The Angel with Michael Conniff

caz (00:00)
you

Michael Conniff (00:00)
Hello again, everyone, and welcome back to the angel. That's a podcast with me, your host, Michael Kahn, if great to be here, a podcast named Money People, you can get us on Substack also on all the familiar audible Amazon, Apple podcast networks. And for audio and video, you can find us on Spotify and YouTube. I'm really excited also to tell you about the accelerator, our companion podcast, and you can see.

caz (00:04)
you

Michael Conniff (00:29)
subscribe to both via Substack or look at all those platforms. Today we have a special guest. Let's say he's smarter than Tony Robbins. And I can only say that because Tony Robbins is his co -author. Tony Robbins, the famous self -help guru and our guest Christopher Zuck. He's the founder, chairman and chief investment officer at CAC Investments. The book I'm going to hold up is The Holy Grail of Investing.

with Tony Robbins and Christopher Zook. And it's a number one New York Times bestseller list. So I have to ask you, how has your life changed, Christopher, because of this book?

caz (01:03)
Well, it's changed in a number of ways. First of all, thank you for having me. It's an honor to be here. What I will tell you is that it has changed quite a bit just from the standpoint of there's a lot more people that know who we are and that's a good thing. I've done a lot of media here in the last month since the book came out.

Michael Conniff (01:15)
Thanks, sir.

Yeah, and what's interesting, and I don't want to focus on Tony Robbins because he gets plenty of focus. I want to focus on you, but I will start with

caz (01:29)
And it's just something to where we're shining a light on an area of investing that the vast majority of people do not know much about. Or if they do know something about it, they never realized that it actually was accessible for them.

Michael Conniff (01:53)
With you, you and I have in common that at one point in our adult lives, we started to listen to Tony Robbins. And you took it much farther than that. You're now his co -author. But what was it about? Tell us about the first time you heard a tape, I guess we had cassette audio, cassette tapes. That's how long ago it was. But what was it about what Tony was saying that resonated with where you were in your career at that moment?

caz (02:21)
So the story is 32 years ago, actually, when I was fresh out of school and was working really hard and doing well. But I saw this person on television who was a giant and who had a lot of very interesting things to say. And I ordered the cassette tapes I did with my wife, the 30 -day tape series at that point in time. And I did so because the fact that I wanted to find an accelerant to be able to pour onto the success that I was having at that point.

Michael Conniff (02:44)
you

caz (02:51)
You know, I was working really hard and I was pretty good at what I did, but I knew that I wanted a lot more. And what I really took away from it was how important it was to set goals. And so one of the goals that I set during that series as a goal setting workshop, I set a goal to within 10 years to start a firm by the name of Kaz Investments, C -A -Z, my initials, Kaz Investments. And sure enough, nine years and nine months later, I started this firm. And...

Obviously, that's not a coincidence. Everything that I did along the way was to prepare me to achieve that outcome and that objective. And Tony just has an amazing ability to be able to bring very complex subject matter and make it concise and also make it understandable for people, regardless of their stage of life and kind of where they are. And that really resonated with me is that at that time, a 21 year old who is just really wanting to do well and was looking for some guidance.

Michael Conniff (03:48)
Yeah, and you know, this actually pretty drastically changed my opinion of Tony Robbins, because, you know, I think a lot of self -help books are alike. And I always cite the Napoleon Hill thinking grow rich is kind of being the, you know, the fountain, fountainhead of all this. But but I had was honestly, I'll make a confession. I was a bit dismissive of Tony because I said, you know, the only thing he's been successful at is telling people how to be successful. And it turns out that's not

caz (04:09)
you

Michael Conniff (04:18)
true at all. In fact, he's a major investor, I think has over a billion dollars in assets, according to the information he has supplied for the book. And he's really your financial partner now. So I think what I'd like to do is know more specifically what C -A -Z Investments does, and then we'll jump into the meat of the book, which unlike every other interviewer I have read, I have read this book,

caz (04:25)
. . .

