Long Term People

One of my professional mentors and heroes beat cancer this year. After months of uncertainty, painful treatments and indescribable fear, he emerged with a clean bill of health. When he called me with the news he told me that the experience has transformed his outlook on life.

“It’s funny, but all those risks I was afraid to take, I look back and can’t figure out what I was ever afraid of. And all those work goals I cared so much about, I just can’t bring myself to care anymore. It’s not that I don’t want to accomplish those goals, it’s that the goals for the sake of the goals, or for the sake of my company, it doesn’t mean anything to me anymore. The only thing that matters is the people I want to work with, to celebrate with and to accomplish great things with. It’s all about the people.”

Long term games with long term people.

That’s a Naval Ravikant saying. Naval is a modern-day philosopher, and venture capitalist. In that order. Here is his the full quote:

“Play long-term games with long-term people. All returns in life, whether in wealth, relationships, or knowledge, come from compound interest.”

Michael Venuto is another long-term person, and Michael Venuto is playing a long-term game.

I knew from the first substantive conversation I had with Mike that we would become friends. Mike had been writing about the concept of investing by Ethos, and I had been following it from afar. I loved the concept. An investment ethos can be built around climate change or social justice, but it can also be built around value investing, passive indexing, or thematic tech trends, or anything else. What investing by ethos means is that your investment strategy is true to who you are.

I had just launched a fund based on the concept that any company in any industry is in the business of satisfying their customers, and customer satisfaction is the most critical long term metric for company growth. Simple concept, complex data, and it hit the ethos concept on the bulls-eye.

Mike was surprised I knew about his “ethos” thesis, and it led to an hours-long discussion over several-too-many drinks about product development, and factor investing. I shared my Pareto Index idea, and Mike poked enough holes to kill it. Mike shared his Power Law index idea, and I returned the favor. I shared my inverse-market-cap weighting idea. Mike shared his ETF industry index idea. A friendship was formed. And it would take years for that friendship to transform into a business partnership.

Mike’s company Toroso Investments is starting to look like what people like to refer to as an overnight success. If you follow the asset management industry and haven’t heard of Toroso, you soon will. Toroso has had a key role in just about every breakout ETF to hit the market over the last several years. And like every other “overnight” success story, this one too was precipitated by almost a decade of grinding, restructuring, refining, and refusing to accept any other outcome.

To state the obvious, Mike didn’t grow Toroso on his own. Guillermo Trias is the CEO, and you aren’t going to find a more optimistic and visionary CEO in the industry. Dan Carlson is the COO/CFO and is the glue that bind’s a network of the team's projects together. Eric Falkeis, David Dziekanski, Dan Weiskopf, and newest addition Michael Gayed are each carving out their own businesses under Toroso, and their own niche in the asset management space.

Long term people.

Do you want to know what Toroso’s secret to success is? It’s really not that complicated. They help anyone and everyone who asks for their help. Thinking about launching a fund? Want to grow that fund? Want to access the best portfolios or the best strategies? Call Toroso and you’ll get honest feedback, a roadmap, and help in any way they can. After doing that for a decade the results have compounded into an “overnight” success.

Long term games.

Toroso was one of our earliest supporters at Exponential ETFs. We had built portfolio management and capital markets systems for scale, and it became clear that scale would have to come from the outside. Toroso was building and growing ETFs left and right, and needed a portfolio management team that could handle complex strategies while managing portfolio taxes and custom baskets and market makers and reporting and everything else that goes into managing an ETF.

Toroso trusted me to manage the underlying trading for their most prized ETFs. And inside Exponential, I trusted Charles Ragauss to do the same.

Charles had been working with me since before we were called Exponential. Before we were called ACSI Funds. Before we were called CSat Investments, and before we were called SFC Strategies. We would end up launching two proprietary ETFs, and managing 14 others while building an ETF sub-advisor business that grew from $50 million in assets under management to 1.8 Billion in less than two years.

We built that business on a limited budget with the ruthless efficiency that only an underdog can bring. We had a determination to prove ourselves to the industry, to each other, and to ourselves. As Josh Wolfe says: “chips on shoulders put chips in pockets”.

Necessity is the mother of invention, and we grew our business by taking risk, by doing things we’ve never done before, and by paying attention to the details.

Charles is another long term person playing long term games.

And now, today, I get to announce that Toroso Investments has acquired Exponential ETFs’ sub-advisor business.

“True long-term thinking is... not about any single accomplishment. It is about the cycle of endless refinement and continuous improvement. Ultimately, it is your commitment to the process that will determine your progress.” – James Clear

I attributed that quote to Toroso earlier this year, and it also applies to Charles Ragauss, Qiao Duan and Eric Kelly who will now be joining them. It is a partnership of like-minded, entrepreneurial-minded, long term people. And I could not be prouder for what we built, and for the future of Toroso.

As for me, I still have unfinished business. I have learned a few things as an entrepreneur. I’ve got scars – the kind that can only be earned on the field of battle. I am stronger, tougher, and a whole lot less na?ve than when we first launched.

Here is some of what I have learned: startups are harder than you expect, they take more time than you expect, and they require more funding than you expect. And these days, it also takes better technology than you expect. Which is a long way of saying, this entrepreneurship thing, I can’t do it alone.

I will soon be making an announcement on the future of the Reverse Cap ETF, and shortly afterwards I'll be announcing the company that I’ll be joining. A Fintech company right here in Detroit. An underdog company with a lot to prove. A company led by people with chips on their shoulders. A company full of long term people.

Playing long term games.