Thinking About What the Next 40 or 50 Years Look Like
In recent weeks, Aaron and I have come to realize our life is in the middle of another major transition; one so large and transformative that we have come to call it the “Second Founding” as a shorthand to describe the complete overall that is in the midst of unfolding. It’s quick. It’s efficient. We both know what we mean when we say it. In a sense, it feels very much not like we are starting another chapter, but, rather, another book.
This is especially important because, while no one can predict the future, if he and I are fortunate, our family history indicates we have an above average chance of living into our 80s or 90s. At least, we hope so. Neither of us are particularly keen on tempting fate. In any event, it doesn’t hurt to map out a potential journey that far into the future to make sure we are at least aiming in the right direction thinking not just about our own lifetime, but those of our children and future grandchildren, as well.
I know a lot of you have been around since as far back as 2001. Before I jump too far into the details, let me provide some context for those who haven’t. Broadly speaking, it’s safe to say that he and I generally think of our time together as follows (I’m omitting specific months but reflecting it in the age range given our respective birthdays):
- 1997-2001 – The High School Years – Ages 15 to 18 – We met in High School in Missouri, became friends, were in many of the same classes, extracurriculars, and social events together. Our lives became more and more intwined, especially towards our junior and senior years. I took a job at what was then About.com at the tail-end of the dot-com boom.
- 2001-2005 – The University Years – Ages 18 to 22 – We were accepted into a classical music program at a university on the East Coast, where we lived in New Jersey. It was during this time we truly became independent adults and decided what we wanted out of the rest of our lives together, mapping out our plans. We stayed in New Jersey until the end of summer because we had a lease on our apartment. This is when we really started earning money together, as mentioned in that old post from a dozen years ago. We count our anniversary as being since 2001 as that is the point at which we were all-in for life.
- 2005-2009 – The Establishment Years – Ages 23 to 26 – We returned to Missouri post-graduation. During this transition period (from the very end of 2005 to the very beginning of 2009), we implemented those plans, rapidly expanding our e-commerce businesses and other holdings as we piled up money. The decision to specifically choose a low cost of living area and staying off the radar were strategically important.
- 2009-2018 – The Retired Years – Ages 26 to 35 – We bought our house in Missouri, furnished it, continued compounding, and, for all intents and purposes, lived as though we were retired with automation doing a lot of the heavy lifting. Our businesses in those days sold goods and services at 1.) extremely high profit margins, sometimes exceeding 90%, and 2.) using negative cash conversion cycles (we didn’t have to pay for the goods until months after we collected the cash, removing any limit to growth). This was important because we didn’t begin life with any inherited capital so we had to find the most intelligent thing to do to scale quickly based on our personal opportunity cost. We made sure the systems ran so shipments were coordinated around the world, we kept costs rock-bottom, and pocketed the surplus to fund our expanding investment holdings, buy nice clothes, learn to cook, take language lessons, etc. Wash. Rinse. Repeat. It was only towards the end of this period, shortly before our 32nd birthdays, that our marriage was finally recognized by the Federal Government, allowing us to simplify our finances and estate plan. Also towards the end of this period, we came out of retirement and launched the wealth management firm.
- 2018-2023 – The Post-Retirement Start-Up Years – Ages 35 to 41 – As part of our plan to become parents through gestational surrogacy, we uprooted our lives, moved to Newport Beach, California, went through a pandemic, had our two sons, moved Aaron’s mom and dad out to California to be near us, and grew the aforementioned wealth management group from nothing to $130+ million under management, give or take a few percent on either side at any given time with ordinary market fluctuations. During this process nearly everything, down to the forks in the kitchen drawer, changed. We had to move fast and outrun both the political environment and the health crisis that was unfolding.
