How this money manager uses his military background to maximize returns

“I spent 22 years in Army Special Operations where my expertise was psychological warfare. Because I had an economics degree from Harvard and add to that the military background in psychological warfare, I became very interested in clearly understanding the intersection between human psychology and economic activity.

“There are two big things that come out of that in terms of how I look at markets. The first one is no one makes a penny until someone decides to buy. Human behavior drives consumption. So, if we can understand the consumer’s decision-making process, we can be predictive about their purchasing patterns and know not only what they’re going to buy, but who they’re going to buy it from and how they are going to buy it. The other thing being a military intelligence officer taught me was to look for chokepoints. A choke … is like a bridge you have to cross. The guy that controls the bridge controls your satisfaction, so he’s got pricing power and he can charge more. … It’s really all about fundamental human demand and who can make the most money from that.”

“I started off originally in the investment banking business with a regional broker-dealer in Fort Smith, Ark. We provided equity to rehabilitation hospitals, mostly on the real estate side. I did that from about 1987 up until about 1990. That was very successful. Then, I got mobilized for Operation Desert Storm. I was in the reserves; the Army brought me back on active duty and sent me to war. When I came back from that experience, I really wanted to be on the other side of the life business. Because I did that, I wanted to look for a business … that was in the business of creating life as opposed to destroying life. I was able to get involved with the fertility lab business just as fertility treatments were becoming available to a wider populous. That was my focus for several years. … In the late 1990s, I met my wife, Laila, who had a successful financial planning business. We got married in 1999, and between 2002 and 2004 we decided to team up and started working together. Her practice at the time had about $80 million in assets under management.”

“My wife Laila and her team focus on the planning side. Me and my team focus on the investment side and we’ve been able to deliver consistent returns over time because we really stick to our investing principles. As a team running each side, letting each member of the team throw their fastball and do what they’re best at … has certainly been responsible for our investment returns over time and has allowed us to have a definitive investment process that’s easy to explain to our clients.”

“Originally, ETFs were thought as a vehicle that may reduce volatility. Now they’re becoming a vehicle that may increase volatility as people become very emotional around headlines. Because of the ease with which someone can go in and out of the market with the use of ETFs, retail clients are often given the ability to run with sharp objects. Sometimes they need someone to save them from themselves. All this headline volatility induces more market volatility than should be there because of ETFs. This is one of challenges we see in the markets. The second thing is, at a macro level, more people are making more money than ever before. When you think of the American consumer — 70% of our economy is that — is as good, if not better than it’s been in a very long time. People underestimate that because they get caught up in too many headlines that are more political than they are economic. Because of that, people forget that in the end this is about fundamentals.”

“Human behavior drives consumption and the American national pastime is shopping. But the thing we’re doing differently is we’re shopping online. Therefore, we are still very constructive towards Amazon. It dominates the online retail space and it’s going to continue for a long time. It’s not just what we buy; it’s how we buy it. … If you think about the consumption process, we really like the payments space. That tends to be dominated by Visa and Mastercard in the U.S. and Europe. You also have PayPal, which owns Venmo, and American Express. We’re buying things through payment systems and those payment systems are a chokepoint. If you’re going to buy something online, you’ve got to have a way to do it. You can’t just hand them cash. We also like Disney. Disney has done a great job of positioning itself to continue to do well in the streaming wars, but they also have the content. Disney has emerged as the hands-down leader in capturing the imagination of the public. They’re able to deliver content regardless what platform you use.”

“Much of it depends on where you are in your life. For younger people, the sooner you start, the better … That’s the first thing. The second thing is you don’t need to swing for the fences every time. It’s better to look for consistent returns over time than to try to hit home runs all the time. If you try to hit home runs every time you’re up to bat, you’re going to strike out a lot … But really start as early as possible investing some and do so consistently over time. It’s standard jargon, but it works.”