The Compound and Friends - Monday Morning Meeting 6/24

Episode Date: July 1, 2019

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I want to talk about something that I think it's a theme that we've gone over before, but I want to reiterate it because I think it's just something that we have to constantly remind ourselves of, and I have to constantly remind myself of as being one of the mouthpieces for Ritholtz Wealth Management in the public, but I think it applies to everyone. public, but I think it applies to everyone. I see this same group of people online, at conferences, in the media, on their blogs, in articles. It's like 10 or 12 people that cannot shut up about what other people in the industry are doing. They just, they wake up, they take a shower, in the industry are doing. They just, they wake up, they take a shower, presumably they brush their teeth, maybe they have Froot Loops, and then it's 12 hours of this one's doing this, and that's not good, and that one's doing that. And it's, some of them are industry commentators

and they don't even manage money or deal with clients. Some of them are like columnists. Some of them are people that had a bad experience in the industry and now they're like yelling at everyone else. It's just – it's like almost like a syndrome and they can't seem to break themselves out of it and it's on and on and on and they don't even fight with different people. They fight with each other. I don't – maybe they love each other secretly and this is how they make contact and communicate. Maybe this is a language that's imperceptible to the rest of us. But

whatever it is, it's just this internecine industry like deep in the weeds squabble and it's around the clock and it's demented from the outside looking in. And the point I want to make is it's around the clock and it's demented from the outside looking in. And the point I want to make is it's important for us to stay on the outside and not wade into those debates because they don't matter. They're not changing the industry. They're not impacting the way other people speak. It's just a disastrous thing that you can get lured into. And then once you're in the middle of these conversations, you are wasting your time and not focusing on the only thing that matters. And when I say you, that would apply to me as well. The only thing that should matter to us, does matter to us, will matter to us is how satisfied our customers are. That's it.

That's it. Is it important to be aware of what's going on in the industry? Of course. I'm hyper aware of what's going on in the industry. But to fight with people over it and dwell on it and pick it apart and worry about what everyone else is saying and doing,

it's too much. It's irrelevant. Successful people, name an industry. I don't care what it is. Do not spend their time worrying about what everyone else is doing. They're worried about making their product better, making their service better, making their clients happy, making sure that their clients are satisfied with the service or product or both that they're providing. And that is the only thing that's worth focusing on for a growing, thriving organization like ours. If we get pulled into these idiotic debates amongst people who have nothing better to do or have a mental tick that prevents them from focusing on their own business.

If we get pulled into that, it's a substantial distraction and waste of time. And that's not just on Twitter. I'm talking about anywhere we go, out and about within the industry, any conversations that we're having with other people. Who cares what other people are doing? Who cares? How does it help us? How does it help our clients?

It's the only thing we need to think about. I spent some time last week with Sheryl Penny, who's the founder of Dynasty, and I asked him about competitors and what's going on in the industry and how he's viewed. He doesn't care how he's viewed. He knows that his clients, which are not, by the way, household investors, his clients are financial advisors, a very specific type of financial advisor that comes to him and builds their firm on his platform. He knows that those people are the only people that matter for the success of his firm and for what he's trying to accomplish. So he doesn't worry about

everyone else having these arguments about what's going on elsewhere. It's on his radar. He knows what's going on. If somebody directs some kind of invective toward him, he'll fight back if he has to, but not in a public forum amongst people who have nothing going on in their lives. It's not going to happen. He's too smart. He's too smart. Barry did an interview with John Stein from Betterment. We have a huge amount of respect for John and we're now working with him on our automated

advisory service. The competition question came up. He knows what everyone else is doing, right? He's aware. It's one of the most competitive fields within financial services right now is exactly what he's doing. He knows what's going on, but he's not dwelling on it. He's focused on improving betterment, betterment for advisors, betterment for business, all of the various lines of business they have. That's what he's working on all day. He's not working on comebacks for other people's comments. He's not looking to get into fights with people on the internet about how he runs his business, how this one runs their business. It's just, it's not what he's doing. He's focused on the betterment, pun intended,

of betterment. And that's where he should be focused. And if he does that, yeah, there's going to be a ton of competition. The next $15 billion they raise is going to be harder than the first $15 billion perhaps. That's the nature of – and he said it and I thought this was a great quote. He said if we're successful in what we're doing, there's going to be lots of competition. John does not spend his day dwelling on what his competitors are up to or what other people think his competitors are up to. It's just not important. And I want to leave you with a quote. This was said in 2013, and I couldn't memorize the whole thing, so I'm reading it off my phone. Quote, if you have a customer-centric culture, that cures a lot of ills. Let's say you're the leader in a particular arena. If you're

competitor-focused and you're already the leader, then where does your energy come from? Whereas if you're customer-focused and you're already the leader, customers are never satisfied. If you're customer-focused, you're always waking up wondering, how can we make that customer say, wow? We want to impress our customers. We want them to say, wow. That kind of divine discontent comes from observing customers and noticing that things can always be better. That is a quote by Colonel Sanders, the founder of, no, I'm just kidding. That's Jeff Bezos in 2013. So what do you think Jeff did six years ago after – I got you, Barry.