I’ve shared, a bit, that while we blew past our goals and knocked the ball out of the park, I think we are only now coming to terms with the toll the final period took on us in respect to the mental and emotional exhaustion. If I reflect on it long enough, I’m convinced it was the pandemic. The timing of launching a business, moving across the country, and having two kids while the world shut down was just … difficult. We essentially had suspended ourselves as people and, instead, become almost laser-focused machines. We almost literally burned our lives down to the ground to rebuild it. There was a grieving process there because that life had been amazing.
We knew the end goal was worth it, and we allowed our rational mind to get us through it via sheer willpower, but my goodness I’m glad it’s done. In fact, as I’ve mentioned recently, with it now in the rearview mirror, the kids a bit older, and us having started to build a staff at Kennon-Green & Co., we can finally breathe, again. Aaron and I have talked about how one of our big objectives is to find a way to merge our new lives with the best aspects of our old life in Missouri.
For that reason, combined with the fact we are both 41 this year (not to mention only a few years away from celebrating our 25th anniversary), it’s causing us to take stock, look around, and ask ourselves, “What’s next? Where do we go from here? To the extent we can control things, what would we like the journey to look like from this point onward?”
That process is still on-going. The more efficient way I know how to start is to begin with the things we know for certain.
What Do I Know for Certain?
I Know That I Want to Build Kennon-Green & Co. for the Rest of My Life
I don’t see myself ever wanting to retire in the traditional sense. If I am fortunate to have another 40 to 50 years of life, I want to spend my professional time building the firm. I love the business. I love helping people. I love helping them make money so they can do what they want, including protecting the ones they love. I get satisfaction out of solving problems. While the scale-up, including building a payroll and transitioning to SEC registration, created a short-term bottleneck over the past year, as things settle down and get back into a steady routine, I get to spend my time reading all day, thinking about interesting problems, and analyzing businesses. That is especially fun at the moment because there are some great companies that are trading at increasingly cheap prices to the point I feel confident I could put a billion dollars to work tomorrow. That’s the kind of market I like, as a long-term investor.
That said, I do know that I want to build the structure of the business so that as we expand, my only function, besides Managing Director level decisions, is capital allocation and speaking with private clients. I want to hire other folks to handle the compliance, technology, accounting, back-office functions, and facilities work. I think there’s a real chance at some point I even hire myself a couple of executive assistants to do everything from handling my schedule to picking up lunch. With young kids at home, and the responsibility I have at work, I don’t have the bandwidth to think about a lot of the smaller details. There is no need for me to do so when others are capable of the work, freeing me for the high-value added decisions.
I Know We Want to Have More Kids. Eventually.
As I’ve said in the past, we knew we would love our kids. I’m not sure we were prepared for the extent our hearts would expand. Our lives are no longer about us, in a sense. Everything is filtered through the question, “What is best for them?”.
Awhile ago, Aaron and I made the decision that no matter how busy we were, no matter how important the work we had to do that day, every day, without exception, we are going to do everything we can to sit down, as a family, and have at least two of the three daily meals together. One reason was the old adage that children spell love “T-I-M-E”.
Since we started doing it, it’s become one of my favorite things in the world. I get up in the morning and hear them yelling to me, “Dada! Nummy food is ready!” as they play with their toys and Aaron sets the coffee and plates on the table. As we eat our eggs and sausage, bagels and fruit, they talk and talk, telling us everything that’s on their minds. There is a routine to it, a comfort, that lets me enjoy the rest of the day and not feel like I’m missing out on something important.
And they make us laugh. They love coming to the Kennon-Green & Co. office (and know we will usually give them a cookie as they sit at the conference table and wait for me to wrap up my work for the day.) As a result, lately, Dorian has been insistent that he needs an office of his own.
“What will you have in your office?”, I asked.
“Lots of books.”
“Mmhmm … what else?”
“Lots of highlighters.”
“What will you do in your office? What kind of work?” …
He thinks for a moment.
“Draw a peacock.”
I don’t know what I was expecting but not that.
I told him lots of people draw for a living. Art is a perfectly acceptable career and if he wants an office where he draws, then he can have an office where he draws.
