Leaders as Humble as They are Successful

Refreshingly candid conversations with some of today's most humble leaders. Adam Kaufman dives into topics often left unexplored. His guests’ challenges, fears, and motivations show what it takes to become a humble leader.

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Special Series with Umberto Fedeli: Session Two

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Business owner and powerbroker, Umberto Fedeli, joins Adam for the second session of this three-part miniseries. Umberto shares business and investing advice, featuring special tips for those just starting out in the investment world. With 40 years experience in business, philanthropy, and politics, he also focuses on the importance of balance.

Adam Kaufman: Hello I’m Adam Kaufman. Welcome to the up2 podcast. Coming out of our first season of the up2 podcast it became clear to me that our show with successful business owner and power broker Umberto Fedeli resonated with so many of you. I heard from a lot of listeners. Some came up to me who loved Umberto’s rare combination of genuine authenticity in the rarefied world of dealmaking and high level access and investing. It left me wanting more. It left our listeners wanting more too. So today we invite him back for part two of our special mini series. Welcome back to the studio Umberto.

Umberto Fedeli: Thanks for having me.

Adam Kaufman: Later I’m going to ask you something. But I want to plant the seed now, not to answer it, but just to get our listeners intrigued by it. What should the 30 year old listener be thinking about as she or he is just now starting to invest? Maybe just now finishing off their student loans. A lot of our listeners are in that demographic. So just plant that seed with you and with them for now and we’ll get to that a little bit later. I think you told me at one point that you’ve invested in close to 400 public companies over time, not current holdings, but 400 in and out of companies. How many must you look at to make a decision to buy 400 times?

Umberto Fedeli: I start every morning very early as you know typically around 3:00. Sometimes I may sleep in to 3:30, quarter to 4, sometimes 2:30.

Adam Kaufman: So lazy.

Umberto Fedeli: And I read and I study. Everyday I look at dozens of ideas dozens every day.

Adam Kaufman: Are you doing this online or what do you read? Are you reading the Wall Street Journal or newsletters you subscribe to? Like, how are you even getting this information?

Umberto Fedeli: Yes yes yes and yes. So I have to iPads so I have my large iPad and I start and I read Barron’s and I read The Wall Street Journal then I had various other things that I subscribe to. I follow 13Fs, I follow 13Fs of probably 100 of the greatest investors that we think when we look at everything they’re buying which they have to report every quarter and look at what…

Adam Kaufman: 13F, that’s a federal filing?

Umberto Fedeli: Yes. So they have to, if you have over 150 million of assets and you’re running money you have to…

Adam Kaufman: Disclose it.

Umberto Fedeli: Yeah. So what a bunch of very successful smart investors are buying things I look at. I don’t necessarily buy because they’re buying.

Adam Kaufman: Right.

Umberto Fedeli: They’re saying, but why are they buying these things. Let’s look at reasons. So and then we have all kind of sites we look at. We read research from the various investment firms, we subscribe to some research that we read.

Adam Kaufman: Again thinking about my listeners. Let me interrupt if you don’t mind. What should the beginning investor read? Are there free sites or free newsletters you’d recommend? Not everyone’s going to read 13Fs.

Umberto Fedeli: I think if they start off—

Adam Kaufman: The Motley Fool.

Umberto Fedeli: Yeah I guess they get all their services, right? And some people say because they have kind of a funny name.

Adam Kaufman: Yeah.

Umberto Fedeli: But they have hundreds of employees, they have little tidbits and they really do a lot more on growth company so we have all their material.

Adam Kaufman: I love that site.

Umberto Fedeli: We look at them. So we subscribe to them. That’s one source. I would say Wall Street Journal would be one, and Barron’s. Those are the two that you have to read I think.

Adam Kaufman: I agree.

Umberto Fedeli: Looking at you know just like Yahoo where you’re just looking at business news and you’re looking at things like that that’s going on.

Adam Kaufman: And the ratings are on those sites like Morningstar ratings of stocks.

Umberto Fedeli: I look at Morningstar I look at the Value Line I look at Seeking Alpha Pro and just reading a lot of different things.

Adam Kaufman: Right and then you have to curate and decide.

Umberto Fedeli: But I look at Forbes and you know and I look at various business articles but if you had to start with two I would say Wall Street Journal and Barron’s.

Adam Kaufman: I agree. Wall Street Journal especially even the left column alone of the front page. If you only have like 10 minutes that’s a great place to start.

Umberto Fedeli: But I look at that group of focus and it follows you know all these great investors they look at something called Inside Monkey.