Michael Conniff (04:48)
I read books. This was a really good one. I really enjoyed it. Learned a lot. But tell us about CAZ Investments and then sort of now you're kind of a financial partner with Tony as well, right?

caz (04:58)
And that actually the genesis of this relationship with Tony is informative and helps answer the question. So obviously 30 years ago, 23 years ago, I decided that I was going to do this business and we launched this business after watching or listening to his tape series 30, 32 years ago. And what we focused on for the first 15, 17 years was just delivering great results for investors.

And we candidly never really told people what we did. You know, I confess that as a 31 year old at the time, I took the field of dreams model, you know, do a great job and build it and they will come. And what I learned is you can do a fantastic job for people, but if they don't know who you are, they won't come. So we realized that we needed to do better. And so actually in 2013, I went to one of Tony's events called Business Mastery and 2014, early 14.

Michael Conniff (05:51)
you

caz (05:55)
And at that point in time, I learned that business, according to Pickard, Peter Drucker, you know, is only two things, it's innovation and it's marketing. And we were amazing at the innovation side. We had shorted subprime mortgages with John Paulson. We had made a lot of money during the global financial crisis and taken advantage of the opportunities on the other side. And yet at the same time, we were not very well known. So we needed to get better on the marketing side of the equation. And so for the next five or six years, we actually told people what we do.

Michael Conniff (06:08)
Thank you.

caz (06:22)
And sure enough, we grew very, very quickly. Well, one of the people that learned about what we did was Tony Robbins. And he was introduced to us by somebody who used to work for Paul Tudor Jones, a partner of Paul's, that literally, Tony knows extremely well, said, hey, you really need to know what this firm in Houston is doing. Tony became a client. At that point in time, he learned, these guys really do something different. I want to learn more. That led to a conversation in 2020.

which led to him actually becoming a shareholder in the firm in May of 2021, becoming our partner. And so his journey is very informative because what we do is we provide access to things that people usually would not be able to get anywhere else. And Tony, who has enormous resources, he cannot get today the vast majority of what we invest in because you either have to have a specific relationship or you have to have

a certain size check. I mean, we wrote a billion dollar check a couple of weeks ago. There's very few people on the planet that can write a billion dollar check into a single investment. You have to have enormous size scale relationships. We did. We made a billion. There's a press release out on there. You know, it's the second billion dollar investment. So dial is one of our partners, Blue Owl Capital is the name that's become, but we are the largest investor in their fund five.

Michael Conniff (07:30)
You wrote up you made a billion dollar investment.

Who was it? Yeah, who was it?

caz (07:49)
and we're one of their slash largest investors in their fund six. And we have been a very, very big supporter of theirs for a long time. And it's one of our themes. And I think it's important to take one step back. Tony is an investor with us because we can get him things he can't get on his own. There are 3 ,100 investors around the world that invest with us because we can get them access to things they cannot get anywhere else. There are hundreds of investment advisors.

Michael Conniff (08:13)
Let me.

caz (08:17)
that invest with us for their clients to be able to get things they can't get.

Michael Conniff (08:20)
So this brings us to the book. I want to, because I want to be very clear about what you do and what you don't do. And so this book is not for, you know, this is not the, this is not for the same audience that read Peter Lynch's book from Magellan about, you know, you walk around the mall, you see something that looks good, you invest in Walmart or something like that. This is really for financial people, very smart financial people.

caz (08:32)
you

Michael Conniff (08:47)
Your business, as I understand it, is to invest in the best funds, which means the best fund managers and fund companies. So as I understand, CAC Investments, your portfolio is all these various funds. Do I have that right?

caz (09:03)
So the answer is kind of. And here's one of the things that's the biggest misconception. So people will try to throw us into what's called the fund of funds bucket, which is where you just, you know, you're effectively hiring funds to manage money and you're just aggregating that together. Make no mistake, we do invest in some funds, but we're not a fund of funds in the classic sense, because there's not these fees on fees that most people are, you know, unattracted to when it comes to fund of funds.

But again, that doesn't mean that we won't invest in funds. But what it does mean is because of the size and the scale and the scope, we can invest in funds, but we also can do co -investments. We can do secondary purchases. We can do direct investments. And we have all of those things in the full arsenal of our business. And that literally we invested, you know, it was very much all over the news. There's a LinkedIn profile. So this is nothing secret, but Wonder, which is Mark Laurie's company that just did a $700 million financing raise.

