Generational Wealth, Intellectual Property & Building Legacy

Wealth is not just monetary. It's not just assets.

Buddy Ozan is the president and founder of Probity Advisors, Inc., a Dallas-based financial services firm that has helped individuals, families, and businesses build and protect wealth for over 60 years through integrated portfolio management, financial and estate planning, retirement, risk management, and tax services.

There are 3 forms of capital that make up wealth: human capital, financial capital, intellectual capital.

Buddy has spent decades helping individuals and families navigate financial decisions that extend far beyond a single market cycle. Buddy has seen firsthand how wealth is built and how it's preserved across generations. You have managed two emergency landings.

Takeoff and one of the engines quits and the other engine quit. By the time I touched down, we were probably doing about 60 miles an hour.

Well, it sounds like you did a stupendous job.

Our Bible lesson that week was on God, the preserver of man. I still remember the message that I got was You're going to be okay. Yeah, this is fine.

Yeah, buddy. Welcome. Welcome to the deal table. Welcome to the pig room at old Parkland where pigs fly literally on the walls here.

Well, it's great to be here. I just hope I can help the team.

You can help the team. Look, I'm excited to have someone of my era. You took over your father's insurance business in 1976, the year I was graduating from high school. You became one of the first fee-only registered investment advisors about the same time I was making that transition out of a wirehouse as well. And that wasn't a thing, right? That was unusual to step out into a fee-based RIA. Now, it's very, very common. Back then it was very unusual. In fact, when I resigned at Dean Witter Reynolds, usually when you tell them you're leaving, they escort you out and take your keys and put your stuff in a box. And he laughed. He said, what are you going to do? I said, I'm going to start a fee-only RIA. Thought it was so ludicrous that he didn't even challenge me. I was free to leave the building and get my stuff. So talk about taking over your father's business in 1976. You're fresh out of SMU.

Well, actually, I was fresh out of SMU in 1970, and I went to work for— I swore I'd never go to work for my father. He had a life insurance agency. Nobody wants to do that out of college. I believe strongly in the power of prayer. This is not a Bible thing. I'm not a Bible thumper. I just know that when I've asked for guidance, I've gotten it, and it's never been what I've expected. Spring of my senior year at SMU, I decided Vietnam was hot. I wanted to fly. I went down to Navy Dallas, which was in Grand Prairie at the time, and I took the flight aptitude test., and I scored the highest score possible on the flight aptitude test. And they offered me a commission, and I was extremely excited about it. My counselor at SMU said, gee, buddy, you're 4 hours short of graduating in May. The Navy was about to issue me orders to report to Pensacola in, in May, right after graduation. You know, I went out to Navy Dallas and explained the problem. No problem at all. We'll just defer your Report date, it was May 18th, 1971. I remember this extremely well. I graduated in the summer of '70 and my dad said, well, you need part-time work until, you know, before your report date. I've got some projects that I want you to do at my office and I'll pay you. He had me killing people on paper. You know, our client had passed away or as if the wife of the client or the spouse of the client, back then it was always the wife., you know, had passed away so that they could see in 1971, the maximum rate was 70%, the estate tax rate. There was no unlimited marital deduction. And so if the spouse passed away, there was, and there was a $30,000 exemption that year. It rapidly went up to $60,000, but still, you know, you take a million-dollar business, closely held business, as you know, there's no liquidity. So the wife, in the state of Texas being a community property state, owned $500,000 worth of that business. And if she passed away, you got a $30,000 exemption and you were taxed on $470,000. It was a graduated tax, so it wasn't at 70%, but, but still it was, you know, a considerable amount. And it was fascinating. I had to learn how to value businesses. I took over my dad's business in 1976. In the meantime, Guardian Life Insurance Company was his— he had a general agency for them, and they were the first insurance company, life insurance company, to own, to create an insurance company-owned mutual fund. And George Conklin, the then president, his vision was to take this mutual fund, which the Guardian Park Avenue Fund, which is still there. His vision was to get all of their life insurance agents licensed and then distribute this mutual fund through their through life insurance agents. So back then, the only securities license was the NASD license, National Association of Securities Dealers license. There was no Series 7 or Series 6, just the NASD license. The head of the agencies, Art Ferrara, called my dad and said, in order for you to keep your GA's contract with Guardian, you're going to have to get your NASD license. My dad was a World War II veteran. Had to get his GED to be able to get into the service, and he wasn't about to take a test. So he said, well, what if I had a manager in my agency that had his NASD license? And, well, that would work. Buddy, come here. You're going to get your NASD license. That's kind of the beginning of how I learned estate planning right out of the box. Estate planning is not— it's super important to consider the end of the game, but there's all this in-between planning that really needs to be done for a family to create wealth. My company, Probity Advisors, we pride ourselves on helping people create and conserve wealth. Well, you have to create before you can conserve it. When he sold the agency to me, we really started moving the insurance agency toward a planning company. My dad was working for me. He didn't understand that. He retired in 1984, but in the early '80s, when the very first IBM desktop computer came out with, I think it was 500 megabytes of memory, floppy disk, I bought I bought one and I bought a Luhmann's financial planning package and started doing written financial plans for clients.

In the 1980s?