And it’s not like this is a passing fad, either. This morning, he told us he wants a cake and “an office” for his birthday in April.
Graham, in contrast, wants a blueberry cake and toys for his birthday in November. And when he talks about the blueberry cake, he gets this maniacal laugh like it is going to be the greatest thing in the world … can you even imagine? Blueberries? In a cake?
So, we know we’ll want to have more kids. It is an amazing experience. That said, it’s only been a couple of years and, having recently gone through it, we need a break from the baby phase. Kids three and four can wait until we have fully recovered. We are enjoying this part of parenthood – the questions, the stories, the exploration, the personality development – so much more. It truly gets better and better with each passing day.
I Know That We Will Own a Home in the Midwest, Again
We love California. The weather is great, the nature is breathtaking, the people are welcoming. It is one of the best places in the world. However, the pandemic and parenthood, taken together, changed things. Or, perhaps I should say, it brought some things into focus.
Firstly, just as a well-constructed portfolio is diversified, we want geographic diversity to reduce our political, tax, cost, and natural disaster risk. Over the past few years, nearly all states in the country, with only a handful of exceptions, have modernized their gestational surrogacy laws so the trade-off costs we faced when we had to move to the West Coast are simply no longer relevant as we have more children. A super-majority of states have also dramatically simplified and reduced their tax rates over that same period. When you add in that some of these states do not have a constant risk of wildfires, earthquakes, draught, landslides, and, apparently now, hurricanes, the value proposition has changed significantly. The opportunity cost of staying here fully (as opposed to part-time or just having a vacation house here) is enormous and, increasingly, I feel it cannot be justified when I think about our children and, someday, their children.
Secondly, we miss the seasons; falling leaves in the autumn, Christmas lights in the snow. We miss thunderstorms. We miss rolling fields of green and white picket fences.
Thirdly, we miss feeling connected to America as a whole. We definitely live in an elite coastal bubble. There are a lot of pros to that. There are some drawbacks, too. If we didn’t make an effort to expand their horizons, our kids would quite literally never know anyone in their social circle with whom they regularly interacted who was not in the top 5% of American households. It seems like every other car is a Rolls Royce or Bentley SUV. Small condos built fifty plus years ago are between $1.5 million and $2.5 million while typical “middle class” homes, as a person would ordinarily think of them, are in the $3 million to $6 million range. Nearly everyone is well-educated. If you have an idea, there is nearly always funding around for it, or at least someone with the expertise to figure out how to develop it and/or bring it to market. Essentially everyone is part of a stable, married two-parent household. Socioeconomic data, as well as common sense, tells us these things produce enormous advantages for life. Still, we want them to at least be aware that not everyone has the benefit of being brought up in a culture that prioritizes education, creativity, and long-term wealth accumulation; that there are people who are not loved, or who go to bed hungry, or who don’t have stability and part of our responsibility is to try to improve civilization so that more people enjoy the basic fruits of a prosperous society. Another motivation is making sure they understand they are only second generation wealthy and it cannot be taken for granted. No matter how much of a glass floor we put beneath them, they must still make good decisions, including in the type of person they eventually marry. In other words, if we can somehow bring them up so they have the culture code and signals of the upper class, but the values of the middle class, the chances of them not just protecting, but dramatically expanding, the resources we leave to them increases by orders of magnitude. It is, in a way, a sort of vaccination against the proverb, “Shirtsleeves to shirtsleeves in three generations.”
Fourthly, Aaron and I are quiet thinkers. Sometimes, it helps to be away from the noise. There is always something to do here – restaurants, classes, events, recreation. From time to time, it’s nice to be able to step away; to sit by a fireplace with a cup of coffee and read in silence. No phone calls. No meetings. Little to no traffic. Just intense focus on the work in front of us – thinking about businesses and what we think is a fair price to acquire them – so there is crystal clarity in our decisions.
