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Host Stacy Havener brings you the storytelling tips, sales strategies, behavioral secrets, and inspirational stories that help YOU turn your words into dollars. Learn from sales and marketing experts. Meet finance and investment leaders, founders and fund managers who have made it, and the ones on the rise. Because there are people behind the portfolios. Their stories matter. So does yours.
@stacyhavener // www.billiondollarbackstory.com/
[00:00:00] Martin Tarlie: We were making progress. We were actually talking to the PJ of America, which is the association of the teaching professionals. And they had said, if you get your next round of financing, we'll endorse this as a game improvement product. Would have been the first time they'd ever endorsed a game improvement product.
[00:00:19] Stacy Havener: Hey, my name is Stacey Havener. I'm obsessed with startups, stories, and sales. Storytelling has fueled my success as a female founder in the toughest boys club, wall street. I've raised over 8 billion that has led to 30 billion in follow on assets for investment boutiques. You could say against the odds.
[00:00:39] Yeah. Understatement. I share stories of the people behind the portfolios while teaching you how to use story to shape outcomes. It's real talk here. Money. Authenticity. Growth. Setbacks. Sales and marketing are all topics we discuss. Think of this as the capital raising class you [00:01:00] wish you had in college, mixed with happy hour.
[00:01:04] Pull up a seat, grab your notebook, and get ready to be inspired and challenged while you learn. This is the Billion Dollar Backstory Podcast.
[00:01:16] If I told you that this podcast is with a guy who has a PhD in theoretical physics, you might have a certain perception of what's to come. If I told you this podcast is with someone who spent the last decade plus working for big asset managers. You might have an idea about that too, and you'd be wrong.
[00:01:38] I was. Because this podcast has all the startup vibes, some tech, some venture, some sass. Yes, the S A A S. And also, the S A S S. Dr. Martin Tarly spent many years of his career working at [00:02:00] GMO, the storied asset management firm in Boston. Now, he is leading a team at Nebo Wealth, a goals based investing platform that was born of the curiosity and research within GMO.
[00:02:13] This podcast isn't what you think. Because Nebo is more than you think, and so is Dr. Tarly. Get ready to challenge your biases, expand your mind, and laugh. This podcast is a banger. Meet my friend, Martin. Martin, thank you so much for being in the Billion Dollar Backstory studio today. And let me just tell everyone, because they can't see what I see on the video.
[00:02:42] There is this really cool whiteboard with stuff that looks really smart and arrows and diagrams behind Martin, and I am really intimidated, wink, about what this conversation, the direction we might be going, [00:03:00] because he said it's sales and marketing stuff. So, we're in for a treat. Thank you for being here, Martin.
[00:03:07] Martin Tarlie: Thanks for having me. It's a pleasure.
[00:03:09] Stacy Havener: Yes. Okay, so we start with my favorite thing, and that is your backstory. And so what I want to know You got a lot of fancy titles in some very smart stuff, my friend. So did you know you always wanted to be sort of in math and physics and finance? Or what was the journey like for you to get into this industry?
[00:03:36] Martin Tarlie: Um, it was very much a random walk. I didn't really get into math and physics until my last year of high school, and then I went to college. So I wasn't really the best math student or anything like that, but I When I was a senior in high school, I had a really good physics teacher and he really inspired me and I went to college and then I started doing more math and more physics and found [00:04:00] that I really enjoyed it and really worked incredibly hard to get good at it.
[00:04:06] And then I decided I was going to go do a PhD in theoretical physics.
[00:04:13] Stacy Havener: No big deal.
[00:04:14] Martin Tarlie: And well, I remember talking to my parents and they're like, they were horrified because they said, how are you going to make a living doing that? And I said, I have no idea, but it's, it's an adventure I want to go down. And I think that's a pattern that I've been following, just follow the adventure.
[00:04:33] Stacy Havener: Can you just tell me, like, what is theoretical physics exactly?
[00:04:38] Martin Tarlie: So, what you're trying to do is you're trying to describe the natural world. using mathematical models.
[00:04:47] Stacy Havener: Oh, oh, that's cool. That's really cool. Okay. So you also high five teachers because I love that you really got into it because you had an amazing teacher.
[00:04:58] So you get your [00:05:00] PhD and then how do you land? In finance.
[00:05:04] Martin Tarlie: So, um, then I did a postdoctoral fellowship and while I was doing that, I was trying to figure out, okay, well, what do I want to do next? And I was kind of on a path to become a professor and I sort of looked inside one of the professor's offices and I asked myself, suppose I got that job.
[00:05:22] Would I be really excited and inspired about doing it? And the answer was no. And so I started thinking about what I wanted to do next. And at that time I was playing a lot of golf because when I was a grad student in physics, um, I couldn't just do physics all the time. So I had a few friends and we would wake up at five o'clock in the morning and we had memberships at the, at the university golf course, and we would tee off at five 30 and we would be done by about seven.