And this is probably '82, '83. And my dad retired in '84. And, you know, we continued on a transactional basis until, About 1994, you're talking about being early to the game. I had a friend, a member of our church, who was a CFA. He had registered as an independent investment advisor. He cleared through, uh, Donaldson Lufkin Jenrette, as I recall. We went to lunch a few times, and I was just enamored with what he did. I mean, I think he had $25 million of assets under management. I think he charged, you know, 1% per year for those relationships. And in 1994, someone making $250,000 a year with no payroll, and he was just basically, he was a stock picker, he was a CFA, and he, I just thought Wow, that's cool. He's providing a service, he's getting paid a fee for providing that service, and he has no conflict of interest with his clients. Except I guess when the clients want to withdraw something from their account, you know, but still he's— there's, you know, if you're on the transactional side, there is a natural conflict of interest. And I didn't like that. So I came home, we had two sons, one was one year away from starting college. And I went home and I said to my wife, I said, you know, we're going to have to tighten our belts because I'm going to go from a transactional compensation model to a fee-only model. And it's going to take a few years and it's going to be real expensive.

Before we get too far away, did you end up going to become a Navy pilot?

Great question. Yeah. Back to prayer. January of 1971, right after I went to work for my dad, my church elected me to a lay position. Our church, we don't have ordained ministers. Well, our ordained ministers are the Bible and our Bible study text. And but you have to have readers. And so I was elected to a reader in our church as a lay minister, and it was a 3-year commitment. So I made an appointment, went to the captain of the Navy Dallas, made an appointment with him, went in and explained the situation. He said, "Son, it's not a problem." He says, "You can serve your church, you can serve your country. You're going to have to choose. Now, if you choose to serve your church, we'll give you an honorable discharge," because I had already sworn in. He says, "But since you didn't serve on active duty, your name will immediately go to the draft board. And I had a fairly low draft number. I knew I would be drafted. Once again, praying for guidance, uh, no one had ever attempted this before, but okay, wrote the Navy and requested an honorable discharge. I wrote my draft board and explained the position I was in. I had the clerk of our church write a letter saying yes, that I indeed was elected reader. And then I had the, the clerk of our kind of the governing church in Boston write a letter explaining what the duties of this, of the, of the reader, the first reader, is. Duties of the first reader are— took my post in the church first Sunday in March of 1971. And on that Saturday, I got two things in the mail: an honorable discharge from the Navy and 3, 4D classification, which was a ministerial deferment from the draft. I, you know, I told the Navy, this is only a 3-year commitment. Defer my report date to Pensacola and I'm in. And they said, no, you'd be.

Too old.

And what, 24?

Yeah, yeah, yeah, exactly.

The NDA. So what was that like? You know, because like, you know, going to be a pilot, there's a lot of adrenaline. Going into that? You know, like we've had a former guest, Jim Williams, a former 2-star general in the Marine Corps. And, you know, he's so even keeled, but through dialogue, through conversating with him, conversing with him, you just learn that he's an adrenaline junkie. So like I would assume people that were wanting to be a pilot, there's that adrenaline drive, but then come to find out it's like, hey, we're choosing a life of church and insurance, which does not seem very adrenaline heavy.

No, and that's the reason I got into the investment advisory business. There's plenty of adrenaline there. I've always said there are two things that move our markets, our economy and our markets. The markets are either moved by human emotion in the short term. The long term, our markets, our economy is moved by human progress. You know, in our business, there's plenty of adrenaline in the short term. And yes, and I did, by the way, I did become a pilot, a private pilot. I have 1,700 hours in instrument rating and multi-engine rating. Quit flying back in 2008, 2007. And so our business appeals in a way to that side, but also in the long run, our economy, our markets are made— are governed by human progress. And make no mistake about it, our economy, our markets are being moved in the long run by human progress, and we're making progress, both morally, ethically, and economically. I think that that's one of the things that makes our business so, so wonderful, is if we can help ourselves and our clients get past the adrenaline rush and just focus on long-term goals, both financial planning and estate planning goals, and making sure that the portfolios that we're running for those client families meet those goals, then our client families have long-term success and we have long-term success.

The discussion about transaction and transitioning out to fee-based planning we have in common. My situation, I was working for a wirehouse, a well-known Wall Street wirehouse, and This was in the '90s and they recognized that they could create proprietary funds, proprietary products, mutual funds, and other vehicles with fees in them. And instead of being sort of the tail wagging the dog of markets going up and down and transactions ebbing and flowing, they would have the steady stream of income from managing product. So, I went from sort of being a customer's man, as they used to call it, making independent decisions for my client's wellbeing to, Lane, you're going to sell 100,000 shares of the new XYZ emerging market fund. And I was like, no, I'm not going to do that. And so, I thought it was a smart move on the part of Wall Street in terms of the way they operated their business model. I just didn't want to be a distributor, a salesperson of proprietary products. And I'd learned about this Certified Financial Planner coursework. I became an early CFP back in the early '90s. I couldn't use that on my business card because they didn't understand what it implied to the client and whether or not the firm would have liability. So, I get that, but you know, it allowed me to sort of navigate to a place where I went, This doesn't work. I can't do what I want to do, which is financial planning. And the epiphany of, wait, I don't want to be in the business of picking stocks or timing markets or distributing proprietary product. I really want to look at my client's situation, evaluate it, make recommendations that are goal-based, which was novel. And certainly for you in the early '80s to be engaged in that, you must have been a one-man band. I mean, I don't know many— I don't know that the industry had even started evolving evolving in that direction at that time.

