and so you know and I tell that to people they say sam zel he was the grave dancer he was this I said you know what he never ever went back on his word to me neither he or his people Steve Ross his guy Jeff Blau is one of the sharpest

7:40 smartest real estate operators I know but their word was good and so you know you you you you do business with people and you learn you know I I want to shift gears for a second Ken and take you back to the beginning you what's a story from your childhood that shaped the kind of leader you are today I tell this to people sometimes they're kind of amazed I grew up in the 50s and 60s in Texas it was a time it was segregated and some people he oh that must be horrible I said I had a wonderful childhood and part of that was due to the way my parents raised me I got something from each one so my dad had uh grown up in Illinois where his parents were servants in Lake Forest so he had

8:27 gone to school with very white families my mother on the other hand was from a creole family her parents were from Louisiana she grew up in Houston uh so my parents were very different but they each brought something to the table so from my dad I got my intellectual drive my sense of values uh my sense of integrity and honor in fact I used to tell people my dad because he grew up in the Illinois sounded like Walter kronite you know uh and my dad uh would sit up uh he was a physician and at the end of the day he would sit up I can still see him sitting in his favorite chair with his Bourbon and a cigarette and he might put on music but he told me a story about the

9:13 musicians it might be count basy Duke Ellington and he was active in h politics and civil rights and he really gave me that that sense and I got a chance to see a lot of leaders like Barbara Jordan uh my Dad ran the campaign for her state legislatur run and her first run at Congress so I kind of got that from my dad my mom on the other hand was not really what I call a high-minded person but she was one tough tough lady I mean had tons of Common Sense and really a lot of her sayings kind of gu me so for example one of the things she used to tell me she'd say look love with all your heart and soul but never love with your mind and by that she meant never

9:59 let your feelings of love or even dislike for something affect how you think right always try to be tough and objective when you're thinking and another and another thing she told me when I was older and I was an investment banker and I once got I thought jipped out of a bonus and mother I used to call my parents every Sunday and I was complaining and my mom said boy you're too old and too black to expect life to be be fair get over it now when I tell that to people they say what don't she mean I said look my mom's thing was there's going to be a lot of stuff in life that's going to be unfair it might be because of your race it might be somebody do like whatever it is don't sit around and cry about it do something

10:46 and when I told her about that thing about the bonus she said you either she said you can quit you can suck it up or you can go in there and that boss and demand something but don't sit here and have a pity party so what' you do Ken I got ask you what was the end of that story I I went into the boss told him how I felt we reached an agreement and he didn't give me the money for that year but he treated me right the next year but the reason I always like to tell that story is when I say my mom was tough you know uh her thing was you know you have to be assertive and you have to stand up for what you believe and don't let people push you around hey everyone it's coola we'll get back to the interview in just a second before we do

11:32 though I have a question for you have you downloaded the how leaders lead app on your iPhone if you haven't take 20 seconds right now go to the App Store search for how leaders lead and download the how leaders lead app in the app every day you'll get a two-minute video that'll give you a leadership Insight from one of our amazing guests from our podcast to inspire you and to really get your mind in the right place before you start your workday so go to the App Store search out leader lead download the how leaders lead app and start your day every day with 2 minutes of leadership wisdom it'll take 20 seconds go to the App Store download the app and you'll be able to watch every day just like me the leadership Insight from how leaders lead you actually were in segregated schools for the first 11 11

12:19 years of your life yeah you know so give us a sense of what that was like and what it really taught you you know I tell people look segregation was undoubtedly uh bad a evil system or needed to go but there were two benefits of it that I think uh in some respects uh were good one was when I went to school uh my kids here in DC my kids went to private schools and yes there were some poor kids with scholarships but you know it was kind of like upper middle class and very wealthy people they went to school with when I went to school uh I had to go to school uh there might have been some other doctors and teach kids but you know I had to go to school with some hoodlum sometime uh I remember when I was a banker I once came through Houston

13:05 and stopped at a gas station in my old neighborhood and I was with a senior person from ker PE body The Firm I was with and as I was getting gas this guy came out this greasy overall said Kitty and uh you know we we started talking so when I got back in the car my boss said well Ken uh who is it I said that's the guy I went to uh Elementary School with he said does he own this I said own it I said man he just pumping gas I love it so I had to go to school and interact with people from all different classes so that was one good thing because there was a sense of community and the other thing was when I went to a football game that quarterback was black and in my neighborhood uh the