[00:05:51] And so. So I played a lot of golf as a grad student. And then I realized that I wanted to know more about my game. So I [00:06:00] wanted to know if I improved in a particular area of. My golf game, how much would I put? So when I was a postdoc, I started exploring. There were no tools out there to answer that question.
[00:06:13] So I started meeting venture people and said, what do you think about the idea? And they said, Oh, it sounds like. It's an interesting idea. So this was kind of in the late 1990s, early 2000s.
[00:06:26] Stacy Havener: Okay.
[00:06:27] Martin Tarlie: So we raised, uh, friends and family around, we got a couple of patents. We were testing the product at, um, a couple of country clubs in Illinois, in the Chicago area.
[00:06:39] Some of the best country clubs, they like Skokie country club, but they held the 1922 U S open. So we were making progress. We were actually talking to the PJ of America. Okay. Which is the association of the teaching professionals. And they had said, if you get your next round of financing, we'll endorse this as a game improvement product would have been the first time they'd ever endorsed a [00:07:00] game improvement product and then nine 11 happened and we were out of money and we were kind of in that inner financing.
[00:07:08] And so I needed to, I needed a job and I'd met some people on the investing side through the process of looking for investors. And so I met a man named Mark Egan, who he kind of took me under his wing and, and he's a fundamental equity investor. And he invites me for lunch one day at his country club as an interview.
[00:07:30] And he told me what he did. He said, if you like what I do, just stop by my office Monday morning. So I came by and a few months later, he started writing me checks. Then he sent me to business school and I was a fundamental equity analyst for four years. Um, so I, I sort of just randomly transitioned into the investing side.
[00:07:48] I didn't know at that time what a debit was, what a credit was. I didn't know accounting. And so I had the opportunity to learn all of that.
[00:07:56] Stacy Havener: This is amazing. First of all, I had [00:08:00] no idea we were going to talk about like entrepreneurship, raising like friends and family for a golf product with a guy who has a PhD in theoretical physics.
[00:08:11] So, what a cool element to your story. And also, by the way, what an interesting thread from the teacher inspiring you to take the path of physics to Mark Egan inspiring you to take the path of investing. I love the role that people have played in your backstory. And so, where were you working? Was, was this when you went to GMO?
[00:08:37] Martin Tarlie: So I was working with Mark for four years and I had this quantitative background and it was like I wasn't using one of my arms.
[00:08:47] So
[00:08:47] Martin Tarlie: I loved what I was doing with Mars. Very analytical. It was very rigorous company level research, but it wasn't enough for me. So I started exploring how, how can I [00:09:00] combine the more fundamental orientation that I had learned from Mark with a more quantitative.
[00:09:04] Background that I had and that's how I ended up at GML.
[00:09:07] Stacy Havener: Ah, okay. Got it And so at that time, are you still kind of doing like the equity, you know, you're still on the investment side. Cause we're going to get to what you're doing now, which is not that.
[00:09:20] Martin Tarlie: Yeah. So I started a GMO and I was actually in the quantitative equity group.
[00:09:26] So I was, I was kind of building stock selection models using quantitative techniques, but very fundamentally inspired, which is kind of the GMO history behind that very much a pioneer in that kind of work. But then over the years, what happened was I got more and more interested in the asset allocation side of things.
[00:09:44] And so I started doing a lot more work on our forecasting methodology. I got to know the head of asset allocation, Ben Inker, very well. And this kind of ties into how all of Nebo got started. So, so I got to know Ben quite well. He comes down in my [00:10:00] office one day and he says, I just got off a call with one of our large corporate clients, and they're doing more and more work in the defined contribution space.
[00:10:09] They want to know if we have any thoughts on GlidePaths. Maybe you want to look into GlidePaths.
[00:10:13] Stacy Havener: That's kind of cool.
[00:10:15] Martin Tarlie: Yeah, so I started looking into glide paths. And it became very clear very quickly that nobody was explaining how they were building. It was as though my three year old kid had taken a bunch of colored crayons and gone from upper left to lower right.
[00:10:30] Stacy Havener: So at this point, GMO doesn't really have, I mean, are you even doing glide path work or like, no, it's not even like, it's not even on the radar. So do you kind of just take this on as like a side project?
[00:10:44] Martin Tarlie: Yeah, just a side project.
[00:10:46] Stacy Havener: Yeah.
[00:10:47] Martin Tarlie: I mean, the great thing about GMO is it's very research oriented and it's really driven by curiosity and as, and a desire to [00:11:00] understand.
[00:11:00] And then to explain that understanding, right? And so sort of investment education is, is an important part of that. And like, if we can't explain what we're doing, we shouldn't be doing it. So really understanding it is important.
