Interview: Evan Roth

It is our sincerest pleasure to have conducted and recorded an interview with Evan Roth, the founder and co-CEO of BBR Partners. The full-length interview is attached below (in two parts) along with its transcript.

Emmett: How did you get into finance? 

Mr. Roth: I grew up with a family that was very involved in numbers and math and I knew I liked that, both in school and just helping out around the house doing things like helping my dad pay bills and organize his finances and you know when you are first starting out you feel like doing the things that you’re good at and that you think are helpful and then my dad asked me if I wanted to go work in his office for part-time work in high school, I think I was a junior. And I said I would love to, so my dad is an accountant and he is the second generation of a family-owned accounting firm so that was started by his father, Louis T. Roth, my first paycheck was at Louis T. Roth going into the office and doing a lot of data entry and numbers and math, and even though the job itself wasn’t all that challenging, it was just entering a lot of numbers into a computer, it was still things like oh I like this, this is something that I could see doing for a career. And then I went to college and got interested in a lot of other things. One of the fun things about college is you get exposed to areas and interests that you never had growing up in high school, and I learned a lot about politics, and English, and science, and math and finance and numbers was always kind of there and I was lucky enough to go to Penn which had a special college that was just for business students called Wharton and so Wharton it’s a whole different set of requirements in order to both get into Wharton and then to graduate from Wharton, and even though it’s learning about so many different interesting topics when I really thought about what I wanted to do after college it kept coming back to finance and so getting a degree from Wharton was a way to further my education in finance and in lots of things around business and that helped set me up so that when I graduated college I was able to to get a job in finance. 

Emmett: So you started your business BBR partners in 2000, how did you come along doing that and what exactly do you do for your job? 

Mr. Roth: So, I started the business after having worked for a big bank Goldman Sachs and I also worked for a family office: that’s a business that helps a wealthy family manage all of their money from making investments to helping through their education and through legal work and everything that’s required to just keep a wealthy family wealthy, and through those two experiences I thought that, like most entrepreneurs, I could do it better which is part bluster and overconfidence and part of it is a legitimate issue that bigger firms face which is they aren’t as committed to every client once they get to too big and so I thought I could do it would do a better job. And I was early enough in my career I was like this would be this would be fun. I think being an entrepreneur I’m not like somebody who has a million ideas or I couldn’t start a tech company, but I thought I could start a finance company a business company based on my experience and, most importantly, the people I started the business with. So I don’t think I would have just gone to start BBR in 2000 if it were on my own, it was having people who I felt like were ones that I could start a business with and really grow with and what help the business be successful and so that was the other “b’s” of BBR.  

Emmett: What does your company do?

Mr. Roth: What I do is a little different in that I help families who have generated meaningful wealth for themselves. I help them take care of it and give them peace of mind that they don’t have to worry about how their money is going to be invested or what risk they might face and give them some hope and optimism that the things that they have for their dreams for their money that we, in my firm, are going to help them achieve that. And wealthy clients, for the most part, for our clients, they made the money themselves, and when they make the money themselves they could have done it in a variety of different areas, totally unrelated to investing or personal finance and so some of the things that you think well just if you’re wealthy, you must have everything figured out, you must know how to invest because this is how you get rich. But if you got wealthy through starting a Healthcare company that created a great drug or starting a business in retail you know where you developed you know coolers or mugs, it doesn’t necessarily give you the expertise to be able to manage money, and so I figured we could give them the help that they needed that we can give them the help that they needed and do it completely objectively, independently and where we were able to just sit on the same side of the table as the client’s and knew they were taking care of. There’s this old term that Italian families use when they have somebody who really takes care of all their needs called a consigliere and I’ve always thought we’re kind of a consigliere for a client: we just protect them and make sure that they’re doing the right things.

Emmett: So you talked a little bit before about how you worked at Goldman Sachs and you went to the Wharton School at UPenn, but what else did you do before you started your business, and how did it help you like start your business and give you the experience that you needed to succeed? 