Yeah, I was clearly a one-man band. And, and, you know, as I said, in 1994 I went home and told my wife, okay, we're going to start weaning ourselves off of the transactional business to a fee-based or fee-only business eventually. I started selling C-share mutual funds. Yeah, a very poor way and a poor man's way of, of moving from annual transactional compensation to fee-only because C-share mutual funds basically paid the rep— well, after the haircut that the broker-dealer takes, you know, somewhere between 50 and 90 basis points per year instead of whatever after the broker-dealer takes from anywhere from— what, 10 basis points to 2, 2.5%, something like that per year. But in 1998, I had two disparate clients. They didn't know each other. There was no contact whatsoever. And this happened within a 2-month period. I think one in October and one in late November. Came to me with the same problem. One was a charitable organization, and the executive director was a friend of mine, and he said, you know, we have a million-dollar portfolio that we're removing the investment advisor on it, and we want you to become the investment advisor. But here's the deal. We want you to buy individual stocks and bonds for this portfolio, and we trust you. We don't want to pay you any commissions on the transactions. We want to pay you a fee, you know, for managing, and, and we don't want you to call and ask permission when you buy or sell something. We just want you to pull the trigger. And I'm thinking, oh my gosh, I said, there's no way my broker-dealer is going to let me do this. And so as I was mulling this over, this other client calls about a month later and says, I have $500,000 in cash and said the exact same thing. He was an individual client. And I'm like, okay, let me, let me see what I can do. I'll get back with you. I called the president of the broker-dealer. I had actually introduced her to the company that got her her job. She was— she had been— she's an attorney. She had been the head of compliance for a previous broker-dealer that I was affiliated with. And after I moved broker-dealers, there was an opening in the presidency. And so I went to the chairman of that company and said, hey, I've got somebody that would make a fabulous president, and it was Lee Goodman, uh, was the president. And, and I explained to her the situation, you know, and she said, well, what you're telling me is that you would like to take— start taking accounts on discretion. And I said, well, yeah, I guess so. And she said, well, she said, I wouldn't do this for any other in the organization. She said, but if you'll write out your methodology both on the buy side and the sell side, I'll consider it. I did, she did. We cleared through Pershing for a few years and then didn't work very well. And I was stunned once I had made that commitment and started taking assets on discretion and started doing research. And I didn't raid any of my previous book of business, mainly because most of these people who are investors, uh, we use mutual funds primarily, and they had a lot of embedded.

Capital gains.

And, and, you know, I couldn't go back to those clients and say, hey, I've got a great deal. Now we're going to shift to a fee-only arrangement. Now, uh, let's sell all of your mutual funds, pay the capital gains tax. And, you know, I just didn't do that. I was stunned at how rapidly I acquired new clients, referrals, as you experienced. When you're doing the right thing and once again, following guidance and doing right by the, by the clients, your business grows.

You just said doing the right thing, you know, by your clients. Were you surprised how much your clients were talking to each other and, and like the referral business to like grow that rapidly?

