Robert Smith on Being The Richest Black American, Wealth, HBCUs, & Private Equity

so it might take you 10 years to figure out what we've done 45 times already right and now I bring that intellectual property into the company and say here's how we're going to design this a little differently here's how we're going to change your compensation plans for your sales people to actually incentivize them to give you more stable revenues or or you know more visibility into the future revenues and earnings of that business that you may not have figured out or may not figure out because you may not be in an environment a circle of people who have dealt with that before and so that's why the expertise that we bring is often more valuable than the capital my graduates from my school being Forbes backdrop backdrop oh my God backdrop [Music] [Applause] all right guys welcome back eyl this is a very special episode let's call it the icon Edition it's also the earliest episode Oh I thought it was your choice to get here this early well I mean once we got the top slot we should open up 24 hours so um and I did get the memo [Laughter] yeah the blue uh blazer with the the three-piece suit look yes this is the brand this is the new brand that's the new brand this is y'all's new brand which is the icon Edition brand we're rebranded it's called it's called Rebrand so you know this this is it's a it's a very uh full circle moment for us because I think probably three maybe four years ago right so a lot of this started for us on social media on Instagram and um I used to write a lot like write like Vlogs but I I put it on Instagram so I would write about a whole bunch of different topics and one of the topics that I wrote about was you you had a art you had a cover of Forbes and um I think it might yeah like three or four years ago so I uh I put the cover up and then I wrote like a three-page three paragraph um description of the whole situation and then my whole point of it was at that time specifically I didn't feel that enough people knew who you were I remember I remember that you remember it I remember that one of my guys sent that to me yeah he said oh you got to meet this cat that's so funny that's crazy so yeah so you know I was real passionate and I kind of like you know we put too much emphasis on Sports entertainment and we know but this is the most wealthiest black person in American history and a lot of people don't know who he is so long story short fast forward now I think a lot of people do know especially after the Morehouse situation we'll talk about that but um still and still and still the wealthiest black person in America four years ago was true four years later and still that's an accomplishment um and not through sports or entertainment I think if that's something that's extremely important especially for young people to understand that you know you can reach levels of success in our culture in our communities and not necessarily do it through sports and entertainment I think that was one of the pillars that when we started was like let's show everybody what they can be the possibilities in the Realms of things that can be outside of those two things which we knew that we could be great at but let's show them somebody who's doing something that's far beyond that and it's exceeding at a different level as well so definitely one of the pillars of Ernie Leisure yeah so Robert Smith um CEO and founder of Vista Equity Fund um he is actually a very prolific person because if you read his bio it's like 45 different things he's a chairman of Carnegie Hall yes he's uh a family man yeah that's that's probably the most that's what I should have said first um he used to he used to do a variety of different things so he used to be an engineer and then he used to actually work on the corporate side for financing as well so it's an extremely impressive background because most Engineers that doesn't usually mix that's like you know I'm saying a weird combination with that transition is yeah yeah Wall Street and Engineers like at the same time yeah he could build your house and give you financing it's a little it's a little closer than you think I'm gonna unpack some of that yes okay um but this is going to be a very Dynamic conversation something that you know extremely excited about and I gotta tell this story I told this story in LA but this is something that I think is very important to tell because the first time that we met him was in Harlem yes and uh shout out to our guys Steve Harvey yes um so he invited us and you were doing something for colon cancer I believe yeah for African-American men yeah prostate cancer so it was something that you know I always remembered that moment because it was in the projects and Wagner projects in Harlem and um that's where he chose to actually do that and educate and he brought a bunch of celebrities out and that was something that was very impressive to me because it wasn't on Wall Street it wasn't you know in Times Square it was you could tell that it was really for the community and it was really a community-based initiative and we'll talk about that as well and um when we met him you know we obviously are introducing ourselves and the first thing he said to us is I love you guys so I don't even think we got to say who we were yeah it was like I don't know these guys I loved them so his his humility uh was infectious and still is and um you know his charitable arms are just a million miles long so I wanted the public to know that because a lot of times people don't know different things that happen and it's not for you to say that but it is for us to Champion that and that's that's important so well that's important of media and US telling our own story so you you play a very important role in part in our community it's not just the education of our community about our community but helping us understand how to uplift each other and you know our community gets attacked from all sides for multiple reasons uh but it has to be it has to come down to our community defending our community in that context you guys pay a very important role and as dynamic as the media is today your role is even more important so keep doing what you're doing and keep leaning in hard thank you thank you so that was an amazing moment thank you for joining us um okay we can get to it so you grew up in Denver yeah in a very diverse neighborhood they call it the Harlem of the West is that what they yeah the Five Points yeah yeah can you talk about that yeah yeah yeah sure um you know we as African-Americans have had just a interesting journey and you know in in points in time you can kind of frame where different things happened uh to our community and you know things we did of our community and the thing I always point to is our not only resilience but the ability to create and create things new and influence and change I mean a lot of American culture is coming out of our experiences and music of course is one of the principal drivers uh of that you know I always say I grew up in a Beloved Community and you know it sounds like you guys grew up in that as well a place where uh in my case it was completely segregated community but you know the needs of the children in our community were being Satisfied by the adults in that Community because in those needs of love and guidance and instruction uh and everything from learning how to play the piano to learning about science and in my case like rocketry and in learning Sports I mean that came from the members of our community uh but you also saw the adults in that Community defend the community and also try to make more progress and the Five Points area is the area one of the first areas that was settled by African Americans in Colorado as we moved across this country