Venture Capitalist Explains Silicon Valley Bank Collapse and Why His Firm Bought a Bank

Rick Holton [00:00:00] Never really thought about the US running outta ammo. You've got Chi saying that he will take Taiwan by 25 and the guy does everything. He says he's gonna do what happens to us when that happens.

Vance Crowe [00:00:12] But it's gotta be incredibly hard to know

Rick Holton [00:00:15] Which

Vance Crowe [00:00:15] One is an AI company that's

Rick Holton [00:00:18] Got some magic.

Vance Crowe [00:00:19] And which

Rick Holton [00:00:20] Ones, which are most of them that are all just vapor? How are you thinking about investing in artificial intelligence? We had a zero a couple years ago. It was our first zero. It was an Israeli company that was a money change agent between Russia and Ukraine. And we funded it six months before Russia invaded

Vance Crowe [00:00:42] Uk. Oh,

Rick Holton [00:00:45] I'm Chris Haworth, a grain originator and accountant living in Pocahontas, Iowa. And you are listening to the Vance Crowe podcast. Welcome

Vance Crowe [00:00:54] Back to the podcast. I'm glad you're here today. Rick Holton, the venture capitalist returns longtime listeners of the podcast will remember that I had Rick on during COVID and the government had started to pump huge amounts of money into the system. And I wanted to talk with somebody about where's all this money going and the stock market. Well, Rick and I have maintained a friendship over these last few years, and I invited him to come back in and talk about the world of venture capital as inflation is going up, as people are losing jobs and as cities are developing in the way that they are, this is a fantastic conversation with a guy that thinks about the world pretty differently than I do. I enjoy hearing Rick's perspective both about money in the economy, but also about the city of St. Louis and really how this is a microcosm for cities all around the country. We're gonna get to that interview in just a moment, but first I wanna talk about Legacy Interviews. If you're a listener of the podcast, you know that I sit down with individuals and couples to record their life stories so that future generations have an opportunity to know their family history. Just last week, we had a couple in from Montana. This couple had a wonderful story about raising their kids, living on a homestead and really building their lives throughout their stories. They were able to communicate to future generations. What are some of the most important things they can know about being a part of a family? What can you do to make sure that you're a good person and how can you live your life so that at the end of it, your family is interested in your story and wanna make sure that they get passed on.

Vance Crowe [00:02:33] We are just a few days away from Father's Day, so if you're interested in getting a legacy interview for your father, or let's be honest, oftentimes when you get data gift, you get one for mom too. And you could do an interview for both of them. You use the promo code fatherhood at checkout for a hundred dollars off either a full or half day interview. You can learn more by going to Legacy Interviews dot com. All right, without further ado, let's head to the interview with Rick Holton. Rick Holton, welcome back to the podcast. It's

Rick Holton [00:03:03] Great to be here.

Vance Crowe [00:03:04] So you are with Fin Top Capital and you guys were famously with Silicon Valley Bank When they imploded,

Rick Holton [00:03:12] What

Vance Crowe [00:03:12] Happened and what is it like to be a client of a bank that fails?

Rick Holton [00:03:16] What happened with the bank or what happened with us? What

Vance Crowe [00:03:19] Happened with you guys? Yeah, I mean like I know what happened with the bank.

Rick Holton [00:03:21] Know what happened to the bank. So Silicon Valley Bank was a, a brilliant creation 'cause it was ideal for people like us. And a lot of people don't know what the magic was there, but they like a traditional bank. They loan money and all that stuff. But what they focused on is fund managers like us. So they actually have lines of credit for people like us that we can use to fund businesses. Then we do our capital calls and pay it back.

Vance Crowe [00:03:57] Wait, what does that mean?

Rick Holton [00:03:59] So we have a, a fund set amount of money that LPs commit to us. They look at our documents and they say, okay, you've got $300 million coming to you. We'll give you a line of credit for some portion of that. So you can go do deals, write checks, fund the deals, and then you do a capital call to pay off the land of credit. So it's us smooth. I, I don't want to call capital if I don't have a deal to fund,

Vance Crowe [00:04:25] I can. 'cause otherwise you're paying them on that capital. Right?

Rick Holton [00:04:27] Well it hurts our IRR and you know how to manage your cash better than I do. So when you're sitting on the cash, it's better for me 'cause it's not counting against my IRR for for the return. So I'll actually borrow money and they get better interest rates doing this kinda lending more, you know, it's better interest rates than like a mortgage. So they loan us money to go do two or three deals, then we do a capital call and we pay down the line of credit. They also loan money to gps so we can actually commit more LP capital to our funds. So we can go and tell you as an investor, like, hey, the GP is heavily invested, we're an anomaly. We're 20% of the LP capital.

Vance Crowe [00:05:05] Alright, and LP gp, what are these terms?

Rick Holton [00:05:08] Sorry. The general partners, people that run the fund, the lp, the limited partner are the people that invest in it. So when I go to you to get your hard-earned money to commit to my fund, I say, Hey, by the way, we're 20% of the money in this thing. So we're putting our money in alongside of your money. So we care about the returns. Very uncommon to have that much, you know, GP capital in, in the lp. But they'll, they'll loan us money to make our LP capital calls. So they're very connected into us. Then the magic is they're sitting on all the LP money that comes in the capital calls that sits in the bank. They're loaning money to the gp. The real magic is then all of a sudden when we put 10 million bucks in a company, the operating account sits at SVB. That's how it grew so fast. 'cause all these funds were raising all this money and then they invest in portfolio companies. The portfolio companies bank at SVB. So it was a magical system. They ended up with way too much money. So they were buying all the government securities interest rates, run up the bank bus. They also were very tech forward. So think of credit card processing, h you know, a CH, all the movement of money inside operating companies. They were very tech forward because they were Silicon Valley Bank. They had all the best technology. So it was a bank that was business ready to do the, you know, digital transactions.

Rick Holton [00:06:46] When it blew up. A bunch of our portfolio companies were running all of their stuff through the bank and the bank was busted. It was a scary weekend. A lot of our LPs thought we'd lost. We had just done a capital call. We actually had a line of credit. We owed them money and we had a bunch of cash from a capital call sitting in a bank. And we were with lawyers all weekend saying what happens? A debt is still a debt in bankruptcy and we would owe them the money, but our money was gone. That would've just washed out. It was the weirdest thing. It got billed out. But what it did for us is we actually own a bank that's a FinTech bank that we were building for all of our portfolio companies. We literally flipped all of our portfolio companies on Monday to our bank thread bank. And so it was, we were there to solve the problem and now our bank's doing really well 'cause we moved all of

Vance Crowe [00:07:46] Our portfolio

Rick Holton [00:07:47] Companies. So it was kind of a blessing, but it was very scary.

Vance Crowe [00:07:50] Well, let's go to thread in just a second, but it's kind of like, there's an irony there, right? Like, so banks make their own money by, you know, you take in money and then you lend out most of it, not all of it. And then that money gets deposited back in the bank and you lend that out. And since they were doing it to themselves, you said this stacked up really fast. Should they have known, should you have known that this was like a bomb waiting to happen?

Rick Holton [00:08:15] It it wasn't a bomb until the Fed did what it did. It's never happened though. Most banks, you know, conservative banks will pressure test a a 3% rate hike over 18 months and they did five and 12. You just can't, you can't forecast that. It's a, it's just an anomaly.

Vance Crowe [00:08:40] Yeah. And while that was all going on the lead up to it, the the, the banks were being told, Hey, you should invest in these government securities. Hey, take your, you have too much.

Rick Holton [00:08:50] Well, it's standard practice

Vance Crowe [00:08:51] Liquidity. Yeah. But I was with the bank at the time and they were certainly promoting that more than they had ever done it before. Yeah. So it almost seemed like they, you know, pushed people into it. I think it was not intentional. I don't think they meant to build burn it down, but when you look back on it, it looks pretty, pretty nasty.