We were invited, as Tony puts it, beyond the velvet rope to be able to be able to invest alongside the luminaries of venture capital to invest in Mark Laurie's new business, Wonder. We were able to invest in Figure AI, which is the business that literally Nvidia talked about at their special week about how it is a robot that literally can make your coffee for you and deliver it to you in.

It's already live and operational, not live and operational, but it's already operational and it looks live. But it is something. Exactly. But it's something to where we can do all of those things. But here's the thing we're most well known for, is that we are owners of firms that manage money. So in the example I gave you about the billion dollar check in that vehicle, in that ecosystem, all right, they buy.

Michael Conniff (10:34)
It's already online, but operational. Yeah.

you

caz (10:57)
Firms, stakes in firms that manage portfolios. So private asset management firms, that's what's called a GP stake. And so we have the ability to invest in these GP stakes where now we have collectively over 75 different firms of firms that you would recognize, whether it be a Starwood Capital or a Platinum Equity or a Clear Lake or a Vista or an HIG. We own a piece of their business. We're not just an investor in their fund.

And so when that happens, we obviously get the GP economics and the book. We talk about this a lot, but it's. Yeah, GP being general partner, as opposed to being just a limited partner in that. The other thing I'll say about your comment, Michael, you know, the book was written for definitely financial people that that understand investing, et cetera. What Tony and I are both very passionate about.

Michael Conniff (11:26)
Nice.

GP meeting, general partner, yep.

caz (11:51)
is that just because someone doesn't have 10 million or 20 million or 30 million dollars doesn't mean that they have to give up on, you know, potentially really good attractive return streams. And the good news is that because of some rule changes, there are now the ability for somebody even at this an accredited investor, which can be made with income, 200 ,000 hours of income or 300 with a with a co -filer or a million dollar net worth. It's an or test. So.

If you have somebody who just makes a really good living, but they're younger and they haven't saved up a million yet, they can invest. If they have a million dollars, they've just worked for a long time and never made more than $50 ,000 a year. They can invest. That didn't exist until just a few years ago. And we want those people to have a resource in the form of this book to be able to get more educated. It's not going to give them everything, obviously, but it's going to give them enough information to know the right questions to ask and how to go about the.

process of potentially investing in alternative investment.

Michael Conniff (12:54)
The book is the holy grail of investing. The world's greatest investors reveal their ultimate strategies for financial freedom. And it also says how the smart money uses alternative investments to win in any market. Obviously, you have a window on the investment world that very few people can compare with. My question to you is about two thirds of the book.

40, 60 % of the book is interviews with very, very smart people. Some of them household names, but not all of them, all of them incredibly successful. I'm really interested, what did you personally learn from doing these interviews? How did it change your world?

caz (13:38)
What are the things?

So it's everybody that we interviewed with the exception of one person I already had a very close relationship with. And so I knew them, but I knew them more in a business setting. And one of the things that we do in the book is we actually go through and learn a lot about their their history, their origin story, as Tony likes to call it. And obviously, Tony is such a fantastic interviewer that we're able to learn a lot more about what makes them tick and what makes them successful, not just, oh, they were successful. That's important.

and how they did it was important, but the why behind it. And so for me, the thing I loved more than anything else about doing those interviews was to be able to see what Tony refers to as success leaves clues. Right? If you study people that have been successful, usually there's something you can glean from their success that we can apply in our own lives or our own businesses. Well, that was so true over and over and over again. And the number one thing that if you read all of the interviews,

They all have one thing in common. And that one thing is that they do something really, really, really well that's different from everybody else. And obviously different firms, that's different things, whether it be Barry Sternlich in real estate does things different than Ramsey, Moosalem and Veritas, or what happens in any of the other folks that we interviewed. But what they all had in common is this word that I call persistency. You know, people always look for the best performance.

