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About The Guest
Ronald Diamond is an experienced entrepreneur and investor who established Diamond Wealth, an investment firm that caters to more than 100 Family Offices with a focus on private markets. The firm also has divisions that specialize in philanthropy, wealth transfer, investment banking, social impact, and governance.
Ronald is actively involved in the business, serving on the advisory board of several private companies and chairing TIGER 21 chapters in Chicago. He is also known for his appearances as a speaker at various Family Office and Alternative Investment Conferences and is the founder of the Family Office World podcast.
Prior to Diamond Wealth, Ronald founded Pinnacle Capital, a successful hedge fund, and worked as a Senior Managing Director at Bear Stearns. He began his career as an analyst at Drexel Burnham Lambert.
Ronald is deeply committed to giving back and is an active philanthropist and civic leader. He serves on the Leadership Circle of the Aspen Institute, a global nonprofit organization committed to realizing a free, just, and equitable society. He also sits on the Board of several other charities and non-profit organizations in his community.
Ronald studied at Northwestern University, graduating Magna Cum Laude and earning his degree in Economics. His experience, expertise, and dedication to philanthropy and civic leadership make him a valuable contributor to the investment community and society at large.
- 00:00 — Intro
- 01:35 — Ron Diamond’s origin story
- 02:52 — Starting a hedge fund
- 04:03 — Advice for someone thinking of starting a hedge fund
- 05:36 — Ron’s exit plans
- 07:09 — Ron’s future plans
- 09:17 — Current business and family office history
- 25:14 — Reasons behind the loss of generational wealth
- 28:55 — Factors that drive family offices in the right direction
- 31:26 — Common misconceptions about family offices
- 33:27 — Definition of philanthropy
- 37:33 — Strategies for transferring wealth to children
- 40:54 — Tips for people with low incomes
- 42:16 — Importance of listening in conversations for ultra-successful people
- 43:16 — Key considerations in assessing deals
- 46:36 — Difference between impatient and patient capital
- 50:34 — Ron Diamond’s biggest regret
- 53:45 — Ron Diamond’s advice for those who have had a liquidity event
- 54:47 — Ron’s message to the audience
- 56:09 — Where can people connect with Ron Diamond?
- 56:50 — What does success mean to Ron Diamond?
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The podcast is hosted by entrepreneur, business executive, author, educator & speaker, Scott D. Clary.
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Machine Generated Transcript
people, offices, started, private equity, family, money, deal, philanthropy, office, venture capital firms, invest, strategies, business, multifamily, fund, years, general, hedge fund, capital, liquidity event
Ronald Diamond, Scott D Clary
Scott D Clary 00:00
Welcome to success story. I’m your host Scott D. Clary. The success story podcast is part of the HubSpot Podcast Network, which has other amazing podcasts like business made simple hosted by Donald Miller. Business made simple takes the mystery out of growing your business, so make sure you tune in wherever you get your podcast. today. My guest is Ronald Diamond, longtime investor and entrepreneur. Ron diamond is the founder and chairman of diamond wealth. He represents over 100 Family Offices ranging in size from 250 million to $30 billion diamond wealth invest in private markets, including private equity, venture capital and real estate. And in addition, diamond wealth has divisions that focus on philanthropy, wealth transfer, investment, banking, social impact and governance. Earlier in his career, he founded Pinnacle capital, a $250 million hedge fund that outperform the s&p index 10 out of 10 years for ultimately selling his company to an international investment firm. Previously, diamond served as senior managing director at Bear Stearns and he began his career as an analyst at Drexel Burnham Lambert. He serves on the advisory board of 10 privately held companies and acts as chairman for four of them. He is also chair of two Tiger 21 chapters in Chicago and chairs a newly created family office group for Tiger 21. He is the past chairman of the advisory board for the disruptive technology and digital Cities program at Stanford University and taught classes in the entrepreneurship program at Stanford.
Ronald Diamond 01:34
I was 24 years old, I was sitting in a room with a group of extraordinarily successful people at Drexel Burnham, Drexel Burnham, at the time was the most profitable firm on Wall Street. Fred Joseph, the CEO came into the meeting. I was a trainee at the time, and he announced that Drexel Burnham was going bankrupt. So I’m literally in the room with the 10 kids from my training program, we’re all 24 years old. It it didn’t impact us much, because we don’t have stock options, and we lost a good job. But I’m literally watching people in their 60s and 70s. And many of them were openly weeping. And in on Wall Street, certainly in the 70s. In the 80s, and 90s. That typically didn’t happen. Many of the people lost most or all of their money at Drexel. It was a surreal moment. But my takeaway from that was, I would always be loyal to people, but not to accompany because if this can happen to Drexel, this could happen to anybody. So as a result of that I’ve my plan initially was to stay at Drexel for 50 years and hopefully run one of the divisions that fell apart two years later. So my, basically, I moved back to Chicago. My father was six, I did move back to Chicago, and I ended up starting a hedge fund. But that was not what the initial plan was,
Scott D Clary 02:53
and and walked me through starting a hedge fund because anybody is listening. That’s a very daunting task. So you just, yeah,
Ronald Diamond 03:01
it sounds more daunting than it really is. You basically, as long as you have a group of investors that have confidence in you to give us, you know, small dollar amount of money, you don’t have to open a hedge fund with a huge dollar amount. And we didn’t. I had several people that I’ve known most of my life, and I’ve done fairly well in school, and they had confidence in me to give me a small dollar amount of money to see how to do. And if I did well, they’d maybe give me more. That’s kind of how we got started. It ultimately grew. And we we had very good performance. But to get to get it to get started. We just I called an attorney we structured, we structured the documents, I found some investors, we had enough money to get started. And then we got started. I didn’t know what I was doing. I mean, literally, you just you just do it as is. In retrospect, I kind of laugh at kind of how that whole period of my life, but I didn’t know enough to know that you shouldn’t start a hedge fund right away, but I did and it worked out fine.