Rick Holton [00:09:06] But they're not a, they weren't a normal bank. A normal bank, a coffee shop, deposits the money and the, you know, in their checking account and then that money's aggregated. It's like a wonderful life, right? Wait Joe, you know,

Vance Crowe [00:09:23] It's in your house, in your

Rick Holton [00:09:24] Store, it's in your house, all that. So they weren't, they weren't out building a mortgage portfolio. They were doing venture lending. They would loan our companies if, if, if we would, they got too big for our, we do series A stuff. But when they started, they did, you know, if, if a company raised 10 million of equity, they would put a put venture debt on it of five. I think their, their minimums were up to like 50 million bucks. So that's how they were loaning their money. They weren't doing commercial real estate and you know, small business lending and they weren't doing normal bank stuff. So they were doing venture debt, but other than that they, they were just sitting on piles of cash. They weren't, they weren't really a normal bank in that part. Like what we do, we have some loans, but we make most of our money at thread off non-interest margin stuff. It, it's credit card processing. And you know, we have portfolio companies that do loan origination and syndication. So it originates in our bank, but we don't hold the, you know, we don't hold the assets

Vance Crowe [00:10:36] With Silicon Valley Bank. I had read that a lot of people wanted to be involved with them because like they were a giant network. Like you would get to meet all sorts of exceptional companies and get opportunities that you wouldn't get if you

Rick Holton [00:10:47] Were not really at our scale.

Vance Crowe [00:10:48] Not at your scale.

Rick Holton [00:10:49] The the big firms Yes. Syndication and all that we're Series A. That's, you're talking about the, the big firms that were putting billions of dollars we're sub billion on of assets under management. So

Vance Crowe [00:11:04] Let's talk about your FinTech bank. It's called Thread. Yep. And what makes it what it is.

Rick Holton [00:11:12] So we have this whole, the, the idea started, my partner Joe's always loved banking, has been in bank tech since I worked for him in engineering school. And, and all of our portfolio companies were working with other banks to, you know, run whatever product they, you know, they had and it would take forever the, for these banks that weren't tech forward to get the technology working. So his, his thesis was if we bought a bank, we could be Tech First and Plum all of our portfolio companies into the bank and they could scale. 'cause we put money into a bank, into a bank tech deal. It could take 18 months for 'em to get integrated into a bank. So we're, they're burning our cash while they're just trying to get onto the bank rails that costs us money. So, and

Vance Crowe [00:12:09] When you say that, you mean being able to pay their vendors and being able to run their payroll or things

Rick Holton [00:12:13] More complicated than that? The, so we do the bank, the bank tech stuff that, that we do is we have Bill Pay Tech, we have a, we sold it, but it was a competitor to bill.com. So having a a FinTech like that, that needs a bank, you gotta be in the banking system to integrate with a bank is hard. We do deals with like JP Morgan Chase, it takes forever for them to turn stuff on. They, they invested in a deal called Truvada. They invested in Truvada with us and it took them 18 months to get it live.

Vance Crowe [00:12:53] I see. So what you're saying is, if you're running a company that needs to use the banking system Yes. Instead of saying, all right, not only do we have to run this company, we gotta go find a bank. We can trust a bank that'll work with us. And then because banks are slow, they're not likely to make the adjustments that this new fast acting FinTech company's trying to do. So you bought your own and, and built around that.

Rick Holton [00:13:14] So we bought it for a dollar.

Vance Crowe [00:13:16] Okay.

Rick Holton [00:13:17] Overcapitalized it. And then we have a tech group that can spin up our fintechs very rapidly. We bought a consulting firm called Core 10, which is a.net programming shop. So they basically assess the software that we're looking at, roadmap it, we do the deal, they get it live on our bank right now so they can be in business. So we're not burning capital waiting to be able

Vance Crowe [00:13:45] To do stuff. That's fact and a hell of an advantage if you have that. Yeah.

Rick Holton [00:13:48] Well now we get better deals 'cause they know, oh, fin Top actually has a bank

Vance Crowe [00:13:53] And, and that's part of the solution that we're getting out of this whole thing.

Rick Holton [00:13:56] And it's pretty unique for a venture capital firm. The, the firm doesn't own the bank. That's illegal. We don't own the bank as a firm. The people that are the big LPs and Fin Top own the bank. So it's a friendly relationship, but it's not actually connected.

Vance Crowe [00:14:17] And who's the charter with it? Is it state bank or a state?

Rick Holton [00:14:20] It's Tennessee. So it was in eastern Tennessee. We looked at a couple, a couple of banks, but we ended up with this one.

Vance Crowe [00:14:27] You've been in venture capital for a while. Have you been in banking before this?

Rick Holton [00:14:31] No.

Vance Crowe [00:14:31] What have you learned about the system by being involved in a bank?

Rick Holton [00:14:35] Very antiquated. Very regulated. Very

Vance Crowe [00:14:38] Regulated.

Rick Holton [00:14:38] They don't understand what's going on. One of my partners, Jim McKelvy, was deputy chair of the St. Louis Fed. He's involved with, with threat as well. We've been coaching the regulators on FinTech. They actually ask us for help to understand what's going on. But they're, they're trying to regulate a very old industry that has very new stuff happening. So they, that's why they asked Tim, you know, from being a founder of Square, to be on the Fed board just to how do you track money? You know, the your Square cash account, Venmo account, those things don't actually hit the, the bank rails. You know that I

Vance Crowe [00:15:25] I didn't know this. No, no, tell me more.

Rick Holton [00:15:27] So if you and I each have a Square Cash account, if I send you a hundred dollars, the Fed doesn't know that the money's just changing, changing designation on square's general ledger. It's not actually in a bank. So that's how that works. So we're just trading money and all of us can trade money around, but how do you track the velocity of money in the economy when you don't see the flow in and out of banks?

Vance Crowe [00:15:59] This is actually remarkably similar to Lightning and the Bitcoin system where, where there's like an abacus and it's just like sitting right outside the system. And until you decide to cash out, it's

Rick Holton [00:16:10] So how do you monitor it? How do you regulate it? It scares the Fed. Yeah.

Vance Crowe [00:16:14] 'cause

Rick Holton [00:16:14] They've had a system that they've used for, for a long, long time and now all of a sudden, yeah. But we're all doing it this way. And there's always been an unbanked community. It was called Cash, the gray market. Everyone's doing that. Well now people are using digital, you know, digital flow of funds, but it's, it's not tracked. They're starting to and they're figuring out how to, but it's very scary to 'em. 'cause how do you, how do you try to manage an economy when you don't really know what's going on?

Vance Crowe [00:16:50] And so do you feel like the regulators are coming along with you guys? They're trying Yeah.

Rick Holton [00:17:00] They mean, well it is very confusing and it's very, it it's fast moving. So the stuff they're trying to regulate now is from three years ago. Right?

Vance Crowe [00:17:12] Right.

Rick Holton [00:17:12] They're, they're way on. You only

Vance Crowe [00:17:13] Write regulations after a problems happen. You and you don't even know what could be going on. Right. So

Rick Holton [00:17:18] They're, you know, they're, they're trying to, they're trying to contain everything and hold it back. And it's, it's a very expensive process to, to work with the government. It's good. We're supporters of the regulators. They're, they're trying to do the right thing. But when you, you can talk to 'em till you're blue in the face and say, that's not how it works. So it's square peg, round hole. They're trying to make everything look the way it used to look. And you'd say you gotta just, you gotta separate the way it used to be to what it is now. Like you gotta get with the times and

Vance Crowe [00:17:58] You know, if you, I it just about a year ago, I guess a little bit more than a year ago that the SVB and the other banks kind of had this contagion after the interest rates went up. Had you ever experienced anything like that before?

Rick Holton [00:18:10] No. I mean, I, I did in 2008, obviously we, we experienced a lot of scary stuff. All the tarp money and all that stuff, but, but not this rapid of an increase in interest rates.

Vance Crowe [00:18:26] Yeah. Because in 2008 somebody couldn't just go to their phone and say, oh you know what, I'm gonna move it from that bank to this other bank. And as long as that, you know, I can log into my account, I can move it see next. And there

Rick Holton [00:18:35] Was a lot of failures back then.