Adam Kaufman: I don’t know that one, Inside Monkey.

Umberto Fedeli: I look but I read reports from friends of mine from Morgan Stanley and Goldman Sachs and UBS and Merrill Lynch and then also some people, for instance there’s a great company called Gardner who has thousands and thousands of technology users and they are tremendous in writing about technology.

Adam Kaufman: Right. It’s kind of a collection of experts.

Umberto Fedeli: They’re incredible. Their stuff is incredible. But then there’s you know people that do the same thing in the real estate industry. So you know because some people don’t like to buy or read research from someone that’s in the investment business because they figured alright they—

Adam Kaufman: Conflicted.

Umberto Fedeli: Yeah they conflict becasue they do business and they cover those and so I like to read all of them as much as I can read about a company.

Adam Kaufman: Yes.

Umberto Fedeli: So I like to be very very eclectic and very open minded and very liberal in reading ideas and even sometimes I’ve also learned for instance how not to treat somebody by someone who I didn’t like how they treated someone. And sometimes you get an idea from somebody that maybe you know isn’t somebody you necessarily do business with or do things with but they may know an industry really well and may know a company really well. I like blending industry experts. Students of the industry and students of the business. So I’ll call a friend of mine who is the CEO of a company that’s in a certain field. So my business partner Marty Adams who you know started with two branches—

Adam Kaufman: He’s a banker right?

Umberto Fedeli: Yeah he started with two branches in a little town called Seleneville, Ohio and he’s a great guy. He built the bank up to about 18 billion. About 12 years ago he sold the bank for three point five billion, it was a public company but he’s a student of the industry and a student of the business. So I like to talk to industry experts that are operators.

Adam Kaufman: Sure.

Umberto Fedeli: And I like the blend that with investment analytic research. I like both. I like the guys who are the operators because they know the business as an operator. They know every aspect.

Adam Kaufman: So you’ve mentioned Umberto, seeking out experts in a field. You’re in this rarefied world of knowing a lot of public company CEOs. I know a few but you know many. And when is it like OK to talk to him about stocks and not ok? Like it’s an honest question.

Umberto Fedeli: Well remember now. They know so if you cross the line cause you don’t know.

Adam Kaufman: It’s their responsibility.

Umberto Fedeli: Well if they happen to give you something that they shouldn’t which they probably won’t.

Adam Kaufman: Right.

Umberto Fedeli: You can’t act on it. You can’t ask him, “So what company you buying now?” You can’t ask him that. But you can talk to him about how are things going in your industry what do you see?

Adam Kaufman: OK.

Umberto Fedeli: How’s your business doing… They just can’t give you anything they’re not giving to everybody.

Adam Kaufman: OK.

Umberto Fedeli: So if it’s in their own report and they’re talking about items they can’t talk about hey how are your earnings going to be next quarter when you report. So they can’t give you anything that is not public and that’s not open. But I talked to a lot of people who are running private businesses. I actually talk to way more private businesses than I do public businesses. And I talk to them because they’re still in the industry. So even though that we bought some, yes real estate investment trusts I talked to friends of mine that are in the real estate business that are running private companies the same principles are going on there.

Adam Kaufman: Yeah I do that with autonomy and autonomous vehicles like which hardware companies are serving that new still private industry mostly.

Umberto Fedeli: I talk to probably… 90 percent of the people I talk to are not from the public sector. They’re from the private sector.

Adam Kaufman: I didn’t realize it was that high.

Umberto Fedeli: Yes the majority. But I like good operators. Students of the industry students of the business they really know the business inside and out they know what’s going on.

Adam Kaufman: You mentioned a minute ago real estate. Do you make investments in private real estate buildings or REITs or funds? Any real estate?

Umberto Fedeli: Yes yes and yes.

Adam Kaufman: OK.

Umberto Fedeli: So I have another theory that I called coach theory.

Adam Kaufman: Coach theory. OK.

Umberto Fedeli: If I don’t know the sport which would be let’s say…

Adam Kaufman: Venture capital for you.

Umberto Fedeli: Venture capital I don’t know at all. So when there’s a field I don’t know then I say OK I need to co-invest. So to me co-invest or coach theory is I find somebody that has credible integrity first. Nothing else matters, I don’t care how smart someone is if he can’t be trusted. Right?

Adam Kaufman: Absolutely.

Umberto Fedeli: After integrity, do they have a proven track record in that niche or in that field.

Adam Kaufman: So track record is important to you?