[00:11:15] Stacy Havener: You know, it's so interesting. I did a podcast. Uh, interview earlier today with a super cool guy.
[00:11:22] Um, I don't know if you know Alfonso Peccatiello.
[00:11:26] No,
[00:11:26] Stacy Havener: he goes by macro Alf. You have to look him up. Okay. Okay. He's brilliant. But one of the things we talked about that just resonates so much with what you just said is We talked about this idea that the investment world can be very, very complicated, very complex, and there's a certain group of people in this industry that sort of perpetuate that complexity for lots of reasons.
[00:11:51] But what I love about what you said is if we can't explain what we're doing, we shouldn't be doing it. And I think that's so true and so [00:12:00] underappreciated in this business. Not only can we, we need to be able to explain it, but we need to be able to explain it in an accessible way.
[00:12:08] Martin Tarlie: Absolutely.
[00:12:08] Stacy Havener: So, I love that.
[00:12:09] So, how does this side project become a business?
[00:12:15] Martin Tarlie: Right. So, um, So, I went to Ben and I said, They're not explaining what they're doing. And I don't understand what they're doing. And so, that motivated us. So, one day he comes down to my office and we're just talking about the problem. that the glide path is really trying to solve.
[00:12:34] And so it kind of motivated us to go back to the beginning, right? Start with a blank sheet of paper, first principles thinking, which is very much kind of the physics mindset. The physics mindset is I want to understand the world with as few assumptions as I possibly
[00:12:49] can in
[00:12:50] Martin Tarlie: as simple manner as possible.
[00:12:53] So we said, well, what's the risk that the acid on our faces said? Well, It's intuitive that that risk is they [00:13:00] don't have the money they need when they need it. So why don't we build portfolios that minimize that risk? And that's how the whole project got started. So we wrote a white paper. We put it out, I think in April of 2014, and it kind of sketched out the ideas.
[00:13:15] It had some of the elements that we have now, but, you know, we fleshed it out a lot more. But we knew we struck a nerve because back then it was one of the most downloaded white papers on advisor perspectives that year, and it was picked up by the Wall Street Journal. They wrote, you know, big article, but it was inspired by just a question from a client.
[00:13:34] Stacy Havener: Which is often how the best businesses start, right? I mean, you hear so many stories, even your first entrepreneurship. endeavor you set out to solve a problem you had. So it's typically, it's like either you're trying to solve a problem you have, or you're trying to solve a problem a client has, and it becomes a business.
[00:13:51] So I love that part of the origin story. So I have a question and it seems simplistic, but I'm just going to ask it. [00:14:00] So tell me again, restate the problem that the asset owner has. about they don't have the money. Say that one more time.
[00:14:08] Martin Tarlie: So the big idea is a really simple idea, that the risk for the asset owner, they don't have the money, they need what they
[00:14:16] Stacy Havener: need.
[00:14:16] Okay. So then you've got, you have the investment management industry, which isn't that also what they say they're solving? So I want you to unpack the nuance of because it's a simple problem with a lot of layers. And I could sort of hear, you know, sort of the investment industry saying, well, yeah, of course, but that's why, you know, they, they hire us to generate returns for them.
[00:14:43] But there's more to it than that. I want you to sort of unpack that for us.
[00:14:46] Martin Tarlie: Yeah. So I think the key distinction are the words return, And money, in a way, or wealth.
[00:14:55] Stacy Havener: They're not always in the same sentence.
[00:14:58] Martin Tarlie: Well, they're, they're actually [00:15:00] different, right? Yes, they are. different, right? Return is, what's my gain on the money that I invested?
[00:15:06] Stacy Havener: Okay.
[00:15:07] Martin Tarlie: But you might have a large gain on a small amount of money.
[00:15:10] Stacy Havener: Okay, keep going.
[00:15:11] Martin Tarlie: And what the industry tends to be focused on is risk adjusted return. Well, my portfolio is better because it has a better risk adjusted return than this portfolio. Well, that may be true, but that's not fundamentally my problem.
[00:15:25] The, the portfolios are a means to an end. But the end is how much money do I have, and do I have the money I need when I need it? That's the fundamental problem. And the, the unit of account for the asset owner in terms of solving their problem is dollars. I need money in my account. Whereas the industries tend to focus on return or risk adjusted return or sharpe ratio.
[00:15:48] But I can't pay my mortgage with a sharpe ratio. I need dollars to pay my mortgage.
[00:15:53] Stacy Havener: I love that. That is so good and so true. So how does that [00:16:00] inspire what you're building then?
