Inside The Counting House with Gary Sernovitz

Greg Dowling (00:05):

Welcome to the FEG Insight Bridge. This is Greg Dowling, head of research and CIO at FEG. This show spans global markets and institutional investments through conversations with some of the world's leading investments, economic and philanthropic minds, to provide insight on how institutional investors can survive and even thrive in the world of markets and finance. For the 2024 research department's Summer Book Club, we have selected Gary Sernovitz, The Counting House, and we are excited to have Gary on today's Insight Bridge. Besides knowing Gary for a long time, the book was selected due to its subject matter. It is a fictional account of a university CIO, dealing with under performance, his investment team, the investment committee, the university president, outside managers, and other stakeholders. I truly cannot recall another book that so closely deals with what we and our clients deal with on a day-to-day basis. Plus, Gary injects a lot of fun into the pages with his wit and sarcasm. Have you ever read a book and wanted to get into the author's mind? Why did he write the book? Is it based on any real people? Why did it end this way? Were other endings contemplated? Here are these questions and more, but wait. As an added bonus at the end of the podcast, we will count down the previous list of books selected for the FEG Summer Book Club. Gary, welcome to the FEG Inside Bridge.

Gary Sernovitz (01:31):

Thanks for having me. Looking forward to it.

Greg Dowling (01:33):

All right, so I've known you for a long time and the firm has known you for a long time, but would you mind introducing yourself? You're not just an author.

Gary Sernovitz (01:41):

Yes. My name's Gary Sernovitz. I work for a private equity firm called Lime Rock. I've been doing the exact same job for 20 years this very month, and work on kind of business development and capital raising. We're an energy focused private equity firm, but before I joined Lime Rock and currently I've also been a writer and it's sort of been a strange hybrid job for the last 20 years of, you know, full-time trying to get folks like FEG to allocate capital, but also as much time as I'm allowed by the family and by the culture to write as well.

Greg Dowling (02:13):

That is great. And you know, we selected you as our summer book club, and that's maybe the highest honor you've ever received. Is it not?

Gary Sernovitz (02:21):

The Nobel Prize would be second in my obituary to the FEG Summer Book Club.

Greg Dowling (02:27):

Wow. It is quite an honor. So, uh, you know, please think your head doesn't, uh, swell too much, but you know, we, we chose it not just because we've known you for a long time, but because of the subject matter. There's just not many books that you see out there that really reflect what we do and our clients do on a day-to-day basis. It was a fun read. With that kind of introduction, would you mind providing a brief synopsis of the story?

Gary Sernovitz (02:51):

Yes. The book is about the life of the chief investment officer of a college endowment, about $6 billion endowment, an unnamed fictional college. Despite a lot of speculation on who this is and what university it is, and it's really trying over six months of this chief investment officer's life as like in any book you want to create drama and suspense. So he is coming off a period where he was sort of well thought of, well celebrated everything was going right. This book tracks him in a six month period where everything is not going as well as he wanted it to. And it sort of culminates with this kind of looming presence over the whole book. And like a very long, almost a quarter of the book conversation with a hedge fund manager who is the university that he works for, most famous richest alumni. And so it's sort of this tightening drama over the course of, you know, relatively short book and it's talking about the world we live in.

Greg Dowling (03:46):

I guess two questions for you, why you wrote the book and then also why a fiction book?

Gary Sernovitz (03:51):

That's a great question. About seven or eight years ago, I wrote a book about the shale revolution, and there it was like a nonfiction book, you know, and so it was sort of a primer, a voice. It was fun to write. And in my back of my mind, I had always thought I would write a follow up about the age of alternatives, you know, which is so much part of modern investing of hedge funds and private equity funds and the like. But when you have a job that's, you know, every day I have a list of people I'm supposed to call and harass, you know, you really have to be compelled to write something. So this is like something I'd always thought for years, like, oh, I should, I should probably do that this year. And, and never, never came around to doing it. And my wife actually is the one that, you know, a little bit more biographical background.

Gary Sernovitz (04:32):

I worked for Goldman Sachs, right out of college, quit Goldman Sachs after three years to write two novels that sold dozens of copies, dozens, dozens, almost as impressive as the FEG with summer book, dozens of copies and started working in Lime Rock, wrote two more novels that didn't get published. And you know, and so as I'm writing and almost all writing nonfiction for the last almost 20 years, you know, I was kind of a little bit stuck as a writer. And my wife one day said to me, you know, listen, why don't you just take this Sunday, I'll watch our daughter take this Sunday and write fiction. You haven't done it in a dozen years, just go ahead and do it. And I was like, well, I get to go in my office and, uh, you know, not have to report for family duty, why not?