Umberto Fedeli: Track record in that particular niche or field and integrity. And then I’ll invest in a deal with them or in their fund or in their shopping center or in their apartments or in private equity. So there I’m a passive investor.

Adam Kaufman: So the power of partnering, again lesson for our listeners, is vital when you’re stepping beyond your comfort zone of knowledge.

Umberto Fedeli: Another thing we did well other than fear uncertainty that created volatility and taken advantage is the real problem is that a short term problem is a long term problem you know. Are you getting painted with the same brush and it’s different than everybody else is getting painted with the same brush it’s the exception. All right we did that fairly well we were pretty lucky with that. The other thing we did fairly well that I didn’t realize. I wasn’t good at very much but I didn’t realize how good I was at knowing who was good and it was almost never me. So now I feel like I’m going back to school and say, “Adam is really good at calculus. So I’m going to ride his calculus coattails.”

Adam Kaufman: That would be a different Adam.

Umberto Fedeli: Maybe Adam would be good in English.

Adam Kaufman: But I see your point.

Umberto Fedeli: But so then what happens is then I sit there and say, “This person has a incredible track record. They have high integrity. They have a lot of experience and they’ve done this super successful.” Like my good friend Stewart Cole at Riverside.

Adam Kaufman: I knew you were gonna say him. Riverside 600 companies.

Umberto Fedeli: They had 600 companies their returns have been incredible.

Adam Kaufman: Up to 8 billion now under management I think.

Umberto Fedeli: More.

Adam Kaufman: Right.

Umberto Fedeli: I think they are over 8 and just under 9 in probably seven or eight platforms, different industries like health care, business services, education, franchise rigth so they have different areas but they have a track record. They look at 4 to 5 thousand deals a year. They may be buy 50 to 75 companies. So they have a track record. They’re super successful. They have a great culture. They have a great process. I say they are best in class and first class. We ride their coattails. We’re passive investors. We’re not picking the stocks there, we’re picking the coach, they’re the coach. They’re picking the players which are the investments.

Adam Kaufman: So why do you like, and I’m glad you like private equity. But why can’t you make the leap further into risk in venture capital. My favorite asset class.

Umberto Fedeli: Sure why. So if you look at the last 50 years and we’re just studying investments which we do. We study tens of tens of thousands pages tens of thousands of hours. The number one performing asset class by far has been private equity.

Adam Kaufman: Mm hmm.

Umberto Fedeli: Reason I’m reluctant to invest in venture capital is it’s much riskier because it’s much earlier.

Adam Kaufman: Definitely is.

Umberto Fedeli: Now the potential return is astronomic but when I’ve looked at it on average there’s more risk for less return. And then in private equity there’s been better returns for less risk because they’re buying something that’s already successful, already has a track record and you’re just taking it to the next level.

Adam Kaufman: That’s true. It’s de-risked once a company makes it to the private equity stage of growth. You’re right about that.

Umberto Fedeli: Well now the right venture capital could blow things away. But what happens—

Adam Kaufman: Because a lot of these companies you love and you’ve talked about you know started as venture backed and privately owned startups.

Umberto Fedeli: I’m just I’m horrible at it. So when I look at something they all look good. I can’t tell. But when I see something that already has a track record, it’s already up and going, it’s already moving, right? So Stewart buys smaller companies and they just take them to the next level, make them bigger and better and sell them for more money they’re already success—

Adam Kaufman: Stewart Cole from Riverside.

Umberto Fedeli: Riverside right. So their niche is they’re investing in successful companies these aren’t turnarounds. These aren’t brand new. They’re just taking something and then taking it bigger, better and that’s easier, not easy, but it’s easier. With venture I’m looking at it. I can’t tell. Most of them don’t work. Now the guys that know what they’re doing can make an enormous amount of money but it’s much riskier and you have to know what you’re doing more. So I’ve never. I’m not saying it never will but I’ve never invested in a venture.

Adam Kaufman: I mean I can understand why you feel that way I just wanted to hear—

Umberto Fedeli: Statistically so many fail. And so private equity I feel more comfortable with, a number of private equity deals. But I like public the best.

Umberto Fedeli: Yeah I can tell.

Adam Kaufman: Private equity has had the best performance. But I can’t do private equity by myself.

Adam Kaufman: Let’s go back to public and thanks for talking about venture capital. I’ll keep working on you on UPC side. But regarding the public companies, does it matter to you after 35, 39 years of being a professional and being an investor, who is in the White House or what tone Congress is speaking as you look at companies? Do you look at all about like the national political landscape when looking at industries or companies?