and typically it was you know at the end of you know emancipation uh uh uh period um my family many of them went into Pueblo Colorado but they came from you know Oklahoma or Tennessee right and you guys are all familiar with Greenwood and part of our family tree comes out of there some of them actually owned the you know one of the pool halls and one of the one of the hardware stores and as that happened in the early 1900s and that Massacre they moved into Pueblo Colorado and then from there so I'm fourth generation from Colorado and so my family are families of teachers and Educators and nurses and doctors think about that right you know providing I'm the fourth generation of my family to go to college wow right there's very few families in America whereas fourth Generations that have gone to college and so what yeah I saw growing up was a community that had a lot of wholeness but was again being attacked in many size but I saw the adults like my parents my father and my mother you know pulled together organizations to not just a fan to defend but to advance and one of the most important areas of advancement was of course education you know being educated it was critically important to success and to creating you know Financial opportunity and to frankly create you know stability in the in the community both my parents were teachers uh Elementary School teachers they both ultimately ended up getting doctors in education both into being principles but I look also to the work they did civically in our in our in our family back then it snowed a lot in Denver you know the whole climate change Dynamic I don't think we're addressing this and so we as kids always got excited about snow days right man stay home our parents didn't why because at that time our neighborhood wouldn't get the snow plow to come through for three or four days after it's no now you think about it we're your parents are trying to go to work but they can't even get down the street they can't get to the bus stop they can't you know for those of us who had cars you couldn't even drive because it was just snowed in so I saw my father lead an effort and it created a civic association and they literally went and campaigned and lobbied so that we at least got snow plows the same day as other communities in our you know in our city I remember and then they'd put one stripe they come down and do one stripe down the Main Street and then you still had to get to the main street and you would get out and then okay great we got on a bus to go across town because they were desegregating schools using busing and we'll talk about that in a minute um and he'd go to the neighborhood where the better resource school and their streets were clean and dry snow piled up on the side are gone and ours still had just one strip down the center so when you talk about economic disadvantage uh uh systemic economic oppression these these are the things that you don't think about on the one hand but if your community can't get to work it has a major impact and we had a lot of wage workers so it wasn't like oh everybody was on salary you were wage workers if you didn't show up that day you didn't get paid that day if you didn't get paid that day you were now trying to figure out how to you know go make groceries and pay pay you know ensure that your kids ate or clothed and those sort of things and I saw the community say this when that's not going to stand right and make take a stand of that I saw my father also pulled together uh resources so our local YMCA our kids had a chance to go to summer camps and to go into the mountains and we raised money to build a gym so we could actually have a place you know where our kids could actually you know recreate in peace and also with facilities but it was them taking that on and making a community projects and us you know going out and selling candy and all that's you know to ensure that that happened and it was I call it a spirit of self-determination that very much was part of the fabric of that community and you saw people looking out for the kids that wasn't perfect like everything you know nothing is perfect but you felt loved uh you felt cared for it you felt protected and you saw adults coming together for the betterment of that community not episodically when something bad happened but on a regular basis and that's what I remember and those are the things that really inform how I like to live my life and I have an opportunity to do a little bigger platform than growing up there um and but it's also I call it rich with community life you know the music the you know we'd have the Friday night fish fries and you guys too young remember we used to do these people take slides pictures on slides and you know slide projects you guys left you don't even know I know I know I feel like that happened in elementary school yeah right on projected Yeah Yeah well yeah but but but people would go to people's homes and you know bring food and potlucks and watch slide projectors of people's what they did that summer and and of course play cards and you know you know drink whiskey and sort of pop it off but and play music and I mean that's it was very vibrant and I just remember that and that wasn't like like I said episodic that was kind of just the way we lived so it was actually it was actually pretty cool it sounds like I mean just having the foundation set like you said most of us don't come from you know families that went to college you had two Educators in the home you spoke about the impact your dad had I I remember hearing the stories about the impact that your mom writing the checks to the United Negro College Fund and what that profound impact had on you I want to talk about that a little bit and bus 13 like you kind of alluded to it but yeah the importance of that and how you know having one plus in the community and the impact that that had on you and also the future of some of the people that were on that bus and how you know they excelled as opposed to the people that didn't make it can you talk about that yeah and it's you know again it's kind of the the great segue into you know the importance of resources uh in a community and the importance of uh guidance in that context you know we we were at a time it was a dawning of uh call it the Civil Rights Movement uh in action so you know there were there were you know we spilled a lot of blood and a lot of our blood was spilled in the streets and one of the things we got out of it was Brown versus Board of Education and I was like okay now we're going to desegregate schools how are you going to do that when everybody lives in segregated neighborhoods so it was in Denver and many other places it was a thing called busing right they call it Force busing but it was busing and so now you know the cities took here they you know bought a bunch of buses started figuring out okay who from this community who goes to this local school my dad was a principal at the local school and now you're going to be bust across town to another school all right well um right before this was to happen some racists didn't think this was a good idea and burned like a third of the buses okay so now all of a sudden fewer people are going to get bust just as for nature so rather than my whole neighborhood getting bust only one bus came to my neighborhood and so just so happened to hit on the on a corner down the block for me and so the kids in that four block radius were the first ones to go to desegregated schools okay and I could talk about better resource schools and when I look at the kids who were on that bus versus the kids who were two blocks away okay it was bus number 13 like I say ironically right it was those kids have a higher percentage of professionals went to Ivy League schools became you know doctors