Gary Sernovitz (05:11):

So I did it and effectively I started with a scene, but the whole novel came to me, the shape, the ending, sort of the feel and like in any artistic product, you know, it's the flash of inspiration is five years of stewing on it, maybe in a different form and a couple writers that I kind of admired it to do it. And so for me, why I think ultimately like in a lot of this is, you know, sort of ex post facto, rationalization doing it as a novel versus doing it as a nonfiction book couple, one, it can be funnier in a novel, then you can be a nonfiction book. And that's like very important to me. And I think second, you know, and it's a little bit of a cliche, is like you can tell more truth in a novel than you can tell in a nonfiction book.

Gary Sernovitz (05:58):

And that in this case, I felt was really true. I'm a pretty conscientious person. I'm also like working and have a job. And I think these are some of the parts you appreciate the most, really kind of get to the inner truth and the heart of some of these matters and some of these conversations, if there's no one I'm worrying about offending and, you know, these are composite characters and, and you know, for the most part. And, and so that allowed me to really like, kind of like just rip off any conscientiousness because this is a fictional world that I'm creating that I think allows the reader, you know, maybe a little confused on who are these imaginary firms, but actually allows like someone new to this and, and you're not new to this group, someone new to industry, to really understand a lot more than if it was a very, like, here I am interviewing Elliot Capital, you know, it's sort of like that.

Greg Dowling (06:41):

Yeah, exactly. And they're composites of people and maybe the CIO will start there. Is it you, is some of this your voice?

Gary Sernovitz (06:48):

There's no question. Like friend of mine, he's in the common fund, he's like, yeah, I really love the novel about you. And you know, and, and, and, and like, I think that's like a very common novelistic position, sort of like there, but for the grace of God go, I, like, I imagined my sensibility. There's some like biographical details. Like he's from Milwaukee, you know, he kind of I randomly went to Williams because once I was like, why don't I go to Williams? I'll have this guy go to Williams College instead of where instead of where I went. And so I think there's no question that there's like a central sensibility, but the thing I always remind people is like, I have never for a day of my life professionally allocated capital or even been in charge of, you know, investing capital versus my role.

Gary Sernovitz (07:28):

So I describe the best analogy I can find. It's like I'm like the stable boy in, you know, global finance, cleaning out the stables. And I write a book about what the jockeys must feel like. And like I've observed the jockeys. I I know a lot about the jockeys from being the stable boy, but this ain't, autobiographic in the sense that I've never been on a horse. It's sort of a mixed message. But the underlying sensibility is like, yes, I'm too old to not have that like point of view, be my point of view.

Greg Dowling (07:56):

It's funny because I had a few people who know you, who read this book said, gosh, there's a lot of Gary in the CIO role and the character. And the other thing that I got a lot of questions on is why the CIO is not named. It goes for most of the book as just the CIO. Why?

Gary Sernovitz (08:14):

I think I have two very mediocre answers to that.

Greg Dowling (08:17):

Okay.

Gary Sernovitz (08:18):

One of the first things I ever wrote about Wall Street as a nonfiction was this essay for a literary magazine called N Plus One about Steve Cone. And the whole time, except for one thing, I called him the art collector. And there was something about that like sort of abstraction I felt as like a technique was kind of cool that I was, you know, so it's maybe like I'm an old man, like, oh, I did that once. Let's try that again. I think the second is this book is really fundamentally at its core trying to think about the professional life, the meaning you get professionally. So there's some stuff about his family, but really in passing no real fully fledged scenes about his family. So this is a person who has put his entire, not just like identity of who he is, but his like purpose on earth into this job and a sense of like him thinking of himself as not Adam, the job that's, you know, the name that's revealed. But, but as this job kind of helps in like very subtle way kind of reinforces that the purpose of this book is to try to explore what it means to put yourself in a job in general or put yourself in this specific job.

Greg Dowling (09:26):

And you do a great job. It is uncanny to kind of read and through reading, watch the downward spiral of the CIO. And I think anybody who's managed money has probably felt that at some point in time where, you know, you're just not seeing the ball. You're, there's always a lot of noise in this industry. There's definitely skill, but there's a lot of luck, especially over short periods of time. And it can be very frustrating when you're not, especially if you're in an allocator's role, you're not making that many decisions. Yeah. And so like you're just spending a lot of time thinking and, and meeting with people and a lot of that time can be used for self-doubt. And you do a great job of that. And one of the things I thought you did well is talking about the relative performance pressure. And maybe you can just for people who aren't aware, so any listeners are kind of not familiar with this, can you talk about sort of the pressure of the league tables?