13:52 first black graduate of the University of Texas Dental School lived on my block uh one of my friends dad was one of the first two or three guys to graduate from University of Texas law school another friend of mine's dad was the first graduate of the architecture program so I grew up with people who were Pioneers I grew up with people who were leaders so as a result uh when integration came about I had no Hang-Ups and no com you know I you know I was used to seeing people who look like me in a leadership position and I think that's something uh I see in your book you had something from Carol d uh who's a u psychologist at Stanford

14:38 and Carol once did a study about looking at uh students from different ethnicities and how they did at Stanford and one of the things she discovered is it wasn't uncommon for some black students at the time to if they got a bad grade to get discouraged because they felt you know they didn't have that inner like what I call model of somebody successful doing what they were doing that's not all the time but I'm just saying that some people came up in situations when integration came and people like me started leaving the neighborhoods some people didn't have role models and it was something that they had to to acquire later in life and I'd say that's I mean and I've talked to some friends about who grew up in the South and people have often said the

15:24 same thing that like the teachers when I went to class if somebody didn't do their homework the teacher might say now Johnny you didn't do your homework I'm G to see your mom at church on Sunday I don't want to tell her you didn't do your homework so that sense of community that sense of uh seeing people in positions of authority that was one of the good things I got you know I also understand that I was fascinated by this when you were growing up the the late world you know renowned uh jazz musician count basy [Music] would actually come over to your house for dinner when he came through town you know you got to tell us one of those stories well what happened my dad was a

16:10 music nut right he really loved music uh he knew a lot of Blues musicians I mean like lightning Hopkins Bobby Brew Bland and he knew a guy who was a drummer for count basy and what happened one time count basy was coming through Houston and the drummer was coming to our house and my mother was an incredible cook an incredible cook I mean my mother at one time or another she served count basy Sam Cook uh a mayor a governor in Texas people raved about her cooking particularly her gumbo so anyway this drummer count was going out com Bas he said where you going he says look uh my friend Bob Bacon's wife is an incredible cook So Cal basy heard this and said let

16:56 me come along and uh I think the first time he came to my house if our memory Sur correctly I think my mother had red beans and rice and uh maybe she had some gumbo and K basy said he like greens collard greens so the next time he came to town my mother fixed him collard greens and stuff and uh she knew the way to the man's heart oh that's right that's right and so that that that was one of the like I said that my brother and I often laughed that when we grew up we think about all the characters and all the people we met and it was like was a wonderful child absolutely you know and you know I'm a little surprised Ken after doing some my research that you don't have a hint of a of a uh you know English accent because because you you were a marshall scholar while you were

17:44 at Stanford which meant that you had the opportunity to study in in London uh tell us about that experience and what it taught you well you know I'm in business today because of what happened when I went to England I was uh kind kind of a left-wing intellectual when I was at Stanford you know I was involved in student protests nothing destructive or violent but you know I I was always looking at what was wrong with the system and I get this scholarship because I wanted to be a professor that's what I wanted to do I wanted to teach and I get to England and I'm going to study economics and I still remember there was a guy who was a marshall in my year and he once proudly told me he says well Ken you know I've got a part-time job I said what that he says I'm going

18:30 to be working at Leman Brothers I said what's that he said Leman Brothers is like Morgan Stanley I said what's that so he sat up and explained to me about investment Banks and I said okay this sounds interesting but sounds like another kind of like this capitalist thing well all of a sudden I was in this dorm with people from all the British colonies I mean from Africa the West Indies India Pakistan so one day I was talking to one of my Nigerian and friends and he was studying accountancy and he was very proud he was going to get something at Royal Dutch Shell and I said well why do you want to go work for a company that's exploring your country he says Ken I just don't want to work for the company I want to own a company or run an oil

19:15 company and what I realized and it's unfortunate a lot of people in this country don't get this when you get on an international stage everybody's a capitalist you know what I realized when I was there I said you know all Africans and West Indians I know these guys are making plans to go back to their countries and run things so that got me looking at business from a different perspective and when I went to England it was also the labor government was empowered Jim Callahan was prime minister there were labor strikes I had to deal with national health and I started saying man this a socialism you can have it get me back to the good old USA so that's what got me interested in

20:00 business so I started talking to people and I think if Margaret Thatcher I'm not a huge fan of Margaret thater but she did get England back on the right course and one of the things uh and reason I say that I had an opportunity to go work at Royal Dutch Shell but the reason I didn't is when I figured out what the taxes were I said hell I'm living better as a student than I would if I took this job so uh when I finished my studies I did my thesis I traveled some I got back to Texas I shaved my beard off got a white shirt and tie and my father's Minister uh Reverend Lawson his wife knew there was somebody in a church who belonged to who worked at IBM and I