and professors and scientists versus blocks just a few blocks away uh much now there were some professionals that came out there but a much lower percentage I mean it is a stark contrast and it's because that K in that case k through six education was so different than what you saw in our local neighborhoods and our because they were still you know separate but equal but it wasn't you see what I mean the teaching the capacity the care and you know and we had some phenomenal teachers in in our community and some of the teachers through that also ended up in those better resource schools because it was that as well and I remember Mrs Olivier third grade teacher African-American woman and you could only after American teacher in that school but she looked out for every kid of color in that school and I'm telling you that's that's one of the most important things that made a huge difference and our educational upbringing and gave us a chance to launch and go into the high schools and going to the colleges that we ended up in because we had great fundamental education k-6 so I want to get into how you've actually built what you have Acquired and if I want to start with your engineering career so you was at craft and you were at Goodyear as an engineer and then you transitioned to Goldman Sachs so can you talk about that like how did that how did you go from being an engineer from Craft and Goodman and Goodyear to being in an investment banking world or Goldman Sachs yeah and on a point to the importance of media okay so I will get into later kind of what Vista is and how the engineering informs all that we do and has created the Enterprise that it is that can grow at scale sustainably because of the engineering background mindset and design points but the transition came from media okay so at the time I was an engineer working at a plant in Upstate New York uh for Goodyear Tire and rubber facility um and I had a a collection of friends and we would get together we'd we'd read I mean like okay we weren't just sitting there watching football because you know we had a book club a bunch African-Americans you know we had a book club back then reading different things and one of the guys brought to kind of the book club uh a Black Enterprise Magazine and on that were a bunch of blacks on Wall Street uh first I'm like well what is Wall Street because I was I had no idea what Wall Street was and they had all these guys on Wall Street and it had you know guy you know John Newton doll this guy you know Ray Maguire and Stan O'Neill and George van ansem and and I'm like well who are these cats and what's this Wall Street all about and why are they undercover this magazine right what's that and so we start reading and understanding and talking about it I mean that's importance of community too where you can kind of Bounce some ideas off and what what's this all about and started really understanding that there's a whole different world outside of engineering which is what I thought the world was right um and so I started thinking about well maybe I should go to graduate school [Music] so as I started looking at different you know elements business school looked interesting law school looked interesting uh and I decided Well I'm gonna go to Columbia I went to Cornell undergrad um and I started looking around and decided Columbia was a good place for me to go was fortunate to get in uh and I also have a good fortune I did well my first year so I was top student in my class I had to come back for an award right for after you know Business Schools two years so after the first year and come back with this award during the summer you know the summer graduation uh so I come back and lo and behold one of those guys from the magazine is actually the keynote speaker for the summer graduates got the name of John Newton doll and you'll like go and give my background and all that sort of stuff and you know where would I get that at the end of the the thing you know he gives his speech it pulls around says hey hey he said you have an interesting background you know engineer all this so he said have you ever thought about a career in investment banking I'm like well I said you know there's a bunch of investment bankers in my class I don't like any of them and uh he says well he looks at me he's like why not I said well they think they know everything and they're pretty arrogant I said I'm an engineer we do know everything it bothers us right and uh yeah I thought it was a jokester then but uh and I said in all honesty I said I don't really know what you all do and he said well why don't you come have lunch with me I said sure and being in Columbia the one of the advantages of being at Columbia business school is you're you know a subway ride away from Wall Street so I go down and sit with with John and I'm expecting you know half hour 45 minutes this guy's not gonna give me any time and we just start talking and he's asking my experiences I'm telling all the stuff I was inventing and doing and all that sort of stuff and uh I guess he thought I was entertaining but um at the end of it he said let me introduce you some people and he picks up the phone and he calls you know Ray McGuire he picks up and he calls you know George Van handsome he picks up the phone he calls you know staying on them it's like hey this guy my office really interesting background you guys ought to interview him and talk to him about a career in investment banking and so you know as a scientist what what you do is you analyze data and try to come to some conclusion and then act upon it was was with some activity uh so now I'm entering my fall of my second year Business School and I'm trying to understand what this Investment Banking thing is all about sure I'm taking classes of finance and marketing and doing well obviously you know with Statistics and accounting but I didn't understand the industry and The Business of it and these brothers all brought me in and had conversations with me and introduced me throughout the organization I ended up having over a hundred interviews with people on Wall Street Goldman Sachs you know Morgan Stanley you know what's called a place called Bankers Trust this time JP Morgan and through that I said wow the business that I really like is mergers and acquisitions right okay because if you think about M A it's board level discussions it's CEO level discussions and it's how assets move across this planet right yeah so I said well that looks really interesting to me and this is another one of those life lessons this is something you don't learn in school it's an apprenticeship business someone has to decide that they're going to make you an apprentice in the m a business and teach and train you how to do this you can read all the books in the world but you actually have to practice it okay you actually have to develop a set of skills that have to be honed through a set of interactions that create fact patterns that you can rely on to make judgments going forward and so from that I said at the time they're only really maybe four principal M A shops Goldman being one that I thought actually did you can get better training there than anywhere else and Goldman at the time had really prided itself on this teamwork Dynamic and some of these other firms at the time if you worked for a partner at M A that's the partner you worked for for the next four five six years and if you were favored then you do great and if you were not it'd be tough sledding right and you look in those departments there are very few people who look like y'all and me and say well will I get that experience and while Goldman was not perfect like no place is you would work for multiple partners so you work on a deal with this partner and a deal on this partner at the same time