Umberto Fedeli: I think you need to look at macro just because you need to look at them because to say nothing is not in a vacuum so everything affects everything right.

Adam Kaufman: Right.

Umberto Fedeli: So yes I look at it but long term, if you’re going invest for the long term you’re gonna have different presidents, different House, different Congress. So long term I would say for me it’s less important. Now if you’re buying Treasury bills or you’re buying currencies, or you’re doing things where you’re timing the markets and there’s other people who are doing different things. Then that’s very important. But if you’re looking at individual businesses and saying, “Is this a good business that long term is going to do very very well?” But now you can’t be ignorant and say it doesn’t matter because they can enact the law and say credit cards are illegal they’re not doing that. And all of a sudden they can put a business out of business.

Adam Kaufman: Right.

Umberto Fedeli: So to ignore—

Adam Kaufman: They could say cryptocurrency is illegal. And think of what that would do to a lot of companies we all know about.

Umberto Fedeli: They could. So to me you have to look at all the items and so that’s why you have to know… At our company and our art our closely held small company. We ask people to have three commitments.

Adam Kaufman: People, your employees you mean?

Umberto Fedeli: Yes our associates. We ask them to be proactive, not reactive. We ask them to be committed to lifelong learning. Your business, your industry, your community, your clients businesses, you know, business. Constantly have that desire to learn and to be cooperative, collegial, congenial, and collaborative with your colleague.

Adam Kaufman: And I suspect you have long tenure among your employees.

Umberto Fedeli: We do. We have a lot of people who’ve been around a long time.

Adam Kaufman: And they stay with you?

Umberto Fedeli: Many most. Every once in a while somebody retires. Every once in a while somebody leaves or something happens. But for the most part we then look for three things when we hire called the three eyes. Number one integrity.

Adam Kaufman: How do you gauge integrity when you’re interviewing somebody. I’ve had to hire a lot of people over the years and that’s hard to measure.

Umberto Fedeli: It’s hard to measure. I think the best way to gauge integrity is doing deep deep dives on people and see how they’ve lived and if you don’t do that extensively—

Adam Kaufman: Or do you talk to others who know the candidate.

Umberto Fedeli: You have to do extensive because typically they give you names of their friends or other people. But integrity is by far the most important thing. And then—

Adam Kaufman: One of our mutual friends, excuse me, Bill Rally taught me when looking at candidates… He was tough but he was right with a lot of his toughness. He said don’t call the person who’s first on the reference list call the fourth person.

Umberto Fedeli: I would say call the person who’s not even on the list.

Adam Kaufman: Right.

Umberto Fedeli: And even better because they’re not going to give you any bad names right only people who like them. But integrity is one. Intelligence. There’s different types of intelligence: experience, knowledge, right and an intensity to get things done. Close to three I’s right. And we want people to have the three 3 commitments.

Adam Kaufman: So intensity, integrity. What was the middle one?

Umberto Fedeli: Intelligence.

Adam Kaufman: Intelligence. Ironically I can’t remember the intelligence word.

Umberto Fedeli: But the first is integrity. First is integrity.

Adam Kaufman: Absolutely.

Umberto Fedeli: And then there’s different types of intelligence. So remember somebody may not necessarily have one type of intelligence. There’s those who have emotional intelligence right. Just like I said investments, there’s two parts there’s art and there’s science. The science is doing the research, knowing how the end reports, digging through different filings and I’m not very good at the science part. I have the attention span of a flea. You know there could be thousands and thousands of pages of documents and the fine things underneath. Right. That’s the science part. Then the art part is the intuitive, the instinct of, just trying to think how things you’re going to go. Looking out and trying to say all right, how does this think… And here’s the thing. You never know for sure.

Adam Kaufman: I think you also wrote in maybe your company newsletter one time about the psychology side of investing. Is that what you’re saying the art is right now. Or is that—

Umberto Fedeli: Art would be the human nature part. In human nature, so think about investments as two parts. There’s the business, the economics.

Adam Kaufman: The metrics, KPIs.

Umberto Fedeli: But then there’s the human nature side of things. How are people going to react you know what’s going to happen. So for instance if you don’t think psychology has anything to do with economics when people are not comfortable they’re worried. They spend less. You know consumer confidence. How much of that is psychology? People are happy and looking at their investments and they’re looking at their phone case and things are going okay. They tend to buy you another refrigerator maybe a second or another car.

