Looking at Office Space in Southern California
It’s been roughly seven months since I’ve been present or active on the site in any meaningful sense. There are largely two reasons for this.
Firstly, as you can probably imagine, nearly every waking moment of our lives has been consumed by the launch of our global asset management firm, Kennon-Green & Co. Whether working on the implementation of the performance reporting platform with our software service provider or structuring the back-office so we can scale as we eventually open beyond the information waiting list and to the broader public, neither of us has had much free time of which to speak. In terms of writing, my output has been devoted to writing quarterly private client letters, which are released through the private client portal and tend to clock in at 15,000 to 20,000 words a piece. (As a matter of fact, I have another one I need to wrap up soon). Coming out of what most people would considered retirement or semi-retirement has been an adjustment but one that we would do again in a heartbeat. Not only do we get to meet interesting people who share many of our values, there’s a sense of accomplishment in helping other individuals and families find solutions to challenges in their lives. I can say with a deep sense of commitment that this is it. This is the thing to which both of us want to commit the entirety of our professional careers and through which we plan on protecting and managing our own family’s wealth across multiple generations.
Secondly, a series of political and social events that began back in June of 2016 here in the United States caused a reaction in both of us that resulted an instinctual and defensive withdrawal from much of the world. Two things in particular stand out, and I’ve tried to write about them dozens of times, but to really explain myself, and do the conversation justice, it would require a degree of candor and emotional vulnerability that I’m either not willing or able to give at present. This is in no small degree responsible for us pulling up stakes and relocating from Missouri to California, which we will be doing sooner rather than later with a possible (though not particularly likely) chance at an 18 to 24 month stop-over in Chicago for reasons that we will explain the future.
On that front, back in January, Aaron and I looked at one another and decided that we needed to accelerate our plans. We had been analyzing commercial real estate leases on office space over the Internet, narrowing down potential communities based upon our trip to California several years ago and socioeconomic data, but reached the point at which we knew we weren’t going to be able to truly understand the neighborhoods or trade-offs unless we physically saw them ourselves. Around this time, the one bit of entertainment we had allowed into our lives was Final Fantasy XV, which is unique because, aside from exploring on foot, the primary mode of transportation in the game is with a car. Perhaps it psychologically primed us for jumping behind the wheel to get answers but we looked at each other, threw some clothes in our bags, and took off for Newport Beach, California. We arrived on the second day after an overnight stop in Albuquerque, New Mexico.
It was extremely beneficial to us and our ability to plan the future of the firm. During this period, we met with representatives of real estate companies, who were all wonderful and helped us understand the buildings, the market, and all sorts of other details that can and, we suspect, will, make our lives easier. We also looked at residential real estate, too, taking into consideration the advice we had received from many of you who live in California that it is probably going to be prudent for us to rent an apartment in different communities for several years until we figure out where we want to live because, unlike the Midwest where you can travel 50 miles in either direction and still be surrounded by cornfields, in Orange County, you can go five minutes down the road and the entire feel of the place changes. In addition, the trip allowed me to focus on writing a good chunk of one of the private client letters, as well as complete some important reading that I think will be beneficial in the future.
While I can’t give you the usual, detailed narrative you’ve come to expect, I’ll try to provide the long and short of it so you can see some of the things we experienced.
Traveling from Missouri to New Mexico
For those of you who are not from the United States, you may not realize there are two primary ways to reach California by car if you are traveling from the East. One goes through Colorado, the other through the Southwest. Once you go beyond the Midwest, there are stretches of hundreds upon hundreds of miles where there is nothing to do see or do; endless fields or desert with the occasional McDonald’s or gas station being about the only thing you’ll encounter. From our starting point north of Kansas City the southern version of the trip, one-way, is 1,624 miles, or 2613 kilometers. This means that just to get the coast from our part of the middle of the country is only slightly shorter than the distance between London, England and Moscow, Russia. (In the past, we’ve discussed the misconception many foreigners have about the size of the United States, not realizing how enormous it is compared to Europe.) In other words, the task for our first day was to get as far as we could, which meant Albuquerque, New Mexico.
We left early, before first light, and ended up having to sleep in a parking lot off the turnpike in Kansas because we realized we were too tired to drive. After a couple of hours, we took off again and it was a smooth trip until we reached the end, at which point we drove straight into a snow / ice storm in the desert, which was so bad we couldn’t see the lines on the road at times. We finally made it to a Hampton Inn & Suites. We went back out to grab dinner at a nearby Panera Bread before returning to the room to work for the evening.
Snowstorms in the Desert
We woke up before daybreak, had breakfast in the hotel dining room, read the news, packed up the car, and returned to the road. There was a chance for bad weather but it was only supposed to last briefly during one,s mall stretch of the trip.