Scott D Clary 04:02
I feel like I feel like that’s a good entrepreneurial lesson. I think sometimes the people that are successful are the people that don’t know any better. And they just do it. How as as somebody who built a fund, curious about how you decided investment thesis how you decided, like, what strategy you would take like it was obviously learning as you go, but if anybody who’s listening to this, which is probably a more complex topic, a lot of the people that listen to this podcast are more entrepreneurs, but this is a business at the end of the day. If anybody ever wanted to emulate you, what are some tips advice for somebody else starting a fund?
Ronald Diamond 04:38
Well, don’t emulate me as a person. But as far as the fund is concerned. We were pretty good stock pickers. You know, our you know, we had some proprietary models. We never had huge returns, we never had 4050 60% returns like a lot of the hedge funds. And remember also when I had the hedge fund, this was very early in the hedge fund era. I mean Back then it was in the 90s, from 1990, to 2000. So people used to think you can make money in an up market or a down market. That’s the term hedge fund. That wasn’t the case, you’re either good at one or good at the other. And we were pretty good at picking stocks, we also had a lot of luck, because in the 90s, you had a bull market. And so it wasn’t that challenging. If I did my exact same strategy from 2005 through 2010, I would have gotten clobbered. So we were pretty good at what we did. But we there’s an element of luck and timing, which is critical. And I think that’s true with with any entrepreneur and certainly true with me.
Scott D Clary 05:37
And when you when you when you build this out, what’s the what’s the exit plan? So following your career a little bit longer. You build this out to what level? What assets under management, how long did you do this for? And then what did you do after,
Ronald Diamond 05:52
so we ran it. First, I didn’t have an exit. It’s not like a company where I had an exit plan or an exit strategy where I was going to hold it for five years and then sell it. We built it. I started in 1990. And I sold it in 2000. So I ran it for about 10 years, we ran about $250 million. And again, we never had huge returns. What we did have those consistency, and we beat the s&p 10 out of 10 years, our clients were happy because they’re up markers up seven were up eight and a half, they’re fine. In the 90s, they didn’t call them family offices, they call them rich people. And now they call them family offices. So that’s kind of how I got into the business of family offices. So I had all these rich people who are not called family offices. And we basically invested we pick stocks that we thought were would go up, we were pretty good at it. We had big tailwind behind us. And in 2000, I felt the market was overvalued, I sold the company to a market neutral fund, I brought 100% of the assets over stayed on for six months. And then I just took a year off, started doing some traveling, got into yoga and meditation. And then after about eight months, I couldn’t I just couldn’t do it anymore. I needed to get back to work.
Scott D Clary 07:08
And then okay, so then when obviously, that’s an interesting exit, you have a liquidity event. Now, what’s what’s next for you, when you want to build something from scratch? Again, you could have started another fund. Obviously, you’ve done that once before. But now you operate in a slightly different way. So explain your thought processes to after a liquidity event from selling a fund? Where do you position your time you could build a company you could build another fund? What do you do now?
Ronald Diamond 07:38
Well, it was my plan was to start a private equity firm. And while I was planning that I wanted to invest. So I like to invest in private markets, which is private equity, venture capital, real estate credit, things like that. And so basically what I did was I would just make small investments in those different asset classes. And I also like to do the direct deals rather than invest in the funds. So I would do that. And then my thought process was, I want it to be typically if there’s a very attractive deal, private equity venture capital real estate deal. Typically whoever owns that deal, they’re going to usually call their number one or their wealthiest clients first and then kind of go down the list. I didn’t have enough capital to be the first call, but cumulatively I did so basically what I did is I went to the family offices that were with with me before when they were just rich people now their family offices. And I said, I’ll put a small dollar amount and I might put one or $2 million into a direct deal. You could put 4050 $60 million cumulatively, we work with about 100 family offices. And these are families ranging anywhere between 250 million up to $30 billion. So they put the mat big chunk of the money in there. And as a result of that, I now have enough money to be the first call. So I call it first call alpha. We don’t charge anything. But I’m not doing it for selfless purposes, I do it selfishly, because without their money, I wouldn’t be the first call and get the great deals. And it also does benefit them because I am doing some diligence. And there’s some value at that I’m doing acting as the funnel. So that’s kind of what we do right now.
Scott D Clary 09:17
And actually, now that I now think about this structure, can you actually help me understand, like, why you didn’t just start that private equity firm? Because then all these rich people family offices, they could have been LPs.
Ronald Diamond 09:30
True. Um, I can’t give you a real reason for it. It just I started investing. And then my thought process was as I started investing in before starting the private equity firm, I realized that what I’ve done by doing what I call first call alpha, I love doing it. So I was pretty good at it and I love doing it. So if you’re pretty good at something and you love doing it. That’s really what you should do. So that’s kind of how it happened. So it wasn’t like a grand scheme that I had a great idea. It just it was serendipitous.
Scott D Clary 10:03
And okay, so then what does what does the business look like now? So just describe like, who you work with? What what the actual is because it’s now it’s matured a little bit,
Ronald Diamond 10:10
right? So I’m hesitant to call it a business. So basically what we do, we invest, I invest my own capital, which is a finite amount of capital. And we work with about 100 family offices, these are families anywhere between 250 million to $30 billion. And we look for the private Mark private deals, private private equity, venture capital real estate credit, I kind of act as a funnel. So if I see a private equity deal, I know 17 families that love that type of private equity, if it’s a cannabis deal, there might be six people, if it’s a multifamily real estate deal, there might be 70 people. So I kind of know who likes what, when I see a deal, I will look at it diligence, that investment myself, and then I’ll go to my network. And if they want to invest in it terrific. If they don’t, that’s fine. But I know what everybody likes. So I’m not going to go, if somebody doesn’t invest in early stage venture, I’m not going to show them an early stage venture deal. If somebody doesn’t invest in multifamily Realty, I’m not going to show them that. So I kind of know who likes what, and I show them the deal. And as a result of that, we’ll structure an SPV, which is a special purpose vehicle and come in and just invest and we typically can get better economics because if you come in investing $50 million, you can more become part of the general partner, and you can dictate terms a lot better than I could if I can only put in one or $2 million. So that’s really why we’re doing it, why I’m doing it.