Mr. Roth: Well, I think, as much as the techniques, the lessons, the actual guts of the job itself, yeah you need those things in order to be successful. But much more importantly I think, I mean you have to be good at your job and to be good at your job you need experience, but also working at Goldman Sachs, going to college, you know starting a business, I would say of all of the things, the equivalent be like would I know enough to like be able to do well on a test. All that experience at Goldman and everywhere else was helpful in getting me a high grade.  But if you want to have a successful business, a high grade is not enough. You have to figure out all the things that don’t go into a grade that are actually instrumental in whether you’re going to end up failing or whether you can end up succeeding. And those are the things that are a lot about like interpersonal skills. Are you able to work with colleagues? Are you able to collectively identify what is a problem and actually working through that to figure out the solution for it? Are you willing to put in the hours and the time, the dedication that it takes to be successful? And so much of that is just making sure that you have the right people on the bus with you. If you don’t have good teammates, it doesn’t matter how brilliant you are, what a genius inventor you are, or you’re going to bring them the smartest investment strategy, in the end, it’s about people, and if you haven’t figured out a way to create a really meaningful partnership, and working together collaboratively then the business is going to be unsuccessful. Those are the things that I learned very much at Goldman and there were just people there that I would do anything for and I think they would do anything for me. And we put more energy at BBR into hiring than we do in almost any other area in the job. When we first started, we were all making our own hiring decisions, but after we hired our eighth person, we put somebody who was in charge of managing HR. That’s very early for most businesses to hire a Human Resources Director when you only have eight humans that you responsible for, usually, you have a human resource director when you have fifty people, a hundred people. But we felt like if we weren’t going to get the right people on the bus it didn’t matter how great we were as investors, we weren’t going to be successful.

Emmett: What was the most challenging about starting your business and how did you overcome those difficulties? 

Mr. Roth: The biggest challenge was that you get used to, as an employee and you work for somebody, you take for granted all the things that get done for you. So when you work at a company, you know that you’re going to get a paycheck, you know that you’re going to have a desk to go to, you know you’re going to have somebody when you have a computer problem, you can call your IT department and they’ll fix it. You know that if you want to go spend money to go on a business trip, to go visit a client or prospective client, the money is going to be there to get you where you need to be and you can stay in nice places and you just don’t worry about so much of the day-to-day, the guts of a business. But when you’re on your own, when you are starting it, you worry about everything. I remember the first like week, we’d spent, you know, all this time trying to get first started BBR, trying to get a lease just trying to get real estate. In New York, in 2000 it was at the height of a technology boom that was going on right as the internet was exploding. It was called the dot com boom. And even though we weren’t a dot com business, we were a finance business, we were still a startup and we had to compete against a lot of these other dot com businesses for real estate. And landlords would not rent to us. And we couldn’t believe it. You talk about taking things for granted like I never had to worry that there was going to be an office to go to when I worked at Goldman Sachs, but when you try to go to start a firm I knew we had to make sure that we had the right compliance in place, and I knew we had to make sure we had the right system and technology, but it didn’t occur to me that, of course, we would have such a hard time finding real estate. Now, we also were also on a limited budget, we were using the money that we’d saved over when we started our careers and it wasn’t a lot and so money didn’t go a long way. I’m sure if we were willing to pay any price, landlords would have been happy to rent to us. And so we spent the first month after we’d all quit our jobs, which was a moment where you had to just, you felt like you were on a trapeze and there was no net below you. You quit your job, I was married at the time and I didn’t know if I was going to be successful as an entrepreneur and a startup business and yet [my wife] was supportive of taking the risk, but we also were limited in terms of how much we could spend because we were really just relying on what little we’ve saved. And so we couldn’t find any real estate, so for the first month, we worked out of my partner’s apartment. And we sat in his living room with all of our computers up and tried to figure out how we were going to grow this business. And eventually, we were able to negotiate a lease, and we were able to move out of the apartment and start the firm, and it’s hard to get clients when you don’t have an address, you can’t even put anything on your business card, and we didn’t have a website. We didn’t have anything. And you knew that was a challenge, that you were going into with your eyes open, you know things are going to be different. It’s just what that feeling is like where you really just don’t have any protection, any safety net, and you’re really just out there you know, and trying to figure things out as you go along. So that was a big challenge. We were really fortunate as a business that the way things worked out is that we had some growth even in the first year, and so we never had to go back to borrow money from anybody, from our families or friends, or go to banks. The challenges were trying to figure out how you grow the business not stay in business. 