so six seven deals you'd have six seven different partners or vice presidents that you worked for and so there you had a chance what I call build your fact pattern of experiences through the lens of different practitioners and I thought that would actually enhance my ability to be expert at that craft so that's why I went to Goldman Sachs so at an m a I want to talk about that because at that time I mean you have the background chemical engineering you've been creating you've been inventing what is that like now because at the time if I read it correctly you the other guy that's focusing solely on technology because you you can see it this is going to be the thing that changes the future so you're seeing Apple you see in Microsoft you've seen eBay and Yahoo all these things before they started what was that like trying to explain to the investment the banking side like hey guys this is my expertise you guys should trust me on this this is going to be the thing so that's interesting so when I started uh you know I I was in New York and I had every I've had I had baby food businesses I had paper companies all these sort of things and it's the dawning of introducing technology into the industrial environment okay so you guys you know back in the day unless we let's unpack this so that's actually pretty interesting back in when I was at Goodyear or Craft um very few companies then were actually you know in well if they wanted to but they didn't necessarily have the investment resources to implement Computing capacity into the environment so you guys you guys are digital natives yes okay my generation are digital immigrants and so at the time if you wanted to use the computer it was like a thousand dollars for a half hour of computer you should have to sign up for it and you could go use it and be somebody standing behind you waiting for your 30 minutes to go up and then they'd come on and you have to go sign up again to use the computer because it was that scarce of a resource and so one of my early projects for instance I was working uh and and running a plant uh in in in you know Niagara Falls New York and I was responsible for implementing some computer systems and computer control systems so the way systems work before that were analog and they were individuals so what would happen is you know you're going to run a process you're going to charge the Reactor with you know with the reagents with the Catalyst and you kind of you know put the Steam on and stir it and in the reaction would kind of take off right and depending upon the rates of change and all that you sometimes need to cool it or heat it up so there'd be what I call there would be an you know a an episodic observation of the event and then you'd have an episodic you know intervention so you change something and it would change the control dynamic and like I said if you weren't if the controller operator wasn't at lunch or you know talking about football or whatever it is every Dynamic was different because it wasn't consistent because you had that human engagement as the actual control system well if you put a computer system in it's measuring those observations thousands of times a second [Music] and you could also then put in systems of control where you could have interventions thousands of times a second so you went from control dynamics that look like this to control dynamics that look like this and for you mathematicians everything under the curve is waste right so now you look at that and like so in first implementation I did of that of the plant increase the productivity of that plant by 26 percent okay that's a whole shift a day by putting a control system so now you understand the power and the productivity that's software actually brings to a plan now take that and put it in an office managing an insurance claim okay you're an insurance adjuster you know my car is wrecked back in the day you'd have to go to a place and they kind of take pictures of it write it up put in an envelope send it to somebody in the home office and maybe you were on vacation to sit on that desk for a week maybe got to the right person and you said well you know you didn't do some rights you got to send it back to you and ask more questions and that happened back and forth and from that you'd adjust it and say okay here's here's how much the you know approximate value is you send me a check I get mad because it wasn't enough to fix the car and that was a whole process how things now introduce a computer in that environment where through the adjustment process in some respects you have an adjuster who's actually looking at it and filling it out but now you can actually take your phone and take a picture of it based on the you know the make of the car estimate exactly how many hours it's going to take what's the bill of materials what's the cost and so the efficiency from an insurance production went like this to now to that okay that hit every single industry that's what we're doing right now so software is now the most productive tool introduced in our business environment last 50 years unlikely will be for the next 50. so now I go to Goldman Sachs they're now in the process of con you know we're using different spreadsheet programs you guys remember because you've used Excel all your life haven't you you've been paying Microsoft 30 years for a project for a product that you use back in the day there were five or six others the one called Lotus there was multiplan there's physical asterisk a bunch of different and so there was always a fight as to which one of these programs you would use but once you Consolidated on one the efficiency of not having to move you know my project which I did in Lotus to yours which didn't Excel because we're working on a team together that's another efficiency that came out of the system by consolidating so I'm now at Goldman I'm now working on a bunch of different M A deals and started to see what I'll call the recognition of efficiency that can come from consolidation on platforms one which we would compare these put these things together called common stock comparisons where you get up in the morning and you'd have to put together 45 different stock comparisons for work that you're doing and you're sitting across the aisle working on or you know down the hall working on something similar and you're doing the exact same work he's doing you just don't know that you're doing it and you're both see all the inefficiency whereas now once you have done that how do I share it with you and how do you you know you can do this part and do that but it makes it much more efficient what computer systems do that so now we're getting more efficient in how we're processing deals and applications in all Industries and so now it's the dawning of what is technology being Mainstay staying real so the head of our department calls and he's like I think I want to start a tech group he's like would you like to be part of that I said yeah so where is it we're gonna do this in California he wanted to do it in LA I said no let's do it in San Francisco he lived in L.A and I'm like well San Francisco's kind of you know Silicon Valley all that sort of stuff I said that's where ought to go so we agreed I was our first m a banker on the ground focused on technology for Goldman Sachs in San Francisco okay and so from there I advise you know like I say build companies like Apple computer and Texas Instruments and Hewlett-Packard and eBay and Yahoo and what was amazing to me because again it's a dawning of an industry that's how they all did things differently in the world of a chemical engineer if you went into almost any production facility where they're you know an ortho cracker where they're taking oil and making different types of fuel and gas they're all pretty