Scott D Clary 11:39
And so now you’ve worked with all these rich people turn to family offices. And I know that’s like the majority of the focus of your work. So walk me through, I guess even the history of the family office, because I think people understand venture capital, they’re everywhere and people understand even what like private equity means they’ve heard the term hedge fund before family offices, like it’s everywhere, but nobody quite understands what it means,
Ronald Diamond 12:02
including people in the industry. So in the US, it probably started at Rockefeller, maybe 1875. and Europe, it started way before then you could go back to Akbar the Great, I mean, so I mean, go back hundreds and hundreds of years. But basically, when you hear the word family office, most of the family office 68% of family offices that are in existence today started since 2000. And half of those started since the crash of 2008. So let’s kind of bucket this is the family offices, really, as people know it today, most of which started after 2000. So this is a relatively new phenomenon. The interesting thing about the industry. And the fascinating thing about the industry is, I believe that as private equity and venture capital disrupted the public markets in the early 90s, because it was a superior model. If you have a company and you’ve got to report to a guy like me or other analysts, every 90 days, it’s hard to run a company long term. So the reason private equity and venture capital exploded was because it was a better model. And it was better model because 2% I’m only paying for the overhead and 20% I only make money if you make money. So that model made more sense in general than the public markets, where you had to report every 90 days, the market exploded. What happened is, and again, I’m generalizing because I put money, I do have money in private equity funds and venture capital funds. But in general, they bastardize the business and it became an AUM game. And what should be a $500 million fund became a $5 billion fund. And I’ll give you like a specific example, which I think is a microcosm of what’s happened to the industry, and why family offices are starting to disrupt private equity and venture capital. A friend of mine rolled up a logistics didn’t roll up the logistics companies. And he went to a placement agent in New York, and he needed about 150 million Placemaker based on his track record was actually able to get them close to 500 million. My friend said, terrific, I just need 150 And let’s get started. The placement agent literally came to his house in New York and wrote down on paper 2% of 500 million equals x 2% of 150 million equals y what am I missing? And my friend was a bit incredulous, he goes, here’s what you’re missing. I won’t have another fund. If I do what you want me to do, because I can’t deploy 500 million, I can deploy 150 million parts very efficiently. But the other $350 million. I can’t deploy that. Well. Now I’m smart enough to know that 2% to $500 million dollars. I’ll make more money today, but it’s not going to help the performance of the fund. So again, I’m generalizing. But this is a microcosm so these private equity firms and venture capital firms have become Massive and it’s become an AUM game. And it’s become an inherent conflict of interest. In many instances, family offices, the biggest advantage they have is something called patient capital. patient capital is they don’t have to sell. So if you look at it from a macro standpoint, the private equity and the venture capital firms, which I believe in general are a better model than the public’s public companies, they’re compensated to turn companies over every three to five years, irrespective of how companies were the company that that’s how they’re compensated. That’s not necessarily the best way to create long term wealth. So if you look at what happens in a lot of the market, it’s typically private equity, firm A sells to private equity firm B, and they do well and sell to private equity firm C, until somebody doesn’t do well, right. So there’s so much money out there family offices. So if you look at a company that has been spotted sold three times over a 20 year period, and then you look at a family office who bought it once held it for those 20 years, didn’t have to pay the taxes, didn’t have to pay the transaction costs didn’t have to figure out ways to redeploy the money, it’s a much better deal, right? So patient capital is the by far the biggest advantage that family offices have over private equity and venture capital. Now, having said that, they’re not going to replace private equity and venture capital, because private equity and venture capital are huge industries, and they’re going to continue to grow. All I am saying is they’re going to start to disrupt them, because there is a better alignment of interests. So let’s say you’re an entrepreneur, and you’ve got a great idea to for a widget company. What used to happen if you go to Sequoia or NEA or these big venture capital firms, and you’re like, terrific, I’m funded by this huge venture capital firm, and you’re set. Here’s the problem. If you’re that entrepreneur, you’re one of 20 portfolio companies, right within the within the fund. Let’s assume it takes three years or so to make traction, and then you think your company is about to hockey, stick up your 1/20 of the font, they might decide, even though they might believe you’re about to hockey stick up that they want, they want to bring in somebody else, so they could sell you even though it might not be in your best interest. So you don’t really control that, right? The venture capital firm does. And remember, they’re trying to turn money over every three to five years. It’s a better model for the entrepreneurs to partner with a family office. The problem is that the family office market in general, the world that I’m in, is very fragmented, very inefficient, and very siloed. In general, that’s starting to change and you’re starting to see family offices become more institutionalized. So the statistics are 25% of family office would make it to the second generation 10% make it to the third and 5% make it to the fourth. So the model doesn’t work. And why is that? Well, part of the reason a large part of the reason is because if you look at who has these family offices, it’s the guy who sold Beanie Babies to the guy who started five hour energy, your guest jeans or Georgia perfume or a chain of gas stations, they have a liquidity event for billion dollars. It’s a totally different skill set to sell Beanie Babies or guest jeans, which I couldn’t do than to take a billion grow it to to not spoil the kids do some estate planning wealth transfer and grow the asset base. So you’ve got huge amounts of capital in, in general, very inefficient hands. The market today in family officers $10 trillion in capital in family offices. There’s currently four and a half trillion dollars in capital in the hedge fund space worldwide combined. That’s wild. In the next 15 years. You’ve got $65 trillion is going to transfer from the Baby Boomers to the next gen. This will be the largest transfer of wealth in history. As a result of that family offices in the next 10 years will be larger than private equity and venture capital combined. So the market is massive. The problem is that it’s a new industry. It’s inefficient. It’s fragmented. siloed. So what’s starting to happen and I think we’re in the third inning, maybe the top of the fourth. But we’re still early in this that family offices are starting to become more sophisticated. So you look at what the Pritzker is did support Carbone has a friend who runs the Pritzker Family office. They’ve institutionalized it you look at what Michael Dell family office,