[00:16:02] Martin Tarlie: So when we set out to build portfolios to minimize the risk that you don't have what you need when you need it, or said another way, maximize the likelihood that you've achieved your objectives from a wealth perspective, we had to invent a new optimization framework, a new portfolio construction framework.
[00:16:23] So we centered it around wealth. and about the risk being that you fall below a target level of wealth over a whole range of time. Because when you need your wealth really matters. Returns are generally framed in terms of one year returns. So there tends to be this real disconnect between how the industry does optimization, which tends to be based on one year returns and return oriented, not wealth oriented.
[00:16:52] So we had to really invent. a framework for thinking through, how do you actually go about building [00:17:00] portfolios to solve the problem that really matters for the investor?
[00:17:03] Stacy Havener: It's so good. Like we don't even have to do differentiators because what you do is the differentiator, isn't it?
[00:17:10] I think so.
[00:17:10] Stacy Havener: In this industry.
[00:17:11] I think so too. Because and so I want to unpack it even more and what I'm thinking about as you're talking is this idea that, okay, is it predicated on the fact that the client already has the wealth that they need or no?
[00:17:30] Martin Tarlie: So we don't know.
[00:17:31] Stacy Havener: Okay.
[00:17:32] Martin Tarlie: So let's suppose you have a really simple problem.
[00:17:36] Mm hmm.
[00:17:36] Martin Tarlie: You're 65 years old and you retire with a million dollars. And you're going to withdraw 45, 000 a year. every year and you think you're going to live another 30 years. So the first question we ask is, okay, well, let's suppose your objective is you simply don't want to run out of money. So you'd be happy with having [00:18:00] zero at the end, assuming the end is 95.
[00:18:03] Well, what return on that, on your money would you need every year in order to start with a million, withdraw 45, 000 and end up with zero? So that's sort of standard, you know, internal rate of return calculation, but it's a really important concept. That's the required return that you need, net of inflation taxes fees.
[00:18:25] So there's a whole nother theme that's sort of running all through this, which I think is really important. Each piece of what we're doing is not really new. So we're using an internal rate of return calculation. Like everybody knows how to do that. You can do that in a standard spreadsheet, but it's the way that we're putting the pieces in place and the way that we're organizing them.
[00:18:47] So we use kind of utility functions. But we use them in a different way than the way that they're really conventionally used. When we do optimization, we use standard [00:19:00] optimization techniques, but they're not the techniques that are taught in the finance and economics courses. They're actually the ones that come out of engineering and physics because for this problem, they're much more suitable.
[00:19:11] So I think it's important for people to really recognize that we're not reinventing new pieces. We're just taking some kind of existing ideas, but putting them together in a different way. But I think in a way that's much more intuitive and much more natural.
[00:19:27] Stacy Havener: So what's so interesting to me is this idea that for those of us who maybe didn't take the traditional path into the investment world, We can have moments on that journey where we're like, um, I'm out over my skis.
[00:19:44] Like you alluded to when you first got into the investor, like, I didn't even really know what debit and credit were. Like, and so you sort of, I won't speak for you. Like I can relate as an English major who's in this business that I'm like, kind of don't really belong. [00:20:00] Like if you did the, like, which thing's not like the other, like I would raise my hand.
[00:20:04] And it's easy to feel bad about that. It's easy to sort of feel bad. But what I love about what you're sharing is that that nontraditional part of your story and that nontraditional part of your training and expertise is the exact thing that you needed to make it happen. Nebo, different, and special, and solve the problem, which is crazy awesome, isn't it?
[00:20:32] Martin Tarlie: And we didn't go out, like, it's not like we set out to do anything different. It's that we needed to do something different and fundamentally, I think we believe that people weren't and aren't asking the right question. And that's something that we learn in elementary school, right? Like the scientific method, the process that you go in terms of problem solving, is all about how do you learn how to ask the right question that gets you [00:21:00] closest to the answer.
[00:21:01] And so that sort of fundamentally, and if you're, if you grow up in the industry, you tend to get that beaten out of you in a way, whereas I think people that come from other orientations or perspectives have an easier time with that.
[00:21:17] Stacy Havener: It's so true. And actually, it's so true in sales and marketing, which.
[00:21:23] is not what people think. I mean, the investment industry is just built like a lot of, you know, sort of mathematically oriented industries on like, there's always a right answer. And we've got a lot of smart people in this industry that think they have the right answer. So it's literally a lot about answers, isn't it?
[00:21:41] Not really a lot about questions, which you'd see more in like the arts and more, um, more of like the literature and kind of, That type of thinking, although I love your scientific method, tie back, but in sales and marketing You know, the best salespeople are not the ones that [00:22:00] can pitch the snazziest pitch.
[00:22:03] They're the ones who can ask really good questions and listen. And I love that you said that that's what you set out to do. And then you figure out, can I help? But if you don't ask the questions.
