Capital preservation can sometimes be at odds with establishing a legacy, and families must balance both.

[03:01]

"And actually I I like what you said because I've I always felt that um capital preservation could sometimes be at odds with establishing a legacy. I think for a a family with wealth that is um an important thing to balance."

[03:44]

"So, in my family we try to identify uh value independent of price. And when we realize there's value in something, then we want to invest in it because once the story is told about that value, the price will follow."

[00:45]

"So, we are building our family office together. I made my money in Silicon Valley through tech exits and then got into real estate and built cash flowing machines from that. And then I married my partner and she came and she's a second generation family office."

Full transcript

Thank you all for being here and staying with us. It's my pleasure to introduce our panel. Um, we're going to dig right into it. And um, Eric, I'm going to start with you. Uh, your why in terms of what you're seeing in the changing family office space and what you think is the most interesting new type of investment or focus that uh, you see as you work for yourself and advise others.

Well, I'm more interested in capital preservation and making money and creating a legacy and do good than fighting and looking for that next exciting shiny object. And for context, let me just explain who I am. So, we are building our family office together. I made my money in Silicon Valley through tech exits and then got into real estate and built cash flowing machines from that.

And then I married my partner and she came and she's a second generation family office. So, we pulled together our resources. So, we're kind of starting now. And she uh, got money basically out of selling surgery centers. So, we are not doing necessarily the tech nor uh, surgery center etc. So, we kind of what you call it, level set and see from here on, where do we want to go?

What makes sense? So, we created a very simple system and we said, we need real estate, real estate for capital preservation and we need places to live and we're trying to understand where this world is going. So, that's one place. The other is private credit. And let's just be clear, I'm just talking about lending money. We love that structural protection and we want to lend money to people that actually create jobs in America.

And when we can create family housing. So, very boring. It's not particularly sexy or exciting. We're doing this to actually make money, and we make good money. Really strong money. We make good from that.

And then the third thing we're doing that is potentially more of that exciting part is that having a floor of lending money and making money in a you know, structurally protected way, that allows us to make more riskier bets. So, that means we are making some angel investments where I can uh help entrepreneurs build something where where you know, my expertise from tech and building companies come in. So, we do that, and that has been for example a defense tech, autonomous drones driven by AI to start you know, to you know, stop the Russians from invading uh you know, the Baltic countries in the Baltic Sea. So, that's shiny.

That's very exciting. There's a lot of stuff I can't talk about, but it's the floor of boring steady money just coming into us that allows us to actually take part in that. Absolutely. Thank you for sharing that. So, James, your family takes a different approach in terms of what you you view as the most interesting asset. Can you guys dig into that a little bit?

Uh sure. And actually I I like what you said because I've I always felt that um capital preservation could sometimes be at odds with establishing a legacy. I think for a a family with wealth that is um an important thing to balance. Uh one sometimes overtakes the other. Uh so, my family uh we invest into art mostly right now uh crypto.

I don't see the art thing changing anytime soon cuz uh these things for us are just like instruments of of the moment that we're in cuz what we're really investing into is human need, uh human nature, and the the the power of stories. So, we believe like stories drive a price. So, in my family we try to identify uh value independent of price. And when we realize there's value in something, then we want to invest in it because once the story is told about that value, the price will follow.

Uh an interesting thing I I I have been seeing is um between preservation and legacy is how actually operators are managers, people who are seeking funding are reaching out to us now. And I don't know if this is I hope this is a new trend because I think they're realizing that family offices are were people. So, we also we we feel fear. Um we're afraid to feel shame.

Uh we're sometimes afraid to be first in investments that we don't understand. So, we need people to connect with us. Like it's not just transactional. That there's a lot about um relationships that um uh that get us to the side. And actually I'm I'm inspired by my friend Eric here who didn't know I was going to call him out, but um I think we met maybe like a year ago.

And I I know a credit to you, the relationship that we have built, the time that we've shared together, and coming to us, and like sitting down with me and asking like what, you know, how how do family office think? What are we afraid of? What do we need? How can he help? How can be of service?

So, I hope a lot of that continues. I thank you for sharing that. And to misquote a former presidential candidate, uh family offices are people, too. Yeah. Okay. Um Randy, tell us a little bit about um the family you represent, Split Coast.