Scott D Clary 19:40
Bloomberg when how does that what does it mean when you say to institutionalize what is what
Ronald Diamond 19:44
well, in other words, basically, you’ve got a family office now that has a huge pool of money, but they they run it more like an institution so that the when you hear the term family office, everyone thinks of something different. A lot of people might think of Michael Dell or Michael Bloomberg To the billionaires of Ross Perot, who made a lot of money. Most family offices today are not like that most of them are much smaller, and most of them are not really run efficiently. And they, because the founder made a tremendous amount of money, he or she made a lot of money in whatever business they were in. It doesn’t necessarily translate to, I can now take, invest in do do that well. So you’ve got a lot of people right now with a tremendous amount of money that are, at least in my opinion in over their heads in order for it to make economic sense to start a family office. And again, I’m not right, this is just my opinion. You need a bare bones minimum of 250 million in order for it to make economic sense. If you’re going to invest in the private markets, private equity, venture capital, credit, real estate, some people would argue 500 million. There’s a ton of family offices that are a lot less those family offices, those families that are much less than that. They’re much better off going to what’s called the multifamily office. So I want to touch on what a multifamily offices and how that’s grown. You started 50 6070 years ago, you had the wire houses. Now the problem with a wire houses in general, is they’re technically not even fiduciaries. Which is mind boggling if you think about it. As a result of that, over the last 10 to 15 years, something called IRAs, which are registered investment advisors came to fruition. They’re fiduciaries, which means they have to do what’s in the client’s best interest, right. So the growth in IRAs has exploded over the past 10 to 15 years. On top of that, you have the multifamily offices. All that is it’s an IRA that looks at things holistically. So they’re not just trying to create alpha, they’re also looking at estate planning, wealth transfer philanthropy, next gen succession, that’s all it is. So you’ve got the wirehouses is model one. The next iteration was a malt is the RAS which was a better model, because they’re fiduciaries. And then on top of that, which is the best model is the multifamily offices. There’s a lot of family of people who are running single family offices, that in my opinion, would be better off in multifamily offices without the proper amount of capital and without the amount of talent to to do that, you’re better off to the multifamily office. Now, having said that, let’s assume you’re the Pritzker to the crown to the Dallas or the Bloomberg to the world. Yeah, you can institutionalize it, so they pay these people, and you have to remember, you have to pay for talent. So one of the problems with family offices, and again, I’m generalizing. But if a family office pays somebody $500,000. In general, many of them look at that as a cost. In other words, that cost me $500,000. If a private equity or venture capital Paulo or Carlyle comes in and pays somebody $500,000, they look at that person as a potential 10 $20 million profit center. So it’s nuanced. It’s not a cost, it’s a profit center. But until the family officers get to the point where they start looking at it as potential profit center, and not as a cost, like some of the family offices are, they’re not going to be able to get there that’s slowly starting to change. So what’s fascinating about the industry right now is as private equity and venture capital, as I said, disrupted the public markets in the early 80s, and 90s, you’re starting to see family offices compete and disrupt private equity and venture capital based on the fact that they’ve got patient capital, and they’ve got money that can just compound and that’s what they’re looking to do.
Scott D Clary 23:47
And this is how the family office environment is now evolving. And this is what you’re actively seeing now. So we’re living through this renaissance of
Ronald Diamond 23:54
this is happening in real time. And again, I will tell you that a lot of the family offices postcrash pre COVID. The thing with family offices is they wanted to do direct investments, and they wanted to direct investments because they didn’t want to pay to 20. They don’t want to pay the fees. The problem, the good thing and the bad news. The problem is everything from postcrash, pre COVID. Everything went on. So if you’re investing in private equity, venture capital, real estate, Bitcoin, the stock market, you probably made money. So these people who did these investments, and then they didn’t pay fees, it’s not that hard. As we had into recession, and I think we are starting to head into recession, people will realize there’s a skill set to what these private equity and venture capital real estate guys do. And I think a lot of people are in over their skis. So I think how this is going to play out a lot of these people who did the direct deals previously, are going to come back tomorrow the experts won’t mind paying the fees because they realize that they’re worth it. And the family offices that have built out institutions like the Pritzker is like the dolls like the crown family, they can compete directly but you’re gonna see a backlash and more of Family Offices, at least in my opinion, are going to use consultants to use outside people rather than doing everything internally unless they’ve got the right infrastructure. So it’s, this is all happening in real time right now?
Scott D Clary 25:14
Well, you know, I’m curious about going through a liquidity event that large. And I know that, you know, you chair, I think one of the offices for Tiger 21. And I’ve spoken to Tim from Tiger 21. And I understand that that’s not that’s not an advisory for like a private equity firm. But it offers guidance as to what to do holistically, I was very, very similar to what you’re saying all the multifamily Office services provided, it’s a holistic view of what to do after a major liquidity event, right. And I think that, I mean, you you see this firsthand, people going from operator to capital allocator, at like, on mass, like with huge amounts of capital, have no idea really what they’re doing. And also maybe just, you know, speak through some of the things that they have to think about outside of just capital allocation, that are the realities for them. I mean, like, you’ve just mentioned these numbers, these very devastating numbers about how quickly generational wealth is lost. So why does that happen?