Emmett: So obviously you’re talking about difficulties in starting a business. You guys went through the 2008 financial crisis and you survived that moderately well. you obviously lost something but it’s also a financial crisis. But how is this Covid financial crisis different than other ones you’ve experienced, and how and how did you overcome this one? 

Mr. Roth: There’s a saying that if you’ve seen one crisis you’ve seen one crisis. Meaning that it’s hard to extrapolate when you go through one to exactly what a new one is going to feel like and how you are going to navigate it and I think there’s there’s some truth to that. It’s not like that there’s a playbook and that if you’ve gone through 2008 financial crisis you know how to handle a pandemic. But what you do have is that you have the resilience that came from navigating it. As you said we certainly suffered during the financial crisis of 2008 and 2009, and no amount of our modeling or planning had us prepared for the amount of losses we would suffer in 2008 and 2009. And since we’re math people we did a lot of modeling ahead of time and we try to present the worst-case scenario. The 2008 and 2009 crisis was worse than our worst-case scenario. And so it was gratifying that we got through it. We came out of that knowing to be aware that there are more things that can happen than you can actually plan for, there are unknown unknowns out there and just be braced for those. And so when the pandemic hit, I do think there was that part of our history that was incredibly helpful, in saying, okay, no one would have known that it was a pandemic but there’s unknowns, and that was it and we’ve we got through it once, we’ll get through it again. The pandemic is, from an investment standpoint, it tested us and tested our clients. In March of last year the markets were down in a month more or less what the markets were down in a year in 2008. And our clients were panicking. It doesn’t matter if you were the CEO of one of the biggest companies in the country, that client was still calling us and worried that everything was going to disappear. And so giving that client comfort and holding their hand and saying everything is going to be okay, and not only are you going to be just fine financially but what we want you to do actually is to invest in the things that are down 40 or 50 percent. And even though rationally every person knows that’s what they should be doing, you should be buying when things are down, they’re on sale, what’s happened is fear has taken over, and when fear takes over, people just sell. And if you’re a savvy investor you take advantage of that, but you have to be very non-emotional, you have to be pragmatic, you have to realize that this is the opportunity where real money can be made is when people are panic selling. Having lived through the financial crisis, we knew that that was the case, and, of course, in twenty years, there are lots of times where markets are down, so we’ve had that experience over and over again. But because this was different in that you know, you’ve seen one crisis you’ve only seen one crisis, is that we never have seen what happens in a health [standpoint]. It’s like okay maybe companies are going to go bankrupt in 2008 because they’ve borrowed too much money which was really the heart of the problem, but who knows if a pandemic starts to create massive deaths that companies can’t operate because they’re not allowed to actually go to the office, not allowed to go to the factory line. And their employees and every company is suffering because their people are sick and dying. So the first thing that we did was make sure that everyone at BBR was taken care of, that was more successful than I would have guessed. If you told me that one day we’d all be in the office and the next day everybody would be working from home dealing with all of these issues that are coming up because of the markets and because of client fear and we’d still be able to do our job well, I would have said no way. But we’ve got a strong culture and have been able to work through that. And then we took a lot of situations where we had conviction that over the long-term this too shall pass, and that meant that you provided what clients needed that time, which is a voice of reason. And we were able to help them through that time, most actually did invest at times where things were really tough, and it’s been a very good year from the market standpoint since then, and so we as a business are probably better equipped to, we earned a lot of trust in our clients during that time, when we were there for them we were putting her head in the sand and worried about that. But we think they know they can trust us and at the end of the day, that’s what it’s all about. 

Emmett: What is your favorite part about working in finance and what is the most challenging?  