We know where we will end up with property – it will not be Missouri – but are not sure on the timeline. In the short-term, it doesn’t matter because we will continue to have the office in Newport Beach for at least the next few years. (In fact, one condition I gave Aaron before agreeing to this was that if I couldn’t stand it, if I absolutely missed California too much, we would would buy a vacation house in Newport Beach or Laguna Beach so we could spend three or four months a year on the West Coast. The biggest challenge would be working around the kids’ school schedule but the area in which we are looking in the Midwest has a lot of families that divide their time between residences in different states so it is fairly common.)
I Know That I Want to Travel and See the World
Speaking of travel, especially now that we have kids, we want them to see the world in all its splendor. We want them to grow up having tea in Tokyo, shopping for clothes in Paris, visiting chocolate factories in Switzerland, having coffee in The Netherlands. They need to stand on the Great Wall of China. They should walk through churches in Spain. They need to see operas in New York. We need to go to baseball games and art museums. As the firm gets bigger, this gets logistically easier because I can take my work with me anywhere with sufficient back-office infrastructure support. Give me a stack of annual reports, a box of highlighters, a pen, and a pot of coffee and I am good to go.
I’m not sure what this looks like in its implementation. One thing we’ve discussed, and that we’ve seen a lot of people in our own lives do, is renting a place in another country for a couple of months, living and working from there, then returning home. It would give me a chance to connect with myself, again, and blog about it as an outlet.
It would also be nice because we increasingly have clients from around the world. It’d be wonderful to finally get to meet a lot of them face-to-face. It could also give me some advantages when researching international investments. After a certain size, plenty of value investing shops have opened small offices in Europe, for example.
Final Thoughts and Observations for Now
The task now, when I have a moment here and there, is to try and figure out what building all this looks like. This time around, changes will not be abrupt – our lives have become too big and too complex for that – but rather thoughtful, strategic, and done in a way that requires no disruption or distraction from my day-to-day work or my time with Aaron and the kids. That is, any changes will happen slowly, and unfold, over multiple years and decades.
The point is, as far as I can presently tell, the picture that is shaping up is this: When I look out over the next half-century, I see the Kennon-Green & Co. headquarters in a Midwestern location that should be safe from climate change for the next 70 to 100 years, a house that serves as our family’s primary residence, with part of the year spent in other locations (including the West Coast and internationally) as we continue to expand and prioritize the firm. I see a growing staff of people, potentially in multiple locations, and whom I hope work with us for not just years, but decades. I see clients with whom I hope to work for not just decades, but generations. I see myself writing, blogging, and maybe having a podcast or other media outlet.
One thing I find really interesting is the nature of compounding. I think about our kids. If this is the life we build for them, their experience is that it is the baseline. That is, it is the “normal” against which everything is compared. They don’t see the foundation it was built upon – us working our way through college, selling everything from letterman jackets to wedding favors to baby gifts online then using that money to buy shares of automobile part retailers, discount retailers, fast food restaurants and coffee shops, beverage giants, whiskey distilleries, software companies. They don’t see the start-up days of the asset management firm. They won’t ever know our house in Missouri. It will be, to them, like some of the stories my grandmother would tell me about her childhood. It’s a strange thought but the nature of life. Time keeps rolling. A decade here, a decade there. It really is just a blink.
That really is the underlying current I feel emotionally. Time is limited. God willing, I should have a long run remaining but I must re-evaluate, re-assess, and re-prioritize what I want to do, when I want to do it, and how I want to do it because my interests and passions are far greater than a single human lifespan. There are so many businesses to buy, so many places to see, so many books to read, so many people to meet, so many skills to learn. I must now lock down and solidify a lot of the infrastructure of our lives in a way that Aaron and I never had to do. We could always move on a dime. We could always go wherever we wanted. That’s not the case, anymore. Many, many people now rely upon us in numerous capacities and we take that responsibility seriously.