Ronald Diamond 26:20
In my opinion, a lot of it has to do with ego. It has to do with the ego of the founder of the person who had a liquidity event. You have a liquidity event, you can do anything you want with your money, and I make no judgments, you do whatever you want. But I think a lot of times people think that because they’re good at one thing, that means they’re going to be good at everything. And it’s a different skill set to sell Beanie Babies than to take a billion and grow into two. So I think the problem with many people is because they’ve had such success with with so much money at such a young age. And remember, this is not generational. Back when the Rockefeller started, it took 1020 30 years to create generational wealth. You can create an app today in a year and create huge amounts of generational wealth. So it’s happening so quickly. And that’s why this the speed is happening so quickly. So family offices right now. You could talk to 10 experts, and what’s the family office? How much money do you need for family office? Why’d you create a family office? You’re gonna get totally different answers. I gave a keynote at Stanford, five years ago, I had $5 billion families. And I asked each one of them, what is the family office? And why did you create it? And there were five completely different answers. And nobody was right, and nobody was wrong. It’s just that’s where we are in the industry. So I think that the fascinating thing for me is that in 1986, when I was a senior in college, my dad, who was a brilliant banker, wanted me to meet this guy who was also a banker. And he said, there’s an industry called private equity. And I’d like you to, you should look at it because I think it’s going to be big. Well, when you’re 20 years old, you’re smarter than your dad. And so I said, Dad, I already got a job at Drexel Burnham. I’m not going to listen to who you want me to talk to. And I went to Drexel, Well, fast forward two years, Drexel goes bankrupt, and the person you wanted introduced me to was John Kenneth, who started Madison Dearborn, which became one of the largest private equity firms in the industry was called private equity. So that to me, when I look at that point, and obviously, in retrospect, I would have done things differently. But I do think that we’re at that inflection point right now. We’re just like private equity and venture capital firms disrupted the public markets. I do see family offices starting to do it. So I do think we’re at a tipping point right now. And I think family offices can make a huge amount of difference, not just in creating alpha, but equally, if not more important, in a lot of the philanthropic endeavors that can engage in
Scott D Clary 28:54
and, and obviously, to engage in philanthropic endeavors to have to be successful and maintain that success. But I’m curious about this seems like there’s this this problem with the family office, industry, for lack of a better term, it’s that they’re so fragmented. You mentioned this before. So how do you actively fix that? Because there’s no, there’s no group or organization that supports, you know, the collective body of family offices. So what drives them in the right direction?
Ronald Diamond 29:21
Well, and the other issue is, you know, a lot of this is a lot of family office, first of all, every bank, every law firm, every accounting firm, they’re trying to get into the family office world, where all the money is that’s it makes sense. And you’ve got all these family office conferences. The problem with a lot of the conferences where these family offices are supposed to learn to invest, is many of them have become a pay to play game. So if you’re speaking, it’s not that you’re necessarily an expert in real estate, it’s that you spent $25,000 to be able to speak and you’re really just selling your fun. It’s inherent conflict of interest in my opinion. So I think that you you have to learn Look at from the standpoint of what is in the best interest of family offices, and where are you getting your deal flow from? And what is what are people’s agendas. So everybody has an agenda, and that’s fine. But I just think that family offices in general, the first second third thing they want to know before they’re gonna work with anybody is can I trust this person? And then the fourth thing is, what’s your 135 year track record? What’s your biggest drawdown that’s flipped when you look at it from an institution. So trust is the main component of why family offices will work with somebody.
Scott D Clary 30:34
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Ronald Diamond 31:34
so many misconceptions, or how much money you need to have a family office? What’s the point of a family office, I mean, a lot of these people, and again, I make no judgment you if you make money, you could do whatever you want with it. But many people will be better off just finding the philanthropy that they like and outsourcing a lot of what they’re doing. It’s a full time job, if you’re going to do it, right. It’s a business in many of the family offices don’t look at don’t take it as seriously as they did their business. If they did, then they would realize it’s a full time job. And if they did that, I think it’d become more efficient. I think that’s starting to happen. But the beauty to me of where we are in the world, from an economic standpoint, is this is changing real time right now. So the family offices, they’re not there today. The smart people want to find the rich people and the rich people want to find the smart people. But the smart people don’t know how to find the rich people and the rich people hide behind the veil and want to be secret. So how are they going to find the smart people, this is starting to change. And I think it’s going to happen over the next three to five years. It’s not going to like click and all of a sudden it’s going to happen. But I think it’s going to gradually change and people will start realizing the value of working with the family office, a lot of people who are in real estate, a lot of people who are in private, you know who have deals, independent sponsors, they would prefer to work with a family office rather than a private equity or venture capital firm. The problem is, how do you find them? So one of the things that I’m trying to help with in the industry and it’s a, it’s a massive task is how do you connect the rich people in the smart people? Because once they’re connected, and they know what everybody wants? And everybody says this was kind of what I’m looking for, it will be a much smoother market, it’ll be much more efficient market.
Scott D Clary 33:27
I was okay, so we’ve we’ve spoken through significant significant amount of info on family offices. I’m curious if you want to take this in a couple of different directions. Because there’s other things that you that you do for these families. I mean, you literally invest in them. So I’m curious if you want to go into how you source and look at deals and what your thesis is for what is good and what is bad. And what you put in front of families, we can do that. Or I was, you know, we can also go into wealth transfer. I think that’s super interesting, because you hear all the time about why are the rich not paying enough tax? And what’s going on with that? Well, I mean, there’s strategies as well to help you avoid tax that maybe the average person doesn’t know that much about. So whatever you feel like you want to go into, which is most relevant, but they’re both really interesting topics. So no, they are
Ronald Diamond 34:11
and also philanthropy which is which is huge. And it’s been a big,
Scott D Clary 34:14
I don’t know what questions to ask about philanthropy outside of. I’m assuming it’s, it’s a focus. I mean, I’m not at that level of wealth yet. We’re after worry about philanthropy, so
Ronald Diamond 34:23
well look. So kind of my North Star is so my dad passed away from prostate cancer. My first boss was Michael Milken, Michael Milken developed prostate cancer. What Michael Milken did is rather than throw $100 million, it’s the American Cancer Society. He built it like a venture capital fund, right? So he put 250,000 into this crazy idea. 500 here, 2 million here. But because of him, you and I and all the male listeners will die with but not all prostate cancer. You look at what Bill Gates did for vaccines, I would argue he did more than the US government. My point being that you can’t run a slant with your family, or a charity exactly like a business. But you could run it more business like, so kind of my North Star, that you take these really innovative entrepreneurs who’ve done extremely well. And you apply that more towards philanthropy. And I think that’s going to solve some of the big world problems. So I just did a podcast with David Rubenstein the other day, he owns the Magna Carta, he owns I mean, he helped rebuild the Jefferson Memorial he’s done or the Lincoln Memorial. He’s done so much for philanthropy right now. And so I think there’s a lot of good that can happen out of that. So you’re gonna see that?