Eric is going to jump out the window. All right. That's why they're chicken so crispy. That's right. Customer-centric chicken. What do you think Jeff did six years ago? What do you think he did the next day after saying that quote to a reporter? You think he went on Twitter and started arguing about two-day shipping is better than three-day shipping? Jeff Bezos doesn't give a shit about what people are saying on Twitter.

Jeff made Amazon even better from that moment, from 2013. Would anyone at this table argue that in 2015, Amazon was any worse? No. He could have stopped. So being customer-centric, that's a healthy paranoia. Are we doing enough to make sure that our customers would say they're having a better experience with us in 2019 than they had with us in 2013 when we founded the firm? I know the answer is yes. The evidence of that is we're not losing customers. We'd lose them all if we were still doing what we were doing in 2013. We'd have none because the customer is never satisfied. The expectations of a customer for any business

always go up. Now, that's not to say they want a radical overhaul of their favorite businesses that they, you know, their favorite stores they go to or their favorite doctor that they like seeing. Of course, they want continuity, but they want an improvement. They want to see that you're still trying. It's not just getting a customer. It's keeping the customer. Anybody in our industry, financial services, you could lie and get new customers really easily, right? You could promise people the moon and just, hey, you want all upside, no downside? We do that. Come on over, right? Anybody could do that. Can you keep customers? And part of keeping customers is focusing on how can I make the customer experience better.

Being aware of the competitors but that not being the benchmark. I don't care what anyone else is doing. Like Jeff, I also don't give a shit how someone else is managing money, how someone else is billing, how someone else is onboarding. I want to know that we're doing everything we can to make all of these processes better, easier, and customers happier, okay? It's not easy. If it were easy, everyone would do it. Everyone is not doing that, to the best of my knowledge, right? So that's what our focus is. Our focus is not winning theological debates, 4 a.m. dorm room style debates in an open forum with people that are doing nothing. We don't care. We don't care.

You will almost never see an example of someone who's succeeding right now dipping down into the swamp and fighting with those who aren't. Why would they? Who punches down on purpose? It's ridiculous. It's absolutely ridiculous. So our focus is our clients. We want our clients to love us. We want them to see that we are constantly trying to improve what we do. It'll never be done. There's no finish line. You think you hit a permanently high plateau? You think you hit this place where this is it, this is as good as we can be, customers will love us forever? I promise you, I promise you that will not be the outcome. And part of it might be because of things your competitors are doing that are better than what you're doing. But part of it will just

be what have you done for me lately? This is a permanent fact of our industry, any industry. So the bottom line here is we're aware of everything that's happening. We understand it. We're not hiding from it. We just, we're not worried about it. We're not focused on it. One of the most important things that I can relay to you, you think about Danny Meyer who is one of my business heroes. After reading his book, I had a real understanding about making customers happy. I think that's like what every entrepreneur should aspire to in terms of customer service is what he's built with Union Square Cafe and Gramercy Tavern and Shake Shack and on and on and on. And Danny did something that he thought was the right thing to do with tipping. He wanted to get rid of tips for waiters and waitresses.

He looked at it and said, this is the worst thing for my employees, and it's the worst thing for the customer because the customer has to sit there and figure out some kind of arithmetic to leave a tip. And he just said, this is something that I think if we got rid of, everyone would be better off. And we account for that lack of tip by raising the prices on our menu or paying our employees what their time is really worth or some combination of the two, right? When he did that, I'm sure there were five or six cranks from the restaurant industry who took to Facebook or took to Twitter and started screaming their heads off. I highly doubt Danny saw any of it. Maybe if somebody in the New York Times wrote negatively about it, maybe he would address that. But Danny Meyer is not fighting with

somebody who owns a pizzeria in Poughkeepsie about his no tip policy. He doesn't give a shit. He's focused on what's best for my restaurants, my employees, my customers, my community. That's what his focus is on. This is the way we need to go about our work. This is the way we need to think about developments within the industry innovation within the industry new products, new services we may or may not want to offer, this is the benchmark, will it make our

clients happier with us that's where I want to end, I appreciate everybody checking in this morning let's rock and roll this week