Vance Crowe [00:18:37] Yeah.

Rick Holton [00:18:38] But I actually have you remember tarp?

Vance Crowe [00:18:41] Yeah, well vaguely. I would've been pretty young in the system, but yeah,

Rick Holton [00:18:44] So I was pretty young too. But, but we ended up for two years, all that tarp money that got pushed out. I had a classic car dealership and, and we had numerous regulators come in where people had used TARP money to buy classic cars.

Vance Crowe [00:19:03] We

Rick Holton [00:19:03] Weren't in trouble, but they were, they were following, you know, following funds. And so we had several meetings where people had abused the tarp money and, and thought they were having some fun and they got pinched. But, you know, that was crazy times a lot of people got in trouble.

Vance Crowe [00:19:20] I just read in the business journal that CRE lending is getting, getting tighter. Like there's more delinquencies than there have been. What do you think about the state of the economy right now? Banking in particular

Rick Holton [00:19:33] Private credit is exploding because banks are holding back because they can't make loans 'cause they have to maintain liquidity because everyone's waiting for

Vance Crowe [00:19:48] The shoe to drop.

Rick Holton [00:19:49] Yeah. And it's, you're reading about it. I mean, there's the uptick in bankruptcies and you're seeing banks take back, especially office. So it's, it's pretty scary. If you're over levered, you can have a really good asset, but if you've got too much leverage on it and you didn't fixate your debt and all of a sudden everything costs a lot more. And yeah.

Vance Crowe [00:20:16] And, and buildings that made sense to own just a few years ago. Now if you go to refinance, they don't make sense to, to own. And who's gonna take that on and who's gonna buy 'em. Like there's very, and

Rick Holton [00:20:27] People are walking away and the banks are getting stuck with it. And as soon as you've got the, the bank owned real estate, the BOR, as soon as they've got that, it changes all their ratios. So they've gotta have enough cash to, to offset it. And so it's, it's very hard to get loans from banks right now. You know, my

Vance Crowe [00:20:46] Only real experience with like market crashes. So when I was really young, I lived in an ag community when pork prices fell and like all of a sudden my neighbors were like totally bankrupt. Then I remember, I vaguely remember Black Monday 'cause my dad was a broker and so mom had us all get dressed up and cleaned up because dad had had such a bad day. And then the 2008 crisis, those were like very sudden.

Rick Holton [00:21:11] Yeah.

Vance Crowe [00:21:12] Do you expect that whatever is going to happen, the shoe to drop, will it be gradually or would it be sudden

Rick Holton [00:21:19] We sit and we call it red teaming in our office, we sit and think about, so we don't get blindsided again. What could it be China invading Taiwan? You just read two weeks ago that, you know, our stockpiles on, on munitions as low Boeing just got a seven and a half billion dollars contract to make more smart bombs because they're depleting the, the stores by sending it over to, you know, to Ukraine. Like, I don't think about this stuff. Right, right.

Vance Crowe [00:21:52] It's

Rick Holton [00:21:53] Not what I do. But you read something like that and you go, Hmm never really thought about the US running outta ammo. You've got cheese saying that he will take Taiwan by 25 and the guy does everything he says he is gonna do. So what happens to us when that happens? Does it just happen or is there a war? I don't know. I'm not, that's not what I do. Right. What would we do? We talked about it this morning actually and said, you know what, if they did it, it would probably be a global flight to quality, which would be buy the s and p 500 in the United States. It's the safest place for your money. You know, the s and p's outperform, you know, outperformed emerging markets, developed markets globally. I mean we've been the, the highest performer globally, you know, in, in the equities. But your guess is as good as mine. You know?

Vance Crowe [00:22:51] Yeah. I mean you think about an international incident, it, I mean it used to be very apparent that the US was the safest place, but I don't think the Russians would, would agree that they want money in, in the US system. Right? Well, they don't

Rick Holton [00:23:02] Have the option.

Vance Crowe [00:23:03] Yeah. But I mean, like, there's been a lot of countries, at least when I read about it in the papers, and it's very difficult to discern what is real there. Other countries are trying to find ways to, they

Rick Holton [00:23:13] Are trying and they're not doing because where else do you go? I mean that's the reality of it. Where where else do you put the money? That's why, I mean the foreign flows of funds into the s and p is is a lot.

Vance Crowe [00:23:28] And as a venture capital firm, you presumably have to keep finding good deals no matter what goes on in the world. Right?

Rick Holton [00:23:36] Yeah. I mean, you asked about the state of venture and the industry got hammered in 23. We look at our portfolio, it's actually performing quite well, but valuations went in half. So it's, it's demoralizing. We go to work every day, things are going great and you get told, we use a third party to mark our marks so there's no conflict. And then they tell you, well, multiples are in half. So even though you doubled this, you know, doubled the revenue, your business is worth the same as it was. And we're like, how's that possible? But it is possible. It's, you have to look at the market. They have to look at the market and value it accordingly. We're selling several companies right now that are much higher than the marks that they gave us. So we, we did get our, they undervalued our, our assets. We don't mind that because it makes us look good when we sell for more than, yeah. Yeah. The worst thing in the world is the firms in 21, 22 that were marking their own marks or they were raising money at such stupid valuations on their existing companies that they mark, they mark up to the last round raise. But they were the mark that said it, and they were overpaying for everything. So they had these incredible runup returns, you know, through COVID 21, 22.

Rick Holton [00:25:09] And then all of a sudden they had to mark their portfolios down 60, 70, 80% like Tiger Global. I mean these, those guys were doing a deal a day, like no diligence. They were just writing checks. We never participated in that stuff. You know, our model's a little different. We're not looking for unicorns and you know, we look for like three to four x deals and we like to hold 'em for three years. We get into series A and we will turn 'em over to the bigger firms after we do our, our work. And it's more consistent. We kind of always have an idea who the buyer is for our deals. When we invest in them, we're talking to them. We've got a really good network of, of, of buyers. So ours is a little bit more predictable. We're not investing in the moonshot ideas that are gonna change the world except 95% of the time they go to zero. We don't like binary outcome stuff. There's usually some value in the businesses that we're doing to somebody. So we know we can at least get our money back. We had, we had a zero a couple years ago, it was our first zero. It was an Israeli company that was a money change agent between Russia and Ukraine. And we funded it six months before Russia invaded Ukraine.

Rick Holton [00:26:40] Oh. That was a write off. So, you know, sometimes that stuff happens, but we've had, you know, over a hundred investments and we've had two zeros.

Vance Crowe [00:26:49] So it's, that's pretty good for venture capital. That's like,

Rick Holton [00:26:51] But we're also not looking for moonshots. We're not investing in a great idea that may turn into something and may may go to zero. So we don't have a hundred x deals, but we also don't have a lot of zeros. Ours is more predictable. So that's just our motto.

Vance Crowe [00:27:07] Yeah. It's interesting that you're a venture capital firm. You're in Nashville, St. Louis, and I'm trying to think of the other one.

Rick Holton [00:27:14] New York,

Vance Crowe [00:27:15] New York. This is in, it's not, it's not Silicon Valley, it's not la it's not. Yeah. So is there an advantage to being in a place like St. Louis?

Rick Holton [00:27:25] Yeah, the advantage is that the coasts don't come here. And you, when you, when you do a deal, when you gotta know the people, you gotta, you know, travel for board meetings and when, if you got a connecting flight issue, no one's gonna give you money. It's work. And when you've got people that'll just walk in your office from down the street all day long, you don't have to hunt very far.

Vance Crowe [00:27:53] So

Rick Holton [00:27:54] The sort of middle of the country fly over country. People love working with us. They love the fact that we give 'em the time. We're not, we're not arrogant, you know, we're conservative. We, we've all run stuff. You know, when we sit in board meetings, we're not analysts. We've actually run companies and we, when we give advice to our leadership teams, we've actually done the stuff that we're recommending that they, that they think about doing. So

Vance Crowe [00:28:24] It's,

Rick Holton [00:28:26] I

Vance Crowe [00:28:26] Heard Ray Kurzweil, you know, the other day say, it's not that AI is going to kill you, but not investing in it or using it may like leave you so far behind that you'll be left for dead. But it's gotta be incredibly hard to know which one is an AI company that's got some magic and which ones, which are most of them that are all just vapor. How are you thinking about investing in artificial intelligence?