Oh, absolutely. In 2002, literally in April of 2002, a number of things were happening that I was almost oblivious to. April of 2002 was right after 9/11. The economy was in the tank. Nobody was hiring. I wasn't aware of that. I was focused on taking care of clients and doing research and fundamental research and, you know, building portfolios and such. Second thing that was just about to happen was the, the, uh, the dot-com bust. Fortunately, my heroes had always been, you know, Warren Buffett, uh, Sir John Templeton. You know, I was very much on the value side. And so our methodology was— my methodology was fundamental research, um, and adhering as closely to Marvin Portfolio theory as I was capable of figuring out at the time. As the market began to readjust to the dot-com era bust, and our client portfolios did quite well. I mean, they didn't, you know, everything dropped. The S&P dropped 48% between 2002 and '03. And, you know, but our portfolios maybe dropped 10, 15%. And most of our portfolios were, were invested to, you know, generate income for basically widows and orphans, um, uh, clients. In April of 2002, I found myself working 16 hours a day, 5 days a week, 8 hours on Saturday and another 5 on Sunday. I'd meet with clients during the daytime hours, and then I would do all my research, blocking up trades at night, you know, after hours, after working hours, and then cleaning everything up on the weekends. On Saturdays, usually 8 hours in the office, you know, doing the paperwork, making sure that everything was copacetic with regards to allocation to clients and all that. And then on Sunday, I'd spend about 5 hours preparing for the next week. And I realized, okay, if my business was growing— oh, I had 2 people on payroll that were just assisting, you know, doing paperwork and such as that. And I was like, oh man, I'm going to get burned out. I need help. I need to clone myself. Well, my younger son was a senior at SMU majoring in financial consulting, but I had always told him that he had to go to work for somebody else before he came to work for me. He, you know, he thought he wanted to come into our business and I was thrilled. But I went to work for my dad right after graduation from SMU, and it hurt our relationship. It got repaired, but that was not good. And so I told both my sons, if you want to come to work for me, great, wonderful. You have to go to work for somebody else first. But Tyler, my younger son, had introduced me to his business law professor at SMU, Barbara Kincaid, is one of the most wonderful persons in the universe. Got to know her fairly well, and I went to her the spring of 2002 and said, I have to clone myself, you know, and I explained the situation. She said, no problem. She said, I've got the guy for you to meet, Dennis Grendel. He was in the career development office for the Cox School of Business, the graduate school. What I didn't realize is at this particular moment in time, Cox was thrilled to have anyone interview because everybody had canceled interviews. Fast forward, actually I hired 2 people beginning July 1st, or the first Monday in July in 2002. One out of the graduate school and one undergraduate. And the one out of undergraduate, Adam Bronson, he's a partner in our firm now, had had an offer from Goldman Sachs with a signing bonus. And they, so just before graduation in May, they told him, keep the signing bonus, but the deal's off. And he was about to go on his honeymoon. He had been a presidential scholar at SMU. So Dennis Grendel actually, he gave me an office in the Career Development Center at SMU and he lined up 10 of the smartest human beings I'd ever interviewed. As it turned out, I wound up hiring the number 2 graduate from that particular class in finance, Chris Sarro, and he's a He's a partner in the firm now. Tyler, my son, worked for Kay Bailey Hutchison, a U.S. senator in Washington, for a year. The plan was he was going to work for her for 2 years and then make up his mind. And after 9 months, he called and said, Dad, there are 2 things you don't want to see made— sausage and law. And I said, okay, you finish out this year and I'll bring you back and hire you. Within a year, I had made 3 key hires, all 3 of whom now are partners in the firm. Chris Sorrow has a CFA now. Adam Bronson has his CFA and CFP. Tyler, my son, is a CFP, and he, he really leads our team of planners, the CFPs. But, you know, once again, came out of prayer for guidance and, and just doing what seemed to be the right thing to do for clients, and it.

Sure has worked out nicely. Understanding what you do as far as creating wealth, preserving wealth for the, you know, the lasting, as long as you can with these families. So, you know, the patriarch, the matriarch, long past gone, their descendants survive. But statistically with generational wealth, Isn't it like 2 or 3 generations, then all the wealth is gone because by the.

Third generation they squander it?

Rags to riches to rags.

Something like that. My dad used to say.

Yeah. Are you preventing all that? Is that the value proposition of you and your firm?

Part of it. Yeah, absolutely. Yeah. As a matter of fact, in the English language, there's the shirt sleeves to shirt sleeves in 3 generations. Apparently, that is very much a human mental condition because the Chinese have a very similar saying, which I can't say it in Chinese, but it's roughly translated, rice paddy to rice paddy in 3 generations. Very few closely held businesses survive the death of the first generation. We're helping families break that, and part of it is the recognition that wealth is not just monetary. It's not just assets. There are 3 forms of capital that make up wealth, and if you leave one piece of that out, it's like a 3-legged stool. If you take one leg away, the stool is not gonna stand. And the three legs are human capital. You have to have people, you know, to perpetuate wealth across generational lines, or you don't have generations to pass it to. Financial capital. But the third is regularly ignored in estate planning and financial planning, and it's intellectual capital. One of the things that we help our families do is perpetuate the intellectual capital that allows them to generate the wealth in the first place. It's not an easy chore. I mean, one of the things we do, which might be really interesting in your line of work, is we've actually had families video the patriarch explaining what it, what it took to get the family wealth to where it was when he's about ready to transfer it. But there are all kinds of techniques that we use, and one is written communication. You know, I believe strongly in, if you're doing an estate plan, the attorney— we choose the attorney well, he or she is going to do a great job of drafting documents that will, that will do the job of transferring the monetary capital, but the intellectual capital, the only way that you can transfer that is to have someone in the family document it. And so we encourage our families to write letters of testamentary intent, but include in that family stories, things. How did you achieve this wealth in the first place? In that way. And we always tell our families, you're writing to someone that you may never know. Your great-great-grandchildren maybe are going to read this, or they're going to watch the video, or they're going to listen to the tape. And so you want to talk and use a tone and a language they can understand what you've gone through to accumulate the financial capital that you're trying to pass on.

So, so those three pillars, is that like a common thing in the, uh, in your business, or is that more, is that like trademarked by your, you and your company? Is it like a common theme?

I don't know.

Uh, it's something that you hear it articulated as he did very often.

The reason I ask is, is I have a friend of mine out in Florida and, and her business is, uh, paraphrasing the delivery of the business itself, but it's like helping a family office with their troublesome kids, you know, so like, hey, you got a lot of money, but your kids are out of control. Like she comes in and, you know, helps solve that, et cetera, which 100% falls in that intellectual capital pillar. But like when she was explaining to me, I'm like, the only way you would ever get business is like secretive referrals. No one would ever just, you know, out of the blue to come and get you, you know, and yes, and how awkward it would be like, hey Lane, do you need my services? I heard your kid's a screw up. You know, it's like, like, so like, but now that you're the way you've articulated, like, oh, well, if that's a common theme, then everybody knows they need to have that. Or, or, or the, maybe the people that she should be really seeking out.