[00:22:17] Martin Tarlie: Yeah, I mean, there's, there's so much in what you said that, that I just fully 100 percent agree with. So there's this book called Spin Selling.
[00:22:25] I don't know if you're, if you're familiar with it.
[00:22:28] Stacy Havener: Would I hate it? No, no, you would love it. Oh. No, no, you would love it
[00:22:31] Martin Tarlie: because it has a sort of a terrible namespan. It sounds like you're actually, but it's not, it stands for, it stands for situation, problem, impact, and need.
[00:22:39] Oh, okay. Bye.
[00:22:41] Martin Tarlie: Um, I think it's written by a guy named Neil Rackham, but he did like real research on what makes the best salespeople.
[00:22:48] And it's exactly what you said. The best salespeople are problem solvers. Like if you're making a complex sale, which most sales today now are complex. They're the best problem [00:23:00] solvers and they listen. They speak much less.
[00:23:04] Stacy Havener: Yes.
[00:23:05] Martin Tarlie: Than the person that they're engaging with.
[00:23:07] Stacy Havener: Yes. Fascinating. Are you an investment boutique looking to grow your business and need a little help?
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[00:23:34] You'll refine your story, focus on your ideal target market, and practice your pitch. You'll rethink your marketing materials, rewrite your emails, and refresh your differentiators. We'll even help you step up your LinkedIn game and give your profile a makeover. You want to grow your biz, we've got your back.
[00:23:51] Learn more about The Collective, the curriculum, and the amazing coaches who will help you on your journey. Visit HavenerCapital. com slash Collective. [00:24:00] High five. Hope to see you in a coaching session soon.
[00:24:12] And so, so at what point, I'm just curious, I want to talk more about Nebo, but I'm also just curious about your journey. So obviously you, you have an entrepreneurial, you know, vibe to you because that was, I mean, I don't know many people that go get their PhD and then decide to start like a golf business.
[00:24:30] Like those two things. Were your parents entrepreneurs?
[00:24:33] Martin Tarlie: No. And they were horrified by all of this.
[00:24:37] Stacy Havener: All of it.
[00:24:37] Martin Tarlie: But, but my grandfather was. So he, so he never went to college. He owned some gas stations. But he had a knack for engineering, and he designed and developed, like, tractors and combines and was very, very successful at it.
[00:24:56] Stacy Havener: Fascinating. So now, here you [00:25:00] are, like, working for a very big, very successful asset manager. You've done this side project. It's interesting intellectually, and you've got a client that maybe is willing to sort of seed the business, I'm guessing? Fascinating. Fascinating. Fascinating.
[00:25:13] Martin Tarlie: Um, no, no, no, no, I mean, I wish I wish well, but we've had a very supportive parent company, right?
[00:25:23] Okay, so very research driven culture. And so the idea about, Hey, basically GMO has always had this, this notion that risk is not a number. And so the idea that risk is volatility has always been anathema. And so now. There was a lot of support for this idea because this is a way to actually quantify in a practical way that the notion that risk is not a number, right?
[00:25:51] So there was support for the sort of the research underlying it. I actually left to go to another firm for four years and continue [00:26:00] to flesh out the methodology and then came back in 2018. And then by that time, I'd really sort of fleshed out a lot of the underlying ideas around mean reversion and all kinds of things that turned out that when we originally wrote the white paper, we didn't know how important they were, but now we kind of understand that.
[00:26:17] So by that point, we had a sort of a fully fleshed out framework. And the orientation towards commercialization was really around the glide path and sort of what I would describe as institutional retirement. And the problem, and it took us an embarrassingly long time to understand this, So I returned in 2018, by about the spring of 2019, we'd finally figured out that the institutional retirement space, we were banging our head against the wall.
[00:26:48] It was like we were chewing on glass. And the reason is that we realized eventually is they were never going to be innovators or early adopters. That [00:27:00] their
[00:27:00] Stacy Havener: Bingo!
[00:27:01] Martin Tarlie: Their motivation is don't get sued.
[00:27:03] Stacy Havener: Yes. So how did that? Thank you. Also. Sorry. It took so long to get there that that Rogers adoption curve is really helpful.
[00:27:12] Um, yeah, well, we're finally,
[00:27:14] Martin Tarlie: we're finally getting to an interesting point on that curve, right? And I actually use that curve all the time. And it's a
[00:27:21] Stacy Havener: great, it's great for so many things besides, Tech. But so before we get to where, when you made that realization that you were chewing glass and talking to the wrong potential client, the wrong time, you know, for the, with that curve in mind, how did you pivot from there?
[00:27:38] Like, how did, where did you go to get, find the early adopters?