Gary Sernovitz (10:16):

Yeah. You know, the interesting thing is like it is all public and there are articles written and Pension and Investment magazine keeps it, you know, on its website, keeps it going that around, you know, September to November because endowments have fiscal year ending June 30th for the most part, your performance is there for the world and everyone has different levels of admitting how much they care. You know, it's like that some joke probably you either care about your performance or you're lying, you know, it is probably something that I've had both, there are some endowments that I know, like there's people who spend time trying to guess by May, like what, what the relative performance is going to be June 30th. Some of it's an actual compensation. But a lot of it is the weird role you have is that chief investment officer, generally the people who hire and fire you are extraordinarily successful trustees, a lot of them in finance.

Gary Sernovitz (11:08):

So not only is there a sense of like this is public, there is a sense of like your trustees and you know, the funniest character in the book is a trustee. Who is a guy who works at Goldman fictional character, but all his buddies are trustees at other schools. You know, and so there's like a sense of like a culture where it narrows down the unfair often ways like your worth as a human being. Because a lot of it is luck. A lot of it is reversed the next year. A lot of it is, you know, in the two year stretch, it is in ways that other jobs don't have that annual grade. This has a very big grade and you can feel, you know, 8.2 versus 6.9. You know, from the heavens, probably no one cares, but that could be a real judgment of you in the eyes of your peers and your trustees and everyone.

Greg Dowling (11:56):

And it's amazing to me. I always observe and I get it, but you don't know how much risk somebody took to get that return. And it's often the, the one year number, the last year that it is analyzed. And it's funny, like a lot of times people don't compare themselves to like schools they tend to compare themselves to in-state rivals or people in their athletic conference. Like, we have a big rival theme in football and so therefore we lost this year, but we're going to beat them with our endowment returns.

Gary Sernovitz (12:26):

Right.

Greg Dowling (12:26):

It's crazy. That pressure is amazing. Did you talk to any CIOs to kind of get more perspective on that?

Gary Sernovitz (12:33):

I purposely did not want to do too much research on the front end for a few reasons. One, back to like, I didn't want to have other people's words get in the way of the imagination. I didn't want to be too conscientious. So I had people read it after the fact more of like, is this something that I've done crazy relatively to allow sort of some more imaginative freedom and that worry that if this became too much like a non-fiction research project that would sort of cripple the fun of the book. I think the other thing or sort of in the history is like my job as you know, from being a lot of these meetings is like, I'm not usually the guy talking. And so I am usually the one who's like sitting there and like a lot of times people are like, why is this guy staring at me?

Gary Sernovitz (13:15):

Because I was like, well probably I'm bored, you know, I'm just like sitting in the meeting not talking. Partly I'm just sort of like, as a novelist, reading their reaction, trying to guess their thoughts. And so part of it is like just I have a lot of time in meetings trying to presume. And then the other sort of, you know, input into this imaginative process is when you started this job 20 years ago, a lot of the people I knew 20 years ago who are like the junior analyst in private equity are CIOs places. Yeah. I've had enough friends who have kind of grown up in the industry with me that I knew I was going to kick completely off though still, I was a little worried when the first readers came that they were going to be on ear real bozo.

Greg Dowling (13:51):

You know, I don't want to do a spoiler alert kind of thing. But a lot of the story is this kind of elusive, very successful hedge fund manager Michael Herman is talked about and he's, he's an alumni and he's kind of gotten it all right. And they're like, gosh, you know, you have, you talked to Michael and no one really has talked to him. And, and then there's just the ending is just this meeting, the CIO with Michael Herman. And it might be like, I don't know, like a fifth of the book or something like that.

Gary Sernovitz (14:22):

Yeah, yeah. I know, it's a quarter of the book. Yeah. It's even longer.

Greg Dowling (14:25):

Yeah. And it's a big part of the book. So I just was wondering, is he a composite of different characters? I mean the success and especially around the great financial crisis, I made me think of like Paulson, but are there other, like how did you model that character?

Gary Sernovitz (14:39):

There's a little bit in this one of, I can't remember it's the left brain, right brain, but like the engineer, which I've never been like the math side of my career. It's like I wanted this final scene to be, the model was the grand inquisitor scene in the Brothers Care Mazda, which is, you know, something people I haven't read since college, maybe read once after college. But that's about more important things than how do you generate returns. It's like, does God exist? Is the, is the thing. But the drama of that scene, it is like both sides are incredibly right, you know, in this debate and it's almost like a high drama tennis match. It's like, you're like, well I fully agree with Michael. Oh no, I fully agree with the CIO. And so I was trying, so the first step was like trying to capture what is the feel of this theme that I want In order to do that I had to effectively reverse engineer the opposite of the CIO and like this perfect investor, you know, in certain weird ways. And then the third of it is like once you kind of get that, you layer on characteristics to not just make them sort of this kind of function of the novel, but you know, so he like doesn't use adverbs like do I know anyone who doesn't use adverbs? No, no one in the world doesn't use adverts. You know, he's extraordinarily un charitable, like shockingly un charitable. I don't think there's anyone in the world, probably it's un charitable as Michael Hart.