Adam Kaufman: So you’re talking about the psychology of like the public in this instance I thought you meant like the psychology of a potential customer of…

Umberto Fedeli: Yes.

Adam Kaufman: …a business who might buy a widget or not. Like we’re doing a deep dive in autonomy right now. But part of that isn’t just the technology but it’s also are people going to be willing to sit in a vehicle that they aren’t driving. That’s a psychology question.

Umberto Fedeli: Yes I look at all of that. So macro and micro. So yes absolutely so I’m looking at the macro but also when you look at the individual companies and saying, OK so for instance some retail stocks, I just sit there and say I don’t know if it’s a fad or not. And the question is, as you said, is it going to be a fad? I don’t know if it’s a fad or if it’s going to be a brand. I’m saying I don’t know. I can’t tell. So sorry I’m not going to do that. But the TJ Maxx is selling different items, Costco is isn’t one brand. Costco sells in bulk. They get a membership fee you go in there you get you buy big cases of things in there.

Adam Kaufman: I go once a month. I can’t get out of there for less than 400 dollars. Even I only have like five things on my list.

Umberto Fedeli: So the model I’d like I just can’t tell when I go into another brand, for example some female clothing store or some shoe store and it’s going to be hot and it’s this new there’s new shirts going to be good, and it could be big winners I’m not saying they’re not. I just can’t tell so I say…

Adam Kaufman: You stay away from those.

Umberto Fedeli: I’m going to stay away from that, I don’t have to do everything.

Adam Kaufman: Yep absolutely. Well it’s part of your focus.

Umberto Fedeli: I’m not always the best at focus.

Adam Kaufman: Well we all we all try to be. Let me ask you about this I mentioned politics but this isn’t exactly a political question. We’ve had a good run in the economy and in the public markets for several years now. You care to speculate like how far we are into that run. Are we near the end? I know timing is hard to do but it’s been a long up time.

Umberto Fedeli: Yes. So though the market bottomed let’s say March of 2009. So we’ve had 10 fairly good years in the public markets and fairly good years in the economy.

Adam Kaufman: Unemployment all time low.

Umberto Fedeli: Unemployment low, interest rates are low. There is a couple of concerns I do have.

Adam Kaufman: What are those?

Umberto Fedeli: My biggest concern is the amount of debt.

Adam Kaufman: U.S. debt or by consumers you mean?

Umberto Fedeli: Consumer debt and U.S. debt, world debt. So we have around 20 trillion of debt but that’s not accurate. We have another 80 trillion of unfunded liabilities, things we owe like health care and Social Security.

Adam Kaufman: Right.

Umberto Fedeli: So where I come from, if I owe it and I didn’t borrow it but I still owe it. So if you lump that in together we have one hundred trillion.

Adam Kaufman: I can’t even fathom what that number is.

Umberto Fedeli: There’s a lot of zeros but it’s all you have to do is look at Greece and look at Spain and look at where my parents are from in Italy.

Adam Kaufman: Iceland about 10 years ago.

Umberto Fedeli: All this debt. So there is a study that I actually shared from Harvard our great Senator Portman. And he was very smart on economic issues.

Adam Kaufman: Senator Rob Portman he was the budget director in the Bush White House.

Umberto Fedeli: Yes trade ambassador, Dartmouth University in Michigan, very smart. If you were hiring a man, forget politics for a second. If you were hiring a man to do the job you would hire Senator Rob Portman. He’s a terrific guy.

Adam Kaufman: Spectacular.

Umberto Fedeli: Fantastic at what he does. And I shared it with him and Speaker John Boehner in his study at Harvard studied world economies and said OK what existed when these economies did well. So forget about politics, forget about my opinion your opinion.

Adam Kaufman: Right.

Umberto Fedeli: A lot of times people say, “Oh is that your opinion?” I said no, I’m trying to learn what works.

Adam Kaufman: What were the components of the good economy.

Umberto Fedeli: The economies that did the best, cut taxes and cut spending and cut borrowing so we have cut taxes. That’s a nice start, we haven’t cut barring our spending under any administration.

Adam Kaufman: Correct.

Umberto Fedeli: So under President Trump’s administration our spending hasn’t been cut. President Obama our deficit went up more than all presidents combined. And President Bush deficits went up. We are spending more money than we take in. Now some people don’t think that matters. I think sooner or later that is a problem.

Adam Kaufman: So back to my question is it sooner or later that this positive rise after early 2009 ends.

Umberto Fedeli: I don’t know. And I think that anybody—

Adam Kaufman: But that’s why we invited you on this show so you could tell us all in the crystal ball what you’re seeing.