Rick Holton [00:28:52] Good future podcaster for you is David Carish, if you haven't had him. Great guy. He started answers.com in his board room, in his dorm room at Wash U. And he's a YPO friend of mine. And he started a company called Capacity. And he started capacity, I think seven years ago before AI was even a, a word that everyone was speaking about every day. And he's doing a great job, built a great company. All of our companies are using ai. How they're using it varies from company to company. There's, there's use cases for AI in your, you know, development group. So the, you know, the developers are using AI to, to better write

Vance Crowe [00:29:46] Code their code code.

Rick Holton [00:29:46] Yeah. That's been a great, a great use case. Marketing all using AI in the wealth tech stuff. They're the large language models is a big part of it. Everyone's building a data lake. You can't really use large language models if you don't have data. So that's thematically big. I've got a, a portfolio company that uses their data to generate loan books for, for real estate. And it's incredible. It's used to have to aggregate all this information, give it to an analyst. They would spend weeks putting together a nice loan book that then you can go, you know, shop for debtor equity. And this guy in the last year has, has built the machine. You click a button and it generates an incredible loan book. So he's going into the automated lending space. Lending marketplace. Okay. And now as if you're a a owner, it's in the senior living space. If you own senior living portfolio and you want to raise debt equity, sell the business, you can click a button and it just puts it all together for you. I mean, we all sit and look at it and it's like, this is magic.

Vance Crowe [00:31:08] You know, I, the, so I'm like very tech leaning forward. I'm always the first to be like, oh, I love this vr, let's try this out. But with ai, I definitely got scared because I was using, I don't know, I think GT three, whatever one was the most advanced, I was paying for it and I was having it write up some like, calculations that I was gonna end up using. And I got pretty far down the line. The math

Rick Holton [00:31:33] Math is terrible

Vance Crowe [00:31:34] And it's bad.

Rick Holton [00:31:35] The math is awful

Vance Crowe [00:31:36] Bad. And so like, I, I don't, I don't know, I wasn't like right on the edge of making a terrible decision, but I definitely was incorporating it into like my plans and then I was like, I better go write these out and realized it's

Rick Holton [00:31:47] Wrong. And,

Vance Crowe [00:31:48] And you wouldn't know what's wrong unless you go check every single piece of information in there.

Rick Holton [00:31:52] So that's very scary. We actually had the SEC come in business, some in called Smart X and they came in and made us, we're not even, we use ai, I was saying we can use it internally for technology, for coding, we use it for marketing. Like it's an internal use case. We are not putting anything out to the client, the client. We're not using AI on the client. And we had some marketing stuff and the SEC came in and did a, did a site visit investigation and literally made us rewrite some stuff in public domain stuff to get rid of ai. And we're like, we're not using it to trade securities. Like that's not what we're doing. And, and, but it was one marketing message basically was saying that we're AI enabled. So that's how scary that stuff is. And the math is terrible.

Vance Crowe [00:32:55] I mean like, it's, it's one of those, it was one of the best things that could have happened to me was having that to so shockingly wrong. Yeah.

Rick Holton [00:33:02] Okay. I still need to work.

Vance Crowe [00:33:03] Yeah, that's good. That's

Rick Holton [00:33:05] Good job security.

Vance Crowe [00:33:07] Yeah. But it is crazy how fast things are moving. I like, when I use ai, I, I like it for the language stuff. You know, I'm, this is the way I'm writing a sentence right now. Write it in a better way. That's very helpful. But it's in, it's, there's like a, it's almost cursed if you ever go to use it to get an image. Like I one time was trying to do, get a man standing on a box and would put the man in front of the box and then put the man on the side of the box and then make the box on top of the man no matter how many prompts I did. And so the, there's something to it where like it's hard to take a, an image that's in your mind and convert it into language so that this thing can get it. I'm sure it'll get there, but there's like a, it'll get there. It feels like every time you go to put something in there, we're

Rick Holton [00:33:51] In the like second inning.

Vance Crowe [00:33:53] Yeah.

Rick Holton [00:33:53] It's scary. I mean it, it's scary what it's doing. I got friends asking me to for internships for their kids and you're looking at big corporate layoffs. No one's, no one's hiring the kids outta school. 'cause the low level stuff they're just pushing off to Oh wow. To ai. It's real. That's real.

Vance Crowe [00:34:14] That's very interesting. I mean I know that I have to keep up with it because even on the marketing end of things. Yeah. Like in my own the like marketing system, I can have it write a subject line and it's better than mine. It's, it's better than what I would do. So,

Rick Holton [00:34:28] But you need to know how to manage it. Right. So as long as you know what to ask it and how to manage it, make sure that you agree with it. That it looks right, that the man is on the side of the box and not on the box. You're like, nope, it's not right. I need to make it right.

Vance Crowe [00:34:44] I think, like I've talked about this before, one of the things AI is going to empower is weapons grade propaganda. Because you, you know, it used to be if you had to fill a building like this one full of writers that were gonna do propaganda, you had to pay 'em and feed 'em and let 'em go to the bathroom and let them have a family. But these things, you could just run computers to pump so much stuff out. I think the only solution is gonna be cryptography. You're gonna have to sign. Is this actually a message from me on some kind of a blockchain that people trust?

Rick Holton [00:35:14] That's right. The deep bay. Obviously we're in an election year. That's gonna be a disaster no matter what happens. Like it's a disaster today. And, and the deep fake, have you seen some of these deep

Vance Crowe [00:35:29] Fakes? Oh, they're wild man. And they're, and they do 'em to banks too. So you have somebody do a deep fake of a voice of a guy that they've had banking with them for 30 years. Yeah. Scary stuff.

Rick Holton [00:35:40] Now they can do it in video.

Vance Crowe [00:35:41] Yeah. Oh, that I didn't know.

Rick Holton [00:35:42] Oh yeah, they're, you're starting to see the bad propaganda out there on video. I mean you can't, they could fake your mother and you won't be able to tell a difference. I mean, it's scary.

Vance Crowe [00:35:54] They did the voice one, which was just so crazy. 'cause it was anything they typed in, they could, they could get this voice to say.

Rick Holton [00:36:01] So you're seeing all these, I'm sure you get 'em. I I get 30 spam calls a day and the phones are getting good at flagging it as spam. But I get calls all the time. I don't have a landline. My cell phone's in my, my email signature. That's how founders call me to talk about their business. I never know the area code, you know. So when at and t says it's spam, I don't answer it. But if it's a number, I don't know. It doesn't say anything. I Hello. And when it's quiet, don't say anything else. Just hang up. These are,

Vance Crowe [00:36:40] They're trying to collect information.

Rick Holton [00:36:41] Bot their bots. Get in your voice.

Vance Crowe [00:36:43] Oh man. Their

Rick Holton [00:36:44] Bot's getting your voice.

Vance Crowe [00:36:45] Well this is, it's when we're recording on these microphones, I'm sure you can scrape these pretty easily. Well,

Rick Holton [00:36:50] And everyone's got Amazon in their house so they can order milk and they've got a treasure trove of all their voices. My my kids fake it. They ask Alexa if they want to hear a song in the car, they'll go in and say the song, if it's a Taylor Swift song that's got bad language or something explicit, you know, they say, Nina, you're not allowed. And then she says, she turns her voice and says, Alexa play this Nina, you're not authorized to play that or whatever. And then she goes, Alexa play this. And then it plays it. She thinks it's so cool that she, she tricked Alexa.

Vance Crowe [00:37:33] That's pretty clever. And that's gonna happen all over the place. Yeah.

Rick Holton [00:37:35] They're learning the system.

Vance Crowe [00:37:37] So speaking, we were talking earlier about valuations in the stock market. Nvidia is like just skyrocketing to the moon. Yeah.