20:48 went down to IBM and that's how it all started I got a job at IBM in sales shave my beard put on that white shirt and tie every day and blue suit I'm sure oh yeah yeah yeah and IBM was famous for that and so you you work your way to Wall Street and and I know throughout your career Ken you've seen crisis time and time again you know you had the stock stock market crash in ' 87 the Russian Bond crisis 911 the financial crisis of 2008 the pandemic all these things you know what's what's your approach of leading a team through such uncertain times and how do you keep people motivated you know when their future isn't so you know I'd say that up until the financial crisis most of the things that

21:37 happened uh I consider it kind of temporary in terms of their economic impact on people like 911 was clearly devastating talking the other day that someone I remember I had teams all over the country and how do we get people back home but the global financial crisis I'd have to say was the hardest one because F May got taken over about the government people's stock got wiped out and I remember there were people uh I mean I was feeling bad for myself because so much of my net worth got wiped out but then I realized there were other people who made a lot less than I did who were really feeling it so one of the things I did is I didn't try to sugarcoat it uh I held meetings I traveled to my different offices and I

22:22 started off by acknowledging the pain that people felt you know being honest and said look I know what you're going through so one is to be honest with people and at the same time point a a way out to deal with that to deal with that hurt and the way to do it is not to lie a paint a funny picture but what I told people is I said look we're all hurting yes your stocks been wiped out but you know what we have a job you're going to get a check and most important of all we have a mission and what I used to tell people like look you might be mad at the company you be M might be mad at the government but you know who you work for you work for your family and if you can find a better job right now come

23:09 to me I will help you I'll give you a reference I'll do whatever but meanwhile you're here and you have an obligation to your family but you also have an obligation to your customers because your customers are hurting too so I said you know we can sit here again my phrase you can have a pity party or you can get up dust yourself off go get the paycheck go help your customers and keep doing business and I said uh you know what what's done is done I can't make that come back but we can move forward your mom's toly is really helping you there for no doubt about that now Ken Ken when did you when did you catch the real estate homeownership

23:55 bug you know I wish I could tell you this was result was some long thought out logical process it wasn't when I was in business school I told you I got interested in business but I never lost what I call call my liberal do good uh impulse so when I was in business school kerp B's Public Finance team came to campus and I just went I'm not gonna lie I went to the reception just to get some free food right you know get some uh because you know all these investment Banks would always have great food so I went to get some great food and I met the people and I love the people the guy who was running that division in Mike Hernandez just a great guy met some

24:41 other people so I joined Public Finance uh because again it was going to deal with governments municipalities I said look I can make some money I'm not going to make as much money as like Bill Lewis who's a good friend who was going to m&a but I'll be able to make a good living and uh one of the senior people I was talking to him and I mentioned that uh my girlfriend who's not my wife was in Houston he said well let me get you on some Texas accounts and the business they were doing in Texas was primarily tax exempt housing bonds so it it happened by happen stance because I would go to Texas every week I was going to Dallas wo all all types of places and some people were concerned about me going to

25:27 Texas cuz I remember they said well I don't know if we can send this black guy down there some of these clients are kind of rednecky and I remember I said you know what I'm going to do better than you and they said why because I said it's my home state I said I know how to deal with people and we went down and uh it was uh Grand Prairie Texas which is at that time was just a tiny spot it's a big suburb now tiny spot and they wanted to do some housing bonds and I remember the guy in charge of the Housing Finance Agency was a build and he was a Texas Tech Guy big Bley guy and my boss went up there and she you know guys started talking about football and I started talking about Texas Tech and SMU and the Longhorns and and then

26:16 something came up about hunting and I asked well you know what are you shooting and she just lost it she said those are horrible people I don't want to deal with you deal with them so what happened I would go down to Texas every week and that's when I really started kind of falling in love with real estate because I realized that you know you do a lot of things in finance and it's just moving paper I got to see things I finance come out of the ground I really like that and one of the most moving moments in my career came when I was at Fanny May and we were the largest investor in low-income housing tax credits in the country and one of my wife's grandmothers died and I was going back to Houston for the funeral and I went into the neighborhood