As we climbed through the mountains, I was trying to write the private client letter for Kennon-Green & Co. We were surrounded by storms. Suddenly, we were hit with a maelstrom that consumed everything. it was so blinding and powerful that we nearly had to come to a stop. Cell phone service dropped to non-existent as the devices couldn’t find a local tower. We live in tornado country and have our fair share of dangerous weather. We both looked at each other and realized there was a small, but not insignificant chance, we could be facing a mortality event. Neither we, nor any other vehicles on the road, had any ability to see, and the temperatures were so low that it would have been dangerous to leave the car (not to mention the very real chance that even getting three or four feet away could cause you to lose complete visibility, making it impossible to return). It was terrifying enough that we were focused on staying safe and didn’t manage to get any photographs or video. We had no idea whether we should attempt to keep going and get through it, stop entirely and risk getting hit by another car or semi-truck, or try to turn around to return to the city. Being in an area that was completely isolated, there was nowhere to take shelter, either. Neither of us has any desire to ever live through something like that, again.
The Barringer Meteor Crater
We kept driving and a little less than 300 miles later, we decided to take a slight off-highway detour to visit the nearby Barringer Meteor Crater when we saw it advertised. This probably went back to us playing Final Fantasy XV around Christmas as a major part of the middle of the map is devoted to an impact site that you have to visit as part of the plot. It turned out to be an interesting learning experience, both scientifically and from an investing history standpoint.
The Barringer Meteor Crater was formed roughly 50,000 years ago. It is the impact site of one of the largest meteor strikes planet Earth has ever suffered. In the gift shop, I picked up a biography of the mining engineer who squandered his entire personal fortune, as well as the fortunes of many of his investors, trying to mine for the asteroid’s metal, convinced that the asteroid was buried beneath the crater and could be exploited commercially. While it was an economic disaster, Barringer’s theories regarding meteor impact – theories that were originally rejected because the established scientists of the day thought them ridiculous – turned out to be correct, radically improving mankind’s understanding of these types of events. The site, which is privately owned, was ultimately transformed into a tourist attraction, making it a glorious example of the benefits of capitalism. It was Barringer’s greed and obsession, spurred by the promise of even greater riches, that was harnessed for the benefit of everyone. While he, himself, suffered due to poor risk management, we all benefited.
The meteor crater was a training site for Apollo astronauts in the 1960s, playing an important role in the preparation of the heroes serving our national space program.
You can’t get a true idea of the scale of this thing from the pictures. In one of them, try to spot the man standing on the observation deck. Even then, it’s a poor proxy. Anything and everything within hundreds of square miles would have been obliterated.
I found this video on YouTube, which might give you an idea of how massive the crater is. It truly is surrounded by miles upon miles upon miles of nothingness. It caused the winds to become so bitterly cold, and powerful, that it was physically pushing us around and we couldn’t stay outside for very long.
Completing the Final Portion of the Journey
Driving from Flagstaff, Arizona to Newport Beach, California
After an hour or two of visiting the impact site, the attached museum, and the gift shop, we got back in the car to continue traveling to Flagstaff, Arizona. I had no idea how beautiful it is. Then, randomly, at a Chevron station, we came across a Douwe Egberts machine. This marked the beginning of the shift in landscape; the point at which we went from endless stretches of nothing lasting for the past two days to breathtaking sights as the topography changed the closer you drew to California. I read the biography of Barringer, taking notes and highlights of lessons that investors should learn from his disastrous portfolio allocation decisions (which really comes down to a simple lesson, though maybe someday I’ll write a case study of it: do not allow irrational escalation to take hold of you when you are confronted with evidence that the cash generating power of an asset is either non-existent or becoming impaired).
Arriving in Newport Beach, California
We had done it. After looking at each other and deciding to jump in the car to take this trip for the asset management business – a trip we had to keep controlled, tight, with as few distractions as possible as we had an agenda to complete – we had made it the 1,624 miles from home to Newport Center in Newport Beach, California. Due to the last minute nature of the trip, we were unable to get an extended one or two week booking at the resort we wanted to choose, Pelican Hill, and instead had to split our reservation between the Marriott located right in Newport Center and, later, the Island Hotel, which used to the be the Four Seasons but was taken over by the Irvine Company, which developed and owns nearby Fashion Island. Both hotels turned out to be great and we’d stay at either, again. The reason for the low vacancy rates apparently had to do with Restaurant Week, in which people come to Newport Beach to try fixed menus at local restaurants wanting to show off their culinary skills.
We dropped our stuff off at the hotel and then headed over, on foot, to Fashion Island. We wanted to look around, grab a bite to eat, and see Newport Beach at night. It took less than 30 seconds being outdoors for us to realize that our conclusions from our trip a couple of years ago still held: this, or one of the towns between Los Angeles and La Jolla, is where we want to live, work, and raise our children. For dinner, we checked out a cafeteria-style restaurant concept I had wanted to research called Lemonade then stopped into Pinkberry for frozen yogurt.
Checking Out Newport Beach During Torrential Rains
Having arrived as California’s legendary drought was clearly ending, we woke up the next morning and saw the rain continued. In fact, during the first couple of days in Newport, there were times we were caught in torrential downpours, having to run and take shelter, completely soaked. Aside from working in the hotel, which had to take priority because we could not fall behind our on task list at Kennon-Green & Co., we made a choice to check out the city as if we were living here; to look at things like grocery stores, drug stores, movie theaters, restaurants, school districts, neighborhoods, etc.