Is people like yourselves, not necessarily the family offices. Possibly they need psychologists, psychiatrists to get involved. At the end of the day, all that we can do with regards to the problem children is help them figure out what are the best tools for taking care of that child without that child becoming his or her own worst enemy. And choosing a trustee. You know, the right trustee, that becomes crucial to working with that child. And it may be a trustee that's really specific to that child, you know, maybe someone that they get along with really well, but who is, you know.

Really good at tough love. Maybe choosing the right university because anecdotally, very, very small sample size, but like Everybody that I've met that has had like their father and them both went to SMU, they've been very successful family business type thing. And I don't know if it's just because of the heritage or the school itself, but, you know, SMU must be doing something right.

Yeah, absolutely. And okay, so I'll give a secret away. Most of our competitors that are registered investment advisory firms, when someone dies, when a client dies, they lose the accounts, they lose their accounts. But we've learned that if you do the estate plan, if you help people transfer assets across generational lines successfully, then when someone passes away, you know, we get involved in doing a lot of estate settlement work. I know the clients heirs will call us to find out, okay, so how does this plan work? Our name is typically all over the plan, and in the process of helping with the estate settlement, not only do we not typically lose the client, but we gain assets because all the beneficiaries have typically a 401(k) rollover or a, you know, an account that has been that they've kind of forgotten about, or they may, and we get asked to manage that as well as the estate that we're helping transfer. And so for all of our competitors, just start doing estate planning as well as financial planning. That's helped us not just retain assets.

Across generational lines, but actually grow our assets. We had similar businesses. You did some things extremely well that we did less well. Well that you focused on. But one of the challenges I had is I also had the planning mindset. I didn't see my relationship as being a stock picker or picking the best mutual fund. In fact, I thought that was probably a fool's errand. I felt like that the markets were fairly efficient and really what you wanted to do was stay between the boundaries. Also, the data says that very few clients fire their financial advisor over performance. They fire them because they're not communicating. That's exactly right. Maybe there's a trust issue, but here's where, where I got really challenged before I sold my wealth management practice was I thought of myself as a planner and I continually evolved to presenting information to my clients about these are your goals. When we met a quarter ago, you had a 75% likelihood of achieving the goals with the portfolio you have now, right? And here are the levers you can pull. You can defer your retirement longer. You can take less money at retirement. You can have a riskier portfolio. Here are the variables, right? And so which lever do you want to pull? Or maybe you would decide that you're happy, you know, where we are with the probability of success. At the same time, I got paid a fee based on assets under management. And when markets went up, I got a raise. And when markets went down, I got a cut in pay. And I felt like there was this profound disconnect between how I got paid and how I perceived the value of what I was doing. I could be doing a great job and sit down with the client and say, the markets went down 10%, but because you have a 60%/40% portfolio, we have value tilt in the equities, you know, your portfolio only went down 2%. You still have a high likelihood of achieving your goals, but I'm getting a cut in pay. I'm also being judged by the client based on that single variable, which is how did my portfolio perform? And the financial planning tends to sort of drop into the background. So have you figured that out? Do you get paid based on portfolio value? If you do, do you have the.

Same struggle with it I had? Honestly, I don't pay a lot of attention to the ups and downs of the income at this point. I'm more concerned about— this is something else. We don't charge explicitly for financial planning and estate planning. The way we look at it is this is part of why our clients pay us the fee for managing their assets. We're more concerned about consistency of account performance. So 2002, when I hired Chris Sarro, now CFA, and Adam Bronson, now CFA, CFP, and then a year later, my son, CFP, and then now we have 3 more CFPs working for us and another analyst that's working on her CFA. I mean, they're infinitely smarter than I am. I mean, you know, the total intelligence— and by the way, I figured this out— of 11 people in our organization, 9 of those have at least 1 degree from SMU. So thank you, SMU. One of my rules in hiring, and they say this is a pretty low bar, but when I hire people, they have to be smarter than I am. Not a problem. Our CFA team is responsible for keeping our portfolios at or above the comparable portfolios for, you know, you pick the aggregator. Vanguard. Vanguard, Morningstar, portfolio measure or measure. Measurements you want to use. Our goal is to keep those portfolios consistently at or above the performance across the board of portfolios on the efficient frontier for modern portfolio theory. And so we manage aggressive portfolios, moderate aggressive, moderate portfolios, et cetera, et cetera. And then we have portfolios that we have created. And I'm with you, we're efficient market theorists, but we have, we build custom portfolios for clients who come to us and say, okay, look, I'm only interested in income. I'm about to retire. I want to live on the income of my portfolio. I don't want to spend any principal. And so we've created a service where we pick individual stocks that are dividend-paying stocks and companies that have a track record of growing their dividends for the equity portfolio, the equity portion of the portfolio, and then bonds to fill out the balance on the efficient frontier. And so we've kind of— and that's not true modern portfolio theory because virtually the entire equity portion of the portfolio is going to be income-producing stocks. Our clients don't care. And during the meltdown, and particularly the meltdown, the Lehman Brothers meltdown, 2007 through '09, the calls that we were getting were widow clients who were calling and asking the question, should I be worried? And we were in the luxurious position during those years to be able to say, well, are you getting enough income? The answer is yes, then no problem. You know, fluctuation in value doesn't matter as long as the companies continue paying dividends. And because of our rules on diversity and such, we weren't concentrated in, in financials. Back then. To answer your question, it doesn't concern me. The, the fact that, yeah, you know, when, when things get tough, the markets head south and we're getting paid a little less because our clients stick with us. And I know that in the long run, the markets are going to be moved by human progress. We're making human progress.