[00:27:42] Martin Tarlie: Yeah. So we had some people in the asset allocation team. They kept saying to us, Hey, maybe you should investigate the advisory space, because it sounds like what you're doing would really appeal to them. And finally, we're like, Oh yeah, that's actually a really good idea.
[00:27:57] Maybe we should investigate. So Matt [00:28:00] Kadnar and I, who's was on the asset allocation team is now the person who wrote the smiley face on the whiteboard.
[00:28:07] Stacy Havener: We love Matt. Yeah.
[00:28:08] Martin Tarlie: Um, so he and I started going out in the spring of 2019 to talk to financial advisors, so we had a story about risk and I threw together like an early prototype of a user interface and with some glide path and.
[00:28:24] And we just wanted to know, like, what do you think about the story? And if we could build something, would you use it? And would you help us figure out what would be useful for you to build? So we just started engaging and getting their feedback and then just started building a platform based on the feedback that we were getting.
[00:28:47] And it's, it's really simple. We engaged with them. We learned from them, and then we adapted based on what we were learning, and we're just repeating that process.
[00:28:56] Stacy Havener: So much easier, isn't it? Also, what [00:29:00] I love about what you just said right there is that you asked them for help. And isn't it so interesting, that saying where it's like, Ask people for money and get advice, but ask people for advice and you get money.
[00:29:14] I've never heard that. That's
[00:29:15] Martin Tarlie: great.
[00:29:17] Stacy Havener: Right? Yeah. Because people love, I mean, human nature is such that like we are, we feel honored and flattered when someone wants our feedback.
[00:29:30] Martin Tarlie: That's very insightful. I love that.
[00:29:32] Stacy Havener: Yeah. And when we feel that we had a hand in building the thing, forget about it. We've
[00:29:38] Martin Tarlie: been really, we've been incredibly fortunate to have a cohort of innovators and early adopters really helped shape what we're doing.
[00:29:47] And it's still continuing because we never stopped learning.
[00:29:50] Stacy Havener: Yeah. Yeah, absolutely. So I have this also might, you might be like, no, you're way off base, um, which is fine. I tend to be off base a lot. So. Is [00:30:00] this basically, so when you go to the advisors, Are you kind of saying, you know, Monte Carlo, this is that, but with a whole bunch more, like, is that kind of the vibe?
[00:30:13] Like, is this like a new and improved Monte Carlo type of thing or no?
[00:30:18] Martin Tarlie: So Yes, but no. Okay, great. Yes, it is. And that's, then that's a cool thing. But if that's all it was, it really wouldn't be that exciting.
[00:30:31] Stacy Havener: Tell me more.
[00:30:33] Martin Tarlie: So what we discovered as we were talking to these advisors and engaging with them and then going out with.
[00:30:41] We wouldn't just passively take in the, the feedback. We would then go back out and be a little provocative in terms of, so there's definitely a dynamic that starts ensuing there. And what we discovered is that advisors are facing what we would consider it to be now a fundamental [00:31:00] and widespread problem.
[00:31:01] Stacy Havener: Okay.
[00:31:02] Martin Tarlie: So. They do a lot of work on the planning side. Client comes in, they do insurance work and estate work and tax work and goals and objectives, and they do all that. And then they do a risk assessment and that risk assessment. Gives a risk score. And that risk score says that you should own 60 40. And so then they say, okay, I'm going to run my Monte Carlo and see if a 60 40 satisfies all my objectives that I did on the planet.
[00:31:31] So the risk score drives the asset allocation. But if you go back and you change your planning, you change your goals, you change your objective, but you don't change your risk score,
[00:31:41] your
[00:31:41] Martin Tarlie: portfolio doesn't really change. And so advisors were coming and telling us. We are not confident that we are putting the clients into the right portfolio.
[00:31:50] And our hypothesis for that is it's because the process is actually backwards. The asset allocation should be a by product of what you're [00:32:00] trying to achieve. And that ties then back to what's your risk? It's not having what you need when you need it. Well, what do you need and when do you need it? Well, that's your planning stuff.
[00:32:08] You change that. You should change your portfolio. And when you define risk that way, it's just very natural. You don't have to do anything. It's just it's it's embedded into the system. It's embedded into the process.
[00:32:19] Stacy Havener: Fascinating. Can I ask you a question that you might hate? Of course. OK, because this is something that like if I were an advisor, I would be thinking, so I feel like I want to ask you.
[00:32:32] So this is a really cool, helpful product for advisors, and it would be really cool and helpful whether it's from GMO or not, right? But it is sort of related to GMO and a skeptical advisor who's maybe been in this business a long time and seen asset managers launch [00:33:00] helpful things for advisors many times.
[00:33:03] Might think like, aha, this is really cool. And is this also a way for you to get me to build portfolios of GMO products? And I, and I say that like with a ton of respect, but that is what a lot of the big asset managers did. They've launched stuff with that. Okay. Yeah.