Greg Dowling (15:52):

I think what asked about charity or other things, he said, I find it distracting. And he

Gary Sernovitz (15:57):

Makes some weird joke about he's going to give it all to chickens. He has like $9 billion, he's going to give it all to chicken cancers and things like that. And so all that was like the origin. But then the type, you know, I saw Paul Singer, the FEG Forum, I have a colleague, I have a guy I know who works for point 72. I have, you know, and so there's like a certain very, very math oriented, like this is like my identity is being right and seeing things clearly and you know, 50 people like that. So part of it is like, there's no individual, but it's like when I see a person who fits into this thing and I'm sitting at the FEG Forum looking at the screen, I'm like taking notes about mannerisms and things like that. I'm like, how do you bristle? How do you react to criticism? And so it's like, it's just sort of like finding little brush strokes that you're trying to do, but fundamentally on a character that played this like very essential role in the drama that will end the book.

Greg Dowling (16:48):

It's obviously, you know, made up character composite of people and made up firm, but you definitely have firms mentioned that are real in there. So how did you find that balance between, I'm going to mention a firm that exists versus a firm that doesn't exist? Like Goldman Sachs, you mentioned Goldman Sachs many times.

Gary Sernovitz (17:04):

Most of the firms that exist besides the one guy works at Goldman Sachs, like any of the firms that exist are sort of like background, like people are talking about. So there's no scene with the exception of the one guy works at gold, but like Goldman Sachs like so big, but they don't, they don't really care, you know, but it's like there's not going to be someone from specific venture capital that will be imaginary. So my general morality, I put like anyone I mention will A be background and B, be so big and powerful that they really don't care what's in a novel book.

Greg Dowling (17:34):

They don't care. And they're not reading this book.

Gary Sernovitz (17:36):

Yeah. They're not reading this book as well. But yeah. So it's like, you know, that Michael Herman character like goes on a tour of like insulting Dan Loeb, Ken Griffin, Steve Cone, Singer, like he's going through, Dahlia, he's going through all of them and it's like, I don't think like any of those worry about them because they're such like public figures that are so far above the concerns of the world of this book that they're pretty safe.

Greg Dowling (17:58):

One fictional, firm that's mentioned is Busken Capital. Can you give a little background on that?

Gary Sernovitz (18:04):

Well, one of the, joys of writing a novel, especially a novel that there's a lot of like need for proper nouns, you've got to pick names and you got to sound realistic. So part of the 20 year club is Christian Busken runs real assets, research for FEG and Christian and I talked to him today, like we've spent a lot of time over two decades getting to know each other. I don't know what the origin of it is, but it's highly likely, like, you know, talking to Christian the next day, I'm like staring at the screen. It's like, I need to name this firm Christian's my friend, let's do Busken Capital. Why not?

Greg Dowling (18:35):

This Is Christian's favorite book. He's like, I made it into a book. So, you know, the funny thing is here locally in Cincinnati where FEG is headquartered, his family, Busken Bakery is famous for their cookies. So there's a Busken Cookies versus Busken Capital. And actually the funny unique story for those who care maybe from this area is they are known for, they always do a Republican and Democratic cookie around the presidential election. And it's picked like, I don't know, some incredible amount of the number of sales per side has kind of shown who's going to win ahead of time. And I guess Ohio is a battleground state. So that's kind of one fun fact about Busken Cookies and not Busken Capital.

Gary Sernovitz (19:16):

That'll be the follow up just on Busken Capital. Yeah.

Greg Dowling (19:18):

So next podcast, on election podcast we'll just do on Busken Cookies. It's a humorous book and it, if I may pretty jaded and sarcastic in a lot of areas, which I love. You'd mentioned how, hey, I'm in a lot of these meetings. Maybe I'll do the introduction and then I'm usually an observer and I would say a lot of the wit is almost observational, humorous. You know, if Seinfeld was in invited to sit in, in a meeting, and I mean there's a couple of my love, like one it's kind of somewhat true is I do feel like every IC has someone from Goldman Sachs. I love your comment on just the amazement, how long a placement agent can sit still and in a meeting without talking. What are some of your favorites that you kind of put in there that were like, gosh, I got to put this in there.