much the same because over years they figured out what's the most efficient way to do it but that's not how the software industry was everybody did it differently they go to market the product development okay because it was new and so the whole idea ultimately behind Vista is how do I take the best practices from software companies that I have experience with and deliver those to other software companies so the efficiency now comes out of that system and eliminate all that waste right that's what Vista is it's a system it's an engineered system so my going out to Silicon Valley like all things in life you got to look at what informs you and what creates the basis for the activities or the actions you now bring forward into your work product and that's what it is how do you bring engineering efficiency to the management and operations of software companies so that's the narrative and that's what my actions have been against from a Vista perspective so let's get into this conversation private Equity Vista is which the company that you started 20 years ago I believe and um it has obviously made you a billionaire and you know extremely successful person but can you talk about a lot of people don't even know what private Equity is sure they might have I think people are familiar with Venture Capital at this point because that's really trendy um but can you talk about what private Equity is and the difference between that and Venture Capital yeah that's a it's a great question because our community it's important our community understand the role of capital and growth and there's different providers of capital along different stages of a company okay um one of the best ways to think about it is if you all have an idea what you have we're going to create a platform to educate our people you're going to start off first with the idea of Labor YouTube right and we've got ideas we're going to write them down we're going to put a process together to now communicate those ideas great and so you start off in social media because it's free and I say well how do I now push this out more broadly speaking Beyond trying to get followers and you may say maybe I should buy some advertising where am I going to get this money okay the vast majority of investment Capital even today is still out of the debt markets so unfortunately 70 percent of our communities don't actually have a branch Bank so depending upon where you live there's no bank that you have a banking relationship with you can go and say hey I need ten thousand fifty thousand hundred thousand dollars because look at how you know and they don't understand your business I've got 840 000 followers and if I had twenty thousand dollars I could rent a studio okay five times a month and get a million followers or two million followers and by having two million followers I can go get advertisers who will pay me to have access to you know my my my my my people right and if they pay me I can now pay you back that money and then I can invest it more of my business and make it grow that's the capital cycle and it's a virtuous one but our community hasn't had access to Capital the next phase of that is like some of the banks are like well there's no hard assets because you're hard assets are your hard work so I'm not going to lend you any money I'm not sure you're credit Worthy so you can't come to me so enter the venture capitalist Adventure capitalists are designed to actually look at what it is you're doing in the markets that you participate in and if you have more capital and in some cases know-how and resources that they can hopefully bring to you because they've done this once or twice or a hundred times in that industry they can show you yeah take that ten thousand dollars okay don't buy advertising but what I want you to do is actually build a platform where you can do your own streaming it's more efficient long term and you make more money long term and so that's advice you might get from them and here's ten thousand dollars now they're not going to necessarily ask for an interest rate like the bank Pam you know four five six eight ten now twelve percent all right uh in in interest they're gonna ask you for a percentage of the company I'm saying when you sell the company you're not gonna own 100 you're gonna 100 minus how much they bought that's venture capital okay now years later you now running a big platform you got 20 million followers you've got advertisers making eight ten fifteen million dollars a month and advertising revenues and what you're not spending on your team and crew because you're going to give them all raises because they're phenomenal um uh but don't be too greedy no uh but now you're at the point where you're making you know 10 30 40 50 million dollars in revenues and now you're trying to manage your business how profitable and expenses and all that and that's where private Equity comes in private Equity typically are larger checks and we typically bring in my case we do buyouts we want to do control Investments where you are selling control of your business and you may say well why am I selling control of my business hey you know get the money but B what you really want as my know-how why do founders come to us because we've done it so many times in Enterprise software I can bring remember those best practices I was telling you here's how you run your product development organization more efficiently here's how you run your go to market system more efficiently here's how you do your contract Administration more efficiently because you've never done that before or you've done it but you don't necessarily know the best way to do it and we can share experiences with you that actually can enable you to do it now not all private Equity people bring that so I'm just bringing the capital and they say I just want to own the business because if I buy the business and it's growing well over time and they may put debt on the business they're going to increase the value of that business and then when they sell it they make the difference between where they sold it and what they bought it for minus the debt that was in the company so the way to think about now to think about buying a house if you go into the house worth 100 000 I know you guys talk about this show and a buyout person can come and say all right I'm gonna buy it for a hundred thousand exactly but then go to the bank and they borrow sixty thousand so they only have to put forty thousand in but because it's in a good neighborhood five years later it's now worth two hundred thousand three hundred thousand whatever it might be right or they or they fixed up the house they went in put a new porch and put 40 000 in to really improve the value of the house now I can sell it for 300 000. they sell it for 300 they pay back the 60 000 to the bank they've been paying interest along the way right and that difference they put in 40 the difference is what is profit and that's what private Equity firms do okay as an owner of product Equity Firm that difference in value if I borrowed the money or raised the money I've got to pay my investors back and then I get a percentage of the profits so that's how that works so it is a different form of capital so you just buy buying companies as opposed to where Venture Capital they're investing in companies but the owner still runs it you're actually taking control and ownership of the company yes but like 90 of the founders that we buy our companies from are still involved in the business with us or in our ecosystem okay and so you're taking control but you're also investing in the infrastructure and I expect these words you're accelerating the corporate maturity of that business so it might take you 10 years to figure out what we've done 45 times already right and now I bring