We're just not worried about it. So what about like right now? And I know we try to make these episodes as evergreen as possible. So like anything we talk about on whatever today is will be irrelevant by the time this goes out or a year from now or 2 years from now. But that being said is like, there's just so much rhetoric right now about the AI bubble, about how there's a market crash, how there could be— I saw a headline this morning about how there the crash that's coming is going to be a Great Depression era crash. And I know that type of rhetoric seemingly comes like every other day, but is that just noise to you or do you pay attention and be like, okay, is there a there there? Do you have a research team? Like, or is it y'all are just so in the markets that by the time it's coming out on the news, you've already mentally processed it 3 months ago?

Well, yes to all those questions. We do have a research team that I think does a great job.

But research teams can be wrong.

What's the human side of it? That's exactly right. I'm always concerned about a black swan event, but by definition, a black swan event is not recognizable. I mean, there, there were the handful of people who had the foresight to chart the markets and mortgages back during, you know, the Lehman Brothers meltdown and got wealthy on that. Could they have been wrong? Sure. You know, if you take the position that, okay, so I'm going to prepare for Armageddon, then there's a high probability that you're going to get your head handed to you. Whereas, yeah, I can see some some similarities between AI and dot-com, but I also see some dissimilarities. But at the end of the day, if you exercise a discipline in, in research— and once again, I hark back to my methodology that we still live by— is fundamental research, whether it be individual company research or general economic research, we're going to wind up buying assets for the most part for our clients to fill their needs and goals. You can't say are impervious to a bubble being burst, but for example, during the dot-com era, the burst came when people realized that they were investing in companies that weren't making money. Uh, Lane, you remember the, the days— the tech wreck. The tech wreck.

Yeah.

You know, put dot-com in your business and suddenly your valuation— and we see.

A little bit of that with AI. Yeah. Yeah. Companies were valued by the number of hits they were getting on, you know, on the internet, clicks, not on profits. Our research was done on company profits. So if a company didn't have any profits, We didn't invest in it. We didn't buy their bonds. We didn't, you know, and today we're kind of in the same boat. If there's a company that's being valued as 100 times next year's estimated revenue, not profit, you know, well, that company won't come up on our radar. You know, we'll save our bacon If there is another meltdown, well, it'll save our clients. Save some of your bacon.

Yeah, a whole lot of their bacon. Very Warren Buffett-like, very Sir John Templeton-like.

I'm hearing two references there. One, you've got Michael Levy, he was on here before talking about how at the end of the day, America is always up and to the right. So, you may have short-term hits, but you got to— the long run, if you bet on America, you'll be all right. The second one is Ken Hirsch going for the base hits versus the home runs. So it sounds like, I mean, obviously you would welcome a home run, you would welcome a huge play, but it doesn't sound like you're ever going to go for the speculative, you know, things that you're trying to get that 1.

Million X on your money. That's a great analogy. I wrote an article, shoot, this has been 20, 25 years ago. Its title was You Don't Have to Hit Home Runs. You know, if I owned a baseball team, I think that I would be thrilled if all batters in my 8 or 9 batter lineup, you know, had 280 batting averages, 300 batting average. I mean, I'd be thrilled to death if not a single one of those guys hit a home run.

Ever. Right. You know, Moneyball on what's your on-base percentage?

I don't care how you get there. Exactly right. Exactly. And that's, you know, that's kind of.

Our attitude toward it. I was in a classroom at SMU a few weeks ago lecturing, and after class was over, there were 4 or 5 students that came up to talk to me afterwards, and each one of them wanted to know if AI was going to displace them. So it was, I'm wrapping up this MBA program and I'm, you know, I'm thinking about doing this or that. And of course my answer was, I don't know, I can't tell you. But I went home and I started researching, you know, to the extent I could with my resources, what's happening in AI. And it was really interesting because I found sort of the visionary at Microsoft who said, look, this is going to eradicate world hunger. It's going to make medical care much better. We're going to live longer, healthier lives. And then I saw an article in The Economist from a former prep school, not direct classmate, a few years ahead of me, Paul Tudor Jones, who's a billionaire hedge fund manager who said, there's a 10% chance it's gonna wipe out half the world's population over the next two decades. And I was like, okay.

Eradicate world.

Hunger, kill, kill off significant. So here are two really, really smart plugged in people who have very different views of how AI will impact us. There doesn't seem to be a consensus. There is a saying in the investment world that the markets climb a wall of worry, and there's always plenty to worry about. I know from myself that if I used my worries to build portfolios, they would drastically underperform.