Scott D Clary 35:45
No, I was gonna say, so it’s interesting. So you think that some of the future of philanthropy and it’s not this is not to generalize it? This has to be all of philanthropy, but it’s, again, it’s more doing direct investment into causes that you can actually see, I think something or,
Ronald Diamond 36:01
yeah, I think that if you look at Milken, or you look at gates, or you look at what Bloomberg has done, you, you can take the business mind, and again, apply it more toward to solve some of these real world problems. I don’t think it’s going to come from the government. And I don’t think it’s going to come from the corporate sector, I think it’s going to come from these entrepreneurs who can make a difference. So I think, for me, philanthropy is the most important aspect of family offices, because at the end of the day, you can only you know, the pharaohs tried to bear like bury themselves with money. And that didn’t really turn out to be a great idea. What else, you can’t take it with you. So giving it away and doing it in a way that are important to you is something that’s really, really relevant. So we do a lot of work with family offices, figuring out ways to end prostate cancer is near and dear to my heart because my father passed away from
Scott D Clary 36:54
- No, I think that the smart, a smart way to look at philanthropy because I think, like the way that I default to looking at it is the way that I think most people do that just how do we put money into an organization or government or something that’s already set up? And that’s not the only way to truly do
Ronald Diamond 37:10
it? Also, what’s the first if somebody has a flat screen? The first question people ask is, what’s the overhead? It’s not a good question. You don’t want to Apple or Microsoft and say, What’s your overhead? It’s irrelevant what your overhead is, it’s what’s you know, you could have a lemonade stand that overhead 1%, but you’re gonna only create $5. So I just think you have to start asking the right questions. And looking at it from a big picture standpoint,
Scott D Clary 37:34
can we teach over some of the wealth transfer strategies that some of these individuals use, I think that’d be very valuable. So if somebody doesn’t, you know, doesn’t have the advisory of a billion dollar family office, but I’m sure some of the strategies can still be leveraged. So when you have money, and you’re trying to pass it on to your children, your kids, what are the strategies that you can look into and use?
Ronald Diamond 37:57
Well, when I ran ahead, my hedge fund, I remember, I think I was like 31 years old. And I was, you know, it was a billionaire’s office. And he had his estate planning attorney in the meeting. And he had no idea what it was the estate planning attorney had no idea what I was talking about, from the from the business from the, from the financial standpoint. And when the meeting ended, I asked the my prospective client who ultimately became a client, I’m like, why was he? Why was he there? I did it respectfully. And he kind of put his hand on my arm, and he’s like, you’ll, you’ll understand one day he goes, the goal is not to become a billionaire, the goal is to be worth zero, but control as much as you can. In all these trusts and estate planning attorneys. They’re just getting stuff outside of people’s estates. And that was sort of like an aha moment for me when I realized it. So what these trusts and estate planning attorneys do. And a lot of the wealthy people, the the family offices, are closer with their trust and estate planning attorneys, and they are the financial advisors. Because the goal, again, is not to be a billionaire to be worth as little as possible, but control as much as you can. That’s Trent wealth transfer. It’s very tricky issue because you don’t want to give the kids too much money, right? So that’s a problem unto itself. But you want to bulletproof yourself for litigation, you want to make sure that you have the ability to get things out of your estate, but you still can control it. And that’s all these trusts. That’s all these trusted real estate planning is do.
Scott D Clary 39:26
And that’s really it. So if you if you start a trust, and you start to transfer your assets into that, then you can become like a managing director of that trust, and that does mitigate some tax responsibility, correct?
Ronald Diamond 39:37
Yeah, a lot. If you look at anybody, any family office, or anybody who’s worth, you know, a lot of money, they’ve got a real estate planning attorney in place, and they’ve got trust set up and they’ve got stuff outside of their name. They it might be in their children’s name and might be dead, but they they structure it where they’re bulletproof from a litigation standpoint, and they maximize the benefits they get They can use within the law of what you can do to transit wars.
Scott D Clary 40:03
Yeah, no, I think that that’s the one thing that’s very frustrating is that the average person like they pay such a significant amount of tax and everything they do. And it’s it’s usually because they don’t have access to strategies that can mitigate tax, then that’s really good, like very legal strategies.
Ronald Diamond 40:21
It the look, the tax codes absurdly unfair. I mean, it is what it is. If you look at the people who’ve made those private equity, hedge funds, I mean, you’re paying, you know, your carried interest. I mean, a lot of that is tax is your you’re benefiting from the tax system, real estate, you know, 1031 exchanges, you’re benefiting from that. So a lot of the people who’ve made their money has to do whether it’s real estate, private equity, hedge funds, it is utilizing this tax code, and being able to benefit from that.
Scott D Clary 40:56
Yeah, no, it’s just smart to think that outside the box and just speak to people, because these strategies are not mutually exclusive to wealthy individuals. That’s the thing like they can be used by anyone. And then I guess the other question, is there any other any other I guess, before we pivot into, like deals that you look at? Is there any other strategies or tips that you pick up from dealing with these ultra high net worth wealthy individuals that would be just good that could be utilized by somebody who’s obviously in a, an income bracket?
Ronald Diamond 41:26
Yeah, I mean, I pick up things every day from them. And I think the most important thing I think I do is I try to I’m good at it. I’m not great, I’m getting better. listening is a skill set that people in general aren’t really good at. Just listen to people and the people who’ve done quite well. Rather than talk so much, just listen to how they did it, what they did, what their strategy was, I think listening to people who’ve been successful for for anybody, what techniques they’ve used, what strategies you use, what their what their MO is, I think the ability to listen as a skill set that most people are not really good at. And they’re looking to think about the response to an answer before they actually fully listen to the full question.
Scott D Clary 42:16
Do you notice that that’s something that is particularly like a particular skill set that people that are ultra successful, they have that in spades, like the ability to actively listen to, to sort of take a second seat in the conversation to make sure they get 100% of that information?