that intellectual property into the company and say here's how we're going to design this a little differently here's how we're going to change your compensation plans for your sales people to actually incentivize them to give you more stable revenues or or you know more visibility into the future revenues and earnings of that business that you may not have figured out or may not figure out because you may not be in an environment a circle of people who have dealt with that before and so that's why the expertise that we bring is often more valuable than the capital yeah it feels like the the highest level of mentorship Slash internship where it's like you're you're giving it to me because you've already been through it right yeah and we create an ecosystem where our Founders are we intentionally bring them together our CEOs we have 26 events this year okay we've got 86 software companies today we've got 95 000 employees but we have an event in the last one on our cxo event I had 450 cxos so that's you know CEOs Chief Financial officers Chief marketing officers you know csos all that in one city for three days in that case going through seven or eight different tracks so if you're a CFO of a 40 million dollar software company you're sitting next to a CFO of a 400 million dollar software company sitting next to a CFO of a three billion dollar software company you all are dealing with different things on the one hand but you want to understand what you need to do to build your organization so you can support 400 million worth of growth and you want to understand what you need to do in your organization 400 million so you can support a three billion you're not going to get that anywhere else but at Vista you see what I mean yeah oh and by the way we do that for the product and Technology groups as well and we do it for separately and we'll do it for our talent organizations talent development and we'll do it for go to market you see what I mean all of those are elements that are value-add intellectual property best practices that we now share with the community of founders and Executives in all of our portfolio companies so it gets back into that efficacy that efficiency I've talked about in engineering now I could hope that you could figure this out and invest in your company and hope you figure it out and if you're doing a fire you but we don't take that approach we say let me give you tools and systems and let me actually equip your management team with tools and systems so they have a higher probability of being successful as opposed to let me just hope you get it right or you figure it out you see what I mean yeah that's the difference in how we approach the market and that's in some cases the difference between I'll call it highly skilled tuned investors either private Equity or venture capital and those who are just providing access to Capital One of the things you were talking to us about was knowing value and worth and as I'm listening to you talking about the stories of creating efficient systems for other companies at what point or was it always it that entrepreneurial mindset where like I'm doing this for them I need to start doing this for myself was that always in in the mindset or did that develop as you created more efficient systems and said wait I'm saving them this I'm saving them this maybe I can create this for myself yeah it's a great question because like oh things in my life it's Evolution you know my parents were School teachers I didn't have private Equity people in my life Bankers in my life lawyers in my life so you're learning along the way and you hope that you can glean and learn and understand uh insights that can be helpful to you going forward one of the key insights we talked about a little earlier uh that I had I got as an engineer okay so I was working for a company it was actually a company called Kraft General foods and um in that case I was responsible for changing and hopefully enhancing one of our best products was a company called Maxwell House which is coffee right and coffee blended coffee is made up of different forms of coffee we talked about you know radicals or buses there may be five or six different types of coffee roasted to a certain amount of ground to a certain amount that they'd give you a flavor profile that you want to be consistent everywhere you go in the world so no matter where you went it tastes the same okay uh this is back in the day when Maxwell's was the largest coffee distributor on the planet okay well one of my projects was to figure out a way to in essence enhance the flavor profile at a lower cost and I did that I'll spare you all the details I told you guys some of the details about your audience didn't know all that nerdy stuff but uh and in doing that I was able to save the company 14 cents a pound on every pound of coffee that we manufactured and we were manufacturing tens of millions of pounds a month of coffee okay and I told you guys that I chuckled because I got a great little plaque out of it to give me a thousand dollars in an award and that was wonderful and I started to understand that look I could have never done that if I weren't in that environment I could have never done that had I not been a chemical engineer from Cornell okay but I was graced with those both of those scenarios and I was able to create something of real value for the company at the time but then you start looking at the give get analysis they're saving you know 10 12 14 million dollars a year and you know I got paid the same 34 000 a year whatever it was at the time which I thought was more money than you could ever make because that was more money my dad ever made in his career okay as a principal right and so then you start thinking about is there a different utility of my time that I should be thinking about um and ultimately what I actually realized and you know we chat about this a little earlier through my interactions with with John Newton doll and Ray Maguire and these sort of folks the power of capital versus labor and we just talked about Labor and you always labor to create this platform at some point you realize if I had a different Quantum of capital you could reach more people on accident then you do flying around and doing events if you utilize that Capital efficiently you see what I mean and so that's kind of the next Evolution and we're smarter not harder yeah right okay and in some cases you learn it in some cases someone tells you right and some and and if you get it right you then can do it at increasing scale and efficiency and we call it the unit economics of your productivity go up with every time you do it as opposed to down right so those are the Dynamics that informed me on understanding capital and one of the things we talked about you know Capital markets are just basically equilibrium systems that's what we learn in chemical engineering is understanding equilibrium systems it's actually the same thing in some respects you've got different set of inputs and outputs but what is the equilibrium system that you're actually evaluating and understanding and in some cases changing the dynamic of the control in those equilibrium systems to make a more efficient outcome so they're not as far apart as you think if you look at it through the right lens well let me ask you this as far as I want to make sure I get this number correct well first your guys portfolio consists of 94 billion 94 billion in assets get a little more than that but yeah that's close enough who's counting yeah Oh Me Oh but this is a disturbing fact so yeah 1.4 of us-based assets under management managers uh are for diverse owned firms women and people of color combined right one so that is disturbing so yeah talk so that's 1.4 of the firms are women and just like everybody