Staying invested for the long haul. Well, to that point, it's interesting because I, you know, I am in the Executive MBA program and I get made fun of all the time because I think I bring it up every single podcast. But hey, I'm proud. I'm proud to be in the SMU world. But I just finished up an AI strategy class and one of the case studies was AI— is MBA relevant in AI world? And, you know, to boil it all down, it depends. Because it goes back to what you're talking about. Humans move markets. Well, AI is heavily human-based, you know, because you have to have the programmers, you have to have the prompting, you have to have all those things. So at the end of the day, are the jobs we know it right now going to exist in 2 years, 5 years, 10 years? Maybe, maybe not. But there's always going to be a need for people. And, you know, to your point about 10% dead, in world hunger, it's similar to where, like right now it's like, hey, we don't have enough people. We need to open up the gates of immigration to be able to fill all these jobs. Oh yeah, by the way, AI is going to wipe out all jobs. So which one is it?

It's the same conversation. So we start off talking about the adrenaline of flying military aircraft, and we've talked about mitigating risk for return. And you have one of the most interesting tidbits that I found researching you. I've never talked to any other person who's had this experience. You have managed two emergency landings in aircraft where I presume the pilot was distressed, which makes me— I don't know that I ever want to be on a plane with you. Then again, maybe I want you on every plane I'm on. But, but that's got to be some adrenaline involved there. Tell us about how this— you don't have to go into detail— the circumstances of two emergency landings of planes and.

What you took from that. Well, I'll talk about one of them. It was kind of life-changing, honestly. Being a pilot in an aircraft, whether it's private pilot, commercial pilot, military pilot, is distinguished by one thing. It is hours of boredom separated by moments of sheer panic. Yeah. You know, as you're coming in for a landing, it's frequently, particularly in instrument landing conditions, moments of sheer panic. But yeah, in 1980, it was 1981, June of 1981, I was in Austin I was flying, we had a Cessna 340, which is a cabin class twin that I was flying, and I had a CPA business colleague with me, and we were down visiting with a lobbyist, a client in Austin that was a lobbyist. And we had flown in, this was on a Thursday morning, June 11th, I remember the date. Flew in early in the morning before a cold front came through and landed at the Austin Mueller Airport, which doesn't exist anymore. It's, that's now a real estate development. And we did our meeting. Cold front blew through and just dumped a ton of rain. And, and as the cold front moved through, it left a layer of clouds beginning at 3,000 feet above sea level, which was there about 2,500 feet above ground. And 3,000 feet, and it was cloudy 10,000, 12,000 feet above us. Followed an instrument flight plan to come back to Dallas, to Redbird Airport back then. Today it's Dallas Executive. I still remember the 7218 Bravo request clearance for air traffic control gave me in Austin gave me 7218 Bravo cleared maintain runway heading which we were taking off runway 13 which is south southeast right maintain runway heading climb and maintain 3,000 expect 17,000 10 minutes after departure. So, you know, I did my run-up and I cleared, got, you know, got on the runway. And by the way, part of the pre-flight checklist includes making sure that your boost pumps are on high boost. Okay, well, what I didn't know at the time, and you learned if you're going to fly, you really need to know the mechanics of your aircraft and what causes things. But so I thought when you set the boost pumps on high, that that meant that you had turned the electrical fuel pumps on to high boost because you're taking off. Well, that's not the case. Those are just arming devices and they're little solenoid sensing devices in each engine. It's a twin-engine aircraft that, that tell the system if the engine-driven fuel pumps have failed. These sensing devices sense that and they complete a circuit through the dashboard of the aircraft. Boost pump switches—high, low, and off—are their arming devices. And if the solenoid device completes the circuit and you have it on high boost, then it cuts the electrical boost pumps on high boost. The assumption, if you're in takeoff mode, you know, you need as much fuel to the engines as you can get. And so full throttle, both engines take off, get up, level off at 3,000 feet. And one of the engines quits. So I declare an emergency, request vectors back to the nearest ILS instrument landing system runway. I was still— air traffic control says, right, 78 Bravo, turn right heading 270. Expect vectors back to Runway 31. They're just going to turn me around and put me right back on the same, on the same runway. I'm in a shallow right bank. Okay, you lose an engine, you don't do anything particularly aggressive. Shallow right bank. And the other engine quit.

And I, you know, so in— and.

You'Re at 3,000 feet. Exactly. Yeah. Well, I was at 3,000 feet. As soon as that second engine quit, you start— as a matter of fact, the descent rate, best angle, you learn all this stuff, is 100 knots forward speed, you're going to lose 1,000 feet per minute. Okay. So I had— you got a couple of minutes. Yeah, I had not quite. Almost. Yeah. And so said, yeah, I was using a hand mic. I said, we just lost the second engine. We're going to have to find a place to put the aircraft down. And they came back and said, roger, 18 Bravo, Bergstrom Air Force Base is 6 nautical miles on your nose. And because I'd turned to 270, that was west, you know, perfect alignment. And so I look over and my CPA friend, we didn't have a— we had taken our jackets off, you know, coats and loosened our ties. And I look over and Ben sitting in the passenger seat, he was a white-knuckle flier anyway. And he had a grip on the armrest. I mean, you could literally see his knuckles. He was bald. Sweat was, was running down his face. You could see his chest hairs through his white shirt. So I handed him the mic and said, here, you start talking, because the way that you help a, you know, a nervous passenger is you give them something to do, right? And he goes, he takes the mic and goes, What did I say? I said, well, you can start by telling them, you know, push the little button and tell them that, you know, that we've lost the second engine. We're not going to make it to Bergstrom Air Force Base. And I said, no, by the way, I'm watching the instruments. You know, you look out the window and you tell me as soon as you see the ground. Yeah. So he goes, well, the guy in the tower, all he hears, he's been communicating with me. Yeah. Right. And I was using my, you know, my very best old pilot voice. Calm, rational. Yeah. Chuck Yeager voice. And so all of a sudden what they hear is, we're not going to make it. We're not going to make it. We're going down.