27:03 that my My grandmother used to live in my mother used to live in and I was going to the church it's Catholic Church that the Creos had built back in the 1930s when they came over from Louisiana and I just hadn't been in the neighborhood in decades and I'm riding along and I remember myself said you know Miss brussard used to live here was cuz a bunch of people French speaking French French names and a lot of them were dead but houses were dilapidated everything was kind of old it The Neighborhood had really gone down and I and then I was going man this is really really bad and all of a sudden I saw this sign Senior Apartments built by such and such a church financed by such and such a bank with with financing from Fanny

27:51 May and I saw that right before I went to the church and that just made me feel so good because I said you know the best thing happening in this neighborhood is a project that my division is financing and to this day I still like seeing properties uh because again uh it's tangible I'm sure David like the The Pride you would feel if you went to a well-run franchise and you know the food was just right yeah so when you get a chance to see and when I mentioned to you earlier how I would go spend time with some of my borrowers I remember when they were building the time uh well I think they call the Time Warner Center up in Columbus Circle and Steve Ross invited me and my wife for dinner and I remember we were walking

28:36 through the condos of wires hanging from the ceiling Steve was going yeah and this is going to overlook the Hudson and this is going to see the par you know he was just animated about it when you see people identify with their projects when you see a neighborhood change there's just nothing like it that's great and you were quite the innovator in this in this field you you were the first to securitize commercial mortgages at scale um first explain to our everybody what what that means in layman's terms you know SEC securitizing commercial mortgages and then what it took to really pull this off I had left kerp body I was at Morgan Stanley and I was doing uh I had gone from tax exempt to

29:23 taxable financing when securitization first started and I left ker to go to Morgan Stanley but most of my clients were Savings and Loans so 1989 they're all going under and I was going to have to do something different in the firm and there was a guy I knew who was a partner Michael Youngman at vincon Elkins and Michael had left his Law Firm to go work for the board of the resolution trust Corporation that's what they formed to deal with the bailout and he used to call me all the time to ask me questions and one day he just happened to say you know boy we could really use somebody like you with your knowledge of the markets I said well why don't you make me an offer he said well Ken You' have to take a tremendous pay cut to come here I said well you did it

30:08 so much to my wife sarin and to the people everybody thought I was crazy to leave Morgan Stanley but I took this job in government one of the best things I ever did and we got there and what I discovered I was in charge of policy and I discovered that at that time the government thought they were going to end up with over a 100 billion 50 billion in Assets Now that doesn't seem like a big number today but in 1990 that was a huge number and what I discovered that the biggest bank failure that FDIC had ever dealt with was Continental Illinois which is I think was either 8 billion or 10 billion and it took them over a decade to resolve that so Michael and I were talking we said look we'll be here forever getting this done and so

30:53 Michael one day said well couldn't we bundle this stuff and sell it like like that and I said well you know no one's ever done commercial mortgages they've done single family and we started talking to rating agencies and exploring it and people said it you couldn't do it and we said why not so uh first battle was to convince the powers that be and government to do it and there are some people who I don't think get enough credit uh Nick Brady was Secretary of the Treasury so my board at the the board I reported to was Nick Brady Jack km Allan greenpan uh a guy named Bob Larsson who was head of the tman organization and another guy named Phil Jackson who was a retired governor of the Federal Reserve and there were people at the FDIC there were people in the Senate

31:39 everybody didn't want us to do it and uh and I remember that uh one guy we got into a meeting Greenspan who was not quiet in private meetings and one guy said well you know if you you you you package these things wall Street's going to make a lot of money and Greenspan said precisely this is America that's what people do people make money if they make a lot of money other people will get into it and over time the price equilibrium will set in the taxpayers benefit but the government should not hold assets so Allan greenpan and Nick Brady to me were two unsung heroes uh who really made a difference so they lit me and Mike do it so Ken what does it mean to securitize a commercial mortgage

32:27 it means that you put a bunch of mortgages together which allows you to diversify risk uh you get them rated you do a filing with the SEC so now you have a publicly traded rated security which means that the Universe of investors is huge right uh when we first did it most insurance companies people didn't know what to make of it but once we educated them all of a sudden we had the biggest pools of capital in the world available to us insurance companies Bank pension plans who couldn't buy either couldn't buy because of uh regulatory reasons individual mortgages or else it just wasn't worth their time all of a sudden they could buy a security they could trade it they could go to Goldman Sachs