And there's nothing wrong with that. However, what we look for and what I think investors should look for is the most persistent, strong performance. Because if somebody is just the best performer this year and then the worst next year and the best the following year, that's a really bumpy roller coaster. If instead you can latch on to somebody who has a better process, a better niche and an information advantage, whatever the case might be, that's repeatable and scalable.

then you can partner with them and participate in their persistent success as investors. We're going to do really well, but they all have this ethos inside of their firm. Even Michael B. Kim, who's the wealthiest Korean and you know, is referred to as the godfather of Asian private equity. Okay. They do something in a very repeatable fashion and they have it documented and every new person that comes into their business, they learn that ethos. They learn that playbook.

And so they're able to apply that playbook over and over and over. Some firms, they literally become known for it. Vista, Robert Smith, obviously very, very famous individual. What the Vista playbook is, is how you can take any enterprise software business, any one of them, and apply the Vista playbook to it. And you're going to see benefits that are going to, you know, evidence themselves in higher revenues, higher profit margins, higher profits over time.

Michael Conniff (16:30)
Hmm.

caz (16:35)
Obviously, the more consistent that is and the more persistent that is, the more reliable it is for you as an investor when you partner with somebody like that.

Michael Conniff (16:44)
So does persistency, how does it relate to consistency? Because there are gonna be ups and downs. And even in the best funds, you see that when you, tell me the difference between those two things, persistency and consistency.

caz (17:02)
So consistency can be the same volatility all the time or it can be the same boring all the time. So persistency to me is that you can persist through all types of environments to generate strong returns. That's what I mean when I use that word of persistency. So naturally some of these businesses are very predictable and some of them are very volatile. You look at energy as an example. One of the most volatile asset classes that are out there.

Michael Conniff (17:06)
Yeah, yeah, yeah.

caz (17:29)
But if you look at Will Van Lowe and Bob Zork from Quantum and NCAP respectively, they have over 30 years delivered incredible results for their investors in a very volatile asset class. And it's because they don't try to time the asset class. They are not going to pretend to be able to say we're going to bottom tick, you know, prices and we're going to top tick prices. They're not going to do that. What they're going to do is to apply a playbook of if we have good science.

good technology, good people, good protocols, good processes, good controls, and we apply that consistently throughout the cycle, you're gonna have very strong overall returns. And they have proven that. That would be true even like NEA associates, Tony Florence from NEA, the granddaddy of venture capital. Venture capital by its nature is very volatile.

It's very hard to predict what's going to be the next Amazon or what is going to be the next Microsoft. What is likely is that there's somebody in there that is the next Microsoft and the next Amazon. So if you're going to invest in that area, you must have persistency of the way that you apply. And what I think your audience will be able to benefit from as much as anything else is the sizing of the investment decisions drive more of the returns than people ever give as much credit as they should.

Michael Conniff (18:54)
Explain sizing and how so.

caz (18:54)
So.

There are some people out there that they, I mean, we literally have people that invest with us. They put a million dollars in everything we do. Million, million, million, million. Well, we're happy that they do that, but that's actually crazy because you cannot say that every single investment has the same level of risk or the same opportunity for reward. You must look at it on a risk adjusted basis. So maybe there's something of that million that should have been a hundred grand. You know, we were a seed investor as an example in a, in a company out of Austin called Icon.

I see. Oh, and it was focused on 60 minutes recently. It's now become a very, very well known company. We were seed investors when the company literally was a dream and they had a little proof of concept. But I literally told all of our investors that invested with us that you're probably setting your money on fire. This is probably a zero. But if it's not a zero, you might just change the world. And sure enough, icon really is changing the world and potentially going to help eliminate homelessness. But.

Michael Conniff (19:45)
Oh, really?

caz (19:53)
Then you take the other side of the equation when you own a stake in a firm like a Starwood that has a hundred plus billion dollars under management, it is a much more stable asset. Well, maybe that million dollars should have been 10 million instead of a million. So the sizing, the investments, all of these firms, they will look at it and say they're not going to overweight something and put too much on any one opportunity. Because if you're wrong, it could be very, very devastating.

At the same time, they're not going to put too little in something where it's not meaningful based on the work that you've done, but they're going to weight the investments within a band of reasonableness that is tied to the risk adjusted returns and where they have more conviction, where they have more confidence, they're going to size up. And obviously if they have less conviction, less confidence, but still enough to make the investment, they're going to size it down. And I see that mistake over and over and over again of individual investors.