We're going down.

And so very helpful. Thank you. Yeah. So the guy in the tower comes back in his Chuck Yeager voice now. So he hears what he thinks is the pilot screaming. And he goes, right, 7-8 Bravo, 1-8 Bravo. You have a county road about a mile off your left wing. And he goes, well, I say, we're still in the clouds. I'm descending. I said, well, telling them we can't see the road, but, you know, I'll let them know. We can't see the road. We're going down. We're going down. And just about that time, he goes, I see the ground. I saw the ground, you know. And there was a field ahead of us. You know, they teach you in emergency landing situations, you, you line it up with the rows. There's a sorghum field. Yeah. Down. It was literally 6 nautical miles southeast of the Austin Mueller Airport. Some farmer was growing sorghum. And so when we broke out, we had about 500 feet. So I just turned it with the rudders and there was a fence. And so, so if you've turned your, your twin-engine aircraft into a glider, you can shorten the distance, but you can't lengthen the distance, you know. And so I dirtied the— I wanted to commit to that field. There was a fence line, and then at the other end of the field there was the woods. And my plane liked to fly. There's a ground effect that the wings, the low wings, get into that will cushion the air between the wing and the ground and prevent the aircraft from, from actually settling in. I wanted it to settle in before we got to the trees at the other end. So I, so I put the gear down, put the flaps down, slows the speed at which your wings continue to fly. And so by the time I touched down, we were probably doing about 60 miles an hour. And I, you know, held the nose up, held the nose up, held the nose up until the— I could still hear the thump of the, of the sargums on the wings, you know. Main gear as soon as it hits the mud. And it had been raining. Yeah. So as soon as it just seizes the gear and it, it ripped the nose gear off the nose cone, the radar unit. And we came to a stop and about— it took about 60 yards to, to, to stop nose down in the field on the, you know, resting on the main gear. My briefcase that I put in the back came over and glanced off the back of my seat and hit me in the back of the head. That was the only— I mean, I was not hurt. And we're sitting there face down after I turn everything off, you know, turn all the electrical off. And I look over, Ben looks at me and goes, oh, Zan, you'd do anything to get out of going to see my first lady, wouldn't you?

True story.

To answer your question, yeah, I would fly with me again. And if I didn't lose my medical due to physical problem that I had. What caused it was these sensing devices that wore bare over a long period of time, and a little droplet of water gets between the wires, tells the solenoid switch that the engine-driven fuel pumps had failed. They're fuel-injected engines, and so when the electrical boost pumps were cut on, they were cut on on top of the engine-driven fuel pumps and it flooded the engines. Oh, and so all of your emergency procedures are directly wrong. You know, throttle full forward is okay. Mixture full rich. Well, if I'd lean the mixture out, that might have saved us. Boost pumps on high boost. If I'd have just turned them off, it would have saved the aircraft. And then, you know, full fuel on the fullest main tank. Well, I could have altered two things and it may have changed the outcome.

But— Well, it sounds like you did a stupendous job of maintaining your calm in a very challenging situation. Those moments of terror and panic.

Yeah. And that's back to prayer. Yeah. Our Bible lesson that week was on God, the preserver of man. I still remember when the first engine went Yeah, I uttered a profanity. And that's fair. Oddly, when the second engine quit, we're still in the clouds. I knew that we were okay.

Wow.

The message that I got was, you're going to be okay. Yeah, this is fine. Yeah, it once again, a life-changing experience.

Thanks for sharing that.

That's a powerful story. So we're about to wrap. My thing is less of a question and more of a statement, but for Lane, are you familiar with SMU doesn't tailgate, we boulevard?

Well, I am familiar with the boulevard. But have you heard that phrase?

I have not heard that phrase. So that's the common phrase. Okay. And Buddy is the man behind the.

Curtain that made the boulevard. Yes. Well, I was on the Traditions Committee.

Well, in this room, that means you did it all.

Well, I will take credit for this. If it weren't for me, the boulevard would have been on the intramural fields.

Behind Moody Park Garage.

That wouldn't be the same. Yeah. Well, Buddy, thank you so much for being here. I mean, I've enjoyed this conversation.

Yeah. I mean, I feel like Buddy's a brother from a different mother. You know, we've had this interesting arc in our lives where we had very similar experiences in the same moments in time. And so it's been a real treat to have you here, and thank you for sharing your time and, and your.

Knowledge with us today.