Ronald Diamond 42:33
Well, a, you’re very good at that. Be. My dad told me that he was a banker. And he said, you could always tell the lawyers and the entrepreneurs, because you’d go to a meeting with 1012 people, and the lawyers would come in. And in general, they would try to show the people that they’re the smartest guys in the room. However, that is the entrepreneur their agenda, they want to find the smartest guy in the room. All I try to do, all I’ve done is just surrounding myself with people that are smarter than me in various areas that I trust, implicitly, and delegate. And if you do that, I think it’s very hard not to succeed.
Scott D Clary 43:16
Agree, that’s very smart. Okay. And then last thing that I want to go into just very briefly, you get access to some of these incredible deals. But then you put these deals in front of your network, who trust you implicitly, to basically make sure that these are good deals. So when you look at some of these deals, what are you looking for, because that’s a lot of responsibility to
Ronald Diamond 43:40
write. But again, they also get the deals too, right, of course. So they’ve got another level of diligence. And a lot of the deals we get might come from the family offices that we work with, where they see a deal, it’s just too small for them, right? So a $20 million deal might be too small for them. They love the deal. They vetted it, it’s a terrific deal, risk reward. But it doesn’t make sense, like an individual investing $50, it doesn’t make sense to do the diligence. So a lot of the deals we get are from the large family offices who see really attractive deals, it’s just too small for them. It’s not too small for me,
Scott D Clary 44:14
but still I mean, so that aside, there must be some things that you do look for and deals like some strategies.
Ronald Diamond 44:20
We do. A lot of it is related. I would say most of the families that I work with, it just it’s all our relationship business and with with the right relationships, I think that you’ll see people will know who you are and what what kind of deals you’re looking for. I think that makes a big difference. And I think that people also want to work with people that they like, and they want to work with people that they trust. And you know, there’s there was a person you know, I’m a big believer and just given At the end of the day, I can’t tell you how or why but the more you give, the more you get. It just it just happens. I can’t tell you why rationally. But I know it’s true. There was a guy in New York, and I’m always introducing people to be other people. And I would say, 10 to 15 times a day, I will send an email, I’d like to provide a mutually beneficial introduction. I don’t have an agenda, there’s, I don’t know, there’s no benefit to me. I just think that this person should know this person because they can each benefit themselves. That’s how you have to look at it. Well, when I was in New York, I was in a family office conference, and there was a guy who was trying to raise money for early stage venture fund. And we’re talking in a cocktail party and like, oh, you should talk to this person. One thing led to another. And after he talked to the guy from the venture capital, he’s like, why did you introduce me to that person? Like, what do you mean? He’s like, he doesn’t invest in like, I’m not, my goal at this party is not just to find people for you to invest it right. I just thought he was a nice person, and you’re a good person, it’d be good to meet. Now fast forward, I’ve never given that person a recommendation. So I think the prop, the issue is, we live in a society right now where we want to get, and we want to get instantly. And I think as you get a little and I was much more myopic when I was younger, I think what you realize is, the more you give, the more you do get. And I think that’s a really important lesson that I’ve learned a lot from a lot of the family offices I listened to, just because I listened to them.
Scott D Clary 46:39
I’m curious, when you when you deal with people that are just starting out? Do you see that one of the biggest detriments is their lack of patience, because that’s what it seems like that one particular individual, just like the lack of actually, patience has been a theme through this whole conversation, to be honest, it’s like, what disrupts impatient capital? It’s patient capital, what? What did you do? Well, during your career, well, you were patient with the relationships you built, and you gave and you gave, and you gave, and you expected nothing in return. And then eventually,
Ronald Diamond 47:07
well, again, I was much, I was much more myopic when I was younger. So I didn’t look at the world through the same lens. As you get older, hopefully, you evolve and mature and look at the world through a little bit of a different lens. But I just think that you have to be able to look at things from a perspective of, you know, what’s going to benefit somebody else. And then if you do that, again, ultimately, it’s not. It’s the antithesis of a quid pro quo. It’s basically figuring out if I knew somebody who would be great on your podcast, I would go out of my way to introduce you, because I think you do a great podcast. And I think they’d be a good guest period. I don’t, there’s I don’t even need to be involved in any capacity. But it’s a mutually beneficial introduction. And I think that more and more people need to do that. I think this generation right now. Well, the, there’s a lot of problems. The phone is going to be the smoking of this generation. Number one, two, I think the work ethic in general, is not near where it is from my generation. And three, they want to do things quick, and anything good. It just takes a while. It takes time. It takes patience. And when you’re 22 years old, it’s easy to say it’s hard to do. And you know, so if I had to do it when I was talking to David Rubenstein last on a podcast I did with him two weeks ago. And like if you had to do over what would you do differently? And he became a he went to law, he became a lawyer first he’s like, I wouldn’t have done that. I would I did this, I wouldn’t have done that. We all have do overs, we would all do things differently, I think. But I think one of the major things that that I get out when I listen to people, is I hate going to conferences and listening to people talk about how great their track record is, or how suddenly telling you how wonderful they are. I’ve made a ton of mistakes in my life. And a lot of entrepreneurs and people have made a lot of mistakes. I’d rather talk about the mistakes that I made, then the fact that I might have done well in a specific strategy or, you know, grow my business to a certain level. The biggest compliment I ever received at a conference, and I speak at a lot of these conferences all over the world is that was really authentic. And I didn’t take that as a compliment. I just, you know, took the things, but saying that you were authentic. I think that’s really important. And I think that a lot of these people look up to people like a David Rubenstein, like authenticity is really, really important. And again, everybody started somewhere and everybody can help somebody in some way and you have to pay it forward. And I just think if that’s a mindset you have People see through it. And you authenticity is really important also, because you, you have to be genuine in what you’re doing. And people see see through that, too. So I just think that, again, the family offices that I’ve worked with, in general, a lot of these people, some of the common threads they have, they’re very authentic people, good or bad, and just, they’re, they’re no one real, they believe. And they also have a lot of gratitude, which is a huge component of my life.