You know, they get too excited about something and they put half their net worth in it and it blows up on them and it's devastating to their financial situation or they over diversify and have literally no meaningful outperformance or even good performance because of the fact that they just don't a little bit of everything and don't know anything about what they really own. So really that was one thing I took away and I knew that going into it, but I think the book we were able to really capture a lot.

Michael Conniff (21:19)
This is great advice. I also want to ask you because you brought it up. You mentioned the the big short, John Paulson and the subprime housing mortgage crisis, the book by Michael Lewis. Many of us have read. I've read a couple of books about it. It's sort of a fascinating moment. What were you an investor in John Paulson's company? Is that how that worked?

caz (21:45)
So I actually started investing with John Paulson personally in 1994. So I had 12 years worth of history with John. And the story is actually really interesting because there are very few times in my career that I have looked at something and go, this is a no -brainer. The tech bubble bursting in 1999 was a no -brainer. The bottom and the lows in 2002 was a no -brainer. Valuations just were extremely cheap.

Well, in 2006, what was obvious to anyone that was willing to look at it from a skeptical view was that the housing bubble was gonna burst. And nobody could say for sure what was gonna cause it, but it was going to burst. So I remember, sure.

Michael Conniff (22:25)
Well, is that can I ask you a question there, Christopher, because the narrative that sort of followed the bubble bursting is that, you know, conventional wisdom, correct me if I'm wrong, but I took away the conventional wisdom was saying like the bubble, the housing housing will never go down. Like it's never happened. It's you know, but tell me tell me your view on that.

caz (22:50)
Well, it's something where that was the view and it's something that if you looked back in history at that point, it was supported. But at no point in history had you ever had that kind of dramatic overvaluation caused by bad practices and candidly, some bad people. But what the story is so true, so illustrative, but it's so true. I was literally in Los Angeles airport and I was sitting in the lobby. And if you remember back then, they had the TV playing.

Michael Conniff (22:52)
Yeah.

caz (23:19)
you know, while you're waiting for your flight to board. And I look up and Dytec funding, if you remember that name, Dytec was telling me they would give me 120 % of my home's value as a mortgage with no income verification and with no credit check. And I literally said out loud, that's nuts. Everybody in the area thought I was nuts because I was talking to the TV, but literally the next stop after being in Houston for a few days was in New York. And I was meeting with John and he said,

Michael Conniff (23:40)
Ha ha ha.

caz (23:48)
you know, before you leave, we want to tell you what we're doing on housing. And it took me 45 minutes to go, that is definitely what I want to do. It took me 45 days to understand what he was talking about because I didn't have Selena Gomez to explain it like she did in the movie about what it was for CDOs and CDO Squareds and stuff like that. So I had to figure it out. But what we did. That's exactly right. Collateralized double obligations and CDO Squareds were basically the rendition of that, the derivative of that.

Michael Conniff (23:59)
Uh huh.

Yeah, yeah. Glad relies dead obligations, right?

caz (24:17)
And what ultimately was happening is there was debt being piled upon debt. And literally I was in another manager of ours who we also participated with. And he had literally a stack of, obviously redacted for privacy purposes, but of credit applications for loans. And I remember distinctly one of them, it goes, you the name was blacked out, the social security number was blacked out, but then it goes to the application. This person had three homes and the...

in the Virginia area, average of $600 ,000 a piece. So $1 .8 million for real estate holdings, equity of almost $800 ,000 in equity on those homes. And he was applying to get another loan to buy another $600 ,000 house. And you looked at employer and it was McDonald's. Okay, fine. So he's an executive of McDonald's. No, actually, literally what it says is cook. Okay. No income verification, no credit check.