Umberto Fedeli: Well I’m cautious but on the other hand unemployment is low, interest rates are low.

Adam Kaufman: Those are good things right.

Umberto Fedeli: Those are good things. And I believe that the trade war gets worked out. I’ve thought that from the beginning. I think it’s just the way our president negotiates. A trade war is a two people fighting and saying you got hurt worser than I got hurt. My daughter says that’s not a word, it means worse than worse. But do you win if you hurt me more and I hurt you but we’re both hurt? And so ultimately with the trade war China gets hurt more th we get hurt because we buy more from them right than they buy from us four to five times. But then it will hurt us because then we got to pay more money to buy theirs and it’s still going to affect us. So everyone gets affected just a matter of who gets affected more or worse. That is a concern but I think that gets worked out.

Adam Kaufman: Do you know what economic issue that I’m starting to think about more than I used to I think maybe the biggest consumer economic issue of this generation is gonna be student debt. Do you think about that very much because I really feel like the model’s broken because we have so much government loans available that the universities keep raising tuition but then the tuition as high as it is, is not affordable still with all these students and we want to get everyone college educations. And the statistics of these young professionals and how many years it takes to pay off their student loan debt it’s paralyzing. Do you think about that?

Umberto Fedeli: It is a problem, Adam but I think the biggest problem we’re going to be facing in America, is America used to have the biggest block of middle class. And we had a few poor, few percentage, less percentage and a few rich. What’s happening now the disparity between wealthier and poor is growing bigger and bigger and bigger. OK. For a lot of reasons. And so technology is good. On the other hand in the future jobs that are less skillful will be done by computers and machines. Just like in factories. And so the disparity is going to continue to grow. And it’s important that everybody is better off.

Adam Kaufman: Yes.

Umberto Fedeli: And I think that’s a problem. And I think our debt is a problem. Both to me are the two largest problems that we face.

Adam Kaufman: Regarding, and I agree with you, regarding your concern for automation and machine learning and job displacement because of that technology. I had on our up to podcast last season Cheryl Palmer. Oh you met Cheryl.

Umberto Fedeli: Yes for lunch. Very impressive lady.

Adam Kaufman: Yes CEO of the seventh largest homebuilder in the U.S. and she shared that they turn away profitable projects because they don’t have enough laborers or tradespeople to do the work. Selling the project is the easy part. I’d love to see a renaissance of tradesmen or those types of skilled workers learning how to build things. Because we’re still gonna need more homes.

Umberto Fedeli: If you talk to people, so if you talk to our mutual friend Governor DeWine as he was campaigning what do you hear from business people in the top one two three things more than anything else, that they couldn’t find enough skilled help, enough trained help, that could also pass drug tests.

Adam Kaufman: Right.

Umberto Fedeli: And so that is a concern. And so think about this. A lot of times people say, “Oh you’re a conservative or you’re a liberal or you’re whatever it is.” Everything affects all of us. And so what happens is that you want everyone to improve their life. Right. So the other day there was a great speaker that we went to hear and they said you know what we really want is not a redistribution of wealth. You want a redistribution of opportunity.

Adam Kaufman: I like that. Do you mind sharing who said that?

Umberto Fedeli: No it’s something that I shared I may have heard somewhere, you know.

Adam Kaufman: You gave the speech.

Umberto Fedeli: No it was a speaker and afterwards I was going to ask a question, it was at the City Club. He was an incredible speaker right, an incredible man.

Adam Kaufman: I think you mean Peter Georgescu who is just phenomenal. He wrote a book called Capitalists Arise that’s getting a lot of attention on Wall Street and in the mainstream press.

Umberto Fedeli: Super impressive, gave a super talk and he’s concern about these things.

Adam Kaufman: His life story is remarkable.

Umberto Fedeli: It’s an amazing story. There’s no question. And I think he’s dead on right on things he’s writing about in his book. But also Ray Dalio is also concerned about that and now Ray Dalio is worth 18 billion.

Adam Kaufman: And he’s friends with Ray Dalio by the way.

Umberto Fedeli: Well he is very much concerned about the same thing that I just brought up and I think what happens is if people would look at everybody and say that somebody’s son, daughter, child, mother, brother, and I’ve shared this with people right. It’s maybe not that cool to say especially when we talk about investments that we probably need love more than anything else we need in the world. More love would cure more problems than anything. But that is a big problem. The disparity between rich and poor is a big problem. Those are big issues, right? And also we have to have well-trained workforces, people have to go.