like Latinos blacks like you just don't everybody in the bucket yeah and we only have access to 1.4 percent of the assets we make it up a little more than 1.4 of the population of don't we and we actually make up a little higher than that in terms of our contributing to the pension plans did your parents are they part of a pension plan yeah my mom my mom was a teacher for 30 years so yeah okay which percentage of black teachers in her Union probably a lot a little more than 1.4 percent yeah for sure okay what about you know some of the Civil Service workers you know probably same thing what about federal government yeah probably same thing but yet we don't control a proportionate share of the assets that our parents put those 62 dollars a weekend or pensions and we our parents go out work so hard send us to school send us to college get educated to go manage this capital but yet they don't get the capital to manage that as you know flows back into our communities at much higher rates than almost anything else because as you do better you typically are enhancing your community at much higher rates than non-people color so those are the things we you and me have to pick make people aware and drive these pension plans to make sure they're Distributing their fair share to the constituency base that makes up those who are contributing Point number one and important number two to the highest performers which when you look at we have a group called the NAIC that's been doing this work for 20 years evaluating our firms perform at a higher rate a higher level with lower loss ratio so can you talk about that yeah sure so I mean we've been doing this we do these studies we have over the last 20 years especially in the private Equity business returned more Capital had fewer losses lower loss ratios than majority white firms but yet we get less than 1.4 percent of the allocation of capital we've got the studies and we go take these studies and we you know and as it goes and shows these Consultants are in there and they're kind of like yeah it's going to take some time well that's a problem okay those are the things that destabilize communities if they feel there is Injustice in the way people are treated and it's not a meritocracy that's a dynamic that has to change and there are certain leaders who are doing a good job of that you know somebody criticized honestly New York does a pretty good job of it New York state New York City just to call out we're sitting here now right and understanding that and you know comptrollers and treasurers you know the Napoli being one and and Lander being the newest one in New York City understand that and have been driving the programs in that regard and that's why some of the returns some of the highest in the U.S because they recognize that fact and there's some states that don't recognize and don't do anything about it and they've got some of the lowest returning plans you see what I mean it's economic necessity at the end of the day and it's fairness that's actually going to move our society forward yeah in in uh 2019 I want to talk about this uh yeah obviously you're philanthropic philanthropy efforts have been well documented uh Morehouse philanthropic philosophic I'm sorry yeah I know yeah it's early I was thinking philanthropy and philanthropic yeah so I appreciate you uh obviously combo work well well documented um to give back to the senior class of Warehouse uh and then I recently you know saw that the parents as well of some of the students uh their their tuitions well their student loan debt Parent Plus Loans yeah but one of the things I heard you speak about and I haven't I've never heard it was Broadband deserts yeah and how hbcus are disproportionately affected by having Broadband deserts not a topic that I've heard discuss you know nationally or even in you know amongst communities about how that affects students long term and how it affects communities in education can you talk about your efforts to try to combat that yeah it's a great question uh we've been talking about what is really the fourth Industrial Revolution that's occurring today every industry is being digitized every single one I mean you just look in our studio here and how much of this equipment is now digital versus what it was even eight years ago where was analog right the capacity to edit okay the capacity to deliver streaming real time you know phase time around the world your program that wasn't you know something you could do 10 years ago 12 years ago okay digitizing everything every industry this is again this whole fourth Industrial Revolution is changing the economic landscape of this planet but yet our hbcus 80 of them are in Broadband deserts how are you going to participate if you don't have access to the tool of progress the principal tool of progress today in the economy and that is a big problem and that's one that we decided to take on and I decided to take on and bring some Partners to take on to go get after this we have to enable all of our citizenry to participate in this next generation of opportunity the us today you own all those our borders are basically closed okay you know we've got immigration laws and political conflict that in essence we are not importing labor anymore and as we need to grow as Society we need people I tell people the biggest issue the most scarce asset we have on this planet today are software programmers there's eight billion people on the planet there's only 26 million of us who write software for a living and it is that software that is required to digitize every industry on the planet Automotive Health Care Finance banking all of it is now requiring tools and systems that are digital in nature but yet one of the greatest infrastructures for training people historically black college and universities eighty percent of them don't have Broadband access we're our kids can learn the tools of this craft in a way that they can participate effectively long term and if we don't get this right now eight years from now 10 years from now 20 years from now the market of change and opportunity and transformation will have been gone so far that we won't be able to participate in this next wave we didn't get to participate in the great Economic Opportunity that was America in owning land okay many of our families were unpaid labor okay which created massive wealth and then you had GI Bill Homestead Act Southern Homestead Act we didn't participate in that proportionately we didn't get a chance to participate in the asset accretion in real estate because of redlining and those Dynamics and so now here we are corporate America started to expand it has taken a while for us to get and we're still not even there fair share of opportunity to participate as professionals environment and now you're going through the fourth Industrial Revolution if we don't participate here it's going to be the same Dynamic that's why it's so essential that we equip our children and our communities with the tools and they need to insist that those tools be provided and insist that they learn and train and develop ways to participate in this economy in this digital economy what percentage of your viewership do you think is listening on some digital device or digital enablement 100. yeah yeah your business relies on it so why shouldn't your community participate in it and right now those you know those schools are being starved of those resources you can say conscious unconscious whatever it is but the fact is it is there that's what we have to do about it look I'm going to do my part and you guys got to continue to do your part and make sure that your viewership demands that our hbcus have access to broadband every one of them not just the big ones every one of them so that our kids could learn and