You centered in the Midwest in terms of what's exciting for you guys and how that fits into the legacy of the family. Yeah, so I run a family office and um it's it's representing two generations, and my job's a little different because I get to help find the opportunities. You know, one of the things which some of the other speakers have said, one, this is a relationship business, and I have 45 years of relationships with different people. I use those relationships.

But one of the things we're focused on now is we're really focused on energy, uh we're focused on water, and we're really focused on AI. We've even got so specific, um I was out in Silicon Valley 2 weeks ago looking at the next generation of chips, which when you see what's happening with chips, it's actually amazing. Forget what's happening in the stock market with Micron and everything. Chips are changing the world, but most chips that are used right now, they're not even used to 50 to 60% of their ability.

The next generation of chips, they're coming where the chips have water in them. And like you talk about all these data and energy centers, the new chips, the next generation of chips coming out will use 70% less energy. So, it'll change the whole focus where you look at companies that are look, you know, I think it was Microsoft or Google who bought 3 Mile Island. You know, nuclear's coming back, and we're very we're excited about small nuclear opposed to large nuclear just because it's easier to get done.

But, we like that, and I think water everybody's talked about water, but water is still a huge issue and getting worse. And I think for families that invest right, I think family is a water's a great opportunity. Great. Now, just to follow up, which is for this second generation family, both generations, did any of the wealth derived come from these industries, or is this all new in terms of interest?

The money came from a sale, and we're just now trying to reserve it for future generations and build it. Great. So, we have with the first three of you, we have legacy into doing good. Uh James with your family knowing with the power of what you've invested in and really taking your taste into what becomes success. Randy with yours this uh wonderful innovation.

Everything you mentioned is what everyone says is the cutting edge of what's to do. Now, Brian, you've approached this a little bit differently, and full disclosure, I've been a close friend of Brian for a very long time, so I know everything he might say. But, Brian, you looked at this as a family office yourself as an exited founder, and you saw a systems problem, especially for those wealth events. What do you see as most as interesting in the family office space, and how have you approached it?

Yeah, thanks so much. It's great to be here. Um so, I'm actually going to answer the question maybe that you started with. It So, So, my I founded a multi-family office. I grew up in a pretty successful um entrepreneurial family that owned businesses in different industries. Um and I would say the two big changes like that I'm seeing.

And one is obviously the intelligence. How many of the people here, if you raise hand, are using Claude actively? So, yesterday a a member of our team put together summary for me of essentially one of the families in a multi-family office with a full flow through scenario of their income tax, all holdings, asset allocation, suggestions for improving, ways to optimize income tax. Like all this.

I asked him how long it took. I reviewed a state planning, all integrated in one Excel. He said it took 5 minutes. That would have taken me 60 hours to pull through the quality of this data in 5 minutes. So, I think first and foremost, it's like whether you're investing in AI as an investment, but I think as a consumer and thinking about how can that drive productivity, I think that's just a a transformational shift.

And if you're thinking about family offices and the evolution, the reality is it's been super hard to hire a whole infrastructure across asset classes to invest capital. And so, leveraging AI to drive productivity and reduce the need for as many people is just a reality and make the people that you have more productive. And then I would say the second element that I think is really interesting, and this kind of connects David to where you're going is I think it's around like thinking about what is it you're trying to achieve, and then maximizing what you're able to keep. And so, whether it's like when you think about the new tax bill from last year in July, it's like with 100% accelerated depreciation coming back depreciation coming back with opportunity zones drawing back again.

How do you think really thoughtfully about the intersection of investing and income tax? Like, you know, Eric, you mentioned private credit. But, if I generate interest income and I'm subject to an element of the tax bill that makes it very hard to offset that, right? Um cuz I'm capped at like 525 grand a year as a couple based on 561L of the tax code, could I be generating interest income but have it be passive income?

And then could I be invested in strategies that have depreciation that generate passive losses? And can I just generate double-digit yields tax-free, right? Or tax-deferred, I think is a more accurate way to say it. So, I think super thoughtful at the intersection of investing and tax, whether you're selling a business, whether you have super high ordinary income, or whether you've already sold it and you're like, "How do I generate cash?"

So, I think it's a huge opportunity and shift that people are spending more and more time thinking about. Great. Thank you for sharing [clears throat] that. Join the Family Office Club by visiting familyoffices.com. We look forward to seeing you at our next live event. If you are a founder, raising capital, developing real estate, or you're an investor, we'd love for you to get involved in the Family Office Club.

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