Gary Sernovitz (20:03):

I mean, the one chapter, it's actually Christian's favorite chapter is about like the kind of generic private equity firm with three 50-year-old guys and effectively tearing apart a pitch deck as like, and like how cliched it's, and it's like both Christian's favorites my favorite. It's very funny because like guys who are in that, who are friends of mine, it's like, Gary, I can never write our pitch deck again because every single slide we do. And I tell them like, I don't have any better ideas than this, but it's like funnels, like, you know, and a pitch deck, there's like a funnel and the CIO makes a joke about, now that we know how to put a large volumes into small volumes, we can proceed with the funnel. Or there's a blank space on that of the competitor map. And it's all empty around just in this random case. But every single case of every single pitch deck, there's all crowded except there's this like, God opens up the heavens for this one area, just for the one manager. And then there's like some very random jokes about, you know, lock screens on telephones.

Greg Dowling (21:03):

I like that. Explain that.

Gary Sernovitz (21:05):

Well, and, so this is like, everyone thinks this is like super real as like a, like which CIO uses that trick. But as I think you guys know from meetings, like everyone comes into meetings now with their phone out and a lot of them, and I kind of think it's rude, but a lot of people take their phones and like put it face down on the conference room table. And I'm sure this happens all the time in Cincinnati and, but usually before they like look at it longingly like, oh, I got to go talk to FEG now, goodbye phone. I wish I was with you for the next hour. And they put it down, face down. And a lot of times at all these meetings you get to see what's on their lock screen. And so the joke of this is like, the guys like, yo, because as you know, there's a lot of lock, there's a lot of heuristics, there's a lot of weird things.

Gary Sernovitz (21:43):

But like, he looks at the lock screen and he is like, well if it's him just as like three children, the hedge fund, six three pack of children, that's fine. But if it's like, and I'm, we've all seen this. Yeah. There's like guys who have like family men and I hopefully I hopefully I, I don't know your lock screen. A guy who has three children, but his lock screen is himself like running the end of the New York City marathon or fishing. It's like him with like a tarpin. And so this is the joke, it's like the CIO is like, there's something wrong with that person. He's not putting his children, it's putting him running a marathon. I'm out. I'm out.

Greg Dowling (22:15):

Yeah. Narcissistic and in their pictures. Yeah, that's great. Yeah, I thought that was interesting and I hadn't thought of that. I know there's been, there's all kinds of the crazy, I've heard people checking on Uber ratings for people. There's all kinds of crazy things that people do to try to get an edge on due diligence. But I thought that was good. I also love some of the investment examples and they're funny because they're bizarre, but they're also not that far from reality. I love, one of my favorite is you have emerging Europe and you make the comment in there that the CIOs makes this comment that like, didn't Europe emerge a thousand BC and there's this like a Polish convenience store that the big investment idea is they're going to move into Slovenia. That was good. And I love the Uber for babysitters. That's probably another, another great one.

Gary Sernovitz (23:00):

I mean, the one, I mean, that takes a very large, that chapter's one of the longest chapters. So just one context for people who haven't read it. A the book is mainly set in meetings and telephone calls and some meetings are internal meetings, but a lot of meetings are a sequence of different managers pitching the CIO. And so kind of bringing you into this room, like when you describe it to you, you're like, that's a great idea for a book. When you describe it to my mother, she's like, what do you, what is, what's, what did we do wrong? Like, why would anyone ever write a book like that?

Greg Dowling (23:26):

And who'd read this? Who would read this book? Yeah.

Gary Sernovitz (23:28):

She's like, not me son, not me. But, um, there's a lot. And I tried very deliberately to back this idea that there's, there's a kernel of writing the age of alternative books in this novel. So I tried deliberately to talk about venture in this age to talk about public market, to talk about hedge funds to talk about quants. And so one of the, the longest, and probably because venture capital is such a huge part of what endowment success has been for the last 20 years, but investing and tech, broadly speaking in the Magnificent seven and all that, it's so broadly what it's been that this had to play. Venture capital's more important than Slovenian convenience stars in it. So there's like a very long scene about some very bro-y venture capital guys who like to mansplain a lecture. But like one of the things their big success was is Uber for babysit.

Gary Sernovitz (24:12):

Now this book took a long time to get published and finished. I was very careful when I wrote the book till I Google, there was no such thing. And there's one thing that came out that failed there is now basically this business model called, Wendy, I think it's called. And like I have like friends who use it where it's like you just go on the app and you're like, find a babysitter for your child that you've never met before. So I have one friend who is like tracing this companies rise like, Gary, you got to get this book published because you are like a prophet of what this is going to be. Now you're just reporting on an existing company and they're going to sue. I was like, I can't control the pace of the development of Wendy or this, but it now exists out of my imagination, coincidental this of this idea.

Greg Dowling (24:52):

So you should get some like some options on that.

Gary Sernovitz (24:54):

Yeah, I should, I should, I should.

Greg Dowling (24:55):

One of my other favorite parts of this is that you have the GP, and this is kinda later in the story where a GP makes the comment that there are four types of LPs. I just love this. Could you maybe explain the four types and describe them a little bit?