participate and have the ability to now take what they know and deliver Business Systems Solutions into their Community to make their small medium businesses in their community and the education of the kids in our community more effective than what it is today I want to just follow up on that on the HBCU thing because you got a lot of headlines when you the more house when you paid off the student loans but when we were in LA and I heard you speak about that and I realized that it wasn't it's a little bit more complicated which actually led to something else another initiative so can you talk about that because people just saw he paid off everybody's too long but that's not actually the full story right yeah so the next thing so what I they're like all things it's not as easy as you think to pay off somebody's room I know everybody's like what are you talking about who would have thought because yeah who would have thought right because if you pay off somebody's loan either you're giving them a gift or they're receiving a gift now they got to pay taxes on it so there's a burden to them or increasing burden to you so you've got to actually architect a system to do that effectively so that doesn't create the burden in that process what I learned is over 60 percent of African-American wealth goes towards servicing student loans okay you come out you've got 60 80 120 000 worth of student loans now you're paying interest on those loans something happens in your family to lose your job whatever now that compounds and it can be decades before you've paid off those student loans that inhibit your ability to buy stocks bonds a house invest in a business you see what I mean and I was like well that's just unconscionable because mostly student loans are paying back to the United States government yeah African-Americans paying money back to the United States government payoff student loans how do you all feel about that that was crazy okay all right that's crazy yeah you all should think about that right talk about that right so then I thought well what's a better way to do it this is what's the better equilibrium system the better equilibrium system is to create a fund it's called the student Freedom initiative we raise money I put in a bunch of money and now these students borrow from the fund okay let's make sure it fits our condition our condition often is that we often aren't paid as much as corresponding white students so let's make sure that the interest rate is below Parent Plus Loans at a minimum at a minimum and every now you have life interruptions okay well if there's a life Interruption you know parent ailing we got to go back take care of that parent and we can actually stop those payments in a period of time parent plus uh you can pay whether you're working or not on the compounds and all that so you can stop it during that period of time and if you decide to go work in a community to be a teacher like you were right okay and you're making below a certain amount but you're doing good for the community you do that for 20 years and that's forgiven but rather than pay that money back to the government it pays back into the fund and then that fund can relent that capital and that's a virtuous cycle okay so that's the student Freedom initiative is okay and it's so that our students can borrow from this fund and they pay back into that fund they can be re-borrowed so now you're taking care of your own Community through your work in that regard that's what it is and the money goes back to the next generation of students right Bozo recycle great situation great I want to talk about an initiative and I think it's pretty amazing that the two percent solution yeah uh whereas uh and correct me if I'm wrong but Banks right the determinant on the profits that they make of their Investments they really allocate that back into their communities they should well right I'll let you talk about the initiative but that's the point is it's like you know the average American individual gives about two percent of Charity you know to charity every year um and African-Americans actually a little higher and people call it a little higher um and I said well if you just take that and apply that to corporations so beyond just the dollars it's the know-how okay so take two percent of your earnings two percent of your profits whatever it is and now use that to enable the Equitable opportunity you can listen to the words Equitable opportunity in the communities that support your business right uh if you are in a healthcare business for instance so why not take that and invest that in telemedicine Solutions but communities don't have access right if you're in the banking business invest that in digital banking in the communities that don't have Banks Mike community that I grew up in didn't have a branch Bank okay if you're in the supermarket business two percent of that's a go to providing access to high quality foods low cost in the convention my community I grew up in did not have a supermarket still doesn't think about that right we had to drive across town or go to local convenience store where the prices are three four five x you see what I mean so that's what the initiative is designed to do is to bring a Consciousness to how you can actually enable citizenry to have opportunities to participate in that case in our economy as full citizens that's what it's designed to do it feels pretty simple right makes sense to me well Mr Smith you've been a gentleman and a scholar thank you for joining us anything that you would like to leave the audience with any last words or anything that you would like I will leave you all with something make sure you continue to expand your voice and we talked about this earlier this morning the importance of you thinking about bringing scale to this platform and leave behind so that the youth that hear you or the parents that hear you can point their youth to your messages your tools and bring build systems for people to get more financially literate and enabled to be more effective in achieving their goals which most people want Financial Independence in some freedom in their lives uh and you all have a wonderful and great platform and I sincerely mean that and I congratulate you just continue to think about how you scale it effectively and efficiently so good luck on that and if I can ever be helpful you know just a text away sure well we tried to get you out of we had a big thing called invest fest last year and uh Tyler Perry and Steve Harvey were the Keynotes he's trying to get you but yeah you're out of I think you're out of the country right while you were on vacation no I remember yeah but uh let me know just maybe this year we can good I look forward to Keynote yeah seriously love both those guys I just wanted to thank you for your time and um I'm sure we'll run into well we're actually going to see you next next week we'll see you next week the last time you see us together yeah well thank you guys keep doing what you're doing I appreciate it this is uh definitely off the bucket list of people that we wanted to sit down with um I told this when I woke up this morning I'm like I can't believe this is actually happening today so thank you uh for blessing us with the knowledge and and all your service as well now my pleasure yes it's a it's a blessing to be here with you brother so keep doing what you're doing thank you there you have it guys that's a wrap all right guys did you record it laughs my graduates from my school being Forbes backdrop backdrop a mic drop backdrop [Music] [Applause]

Channel: Earn Your Leisure

Views: 1,298,783

Keywords: earn your leisure, business, finance, Robert smith, Private equity, Vista capital

Id: a82AOTXUrxg

Length: 67min 59sec (4079 seconds)

Published: Wed Dec 14 2022