Rick Holton [00:37:44] It's the stock market. It

Vance Crowe [00:37:46] Seems pretty dangerous to me.

Rick Holton [00:37:47] Yeah.

Vance Crowe [00:37:48] To have one, you know, whatever with like five or six stocks basically keeping the entire thing afloat. What are your thoughts on that?

Rick Holton [00:37:54] Well that's, that's now doing it and, and you know, two years ago it was the fang stocks and that's why people bet the market. 'cause you never know what you're gonna miss if you, if you select. I mean that's the reality of it. It's incredible. And it's not slowing down. It sure seems overvalued to me, but I'm not gonna short it. I don't do public market stuff. But you would think it's way overpriced.

Vance Crowe [00:38:23] I mean, yeah. It's like, it seems to me to be like this FOMO craze that people don't want to Yeah. Miss out on it. I, I can't imagine how a company's value could go up that many days in a row for that much.

Rick Holton [00:38:36] Because everyone's saying it's only gonna get bigger and it's on, I mean, they're, they're sold out. They can't make, they can't make chips fast enough and they, they can't even build data centers fast enough. There's not enough power.

Vance Crowe [00:38:51] That's gonna be the biggest issue. There's

Rick Holton [00:38:53] Enough power between,

Vance Crowe [00:38:54] And

Rick Holton [00:38:54] You're talking about the, you know, the Green Planet initiative and all this stuff. You know, Matthew Porter, he's another YPO, but you, you should have him in here. He is a big thinker. He is actually running for Lieutenant governor right now. But he had ics.

Vance Crowe [00:39:09] Oh yeah, sure.

Rick Holton [00:39:09] So he was the founder of ics, but he's working in data centers right now and the, the site selection for data centers is purely on where there's enough power. And guess what, we're a great place to have data centers because we have an incredible abundance of power from Ameren. We've got an incredible grid here. We've got land here. So, so there's an initiative, a state initiative to build data centers in Missouri. 'cause we've got cheap power and we have a reasonable climate. And, and yeah, it's about power.

Vance Crowe [00:39:45] I mean it's going to get, I think that will be the Manhattan project and we're gonna realize how foolish we were for going so long without building nuclear energy. Yeah.

Rick Holton [00:39:54] Because

Vance Crowe [00:39:54] The amount of demand that we're going to have is going to dwarf everything we've ever had combined.

Rick Holton [00:40:00] Somebody I saw in the next 15 years, we're gonna need to double the power available. So we have 15 years and it takes about 30 years to build a nuke.

Vance Crowe [00:40:11] Well we don't even have the, the people quit going to school for nuclear engineering. 'cause there was nowhere for them to go. You couldn't get a job here.

Rick Holton [00:40:19] Right.

Vance Crowe [00:40:19] So speaking of power generation and we were talking about banking. Where are you at on Bitcoin these days?

Rick Holton [00:40:26] I'm not. I I'm not. I'm out. I got out and stayed out and I just watch it. And you gotta focus on what, you know, if you want to talk Web3 stuff. Jay Steinbeck, another YPO guy have Jay in here. He's the most knowledgeable person I know on the whole Web3. He's, he runs a whole network of, of 5,000 global YPO members that are all in and crypto and mining and you know, coin trade and blockchain, you know, the virtual worlds now. It's, it's fascinating stuff. But it's like if you're going to do Web3, do it. Don't dabble in it.

Vance Crowe [00:41:15] I like that. I agree with that.

Rick Holton [00:41:16] I lost, I lost my private key on my wallet now. Oh

Vance Crowe [00:41:19] No.

Rick Holton [00:41:19] Looking at all my funny money and then lost the key. And, and yeah.

Vance Crowe [00:41:26] So you keep mentioning YPO for people that have never heard of that. What is it and

Rick Holton [00:41:30] Sorry, young presidents organization.

Vance Crowe [00:41:32] So tell me about the young presidents organization.

Rick Holton [00:41:34] We're 40,000 members globally. There's criteria to join it's leaders of, leaders of companies get asked to join. And it's great peer-to-peer learning organization. It's a great global network. They, I just had a, maybe I was chapter chair, I just retired as chapter chair. But it's a, it's a $4 trillion organization if you take all the company, all the member companies. And it's a, it's a neat organization. Yeah.

Vance Crowe [00:42:07] I've had a little bit of a chance to do like work, you know, like for some meetings and stuff and like people are in small groups.

Rick Holton [00:42:14] Forums.

Vance Crowe [00:42:15] Yeah. Forums. And then those forums meet regularly. They have deep conversations. It's like a trust tree.

Rick Holton [00:42:20] Yeah.

Vance Crowe [00:42:20] And, and then, and then you have kind of like a wider organization almost seem to me like a rotary where you have like regional and larger and then those groups are getting together. And I would imagine the network benefit of knowing other people running businesses and having the same kind of challenges, then you're quite valuable.

Rick Holton [00:42:38] Yeah. That's a neat organization. Gotten a lot out of it.

Vance Crowe [00:42:42] What would you say you've gotten out of it?

Rick Holton [00:42:46] The people, I mean like anything it's the, it's the people. Our chapter was started in 1950. So we're one of the oldest chapters. We've won more awards globally than I think any other chapter. We've got 180 members here. We're one of the largest chapters. We pioneered a lot of firsts, different things globally that have been adopted. We invented here. St. Louis, as you know, is a very innovative town, very creative. So we've done a lot of the best practices adopted by YPO globally came outta here. Our, one of our two chapter managers is like the official speaker around the, around the world to teach other cm. She gets flown to, I think she was just in Dublin talking to Europe, CMS about how to run a great chapter. And it's just, it's great people, it's great events, it's great networking. So

Vance Crowe [00:43:49] You mentioned that in the, in the, we're in an election year and things are gonna get really pretty rough. What are you imagining November? What is it, November 6th, the day after the election? What, what will November 6th be like in the United States?

Rick Holton [00:44:02] God, I wish I knew. So we're invested in an amazing company. Scott Line Decker's, the, the founder and CEO of it. It's called No Inc. And we actually support over 50% of the votes in this country, his technology platform. So when you go check in to vote that iPad where you go up and give 'em your ID and check in to vote and then they print a ballot. That's all Scott's technology. And we, after the last disaster of an election, like the, the runoff in, in Atlanta, they actually, we have a, a service where we will manage the election for you. We will staff it and manage all your, your voting centers and whatnot. That's us. So we did the runoff so they could say it wasn't us and it was flawless. Like we, we know what we're doing. We're we're really good at it. He'd actually be a great podcast if you want to talk about what's going on in the election space.

Vance Crowe [00:45:11] Yeah, I love that. Yeah.

Rick Holton [00:45:12] And you know, we, we don't tabulate, so there's three companies that do the actual tabulation, but you remember the name Dominion.

Vance Crowe [00:45:22] We

Rick Holton [00:45:22] Work with Dominion and John, the CEO is a great guy and they did not do the stuff that that was said. The other two companies, ES and s and Hart, there's three companies that do all the tabulation. We work with all of 'em. So we handle everything from voter registration to voter check in, mail in. We do all the stuff all the way through to printing the ballot. But we don't scan and tabulate, we stayed out of that. 'cause

Vance Crowe [00:45:53] That's

Rick Holton [00:45:54] Obviously where,

Vance Crowe [00:45:57] Where the tension lies.

Rick Holton [00:45:58] Yeah. So we're like, hey, we didn't count the vote, but we, we touch over 50% of the voters in the United States and it's going international now. We do a lot of, of the countries in the Caribbean and, and Canada and we got a couple European. So it's a neat company. It's based here.

Vance Crowe [00:46:21] What, what a field to be in. I mean like election integrity is what I I I think that no matter what happens November 6th, half of the country is going to think that the other half cheated or lied or did something.

Rick Holton [00:46:33] I know.

Vance Crowe [00:46:33] And I have no idea how even if you did run a secure election, you would prove it.