Mr. Roth: Favorite part of working in finance is that every day is different. And you just never know what’s coming next because there’s new investment strategies, markets are always different, clients are, you know, are fascinating. Today I talked with a prospective client about how he’s thinking about investing and in my 20 years, I’ve never had a conversation like that. And it’s dynamic, it’s fast-moving. I work with some incredibly smart people who, as I get experience in other industries, I don’t think that all other industries have from top to bottom such smart people, and people who just want to do better, finance attracts those types. And the part that maybe I like least about finance is that sometimes the numbers and the money get in the way of what is really important, which is much more around what does the money mean. And so one of the first questions that I ask for clients is when you’re wealthy when you’ve been very successful, what is the wealth for? And they’re not used to having those kinds of questions from finance people. They’re used to finance people giving them a formula and telling you this is how it’s going to work. And I think in finance that sometimes gets lost, you get focused on the bottom line, making money. It’s all about dollars, and I think, even though I stand by how smart people are who get into this field, there are still too many people who get into the field for the wrong reasons. They get into it to get rich, and I think that that brings down down the overall industry, and sometimes it creates a perception that everybody in finance is greedy. I think that we do good things for people, but I’m not sure that the people in finance, that if you measured it purely by on who does the most for society, there’s a lot of other fields, you know whether you’re a teacher, or a scientist, you know and those are fields where I think you give more than you get. And in finance, you have to find your way through that. 

Emmett: What company are you currently excited by and what about their company do you think suggests promising growth opportunities? 

Mr. Roth: I’m not a money manager, so my job is to pick money managers who pick great companies so I’m going to answer it a little differently which is what areas are really exciting right now. So one of the first things you look at is places where there’s not a lot of hype. So I think one of the worst places to invest right now is in the areas where their valuation is very high. So whether that’s tech companies or Tesla, you know Zoom, and every company the pandemic that has done very well because they thrived in the work from home environment, those are not the places I’m interested in. What I like is money managers that are investing in areas that are overlooked and mispriced, and those are called value managers, so value vs growth. Growth managers will be the ones where companies are showing an incredible bottom line, like Airbnb where they’re growing like mad, or an Amazon, or a Facebook, or a Google. Those types of investments have to continue to generate that kind of growth to validate their stock price. 

Emmett: You have to get lucky in a way because you have to be one of those people who are investing in it when it is at such a low price. 

Mr. Roth: Luck has to do with everything, I mean that’s certainly luck back to business, luck played a huge part, our timing in starting BBR couldn’t have been better. People were looking for advice when the tech boom burst, and we were there for them, and if we started in a different period, who knows what would have happened. Luck, and sometimes luck for an investment is, what money managers are trying to do is try to limit the amount of luck, and maximize the level of information edge that they can have from doing the work. So if you outwork someone, you don’t need to rely on luck. The problem in finance and making investments is that the markets are very efficient. It is very difficult for you to do more work than the next person and find that right investment. And so if that’s the case, luck becomes a larger part of it. My role in doing in responsibility for clients is not relying on luck, they’re not hiring us to go to Vegas and bet on 12.

Emmett: Right, and that’s why you use more value investing strategies

Mr. Roth: We do, but you can be very successful for clients by using both [value and growth] strategies. Really what we do is we weigh value or growth, or we weigh being invested in Europe versus the United States, or we weigh investing in stocks vs bonds, or real estate vs. private businesses. Our clients are diversified, that is principle 101 in keeping wealth is making sure that you’re not making concentrated bets, you’re diversified. And so right now, because in the last year all those growth companies have appreciated so much, luck would be investing in Zoom the day before there’s a lockdown. That’s luck. You might have gotten it right because you loved Zoom and you knew it was a great technology, but you didn’t know a pandemic was coming.

Emmett: Or you knew the pandemic was coming.