Adam Kaufman: That’s what I was speaking of right.

Umberto Fedeli: Yes. Those are all important items.

Adam Kaufman: Let me go back to the first question, Umberto that I planted the seed on early which was, for the 30 year old listening who wants to delve into investing. What should she be thinking about just starting off. We’ve talked about some complicated strategies but what are the basic rules starting to put a little bit of money aside each month towards your savings.

Umberto Fedeli: Well I think that’s one of the first things you have to spend less than you make because you can’t invest if you don’t start off saving. You can’t start off saving if you spend more than you make. So you start off saying, all right you have to pay yourself first. You have to sit there and say, right from the top, I need to put some money away. You can’t say we have put it away once it’s left.

Adam Kaufman: So pay yourself means give yourself some savings not buy more music.

Umberto Fedeli: Yes it means you know right out of your paycheck or right out of your earnings you know as much as you can.

Adam Kaufman: Into your 401K or whatever you can.

Umberto Fedeli: As much as you can. Of course we can put in 401K and you get a match and it’s tax deferred. But as much as you can there before you do anything.

Adam Kaufman: It’s a no brainer but a lot of young people don’t do that. I didn’t do that right away when I started.

Umberto Fedeli: Well the first thing is spend less than you make and learn how to save. Then you have to invest, right? But you have to save first. Initially I would not suggest you buy individual stocks, 90 percent of the professionals do not beat the indexes.

Adam Kaufman: That’s a great point I’m glad you said that. Don’t start with picking stocks when you get going.

Umberto Fedeli: You can play around a little bit and do some if you will. But what happens is that knowledge is so important and you have to learn it. If 80 to 90 percent of the professionals on Wall Street do not beat the indexes and you’re not a professional, statistically your chances of doing well are not going to be good

Adam Kaufman: Right. No offence to all of our friends who are wealth managers.

Umberto Fedeli: You can start off with ETFs.

Adam Kaufman: What is an ETF?

Umberto Fedeli: Exchange Traded Fund. So they’re very very low expenses. But they’re not managed, they’re just a strategy so you know you’re going to buy maybe the S&P 500 to 500 biggest companies or the Russell 2000 or they’re just a strategy but there’s not management. Now mutual funds is another way.

Adam Kaufman: That’s a collection of public companies.

Umberto Fedeli: Collection of public companies where there’s management involved, ththere’seir strategy involved and someone’s running—

Adam Kaufman: There’s usually a fee for that right? Beyond what you invest.

Umberto Fedeli: There’s a fee and of course you don’t want to buy be loaded funds where you’re paying a big commission and the expenses that are in the 12B 1s, 12B 2s or 12B whatever they’re called, I think 12B 1s.

Adam Kaufman: Right.

Umberto Fedeli: But good managers of the good funds and good managers of the investment houses long term should all perform. But 80 or 90 percent don’t. It’s very hard. So you started off just saving money and then after you get a discipline to save money start investing in some mutual funds or some managers or some investment companies.

Adam Kaufman: My first mentor, you mentioned mutual funds a few times, my first mentor in investing his name’s Chad Brenner. He taught me, “Adam if you want to invest in mutual funds…” Just to give you a different thought here, but I think you’re gonna like it. He said, “Just invest in Berkshire Hathaway B shares it’s 70 or 80 companies. There’s no management fee. It’s broad based industries.” So I took that advice some very modest Berkshire Hathaway B share shareholder.

Umberto Fedeli: I happen to own Berkshire Hathaway, I have for years. But let’s talk about Berkshire as an example. They have not beat the S&P index in the last 10 years.

Adam Kaufman: Yeah.

Umberto Fedeli: Now think about it. One of the greatest investors if not the greatest investors, part of it is he has too much money, but he ihass not beat the S&P index. So when Warren Buffett hasn’t beat the S&P index in the last 10 years. OK. It’s not easy to do, right? Again he’s very close to it but it is like a mutual fund. There’s other companies like that. It isn’t there. The only one where you can buy their company. And when you buy their investments you’re getting a collection of business. So there’s there’s different ways to do that. The one thing I found is again you don’t have to know everything, you just have to know people who do know. If you read you can learn a lot and if you ask questions. The other thing I find out is very successful people, you’d be surprised how often they want to help somebody younger. They want to teach you what not to do.

Adam Kaufman: Good point. So ask, don’t be afraid to ask questions of your more senior or more veteran investors.