33:12 they could go to Salomon brothers who were still in business at that time and they could trade it they could repo it and so it allowed that part of the real estate market to play in public markets so there was more liquidity that led to better pricing and it was just a win-win all the way around you know you you mentioned people who have such powerful re reputations like Allan Greenspan I mean you know incredible leader in his own right and and you've had these huge jobs with with all kinds of Power how do you how do you really get to the the real truth you know because a lot of times people are angling for something to to their own benefit H how did you really get to the real skinny you know

33:58 I didn't plan on it you know it just it it it just happened and I think one of the things is that when I had that job I got to meet with people like uh Ace Greenberg and Bear Sterns uh I met the I me I met the heads of every major Wall Street firm dick fold I met them all because I controlled a lot of business and I learned that when you have something that's a value to people a lot of people want to talk to you but I also learned something a lesson I joke about today that I said you know when you have a big job uh like when I ran Fanny May and I controlled all this money I told people you know I was a a Visionary leader strategic genius till

34:46 the day I walked out the door then when I walked out the door I was just a just another schmuck with a tie and a dream right so uh I learned Sometimes some people confuse their position with themselves and so one of the things I learned is like hey you you got this job where you have a lot of power you can use it but realize it ain't you right it's that it's that title it's that job and when you leave it and that's why I think some some people it's so hard for some CEOs for some politicians to walk away because their identity gets wrapped up in what they are not who they are inside we'll be back with the rest of my conversation with Ken bacon in just a

35:32 moment Chile's recently reported its third straight quarter of double digit sales growth this year and if you want to see what's driving their incredible comeback check out my interview with Kevin Hawkman the CEO of Chile's parent company Brinker International I'm in a Chili's in Chicago just outside of O'Hare I'll never forget this and I'm in we call it the heart of house so the back of the house of the kitchen we call the heart of the house at Brinker and I'm in the heart of the house with a team member and she's counting shrimp so her job for the first hour of the day was she counts eight shrimp puts him in a little bag twists the bag counts eight shrimp puts him in a little bag twist the bag and so on and she'll do that for probably 45 minutes it's called portioning and so when I asked her the question hey what's

36:17 the one thing that you would do if you were CEO tomorrow she'd say I stopped counting these darn shrimp and I said well what would you do if you didn't count the shrimp and she said when the customer orders a shrimp taco or a shrimp fajita I'll count eight shrimp I'll put them on the grill you know what sometimes I'll count seven sometimes I'll count nine but guess what most of the time I'm going to count eight right so we took that idea back to the restaurant Support Center and they said hey we got to test this we're going to have a bunch of shrimp waste I don't know about this and I said well what's there to test like she's right like once in a while she'll get it wrong up or down but we're not going to have big waste issue so we rolled it out and guess what happened to shrimp waste absolutely nothing right didn't change like we we measure this stuff literally every day we get reports every day it didn't change and then most importantly

37:04 that team member she hasn't want to do that she doesn't value that to her that thinks it's a waste of time so that makes her job way more engaging when we're like hey we listen to you we got rid of that and go do something that you're excited about doing go back and listen to my entire conversation with Kevin episode 183 here on how leaders lead so what led you Ken to to start your own firm at rafield partners you know I still like real estate I still like the essence of what I did but I didn't like the luggage that came with it having to manage people I didn't like committees so when opportunity presented itself I decided Well you know let me go out here and try it and I like to tell people to be an entrepreneur you should either be TW 25 and broke or 55 and have

37:50 your kids educated so when I started my son had already finished college and was kind of out of my pocket not completely but kind of out of my pocket and my daughter was uh getting ready to uh graduate and my parents were were both deceased so basically I didn't really have a lot of obligations and so I could be a little selfish and so uh uh I decided let me give it a try someone asked me well did you miss fatty may I said every two weeks that's funny you missed that regular paycheck on the other hand though the sense of Freedom the sense of what I call you eat what you kill I've enjoyed that I've

38:36 enjoyed you know you in your business today you have to be extremely intentional about building relationships and you're really good at it you know what's something that you think everybody can learn from that that you put into practice when it comes to to building relationships well you know I talked earlier about building trust and about conducting yourself in a certain way I mean look um I dealt with hundreds of people at Fanny May and I said you know if I dealt with a 100 big real estate people I said there going to be 10 who are going to be good to me when I leave I said the thing is you don't know who that's going to be and we got some deals uh I remember I was once at a conference was walking

39:24 along and I ran across a guy whose company almost gone under the financial crisis but they handled it so nicely they didn't try to go into bankruptcy they didn't try to fight me they work with me and so I didn't deny them credit I just uh put the you know on more conservative terms so they survived and I ran across the CEO and he said Ken what how are you doing I said man it's hard out here I said I need some deals he said you know what we've got some properties for sale he says look I've got a fiduciary responsibility but I'll let you get a last look and so I got a deal like that another time there was a guy who had worked at one of my lenders I called him up and I used to call it