Michael Conniff (25:08)
He's flipping burgers. Flipping burgers.

caz (25:12)
He was flipping burgers and literally had a $1 .8 million portfolio because nobody bothered to ever see if he really was credit worthy. Well, obviously once the houses started going down, he couldn't flip them. No pun intended. He couldn't flip them. He literally obviously was like so many others and he had to give the keys back. And then obviously there was nobody left to buy those properties until prices got a lot lower. And obviously most of the folks that were at the lower end of that.

area got completely wiped out on the loans that they had made or those collateralized debt obligations. They obviously, you know, were wiped out and we were able to do that with John and with others. And it was just something to where there are times and literally you can go to our website, uh, Kazinvestments .com in our insight section is every single letter that I've ever written since 2001. You know,

It's dangerous when you do that, cause you're going to be wrong sometimes. You're going to be right. Sometimes what I'm really proud of our track record and something I'm really proud of in all of the private investments we've made over the last 22 years, almost 23 years now, we have made money or we have unrealized gains in 94 % of all the investments that we've made. So you can go read our letters about every single major theme that we were focused on.

Michael Conniff (26:08)
Yeah. Yeah.

Wow, that's impressive.

caz (26:31)
And one of those specific ones, you can go back and look at the third quarter letter of 2021. What was going on then? The bubble of SPACs and the bubble of technology was at its peak. And I used Rivian as the poster child in that. Rivian's a good company. I have no disrespect to their products that they're selling, but the stock was trading at evaluation. It was more than basically all of the other automobile companies combined except for Tesla. And they had

Michael Conniff (26:53)
. . .

caz (27:01)
never even at that point shipped multiple products to the consumer. So it was just absurdly overvalued, dropped 95 % when the bubble burst. Those kinds of things people just ignore because they don't want to see the reality. And one of the things I say all the time is that, you know, emotion is the enemy. Obviously not the only person's ever said this, but emotion is the enemy of investment success. Unless somebody can look at both sides of the equation and what our litmus test is always.

Michael Conniff (27:05)
Yeah. Yeah.

Mm -hmm.

Mmm.

caz (27:31)
What's the worst case scenario? If I can live with that, the upside will take care of itself sometime like an icon that could be zero. But if we can live with that because we size it correctly, well then in this case, we have a 30 plus X return at this point and who knows where we'll sell it. But we have this huge upside opportunity from a business that we bought when we were willing to take a risk. That's how we encourage people to think.

Michael Conniff (27:52)
No, it's impressive. I want to remind everyone you're listening to the Angel podcast with Michael Conniff, the companion to the accelerator podcast. We're on all the major platforms, Spotify, YouTube for video and audio, audible, Amazon, Apple, and about 10 others for for for audio audio podcasts. Also subscribe to our sub stack newsletter for the accelerator and the angel.

We've been talking to Christopher Zook. He is the co -author with somebody you may have heard of, Tony. How come Tony Robbins faces, anyway, Tony Robbins, The Holy Grail of Investing, an extremely interesting book. And Christopher, you've been a great guest. Is there, how do you think this book's gonna change your life?

caz (28:44)
You know, it's something to where I don't think it'll change my life, but it'll enhance my life. And what I will say is that, you know, this has been something to where I am very passionate. Tony is very passionate about being able to reach investors and help them know what else is out there. You know, there's actually a bill going through Congress right now. The House has passed it. It's sitting in the Senate waiting to be picked up there that would enable people to take a test to become an accredited investor.

Michael Conniff (28:48)
Yeah. Yeah.

Yeah.

Mmm.

caz (29:14)
And so literally, if somebody just goes to our website and gives us their information, if they're not an accredited investor, we will let them know when that law passes. We will likely have materials to help people study for that test if they want to, in order to be able to become an accredited investor. Because Tony and I both do not believe that because somebody inherited a bunch of money, they should be able to invest in what the best investors get to invest in. But somebody who's serving the community in a very honorable way, a firefighter or somebody in the police force.

They should be able to invest in what is best for their family. So we're very passionate about delivering that. And so hopefully what this does is it enables me and my firm to be able to really help others, which ultimately is why we exist. And certainly my ethos is I'm here to serve and I want to do the best I can to add a lot of value.

Michael Conniff (30:06)
Christopher Zook is the founder, chairman, and chief investment officer at CAC Investments. He is now part of his CV, we'll say, New York Times number one bestseller, the holy grail of investing. Thank you so much. I know you're a busy man and we really appreciate your time and thanks for being with us. And thank you out there for listening and remember, we'll be back with another podcast before you know it.

caz (30:28)
My pleasure. Thank you for having me.