Rick Holton [00:46:40] Yeah. Yep. And it's just, most Americans aren't crazy. You've got fringe people on both sides and there's only two sides anymore. They've tried to get more parties involved and the two party system is just solidified and and cemented. But you got people on the fringes that that can create the chaos for all of us. And most people are really in the middle. And it's the barbell theory, you know, it's, it's five to 10% on both sides sort of make it all crazy. And it's scary 'cause we all suffer.

Vance Crowe [00:47:23] Yeah. I think though that like the last few years have taught people that there are things that you're told about on the news. Like, hey, everything's fine. Or Hey, do these things and everything's gonna work out. And it didn't work out or it didn't feel fine for a lot of people. So I think like, I think 10 years ago the dumbbell theory probably was more accurate, but I think people have felt radicalized over the last few years.

Rick Holton [00:47:48] Yeah. We've seen it.

Vance Crowe [00:47:50] Yeah.

Rick Holton [00:47:51] And, and I don't get political with anyone 'cause I, it just goes nowhere. But the look at what's happening, you've got a, a former president getting annihilated by the government. I mean, this is political and the sitting president, like going after his son, it's, it's a disaster all around. And the problem is the rest of the world is watching this, oh

Vance Crowe [00:48:24] Yeah,

Rick Holton [00:48:25] We're supposed to be the leader of the free world and they're looking at us like it's a clown show. I mean, it is a clown show. That's where we're all suffering.

Vance Crowe [00:48:34] Yeah. My sense is that, so, you know, I I I spent a lot of time in rural America and most of our country when we were creating politicians were created in these small communities that had to figure out how to work together. Yeah. Then there would be some leader among them that would go to a larger level and on and on. And I don't think it was perfect. I think it's very easy to be nostalgic about the past, but I think that we had a system where you could at least, that were like an understanding about the way that the world will work. If we all work together, we find a way to resolve things. And at this point I don't see a path back to normalcy. I mean, do you think there's a presidential candidate that could rise from the ashes and be like, come on everybody, let's go to the middle.

Rick Holton [00:49:22] No, as as my answer, one of my forum mates runs campaigns, victory Enterprises, Dave Hagerman, he would be an amazing, amazing podcaster for you. He had an amazing, amazing human in Texas, guy Ryan that he's just always liked. He's a, he's a business guy, loves the country, good patriot. The message, like he seemed left to me and then a friend of mine said, he's right. That tells me he's probably somewhere In the middle. And Dave represents Republicans. He was running as a Republican, this guy's message. I don't see how anyone in the country wouldn't say, you're my, you're my candidate. Like if there was no party label, if, if he didn't have to declare a, a party label that it was so good and he hit all the, all the metrics you had to hit and never like got onto the, onto the stage. They kept like disqualifying him for, they were changing the rules for all the debates. This guy would've been a, a top contender on that stage. But the powers that be decided that he just shouldn't be there.

Rick Holton [00:50:57] And what people don't see is all the appealing going on and the proving of this. And here's the behind

Vance Crowe [00:51:06] Yeah. All the, all the signatures behind and money and Yeah. Behind

Rick Holton [00:51:09] The scenes, behind the scenes, they're, they're sitting here saying, here are your rules. He followed your rules. He should be on the stage. Well he is just not, and I don't remember the specifics, but Dave would would say this, look at what they're doing. They're deciding who they want up there because it's the master of puppets kind of a thing. And it was really offensive because he was, he was absolutely an amazing, you know, amazing person a lot. He wrote all these policies and never got to, to share 'em with us. What's cool is he's going to give a lot of that stuff and just say, look, I don't care who wins. These are just good policies that somebody ought to look at.

Vance Crowe [00:51:56] You know, I would think that there's a guy sitting out in Nebraska or South Dakota right now listening to this podcast and he's working on his farm and he's saying if a venture capitalist, his perception is that things are going on behind the curtain that he can't control. What hope do I guy living way out in the middle of nowhere have to change the system. So are we in a, are we sunk? Like is there any way back?

Rick Holton [00:52:26] Well, I don't wanna be a dooms, there's no place better to live on the planet.

Vance Crowe [00:52:31] Yes. The cleanest dirty shirt essentially. But

Rick Holton [00:52:33] It's not good. And you know, I listen to my dad, my, my dad talks about how tough things were in the sixties and he is like, this isn't that bad. I mean, so this is just our, you know, our reality today and, and you know, it's not, the game's not over. Like it's not, I hear people say they're gonna give up their citizenship and I'm like, and go where?

Vance Crowe [00:53:02] And go where. Yeah. Like,

Rick Holton [00:53:04] I mean,

Vance Crowe [00:53:05] Come on. Do you, have you been watching all this stuff with the, the president of El Salvador?

Rick Holton [00:53:10] No.

Vance Crowe [00:53:11] So, so he like cleaned up the, the country of El Salvador and now he, he won a second term and so all these dignitaries from all over the world flew down to see him. And I think he probably did clean up a really bad gang problem. But my guess is he did it as a wild dictator that is causing all kinds of pro like that, that is solidifying power. And I think we're gonna see more of that because I think the people in El Salvador were sick of all the gangs and crime and, and I think we're gonna see the rise of dictators in our lifetime. So

Rick Holton [00:53:44] I went to boarding school with the president of El Salvador's daughter, which would've been, you know, 35 years ago. And he was a cleanup back then. I went down and visited and you know, we had the armed guards around us and, and all that incredible country. And, and my friend Dan's family was like the Schnucks family of El Salvador. All the, you know, all the grocery stores down there. And my family actually sold all the, the deli film and the meat film to the, to their grocery chain. So it was neat being down there. They were in that cleanup mode. The company, my family's company had a division in, in Argentina. And Argentina was great. Good leadership. Very prosperous nation. Then it turns over and to

Vance Crowe [00:54:40] The east does different

Rick Holton [00:54:41] Leadership and then you've got rampant inflation and they start giving everything away and the gangs take over and it's all the shakedowns and in the port and all the infrastructure falls apart. And that's what happened. Claudia's dad retires, then the new leadership comes in and tanks it. So all these countries down there just cycle like that. And it's really too bad. It's, it's such an amazing, you know, part of the world. If they could get their, you know, Brazil does the same thing. It's cycles.

Vance Crowe [00:55:14] We're experiencing inflation here in the United States. That's bad for our lifetime. Do you think it gets corralled and contained?

Rick Holton [00:55:23] I think it's, I think it's slowed down. What, what was so infuriating to all of my, my friends was when they were telling us that it was transitory and we're all looking at him saying, I've only ever heard of a raise, not a lower,

Vance Crowe [00:55:39] You know,

Rick Holton [00:55:40] There's no term for,

Vance Crowe [00:55:42] Hey,

Rick Holton [00:55:43] I'm taking that raise back and, and I'm gonna lower your pay. And that's what you're seeing with all the, you know, all the layoffs right now is when you couldn't hire anyone and it was get a, any warm body you could. And I mean, we went through that where we're just like, hire anybody. And we busted a lot of people that, that were bold enough to have two jobs posted on their LinkedIn profile. We're like, we're paying you for full time. Like you're telling people you work in two companies really. So we cleaned house in 23. We, we RIFed about 30% across the portfolio, but it was really a house cleaning from years of just hiring whoever you could. And people frankly stealing from our companies. They weren't working and that sort of reset stuff. But everyone else that got, you know, 20%, 30% raises, there's, that's what they're getting paid. It costs us more today than five years ago to fund a series a round. Oh. Because everyone costs all of our money goes to people. Right. So, you know, it's people to build tech. It's people to sell tech, it's people to, you know, manage the, you know, manage the books in tech. It's, it's all the stuff when you're scaling up a company, it's, it's all labor. It's not rent and it's labor in AWS So the, the teams were getting more out of really good people, but they are getting paid a lot.

Rick Holton [00:57:24] So we have to put more money into the business than we used to have to put into a business because people are making more and which is fine, but if everyone's making more, that's where your inflation comes from because people can afford more. And that's why milk was three bucks a gallon and now it's six.

Vance Crowe [00:57:42] And anybody that's run a company knows that an A player is worth like four B players. Yeah. And, but it's hard to, it's hard to justify that on a, on a, on a balance sheet, right. When you're trying to pay or payroll. No, no.