Gary Sernovitz (25:09):

Yeah, so this scene to bring people is like a GP that's like circling the drain and he had success but is basically about to be a zombie fund. And just to add drama, he's like, this is my last meeting I'm ever going to have because you were one of my anchor investors and you're clearly indifferent. And they were different because you know, they didn't perform right. And like the CI was like, this is very awkward. Like, you know, into his head like, why am I here for this man? I'm burdening the failures of his firm and seemingly unfair of his life. But this GP is just like, I'm just going to tell like it is, so he talks about hating these meetings and this is, I've spent a considerable amount of my time in meetings with different of these. The grillers are ones who people are just like asking you constant, constant questions of things like how could this possibly have any relevance to like whether your decision or whether you think we're gonna make eight good investments.

Gary Sernovitz (26:03):

And, but there's just like, it's just like barrage. The testers are like a subset of the grillers where they ask and seemingly like they have like tricks or maybe heuristics or they know you'll say like, Hey, this is a 17% EBITDA margin, what's the EBIT margin? And like a lot of times as managers like, I really have no idea. And so the character is like, I never know if I should just make up a number or I don't know, you know, the statues, which is, you know, probably the most unsettling is there are definitely alarm, you know, a pretty big chunk of LPs that you go in start talking and you know, maybe they ask a question, maybe two, but at the end they're like, thank you for coming in and you know, and my, and after the GP leaving the room, you're like, how do we do it?

Gary Sernovitz (26:42):

I have no idea. And then the fourth is the character jokes. Like these tend to be the most satisfying mediums, but probably the least follow through. Like you think you're like Taylor Swift going to the fan club. They're like, that's such a great invest. You guys did great. This is so smart. You're, you know, you're awesome. Like, we're like, we're, this is awesome. And the joke of all these is like, all the GPs go into these meetings and they read into this LPs reaction. All of these meetings, the LPs are just have a personality or have a strategy and they're just being who they are and gives you no information. Actually and the GP, whether financial relationships going to do emerge from this.

Greg Dowling (27:19):

I love that part. And he is like, as you said, circling the drain. There's going to be no re-ups, it's going to be a zombie fund. And he just kind of goes off on a soapbox. Have you ever wanted to do that?

Gary Sernovitz (27:30):

Oh yeah. That was the, you know, I mean Lime Rock's very successful firm. Been a business for 26 years. 26 years, you have some quieter days. And he's a lot of that anxiety 2008, you know, oil part of our business in 2015 where it's just like this. And, and the one, there's like a very heartbreaking rant he has where he counts the decisions he's made in his career. We should have done these eight deals we passed. We shouldn't have sold those four, we shouldn't have done these. And he is like 15. And I've done that math a lot. And there's definitely, you know, to the actual question, there's definitely a part where, you know, in my job someone comes and says like, Gary, you know, Landmark New Energy two is great, but we're not going to do it because you know, you have too much hardware. I'm like, we don't have that much, you know? And so I, I will sit there and my job is to say, oh then no, we'll get you the next time. Completely understand, no intelligent decision. But when I hang up the phone, I first like double check that the phone is hung up, and there are some rants delivered. There are some rants delivered, in the privacy, to triple check, triple check that the vote is already hung up.

Greg Dowling (28:36):

Confessions from a GP. Hey, without naming names or maybe changing names to protect the innocent, what are some of the weirder GP LP meetings that you've been in?

Gary Sernovitz (28:46):

There's a non-answer, answer to this. I was doing something with merger capital and this question came from the audience and another GP asked me and I was like, well the obvious one is when the guy falls asleep and I thought this was going to be like, they have the audience crack up and the GP, this other GP that doesn't count. That happens all the time once every 18 months. You are so boring or they're so overslept that they actually fall asleep, in this. I think the other ones that are often unsettling are the ones where there's clearly a language gap that no one acknowledges and you just are like, as a GP you're just like so tempted, you know, there's a performative aspect to pitching and you're so tempted, like I am here with three people who clearly have no idea what I've just said the last 40 minutes I'm going to start saying the Lime Rock strategy is only to invest in Apple stock or maybe Apple orchards.

Gary Sernovitz (29:36):

And they're going to continue knocking their head and no one's ever going to notice and they're going to afterwards, you know, give the business cards with hands and we're all going to remain hands and we're all going to remain friends. So I think, I think the ones where there's just like a complete myth that everyone's like deeply engaged, gets revealed by either clear, no one's understood or falling asleep are the ones that are repeated based. And then, you know, I think you guys probably have more stories of so many examples of what someone after I wrote the book, which I didn't get in the book, called the show up and throw up meeting where like a GP just like walks in, you are not a human, they don't care anything about you, they're here because it's Wednesday night and there's another performance of this, and they're going to give their thing and they will not, you know, even if you ask a question, it's like someone's heckling them from the audience, they're going to continue on. I think those are the equivalent, kind of the worst meetings on the other side that show up and throw up.