We’ve talked about it in the past but I really cannot get over the abundance of our market-based economy. The prosperity that is unleashed by well-regulated capitalism (which I do not think “well-regulated” describes the United States at the moment – many companies need to be broken up and consumer protections need to be increased in several areas) is ridiculous. I’ve found myself thinking a lot about the dangers, particularly in terms of personal freedom for minorities, of socialism and communism lately; in systems where individual freedoms are oppressed and political capital ends up becoming more important so resources are not allocated efficiently but, rather, based upon the ability of a person or a family to capture a political body or to control the weapons and instruments of force. It amazes me that young people, who were not alive to see the monstrosities those systems unleashed, are supposedly open to these abhorrent ideas, well-intentioned though they may be. Socialism and communism are insidious and cancerous. The rise of the regressive left, along with the near simultaneous appearance of the Alt-Right, is a danger that should not be taken lightly to those who prize personal liberty.
Touring Commercial Office Spaces and Residential Apartments To Learn About Different Buildings and Areas
We spent several days walking through office spaces with representatives of the Irvine Company, as well as looking at residential apartments in Irvine, Newport Beach, and the surrounding areas, to develop a better understanding of what the market is like and how the firm might look once we complete the relocation from Missouri to California. We didn’t get pictures of most of these days because we were too busy taking notes and doing research. Personally, we like Newport Beach better but Irvine has some advantages, too. We needed to get home and cross-reference a bunch of data to really match the economic and sociodemographic reality of each community with our impression of it. Each of the real estate professionals we dealt with were great.
When we weren’t touring office spaces or checking out local sites to see if this is where we want to relocate, we were working from the hotel.
Oh, and remember the different types of shoelaces that Aaron got me this Christmas? On one of these days – I believe it might have been during our tour of certain properties in Irvine – I wore one of my favorites because they looked like peppermint or cherry-striped candies. (Today, as I type this, I’m wearing a pair that look almost exactly the same except they are navy and white so they appear nautical.) If you have to wear dress shoes for work, give the shoelaces a try. For only a few dollars, you can dramatically expand how well the shoes go with a certain outfit by tying it all together (pun not originally intended but I’ll keep it).
At this point, we still weren’t sure when we were going to go home but we had decided that if we didn’t have commitments back in Missouri, and business holdings that needed to be dealt with responsibly, we would have never returned. Instead, we would have paid a company to pack up our stuff, ship it, and that would have been it.
When it came time to change hotels due to the reservation issues I described earlier, we spent a few hours in between check-out at one and check-in at the other driving through and around residential neighborhoods. Personally, we prefer being up in the coastal areas with higher views that being down near the water.
I can’t recall, exactly, but at one point during one of these days we loaded up on books from Barnes & Noble. At some point we made it over to the second hotel and checked into our room.
In the days that followed, as we continued to tour office buildings and residential living spaces, we studied more of the community, browsing a through a different grocery store called Bristol Farms and heading down to the nearest Williams-Sonoma. It was so bizarre to see the ocean alongside the road as we drove down the coast. In the parking lot of the store, you look up and there’s just … water. As far as the eye can see.
One morning, we woke up, had breakfast in the room, then headed over to Fashion Island, again. There are berries just growing in the landscaping, the weather is perfect, and the views are incredible. At some point during the week, we also headed over to Costa Mesa, California, checked out the local mall, looked at some of the office buildings, and tried to mentally map out our surroundings so when we returned to Missouri and were looking at specific office lease documents, we could figure out where things were based on memory. One of these evenings, we also went out and sat by the pool. California really sells itself.
On the last day, we woke up before dawn, again, swung by some of the apartment communities we had toured, passed some of the office buildings we are considering, and, then, headed back East. Our goal for the day is to make a little more than 1,000 miles to Denver, Colorado, as we are going to go back the more northern route.
We were tired, but managed to make it to Denver, where we stayed at the downtown Four Seasons. Both Aaron and I recommend it enthusiastically. (I think the last time we were in Denver was almost five years ago, when we stayed the Ritz Carlton on our way to a wedding in Santa Fe, New Mexico. While I love the latter, there is no doubt that this hotel is where I’d prefer to say when in the city. I’d be happy at either, though.)
The next day we woke up, had breakfast in the room, again, and got ready for the remainder of the drive back home.
The question we now need to answer is, “Where do we go from here?”. Our original plan was to try and be in California within 36 months or so of launching the firm. As I’ve mentioned, we’d now like to accelerate that as quickly as prudently possible so that it is not a distraction to the firm. Structuring, growing, and nurturing Kennon-Green & Co. has to be the most important thing in our professional life at the moment and there can be no distractions. Ultimately, it will be better for the business to be in California and for that reason, this move needs to happen. It’s a matter of which pieces get moved at which times. What makes this difficult is that our holdings are somewhat complex and we will be beginning the process of having children this year. We’ve achieved a lot since this trip back in January. Still, there is much more to accomplish.