40:10 knee pad and ChapStick time I'm on my knees begging and I got chapstick because I'm having to kiss a lot of you what you know when you come from a big company David I don't know if you've experienced this you know when you're in a big company everybody comes to you all of a sudden you're not at a big company you have to go to them and some people can't make that change but I I went to another guy and I said the same thing and he called me up and said look I've got a deal I'm gonna put it on the market I'll give you notice he called me back the next day said you know what I'm not gonna put it on the market I'm gonna get a broker's price opinion and you and I will negotiate the price and that's how we did the deal so I had people I built relationships with because I had

40:56 treated them honorably and the global financial crisis presented an opportunity I could have shafted a lot of people but I tried to treat everybody with respect and there's some people who remembered that and returned the favor that's great you know and you know you just mentioned negotiations and you've mentioned earlier that you know you're kind of in a sharp elbow business you know you know so what are what are your rules for negotiation do you have any or what what's really key from your perspective to to find that win-win my key and I used to tell this to my staff is don't kill over the last nickel even if the other guy is trying to do it let people walk away feeling they got a victory if to the degree you can afford to do it because that builds Good Will and Trust now there's some people you do that with and they walk away saying oh

41:43 sucker you know I I I got him and they don't appreciate but there other people will say you know what I like doing business with this guy so I never tried to just pin people against the wall uh you know when I got close to what I wanted and you know it was hard sometimes my staff would say we should have got another five basis points I said you know what it's not gonna change our life that much let the let the let the customer win and some people forgot about that but there's some people appreciate it and again I did my fiduciary duty but there Comes A Time in any negotiation where it's the point of diminishing returns you know I I i' I've heard you say that you actually got your

42:30 PhD in bad deals yes tell tell us about one of those deals and a key lesson that you learned from it well what I learned when I was at the RTC there was a guy Tim Ryan I think he's now the head of santand there us uh Tim was the the guy who uh the regulator who would close down that Savings and Loans and if they closed them down on Friday you know that weekend my team would go in look at the books and what I learned a lot of times is that I talk about trust but there uh Reagan had a great thing trust would verify so I'll give you an example I would go in there and see a deal and you'd say wait why did this deal go go belly up I mean it looked like it was

43:15 fully leased and then you start pulling the leases and you'd say oh oh this person said they were a a dancer well they might have been working in the strip club oh this person said they were were in the auto business and you found out maybe the guy was like a taxi driver in other words people would sometimes the some of these landlords would inflate people's income or inflate their profession uh in the documents so I learned that the first time you do business with somebody check all the little things just don't take things that face value you know trust is something that should be earned and so I learned that uh that's number one and number two is a

44:00 lot of people do deals assuming that the world will always be as it is another saying from my mother assume spells ass out of you and me I think my mom taught me that one too you know so so I'll give you an example in my little business at rafield we did some deals from 2014 to I'd say 201 18 to 2019 we would get a an adjustable rate mortgage and we would buy a cap and we would do that and we would watch it and we'd always say if rates you start seeing rates go up we'll lock in a fixed rate when we got to 2020 when rates were

44:47 really low we started saying you know what this is you know I and I hope the people Dr own power forgives me but I felt the Fed was like like a drug dealer and they were getting everybody free drugs and everybody was getting high off low interest rates and I said you know this can't last so I said if we can get a good fix rate let's lock it in and we were losing deals to people doing these Bridge loans and it was a temptation to go do them but I said you know these Bridge loans this is an adjustable rate mortgage it's purely floating and uh I said I'm not going to do it so part of our discipline was knowing that sometimes the the you see the crowd going one way and you got to just sit on your hands and say look this doesn't make sense I'm not going to do it that's

45:33 how we stayed out of trouble you know we just sat on our hands because there were times when I mean it's just like investing I've had people remember when crypto was H I'd say you know what if I don't understand it I'm not gonna do it I'm not gonna invest in it because I don't know what I'm doing so uh when interest rates got crazy when they were so low I just said you know what I'm not going to do a floating rate deal because there's only one way for rates to go and us up and there were people who did uh Bridge loans that is they they did short-term loans floating rate when sulur which is like liabo it's like a an index was at five basis points a couple years later was 500