Umberto Fedeli: Someone who’s super successful and may be a friend of yours, maybe your friend’s dad or could have been somebody that you know—

Adam Kaufman: That’s why we brought you in here cause I wanted you to share. I think the question about what are you reading or what the person who is starting out should read is really important, Umberto. Because like for me, different scenario, but I don’t know anything about wine. So every time I try to learn about wine just to be conversational any magazine I pick up or any website I go to there’s all this assumed knowledge that it’s so intimidating to get started. I feel like a lot of people feel that way about investing. So that’s why I think your thoughts about the Wall Street Journal or The Motley Fool really matter because where do you get started, where is it not intimidating? And you just said maybe just asking an expert.

Umberto Fedeli: Yes I would say you know the Wall Street Journal and Barron’s would be my first two.

Adam Kaufman: Yeah Barron gets is pretty heavy.

Umberto Fedeli: He can get heavy but there’s a lot of little short tidbits and little things you can read. But also there’s just so much material out there so reading is what, now some people have no passion for investments, where they’re just not fascinated by it. It just doesn’t turn them on. It isn’t fun for them. So for me it’s a combination of a hobby because I like it. It’s also a way I socialize because I have a lot of friends then and we share ideas and we bounce things off each other. So it’s a social thing, it’s a hobby, it’s a passion.

Adam Kaufman: And it could be fruitful.

Umberto Fedeli: Well it could be but I don’t happen to like fishing. I don’t like it. Nothing wrong if you like it.

Adam Kaufman: I don’t golf.

Umberto Fedeli: I don’t golf. I don’t have any interest in trying golf. OK. I don’t have any interest in most of the things, when I go to sporting events I have a hard time even paying attention. I have nothing against it. So for me I’m unusual because most of my friends that are are running their own businesses or that have been blessed with some success hire a professional manager. Hire consultants. I have different people that do it. And so I am much more active probably than—

Adam Kaufman: You’re very hands on with the investing consumer. You have a different line of work with your day job so to speak.

Umberto Fedeli: Yes. They call that my day job is what my business is, my morning job right. Then sometimes my my third shift which is the community in the political—

Adam Kaufman: Right. Right.

Umberto Fedeli: And so forth. Now as of grandfather six and two more on the way. I’ve had to cut back on some of that at nighttime time because then I’ll never see my grandchildren and I don’t want to do that. I did that earlier when I was working you know 16 and 18 hours a day. I went to as many as five events in a night. Three was nothing. So you have to balancee it and by nature I’m not balanced. But there’s so much material out there to read, there’s so much you can learn, now if you’re not passionate about it and you don’t want to learn about it then then learn how to pick the right mutual funds or the right ETF or have a professional that can help you.

Adam Kaufman: Well it’s clear you’re passionate about investing and about sharing your lessons. I’m passionate about talking to accomplished people like you who are so humble and authentic. So I really want to thank you for spending time with us today. We’ll see you in a couple of weeks for our final episode of this special mini series.

Umberto Fedeli: Thank you Adam.

Adam Kaufman: Before we conclude today I want to go over what I think are my top takeaways from today’s discussion with Umberto. Number one, integrity and a proven track record are vital when investing in or with someone. Number two, each of us should commit to life long learning. Number three, when starting out in your career you should pay yourself first and by that Umberto meant you should save a little bit of money every month so that you in the future can invest it. Number four, when you begin investing don’t start by picking a few stocks. Instead you should begin with exchange traded funds. And number five, look to ask questions of those who are your senior or are experts because people usually do like to share their expertise with folks younger than them. I’m excited to let you know that for the first time we are going to be introducing our digital mailbag. We love receiving feedback from you, our loyal listeners. And today I would like to read a wonderful note I received on LinkedIn from Chris Dobbins who is the director at the Gaston County Department of Health and Human Services in North Carolina. Mr. Dobbins wrote, “I recently discovered your podcasts and I look forward to pairing the leadership strategies in your podcast with those in my dynamic organization. I think they will be a great fit and thank you for sharing kind regards, Chris Dobbins.” Thank you Mr. Dobbins. And to all my listeners, I encourage you to please contact me with any feedback and also ideas on the future guest speakers. You can contact me on the up2 Foundation web site or on social media. I sincerely hope you enjoyed today’s episode and I encourage you to subscribe to up2 on your favorite podcast app. Up2 is a production of Evergreen Podcasts and the special thanks go out to our producer Bridget Coyne and the audio engineer Dave Douglas. I’m Adam Kaufman, I’d like to thank you so much for listening to the up2 podcast.

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