[00:33:24] Martin Tarlie: So I love the question and I'm so glad you asked it because the answer is.
[00:33:30] In the very first advisory firm that we went to talk to.
[00:33:34] Okay.
[00:33:35] Martin Tarlie: We showed him a glide path. We're like, Hey, this thing can build glide paths. And it's like personalized for that client. They're like, Oh, that's great. Like, what's that purple segment on your glide path? We're like, Oh, it's liquid alternatives.
[00:33:45] They're like, All right, you're just going to use this.
[00:33:49] Yeah.
[00:33:49] Martin Tarlie: To sell us your liquid alternative strategy. So Matt and I walked out of that meeting. We're like, Uh, no, we can't do that. We think, so we made a bet. [00:34:00] We made a bet that there's enough value here that it can stand alone on its own. And we came back to CEO Scott Hayward and we said, we can't tie this to GMO product.
[00:34:13] It has to be 100 percent open architecture.
[00:34:16] Stacy Havener: And he
[00:34:17] Martin Tarlie: said, okay. And that's a huge credit.
[00:34:19] Stacy Havener: Yes, it is.
[00:34:20] Martin Tarlie: So it's fully open architecture. And so it's not only open architecture in terms of GMO product, cause it's just not tied in any way to that. It's also, we're known for our seven year forecasts. You can use whatever forecast you want.
[00:34:35] You don't have to even use mean reversion. So we believe that mean reversion is a thing. There's a, there's a little button in there. You can turn it off. And then what that does, going back to what we talked about earlier, it helps you understand.
[00:34:48] Yeah.
[00:34:48] Martin Tarlie: If I assume mean reversion, what's the impact? If I take it off, what's the impact?
[00:34:53] So it's really built as a tool to help advisors and their clients understand [00:35:00] why they're owning the portfolio. What do they have to believe about the client? What do they have to believe about them?
[00:35:05] Stacy Havener: And you know what else it's doing? Oh, wait, before I have this idea, let me write it down. Cause I'll definitely forget.
[00:35:11] Because I want to really give you a high five for a second on that realization. Because it could have killed your business, like straight up. It would have been some like whirly gig tool that GMO had to sort of Add value air quotes to advisors, but basically pitch funds. And that would have been lame because it's so much better than that.
[00:35:39] So I just want to like put a pin in that. Good job. Great job. Thank you for answering the question. Okay. But the other thing I wanted to say about the tool, the platform that you're building is that not only does it help the advisors and their clients sort of experiment and see all this. amazing insight.
[00:35:59] [00:36:00] But you know what it does, I think? It helps them have conversations that they need to have, that they probably, that are tough to have. Like, you might not have enough money, to go back to your thing, you might not have the money you need when you need it. And like, that's not easy to tell someone, or to have a conversation around, And I feel like if you have something like Nebo in the background and sort of as the prop to facilitate that conversation, it helps.
[00:36:34] Martin Tarlie: Yeah. So we've, we've gotten a lot of feedback that the nature of the conversation has really like Nebo helps frame a much more targeted and Intuitive and simple conversation focused on the thing that matters is what are your goals and what are your objectives and how do we get you there? And we think we also will, um, have an [00:37:00] influence in how performance is measured over time.
[00:37:03] So right now performance is typically measured. Did you beat the S and P 500? Did you be a 60, 40? It's very returns focused going back to this. So Once you change your frame of reference. And so James Montier, who's very well known in sort of the behavioral finance world is had a big influence on kind of a lot of these ideas.
[00:37:25] But one of the things he talks a lot about is framing. So how you frame the problem has a big impact on how you kind of look for the solution. So if you frame the problem in terms of wealth and not return, now we have a target path of wealth. Now, what we can do is we can chart over time. How is your wealth doing relative to the target?
[00:37:47] That's a much better measure of success. than the return on a year by year basis.
[00:37:54] Stacy Havener: Oh, my gosh, you are so right, because does the client I mean, to your point, [00:38:00] if the portfolio BCS and P500, it says absolutely nothing about how close you are to your goals.
[00:38:05] Martin Tarlie: And that brings in questions about spending, which is exactly to your point is the portfolio is only one component of success.
[00:38:14] It's savings, it's spending, it's It's taxes. It's all of these kinds of issues in addition to the performance of the portfolio.
[00:38:23] Stacy Havener: Fascinating. So what else are you learning from like the process of, because this is like a startup. It has startup vibes, but like it has backing. And so does it feel like you basically launched a startup with this?
[00:38:40] Martin Tarlie: Well, that's, that's very much how the team, how we operate and how we think about it. So we, we didn't realize at the time. So a lot of our approach was really based on instinct, but Andy Finnegan, who, you know, who's our, who's our head of marketing spent a lot of time kind of researching best practices and [00:39:00] startups and what we discovered that.