46:19 basis points and so people said oh I'm going to do this loan at 250 basis points over sofa or liore it's five bips they said oh this is cheap money but I said the index is floating guys this is historically this is very low I didn't think it was going to go to 500 I knew I'm G to stay at five basis points so I just said I I'm not going to do that kind of loan and and it proved to be a good move for sure you know I like to say that in Risk Management the biggest impediment to good risk management is Imagination because people often assume that this is how the world is and this is how the world's going to stay and you got to be able to imagine that things could get worse you know kid so much wisdom there and this been so much fun and and and I want to have some more with you with my lightning round of

47:04 questions so are you ready for this I'm ready all right the three words that best describe you empathy Integrity humor if you could be one person for a day besides yourself who would it be I'll tell you somebody just passed away Quincy Jones the music producer your biggest pet peeve people who dissemble in other words people who don't really come out and say what they want or what they're trying to do and they kind of disembl and beat around the bush I can't I can't stand that who would play you in a movie I'm trying to think of somebody good looking with great so no I can't say Denzel Washington who who would play me Jeffy Wright what's something you'd only know about Houston if you're from there now I'm gonna Calla some

47:50 controversy for people from Houston where to find the best barbecue you're only able to answer this next one in French okay do you still speak French what's the one thing you do just for you hunting your most prized possession a painting by John Biggers was a friend of my family is a great artist he's deceased now and I have a painting of his and I saw it when he first was doing the drawing for the painting and I got it on I videotaped it on a super eight camera I just found f the little cassette the other day if I

48:36 turned on the radio in your car what would I hear Serius radio the jazz station no surprise there what's something about you few people would know that I'm a good cook pick that up from your mom what's one of your daily rituals something that you never miss my coffee all right we're out of the light around now good job that was great you know you know Ken I've had the great honor of being on the Comcast board with you and and I have to tell you of all the directors I don't think anyone ever asked for extremely insightful and thoughtful questions you how do you stay current to be able to bring such a studied point of view to the table because it's all your

49:21 questions seem to always be rooted in reality or something you experienced Comcast was the first board I got on and I learned a lot of lessons and I only want to go on a board where I know respect and like the management team and I like the business even if I don't fully understand it I I have to like the business and with Comcast I have Google set up so every day I get all the headlines about Comcast I read about the competition I read about broadband and I'm fascinated I have to say of all my boards Comcast is probably the most intellectually challenging

50:08 because when I first joined the board it was just oh what's dish doing what's AT&T doing and now I mean we're looking at Amazon I mean everybody so free-for-all so I find it very stimulating and uh I just try to you know I'm a voracious reader of newspapers and magazines I get a lot of newsletters and if I like something I just like reading about it and finding out about it and Comcast is um I think Brian Roberts is one of the best CEOs in the country but the whole the board I always thought all boards were like the Comcast board uh uh but it's a very collegial

50:55 board and the management is accessible I've never had anybody from Comcast uh push me away assemble and uh because I love the company I love what they do it motivates me and keeps me excited what have you learned about leadership just watching Brian Roberts in action what he what strikes you most from about leadership from him Brian Roberts does something that's very rare he goes to every meeting he Parks his ego at the door he listens extremely well and when he gets ready to make a move he never tries to sell you on what he's going to do he says I'm thinking about doing X here's the pros here's the cons and he will

51:42 argue that conside just as much energy and much thoughtfulness and integrity as he will the pride and so as a result you feel comfortable pushing back or agreeing or disagreeing now I always tease him that I say when look when you want to do something I'm the wrong guy to ask because I'm going to say put the pedal to the medal let's go for it baby right but but I do that because I know that he's thought it through completely and and that's to me what makes him great because I've been around a lot of people and by the way I'm not saying this in a critical sense but a lot of people say here's what I'm going to do I know it's right and get on board that's what I'm gonna do Brian doesn't do that he says I want to know what you think and I and

52:29 I told someone maybe he deserves an Academy Award but uh I mean you you I'm sure you've experienced this David where he will call an individual board member and say I'm thinking about doing something what do you think and he listens to what you have to say yeah he's he definitely seek the input and is a great listener and that now you you teach a finance course as I understand it for an NBA program at Georgetown what you what's a key thing you wish that students do earlier on in their careers I wish that now you hear people say Follow Your Passion yeah that's that's good advice but also think that people one of the things I always like to tell people what price are you willing to pay for success and I say that because you know