Rick Holton [00:57:54] It's easy if you can find them.

Vance Crowe [00:57:56] Right.

Rick Holton [00:57:57] But finding a players is, I mean that's the magic. If you can, if you can build a whole team of a players managing less people that can do a lot more is obviously easy because you don't have to manage 'em. But a lot of times a players go do it for

Vance Crowe [00:58:12] Themselves, they've got other options they can give themselves. Right.

Rick Holton [00:58:16] So, but we, we feel like our brand attracts talent because people know that we're a good firm to, you know, to be a capital partner. And so we, we have a good network, we get good talent referred to us to work in portfolio companies so we can help get the, you know, get the A players. And so you can do, if you can do more with less people, it's always better. The virtual thing, we're really trying to get people back in the office. We have companies that are virtual and stayed virtual and, and it's working. It's hard.

Vance Crowe [00:59:02] Company culture's so difficult if people aren't in the office. Yeah.

Rick Holton [00:59:05] It's really hard. So, but you know, some people have figured it out.

Vance Crowe [00:59:11] When you and I were talking last, the last time you were on the podcast, we talked about SPACs and just how those were starting to go crazy is, are those still, are people still putting together specs and

Rick Holton [00:59:23] No one's putting 'em together? I don't know if there's any left.

Vance Crowe [00:59:27] I mean, they,

Rick Holton [00:59:28] They all just got destroyed.

Vance Crowe [00:59:30] And why do you think that is?

Rick Holton [00:59:34] It was kind of a scam. I mean, I think that's what we talked about. Yeah.

Vance Crowe [00:59:39] Like crazy. It's a, it's crazy right? Sudden

Rick Holton [00:59:42] I'm just gonna, I'm just gonna raise a bucket of money and you're just gonna trust that I'm, that I'm that good. I'm gonna, I'm gonna go find a deal, just put, give me a bunch of money and, and blank check and I'm gonna go find a deal and I'm gonna take 20% of it. It was, it was a scam and the market was silly and threw a bunch of money at it. And then

Vance Crowe [01:00:06] Yeah, probably a sign that we were, we did have inflation going on in that, in that there was just so much

Rick Holton [01:00:11] Liquidity running.

Vance Crowe [01:00:11] That's all. That's where it

Rick Holton [01:00:12] All came from. Yeah. Free money, stupid amounts of free money. Just shoveling, shoveling money into

Vance Crowe [01:00:21] Anywhere you could potentially get a return. Anywhere

Rick Holton [01:00:22] You could put

Vance Crowe [01:00:23] It. Yeah.

Rick Holton [01:00:23] And, and you felt like you're, you felt like there was a cost to sitting on money 'cause you made nothing on it. So you're just looking at it going, man, I gotta put that money to work or it's gonna be worth less tomorrow. And I

Vance Crowe [01:00:39] Mean, I feel like that right now, right? Like

Rick Holton [01:00:41] It's, it's, it's pretty incredible. So I mean they shoveled all this money in and now it's like, you know, everyone's been out on a cocaine bender and, and they just took the dope away and government just shut it down. So they shoved it all in and then they took it all back and everyone's going, we're actually not worse off than we were from 19. If you just draw a line, it's been a nice growing economy. But somebody, somebody asked me the other day,

Vance Crowe [01:01:11] A

Rick Holton [01:01:11] Guy named Simon Crocker, you love him too. He works for B-D-T-M-S-D. They managed $60 billion and he did this little, he did a presentation for our forum and, and he showed this chart of excess cash and it just grew like this. And then it shrank back down. And then he told a story. Some, you know, one of these schools did a study on gambling and, and you know, Harvard or somebody like that. And they, he, he gave two scenarios. One, you go in with a thousand bucks to the casino and you ride it up to 10 grand and then give most of it back. And you walk out with a thousand bucks b go in with a thousand bucks, you go down to a hundred bucks and then over the next few hours you get back to a thousand bucks box. Who is the happier of the two? Who is more excited to come back to the casino?

Vance Crowe [01:02:16] It's gotta be the person that won it all the way back that fought their way back. Right? Yeah.

Rick Holton [01:02:20] Yeah. They both started with a thousand bucks and ended with a thousand bucks. But when you were worth 10 and then crashed at

Vance Crowe [01:02:29] You, like

Rick Holton [01:02:31] Done, never going back and 'cause you tasted how big it was versus, whew, I got through it and I can do it again. So

Vance Crowe [01:02:42] Well with those companies with boatloads of cash, I mean they did have a problem. I mean, I was at Monsanto when they were looking around and saying, if we put this into r and d, maybe we'll get something back. And even if we get something back, the odds that we're gonna get it through the regulations, it'll take us 13 years to bring this to market is very difficult in chemistry and manufacturing and in a lot of different areas to get anything to, to pay a, to pay because regulation

Rick Holton [01:03:10] And it'll move the needle. I mean, they bought a company that we invested in called Cover Cress.

Vance Crowe [01:03:19] Yeah.

Rick Holton [01:03:20] And Baron Bunge bought it and yeah, it's a, it's a neat little business. It's a cover crop growing. It, it it, a, it's good for your soil b it helps run off and, and see it. It's renewable jet fuel and it's feed for chickens, poultry. But you know, they bought this thing and even if it's a wild success, when you look at these businesses that are, I mean bungee's, $120 billion company, bear crop science is a 65, $70 billion company. This little thing over the next 10 years could be a $500 million company. See the problem?

Vance Crowe [01:04:03] Yeah. It won't even

Rick Holton [01:04:04] Show up. Literally doesn't move the, it's the right thing to do for the farmer. It's the right thing to do for the environment, but it literally doesn't, it doesn't move the needle. And that's what's hard about these companies that have gotten so big is they, they can't spend the money on it. 'cause it doesn't, you know, it's a distraction.

Vance Crowe [01:04:24] I think we all kind of, anybody that's been in the business world at all kind of knows that these bigger companies, how they form, right? You get these economies of scale, you get to be able to buy up other companies. You're buying talent, but they don't seem to deliver better products. And we all really

Rick Holton [01:04:40] Innovating.

Vance Crowe [01:04:41] Yeah,

Rick Holton [01:04:41] We are in a consolidation. Even in venture, every one of our companies is looking for stuff to buy because there's not a lot of new technology coming online. It's been coming online for the last 10 years Now is contraction. So people run outta money so people merge. So you know, things, you turn into the rollup, we've got, you know, smart XI talked about they're competing with Investnet. We keep getting, not even soliciting, we keep getting top people from Investnet because it was a rollup of a lot of wealth tech companies. And they kept saying, oh, if we had this, we'd be better. And if we had this we'd be better. But there's not even a single login for all the stuff they've bought you. It's basically one name with four products and you gotta log in to the four different products. So it's, it may as well be four different companies. So they didn't get anything out of the merger. And it's so big that it sort of, they stopped innovating. We sold one to Nasdaq, very gifted, it's called SLOs, very gifted entrepreneur. It, it's a wealth tech platform for like pensions and endowments. And it was a great return for us. He sells it to Nasdaq. Software hasn't changed in three years. And all the people that were building software left because it was, it was so small that NASDAQ didn't really care.

Rick Holton [01:06:15] That's a great company. But they just stop innovating. They're like, it's good enough. Just, just cash cow. It, it's fine. A lot of these big firm FIS fi serve, you know, black diamond, everyone that's the best gets big and then stops innovating. And then new people come in with new tech platforms. The, the AI's the big driver now is 'cause you can build stuff faster, better, cheaper. And, and that's what we're seeing. So we're looking for people using AI to build great companies. It's not, we don't invest in like people that say we're an AI company, that's a buzzword that they think they can just tack a zero under their valuation. They're a tech company and they should all be using ai. Our, our CTOs are like, everyone thinks it's like cool to talk ai. We've been doing this stuff for five years. It's not actually new if you're a technologist. So we've, we've seen a lot of that.