Greg Dowling (30:26):

I just recently used that example, the same phraseology with one of one of our guys after a meeting the show up and throw up. It's a thing for sure. I can't tell you how many bizarre meetings I've been in and you know, domestically, internationally, you name it. But this book, it's such a long gap in writing. Have you kind of got the creative juices flowing in or do you think you're going to write another book here shortly?

Gary Sernovitz (30:47):

I think maybe I have, I don't have an idea. I've been writing magazine articles. I have another one that is taking my time now about sort of financially I run a big thing about JP Morgan, Chase, and another one about whether or not people are moving to Florida. So I think like just given the job, I have one thing I can do at a time that's not working for Limerock and being a human being as a father and a husband and all that. So I think after this article is done, I will think about it. I've kind of have decided that like the best novels are the ones that don't come out that frequently that have to be written. And there's a part of my life just as like I could have been a CIO you know, I could have been a CIO had I left Goldman Sachs and took a job as like a junior analyst at Cornell's endowment.

Gary Sernovitz (31:31):

I would hope by now it'd be the CIO of something. I mean, maybe it happened, maybe it didn't, but it's not like impossible to think there's a path that if my two novels had sold more than dozens of copies, I would've had a career as a writer. And so I spent a lot of time thinking about that and there the pressure to have to write to survive, to come up with book ideas. I have the luxury of not having to do that. So I'm taking that sort of luxury and calling it a virtue. But it's an interesting, dynamic for me at least of like just the random serendipity that is life. Like I have declared it again, the virtue that I'm going to wait until a book grabs me. Like this book I had to write, like after I came up with this idea, like I had to write it. I don't want to ever care that little about readers that I write a book because, well, I'm a writer and this is what I need to do. And it's not a great, it's going to be half baked, but why not?

Greg Dowling (32:19):

It's interesting. I did have one last question on the story. This current story of The Counting House, and I don't want to give away the ending, but I did want to ask you if you contemplated a different ending. One of the things that I had heard from a few people here who read the book and they're like, yeah, I really like the book, but it would've been great if at the end the CIO did this. What what were some of the other potential endings that you worked through?

Gary Sernovitz (32:45):

There's like, the big scene is like a complete sort of inspired the scene before the final scene by the Brothers Karasov. The final scene is inspired by Henry James and, and every Henry James novel. You know, it's a success because there's enough interior drama because like nothing happens to the CIO during this entire book. He has meetings, he's a success, he talks to people once he goes outside, once he throws his laptop, it's an interior novel.

Greg Dowling (33:10):

He's having some emotional issues, right? And he is, you know, walking around the campus thinking about students hiding from students. He destroys his laptop. It's mostly kind of his internal issues that he's wrestling with.

Gary Sernovitz (33:20):

And so for me, what Henry James really and you know, argue but invented, but the most important in my thing is like in every Henry James novel, if it's successful, you are turning the page like this is a pot boiler, trying to find out who is the murderer based on a decision that this character made. So portrait of a lady most famously, does she go with this guy? Does she go with that guy? Does she go off single and you don't know Yeah. For the final page and even the final page, you're like, what happened? I gotta read this again. So that was always like the intention, like I wanted to end it very Henry James style and also the sense of a book successful is you wouldn't have thrown it across the room if he did other things. So there is, and again, we don't want to give it away, but there's like all three other obvious examples you could have done and there's like a hint of a gun, you know, and there's like all this kind of stuff, you know, in it.

Gary Sernovitz (34:10):

But you want the book to say he is a rich enough, deep enough character that at the last moment I would've could've done it. Now despite the book being like talk about sort of sarcastic at times and, and maybe a little jaded, fundamentally I'm a pretty optimistic person. I am tend to be with like Stephen Pinker or these one that the world is actually getting better. So I think it would've been maybe fun if he had a different ending, but I ultimately, if the choice in theory that he made is like muddle through as best as we can, this wonderful and horrible life. Now that's not the most interesting new things. That's mostly what novels say. Let's muddle through this horrible, interesting life. Like most novels, that's how most lives end we muddle through. So, but I thought it was like the truest both to my view on, you know, this back to my, this is my point of view, but also the success of the book is like people could imagine another ending and it wouldn't have been insulted if he took another end.

Greg Dowling (35:04):

It's kind of like the series finale of the Sopranos when it goes black, right?

Gary Sernovitz (35:09):

Yeah. It's like, but if everyone could only think, well you obviously did this right then it would've been a successful series, but you could realize a lot of things could have happened because he's a rich and deep character. That's exactly, exactly the same.