Scott D Clary 50:34
Those are, those are good questions. And I, you know, I hesitate to ask them, because not everybody’s comfortable going into those. But you know, since since you did bring them up, I guess, I would even ask you like, what would you do? What would you have done differently in your life? What was the one thing that you regret, if any?
Ronald Diamond 50:51
A lot, I would have done a lot. I would have, there’s a thing. My daughter was eight years old at the time, and we have a thing in our house where if you call three times it’s an emergency. So I was meeting with the large family office, I got three calls. I’m like, I gotta take this. She I said, I thought she was in the hospital. I didn’t know what would have happened. I said, what happened? She said, Daddy, what are the five most important things in life? Like? What’s wrong? She’s like, No, no, I need to know this for a project. So I’m like, Okay, well, this is an emergency. And we’ll talk about that when I get home. So fast forward six hours, I went home. And then and I said, first of all, only call three times if it’s an emergency. Second of all, tell me what you’re doing. And I’ll help you with it. And she, for her project, they had to do the five most important things for them. So for her, I worked with her on it, it was being popular. She’s eight years old, she wanted to be really good athlete. She wanted to be a really good listener. And there were a couple other things. And then she says, As children do, what are your five? I’m like that, whatever. But then it did resonate with me. And I thought about it. And then over the next couple months, I did think about it more. And for me in order gets love, gratitude, attitude, balance, and laughter, those five, which isn’t right or wrong, that’s just kind of how I, what are the most important things to me. And I got, I only did that exercise because my daughter asked me to do it. But those are the most important things to me. So I think that I would have done, I would have tried to look at every every person you meet, try to look at how’s that meeting going to be impacted 10 years from now, not 10 weeks from now, or 10 days from now, I think you’ve got to take a look, I think you need to be true to yourself, I think you have to slow down. From the fast pace. I think surrounding yourself around really good people is I’ve done a good job of that. But it’s more important to me now. I will not I try not to hang around people who are negative, I try to hang around people who are positive, who are caring and thoughtful. So the types of people I hang around. I wasn’t as focused on that when I was younger. You know, there’s a lot that I that I would do differently. But again, like Dave Rubin says, you know, I ended up in a fine place. But I wouldn’t do anything differently per se, because I want to learn those lessons, right? So if I if I was like Benjamin Button, like if I if I do over, if I said okay, I’m not gonna do A, B and C, I wouldn’t be as relevant to meter data, realize the mistakes that I’ve made. So sometimes, mistakes in ears that you make are your biggest lessons that you can learn.
Scott D Clary 53:44
Very smart. And I would ask Also, one last little bit of wisdom from you, for people that have had a liquidity event and are sitting at home and listening. And they’re they’re trying to figure out what’s the next action they should take? So for somebody that does come into significant of money, where do they go? What did they do? What are the first things they should have top of mind so that they don’t screw it up? Basically?
Ronald Diamond 54:09
Two things, one, the very first thing to do for everybody is talking to an estate planning attorney. What most people do is they see a great private equity deal, a cannabis deal, a real estate deal. Don’t invest, talk to a private talk to estate planning attorney, and to don’t do anything for six months or a year. And yeah, you might miss out on a huge opportunity. And I’ve never bought a stock at the bottom. I’ve never sold a stock at the top and you’re gonna miss out for six months to 12 months. Just don’t don’t make major investments, let things settle. And then over time, then start doing it. So talk to an estate planning attorney and do nothing for a year. That’s my advice.
Scott D Clary 54:47
Very good advice. Okay. Before we wrap up any other things that we wanted to go into that you wanted to bring up? That we didn’t go into any questions that I should have asked you that I didn’t remember to ask or not ask You
Ronald Diamond 55:01
know, I think you I think you’re you were very thorough you’re, you know, you’re very good at what you do. I just think that, you know, when people want to talk to me a lot of times, it’s because I’m the family office expert, but it’s just in people will often ask like, how do you get to work with family? Often? It doesn’t happen overnight. And it’s not like, I get calls all the time, like, can you introduce me to this family, and it’s just because they want to raise money for a fun, you have to take a much longer term perspective. And I think that for people who are looking to get into the family office space, more fit, figure out a way you could benefit the family offices. So when when I’m working, even if it’s a multibillion dollar family, the first thing I’ll do is I’ll introduce them, because even though they’re connected, they don’t know everybody, they don’t even know most people out, introduce them to other family offices, so they could kind of share best practice. I’m not even involved in the conversation. But by introducing them to other families, that’s a value add figure out ways that you can add value to anybody and everybody can whose life you’re in. And I think in general, good things happen.
Scott D Clary 56:09
Very good. Okay. Last question that I asked everyone. Well, first of all, I’ll ask you, where should people go to connect with you? Social Media website, all of that?
Ronald Diamond 56:18
Um, I don’t, I don’t the only social media uses is LinkedIn. So LinkedIn, I’m fairly accessible on LinkedIn, I don’t use Facebook or anything like that. I do have one, I just launched a family office podcast, a family office world podcast.com. I just did one with David Rubenstein recently, and I actually love doing that. Because I get to, again, surround myself with people that are smarter and more successful than me. So I enjoyed doing that.
Scott D Clary 56:44
Great. Okay, perfect. I’ll link those. So we’ll get those links in the shownotes. And then last question, I asked everybody, after your career, after all you’ve accomplished, what does success mean to you?
Ronald Diamond 56:56
So great question. Um, I think being true to yourself being authentic. I asked David Rubenstein in the same question. And I’m like, is it more important to be happy or significant? I think that, to me, it’s, it’s being true to yourself, it’s being authentic. It is giving back in whatever way you can. And, you know, at the end of the day, you know, enlightenment is ultimately what people want to do. I’m not there yet. But you know, you want to there’s a lot more to life than just making money and creating Alpha. I know a lot of miserable billionaires. If there were a direct correlation between wealth and success or happiness, I would just tell people to make as much money as you can. It’s not the case. And it’s the people who are thoughtful and think about how they want to live their life. So to me, it’s a balanced life. It’s a life filled with love. And it’s a life surrounded by family and close friends that you can trust implicitly