Vance Crowe [01:07:21] We both live in the St. Louis community. The St. Louis City was given a huge wad of cash because of the, the RAM settlement. And now there's this constant like question of what are they gonna spend that, that on? What do you think of that? What should they be spending that money on?

Rick Holton [01:07:42] I talked to a guy who was on that commission and he said, we ought to stick it in government securities and let it just sit there and not touch it for five years until there's a plan that the different things I've, I've heard them talking about doing or just asinine. Just, just give a diviv a special onetime dividend to everyone in the city and you know, here's, here's a thousand dollars that's not gonna, that's not gonna do anything for the, for the city or the region. The greatest opportunity we have right now in front of us, they own the airport. And Rhonda, who would be an awesome podcaster for you who runs the airport, I just saw the latest version of the three and a half billion dollar makeover of the airport ground is breaking in 26. Like it's right around the corner where we're gonna start seeing amazing stuff. Number one complaint I hear from people about St. Louis is our airport. There's nothing left we can do with our airport. She said, if, if we do nothing, we will spend, get this a billion dollars over the next 10 years, keeping it running the way it is. How sad is that? So we can put a plan in place to spend three and a half billion dollars and have an airport that'll go for the next 50 years.

Rick Holton [01:09:13] I mean that airport was built in the fifties. So it's a cool plan. It's a great plan. It's the right plan. It's been signed off by the, you know, the airlines really get to decide what happens. They've signed off on it, the FA signed off on it. They're starting demolition, they're starting relocation, they're doing all this stuff. So we're gonna have an amazing airport. First phase opens in 28 and then the rest of it, 'cause you gotta, you can't interrupt anything. So they basically have to open C and D, move everyone from A and B2C and D tear down A and B start the new terminal. Then they flip everyone over to this terminal, tear down C and d and then move Southwest over. And it's one, it's one massive terminal. So Southwest can connect to United. It's all the same carousel and all that. It's the modern airport, it's one place for customs. So we'll get more international flights and all that stuff. So very cool. The city should be supporting it. They have a pot of money where we could take that money and make it that much better. You know, we're, we're doing a, a great plan, but that's money being spent on something that is amazing and I just don't think there's any vision for a doing something meaningful with that money.

Vance Crowe [01:10:44] Do you think St. Louis is a safe place to go?

Rick Holton [01:10:48] Where in St. Louis

Vance Crowe [01:10:49] St. Louis at all? I mean, I mean I'm not talking about the north side. I mean do downtown the

Rick Holton [01:10:54] I feel perfectly safe here. I'll tell you the stories I'm hearing from people in San Francisco and New York, that stuff's scary.

Vance Crowe [01:11:01] Yeah, that's right.

Rick Holton [01:11:02] I mean if you, if you go to the wrong place in any city, I think you can find a problem.

Vance Crowe [01:11:08] I, I was talking to a friend in like downtown San Francisco that like was talking to me, being like, I'm being followed and harassed by a homeless man. Right? And you could hear the guy yelling in the background, he's like, this is two o'clock in the afternoon. Right? No, it's isn't not good. It's,

Rick Holton [01:11:23] That's a, that's a real problem. A friend of mine's daughter was walking dogs with her best friend in New York and somebody pulled up alongside of him and stole her dog, like stole her dog for Ransom or something. Yeah.

Vance Crowe [01:11:40] For what? Like

Rick Holton [01:11:41] Really just to it it's terrorism, right? It's just scare the crap on him. So she

Vance Crowe [01:11:46] Left New York,

Rick Holton [01:11:47] She moved to, she moved to Palm Beach. I'm like, that's just weird. Somebody stole your dog.

Vance Crowe [01:11:53] So I know you don't, you don't talk about politics, but do you have a sense for the mayoral election? Will this be one that will move the needle? That's Shar Jones. The Yeah,

Rick Holton [01:12:03] Kara said she's gonna run and

Vance Crowe [01:12:04] Kara Spencer. Yeah,

Rick Holton [01:12:06] I, I mean, thar's nice and char, they're nice people and everyone, I mean, I don't think people run, they run 'cause they think they're running for the right reasons. I just look at somebody's, look at the, the result of, of their work. I don't think that Shar has approved downtown St. Louis. I mean, more people moved out and, and I think the crime stuff's getting fixed. 'cause of GSL I'm assuming you know about GSL No.

Vance Crowe [01:12:39] Uhuh,

Rick Holton [01:12:39] Greater St. Louis Inc.

Vance Crowe [01:12:41] Oh, I, tell me about it. Yeah, I I don't think of them in that way. I, I man have

Rick Holton [01:12:44] Jason Hall in here happened to also be a YPR. But I mean, so, so Andy Taylor and, and David Kemper put together this this idea of getting a private sector person to just sidestep politics and, and create a, a non-profit. And actually it's a roll up. It was a consolidation of all the other civic organizations. The, you know, the regional Chamber of Commerce and the, the CVC, the, the, what does it stand for? The Visitors commission and the tourism board and the, you know, all the civic progress. He, they rolled everything up, put Jason in place and it's, it's consolidating the messaging, it's consolidating the efforts in the region and then they get people like us. We're a founding a founding member of it, but it streamlined all the efforts. And that's how we got the Lufthansa flight. That's how, you know, the, the Butler building next to the, you know, MLS stadium, the, the Meat packing plan out in Forest L that started as a like a $300 million project. Now it's a billion dollar, it's gonna be one of the biggest meat packing plants in the, in the country. We've got an Israeli business building the, the battery factory on River to p in South St. Louis. So like Jason goes to work all day every day and he is got a hundred people that are all just building, building the region.

Rick Holton [01:14:19] It's, it's the east of the Mississippi and it's west of the Missouri. It's the whole region. It's not city, it's not county, it's none of the politics. It's the whole region. It's the Boeing project. You know, they're spending a billion and a half dollars building the, you know, the next gen fighter. It's incredible if you drive down one 70 and look at the, the acres that, that, that, that, that they're scraping and, and building this incredible, you know, plant expansion. So there's good stuff going on here and all of it is touched by GSL. So he's, he's incredible. He is a good friend. He is doing a, an amazing job and, and we're very lucky to have him.

Vance Crowe [01:15:04] Well, I've been asking a lot of people that have come through here about St. Louis, and that's the most hopeful message I've heard said in a long time. Okay, we get great stuff.

Rick Holton [01:15:12] Our biggest problem is we don't promote what's going on here. Like that's what GSL there's a, they have a newsletter that comes out every Friday. It's like the wind of the week and this stuff happening here, like, holy crap, like that's serious. I mean, there's billions of dollars of development going on and there is job growth. There is, we're, we are so big geographically that you read about all these parts of, you know, of St. Louis that lost population. You're, and it's, the other problem is all the municipalities, we got 93 municipalities. So it's like this little town of 5,000 people loses 50 people and then they show that there's, you know, the 1% population decline and they move two blocks away to another little town of 5,000 people. Hey, they grew 1%. You know, I mean it's, it's stupid. And you know, we tried to merge city and county to fix a lot of this stuff and obviously didn't work with Better Together. There's another initiative that should be announced shortly and when it gets announced, I'll give you that guy. But it's an incredibly brilliant and easy plan to sidestep all the nonsense and make it a region. And you know that GSL changing a legal structure, everyone keep your more to come.

Rick Holton [01:16:42] Alright, that's a good one. But no, I'm incredibly optimistic. I was at a party with John Kemper, CEO of of Commerce in their new building they just built. And I just said, man, they, it is so cool being in a fresh, brand new building. Yeah, it's

Vance Crowe [01:17:00] Right, right over there.

Rick Holton [01:17:01] Yeah. Thank you for doing this. He's like, he says, Rick, we invest in St. Louis every day, which is cool, right? You know, banks lend money to people to buy houses and, and for companies, but he's a, he's just a super guy and, and they built that building and you know, been on St. Louis, there's a lot of people betting on St. Louis, so we just need to get the word out.

Vance Crowe [01:17:26] Well Rick, I want to thank you so much for, for coming down here. If people wanted to learn more about Fin Top Capital, where should they go?

Rick Holton [01:17:35] Go our website for one or call me. Happy to chat.