Greg Dowling (35:21):

But you're right, I actually had to read that page a couple times to be like, did I, did I miss it? Like it doesn't kind of hint at something, right? But it doesn't, it's not definitive in any way. So I got, I don't know if it speaks to the how jaded my colleagues are, but there were a few people that suggested more darker endings.

Gary Sernovitz (35:38):

Yeah, no, I mean, but it's like, it's a book. You can cross it out and just write your own ending in a book. Like I can't control, I can't control it. You know, I, one of the more, it was like some very random person's like, yeah, my colleague and I discussed it like a person I never met, like did colleague and I discussed it for like an hour over lunch the next day. And like that's the reason you write a book. Is not necessarily to endorse an ending, but to like have people talk about the ending.

Greg Dowling (36:00):

Yeah. No, that's right. You've mentioned a lot of some literary figures and there's some hints to some different things in there. You can tell reading this book that you're someone who not only likes to write but who likes to read and appreciates other authors. So I just wanted to maybe finish with, give us your favorite sort of non-investment book and then maybe your favorite investment book.

Gary Sernovitz (36:22):

My favorite non-investment book is like author Norman Rush. His books on Botswana mortals and Ma mean are just like books that have a lot more action but have both just like a joy in every sentence, but are very rare when they come out and are about the most important issues of why we're being alive, but never feel ponderous and also pretty joyful. I don't know, like a book that, I'm trying to think, a book on investing. I have like a soft spot for the page turners about scams and frauds. So Bad Blood about Theranos Billion Dollar Whale. I just read the book about Bridgewater.

Greg Dowling (37:04):

Oh, the Fund.

Gary Sernovitz (37:04):

And so like those books, I don't know if one stands out among them, but I'm like, that's my beach read. Yeah, I love all those books. It's sort of like the dark side of what we do. And in some ways, you know, this book may be self-defeating as a commercial product was trying to be the antidote to those books. Because those books give the reader like, oh, wall Street's all exciting in all scams. No, actually Wall Street is mainly making hard, ambiguous choices of a lot, but limited data and trying your best. I was trying to make that story as fun to read as stories above Elizabeth Holmes, you know, kind of adjusting, you know, the knobs on a fake machine. And so that's sort of a, you know, I don't know why I did that instead of just finding a scammy story to tell. Maybe that'll be the next scammy story to tell.

Greg Dowling (37:50):

No, those are great books. I also like to read and I do read a lot.

Gary Sernovitz (37:54):

What are your, what are yours?

Greg Dowling (37:55):

I would say, and maybe it's recency bias, but I, I'd say anything by Eric Larson, I just finished his latest book, but I just was reminded how much I've enjoyed all of his other books. The Devil in the White City, Quicken the Vile, or there's so many great books he's written that are historical in in nature. Yeah. And this last one that just came out as more, the beginnings of the Civil War. Any of those are really good. Also, like the genre that you mentioned. And I like them because you know, a lot of these people, maybe they're not your best friend, but you've met themem at a conference. They describe places that you've been like, Hey, there's this meeting at this hotel or this restaurant and I've been there. That's kind of cool. I always enjoy those and it is a little, they, they tend to be a little gossipy and yeah, it is kind of a fun beach read.

Greg Dowling (38:38):

Yeah. Gary really enjoyed this book and we very much enjoyed this podcast, so thank you for participating.

Gary Sernovitz (38:45):

Thanks for having me.

Greg Dowling (38:47):

We often get asked what books have previously been selected, who we are happy to share them with you now. These books were selected mostly due to the topic and what we were discussing internally at the time. This is not a list of the best literary books of the year, although most are very well written and we've enjoyed all of them. As you know, this year we did the Counting House by Gary Sernovitz and in 2023 we did AI 2041 by Quinn Fan and Lee in 2022. The Power Law by Sebastian Malby 2021 was Code Breaker by Walter Isaacson. We took a break in 2020 due to Covid, but in 2019 we did Grit by Angela Duckworth and it all started in 2018 with Principles by Ray Dalio. And we will continue to add to this list each and every year, and we will update you as needed.

Greg Dowling (39:43):

If you are interested in more information on FEG, check out our website@www.feg.com. And don't forget to subscribe to our communications. You don't miss the next episode. Please keep in mind that this information is intended to be general education that needs to be framed with the unique risk and return objectives of each client. Therefore, nobody should consider these to be FEG recommendations. This podcast was prepared by FEG. Neither the information nor any opinion expressed in this podcast constitutes an offer or an invitation to make an offer to buy or sell any securities. The views and opinions expressed by guest speakers are solely their own and do not necessarily represent the views or opinions of their firm or of FEG.