Mr. Roth: What you could say is that in December and January, when the pandemic started in Wuhan, there were some investors to could see into that crystal ball and saw that that was going to be a contagion and that it was going to be a huge problem. Coming up and pricing security or an investment because you think there could be a pandemic when there isn’t even any whisper of it, there’s not a lot of people who can claim that. Back to what I think is interesting right now is not very exciting companies. It’s companies that like do really plain vanilla boring stuff that have been totally overlooked by the market. So [BBR] invests in music rights. So if you’re a musician, and you’ve got a library of songs that you’ve done over your career, you as a musician make money by having people listen to that, selling albums, going on concert,  but you also can make money by using those rights to your music, and selling them to someone else so that they can use in whatever they want. Most musicians aren’t great business people and so they don’t really take advantage of that opportunity. And what we’ve done is we’ve worked with a money manager to pay musicians, for the ability to use their library, their songs, and our manager will help get those songs played more, used more by companies, and the musician gets paid up front for that. So that’s not very sexy, you know the musician gets money, but our manager makes money because the difference between what they pay the musician upfront for being able to use their library of song, and then figuring out a better way to get that music amplified. So if you listen to you know a Cadillac ad you know there is now songs that Cadillac is using to sell their Cadillacs because our manager has taken the collection of music that they bought from these musicians and sold them to GM, which owns Cadillac, to use in their commercials. You can make good, solid, stable money, but it looks more like a bond than it is for what you do by investing in you know a hot tech company.

Emmett: It’s less of like a day-to-day thing where most stereotypical investors, big suits on Wall Street where they just go and sell things day to day, like this is low, buy that, this is high, sell this, you know it’s more like growth over time.

Mr. Roth: Exactly. What you were describing is very transactional, and it is very difficult to make and then keep money when your strategy is just transactional, just buying and selling, buying and selling. It is rumored that Einstein said it is the greatest power that he has ever identified is the power of compounding, which means that if you take a dollar and you make 10% on it and then you keep that and then the next year you take the proceeds of that dollar plus the 10% you made, and make 10% more on that, you will have a lot more wealth in 10 or 20 years then and then instead of taking your dollar, making 50% the next year losing 75% then making, 25%, that is transactional and that’s not the way that you have long term wealth. And that’s back to your luck question which is the one percent that [maintain their wealth in that way] it just happens to be that they happen to get it right. I mean a lot of this you see in today’s markets with the whole Reddit trades in the GameStop trade-in where those people who are playing that stock is not doing it based on the underlying value of the company they’re just doing it based off of do they think that they can either they can have somebody in the future buy it for more than they paid for it. 

Emmett: What advice do you have for someone who is passionate about finance and wants to find ways to learn more about the industry? 

Mr. Roth: Back to one of your first questions is what do I love about finance is like because it changes every day, there is always more to learn. You just have to read, read critically. There’s a lot of stuff out there that when you have somebody who’s gotten very successful as an investor, people tend to then think that anything they write, they should follow that religion: if they made money then that’s how I should do it too. But read critically. So books on first-hand accounts of people’s successes who write also about their failures are the best things to read. Like Shoe Dog, that’s a great book to read about. And that’s a book you might not think is about finance. When I think about finance, I think about markets. But Shoe Dog is about the growth of a company, Nike. But the amount of things that I learned from that book about how to manage a finance business even though it didn’t talk about a stock or a bond in the entire book.  It’s the same thing with what I recently read about Bob Iger. Bob Iger is the CEO of Disney. And it is the same idea. He doesn’t talk about what the stock price was of Disney, but what he talks about is how he was able to get get a deal done to buy Pixar and negotiating with Steve Jobs, or how he was able to talk George Lucas into selling Lucas films and appealing to George Lucas to say there isn’t really a succession plan for the things that you can do George with your business because your family is not interested so let’s work together and have Disney be able to be that succession plan. I love that and that’s when I think about legacy for my company, when I think about how we invest in money managers, I want them to be thinking about the next generation and long-term as well. I mean I’d stay away from reading, even if you love finance, of reading the hot stock tip. It’s fun to read about it, but it’s kind of like reading Page 6 of the post, it’s kind of like gossip, it’s junk Finance, it’s just not substantive. No one would tell you that the prudent way to invest is to find the one stock that you think is going to go up and put all your money on it. 

Emmett: Any last words?

Mr. Roth: Everyone who is listening to this has got a tremendous head start. I guess one last piece of advice is like one of the keys to being good at Finance is being good at a lot of different things and being able to bring other interests to finance. 

Emmett: I know one of the main things you do is talk to people and respond to emails which is is a part of being a CEO.

Mr. Roth: It’s all about relationships. What I said before, it’s about finding the right partners, finding the right clients. And even something that’s so quant, so numbers focused, like finance, it is still all about the people.

Interview conducted by: Emmett Roth