53:16 everybody you know everybody wants to go to heaven but nobody wants to die you know so a lot of people say I want this but are you prepared whether it's the time whether it's the move you know I know in your background you moved around a lot when you were younger and you you know you excelled at that you learned to embrace that and you you you're good at it you're comfortable at it a lot of people aren't so you know I'll talk to somebody like this happens a lot I've talked to a lot of young people oh I love to work for Comcast in New York and I said well the headquarters in Philadelphia well I don't I said well maybe that is a place for you if I could work in New York I just said if you're not prepared to embrace Philadelphia then maybe this

54:03 isn't the place for you I'm not saying that you're gonna be your whole career but if you really like the company you should be prepared to spend time there and I'm not saying that's bad if you don't want to do it I'm just saying this isn't the thing that's what I mean about the price and I've gone through this with my kids and and my nephew uh nieces and nephews where I tell people look if you want something you know one of my daughter's friend's mother once commented when my daughter was working at Morgan Stanley before business school she's working so hard why do you make her do that I said well first of all hard work ain't never kill nobody I she ain't doing nothing that I didn't do and I said secondly I'm not making her do anything I said if you want certain things in life you gotta you got to put

54:49 in the time so hard work and by the way not everybody wants to do it and I say that's fine yeah when you when you think about your your your what's next for you Ken what's your unfinished business my unfinished business there's a ton of books that I've started I haven't completed I want to do more reading i' like to do a little more teaching remember I once said that that's what I wanted to do to teach I love my course at Georgetown I like to teach more and I'd like to uh while I'm still mobile travel more and more time with family you know I've been very very blessed I've been married for 40 something years my kids are are both

55:37 fine employed I love my in-laws I regard some of my nieces and nephews almost like my kids and uh you realize as time goes by that sometimes your kids have less use for you uh you realize that some of your friends may not be here so I'm at the stage in life uh where I still like being in the game the business but you know I'm going to start having to pull back from some boards and I think it's more time for like friends and family and the mind last question here Ken you know what's one piece of advice you'd give to anyone who wants to be a better leader piece of advice is think hard and long about why you want

56:23 to lead and what you hope to achieve by Leading I see people often times I want to be X I want to be the Big Chief and I'll often say why I'm I'm I'm amazed Sometimes some people say well it's the money I say well you know you you make money being a drug dealer right you could oh that's illegal I said well why do you want to do it and what do you want to accomplish one of the things I always like to do is to say I took something from A to B that I whatever I took over I made it better and once I made it better you know Fanny May didn't fire me but I looked up one day and I said you know I think I've accomplished everything every I've had several jobs where I say I've accomplished everything that I wanted to do it's time to move on

57:12 and so I think to be a good leader you should have in your mind it might be fuzzy but like what is the end point what is success look like and why are you doing what you're doing now for some people I might just be money but for me it was building something taking something that was good and making it better you know Ken you you know I've observed you now for number of years and you have a really great moral compass and you do a fantastic job of of finding that magic between Mission and making money you know making money in a way that it betters the world and you know anybody has the opportunity to to work with you

57:57 always comes out better and uh I I want to thank you so much for taking the time to to to be on this podcast and sharing your insights and I want to thank you because uh when I was looking at your book and the lessons there I said man I wish I would have had that like 40 years ago you could write your own book I'm sure of that wi wisdom is uh uh what does they say uh Energy's wasted on the young and wisdom on the old so that's [Music] great Ken is one of those leaders who just gets it what really stands out to me is how much he values trust not just as a fluffy concept because it's not

58:44 fluffy but because it's real it's tangible and it's a form of currency and business and Leadership trust is what makes everything else possible you've got to have wisdom to extend it to the right people and you've got to earn it yourself by being consistent and true to your word do that and it comes back to you exponentially both in the reputation you build and the opportunities you're going to find so here's something simple for you to try this week ask yourself how you're earning the trust of others do you follow through on what you say do you show up consistently for your team now pay special attention to those little moments because that's where trust grows so do you want to know how leaders lead what we learned today is

59:30 that great leaders understand that trust is a form of currency coming up next on how leaders lead is Lindsay Snider the owner and president of In-N-Out burger and boy do I love their burgers and fries we want them to not only um serve the best burger fries and drinks but we want them to do it in a way where our customers feel the difference they feel that we care so the Loyalty goes both ways customers trust our brand because they know we're giving them the best thanks again for tuning in to another episode of how leaders lead where every Thursday you get to listen in while I interview some of the very best leaders in the world I'm making a point to give you something simple on each episode that you can apply to your business so

1:00:16 that you will become the best leader you can be [Music]