[00:39:02] We were just inadvertently following a lot of those best practices. And I think it comes back to this engage, learn, and adapt. And also when you're early on is do things that don't scale is something that we embrace, really try to make sure that we're solving the problem that matters to the advisor and the client.
[00:39:24] And it probably Grantham because his mantra in building the company. Is you do right by the client and everything else takes care of itself. So we definitely embody that, but it is, we don't mind making mistakes. We feel that, I mean, as long as you don't make a fatal mistake, which you'd like, that just takes a good judgment, but then it's learn, learn fast and engage, learn, and adapt as fast as possible.
[00:39:52] So we. You know, we definitely operate with a very aggressive startup mindset.
[00:39:57] Stacy Havener: I think that's so cool. [00:40:00] And, and hopefully you've smoothed out some of like the worst parts of the startup. Like, you know, having money and stuff.
[00:40:07] Martin Tarlie: Well, so I'll tell you. So I'll tell you what, what's happened, especially over the last Six or nine months is so up until really late last year, we were very much focused on the independent RAA, but as we were kind of really.
[00:40:25] Solidifying around this notion that this fundamental widespread problem is there's a gap between the plan and the portfolio. And what NEBO does is that core bridge to connect those two,
[00:40:36] that's
[00:40:36] Martin Tarlie: a problem that all advisors face. So it's not just an RAA problem. Yes. It's a problem for any financial advisor.
[00:40:43] Well, what does that mean? That means that the market is massive.
[00:40:47] Mm hmm.
[00:40:47] Martin Tarlie: And what we started seeing is firms started coming to us that were outside of this sort of little pond that we were fishing in, and they were saying the same thing. And so our [00:41:00] opportunity set is expanding rapidly. And we're looking for, I would say, we're looking for the right partners.
[00:41:07] To help us. And I would say that the orientation is optimized business, right? It's not necessarily maximized it's optimized. It's finding the right partners that can help us do it because we know GMO is, is an asset manager and knows sort of the asset management side and historically has been very institutionally focused.
[00:41:28] And we as sort of grown up in that recognize that there's a lot that we could learn from others. And if we can bring in the right partners, we believe we can optimize the business. And that's really what we're looking to do.
[00:41:40] Stacy Havener: It's interesting you say that. Well, also you, now you're sounding like a SAS. You got like TAM vibes going on.
[00:41:49] You got, you got all, you got startup and SAS vibes all over the place with this thing.
[00:41:54] Martin Tarlie: We are, we're kind of a hybrid between, uh, a SaaS type business and an asset management [00:42:00] business because there's elements of both that we do. And so I think from that perspective, it's a really interesting business.
[00:42:06] Stacy Havener: Yeah. So wait, one question on just your revenue. So your revenue, is it more SaaS, like MRR type of?
[00:42:14] Martin Tarlie: So I'd say right now it is, think of more like a model strategist fee. So it's more AUM based, but as we're going more enterprise, it's starting to become more, so I think it's going to be like, I don't know exactly what the mix will be, but I think it'll be a mix.
[00:42:36] Stacy Havener: Okay, this is so fascinating. The other thing now I'm thinking about is exclusivity. Because if you're going enterprise, again, if I'm going to put myself in the shoes of the buyer, and I'm big and I've got cash, I'm going to say, I want this to be a differentiator for us. And that becomes Challenging for anyone who's building, right?
[00:42:59] [00:43:00] Anybody who has capacity constraint, which really all businesses do, even if they pretend they don't, you have to be really thoughtful to your point about who is the right partner.
[00:43:11] Martin Tarlie: Oh, absolutely.
[00:43:11] Stacy Havener: And are we willing to give exclusivity to someone? What is the value of that? What does that do to our business?
[00:43:19] And so I imagine there's a lot. I mean, if those are the types of conversations you're having, Let's go back to our friend, the adoption curve. I mean, really you've jumped the chasm, which is not easy. Or do you think you're at the chasm?
[00:43:32] Martin Tarlie: So I would say, and I've had this conversation with our team in the last few weeks, I think our toes are right on the edge of it.
[00:43:40] Stacy Havener: Okay.
[00:43:40] Martin Tarlie: And so how do, what's the litmus test for that is that, so we built the. We built a platform. Remember I said to you, like I threw together a prototype and then we just kept adding to it. And up until about two years ago, I, like I wrote every line of code. So like, it's not in the most modern interface, [00:44:00] like Matt calls the original interface.
[00:44:02] It was the East German interface. It was not pretty at all. It was. It was really ugly, but I think that's the hallmark where, you know, that you have something because the innovators and early adopters are willing to overlook that.
[00:44:17] Stacy Havener: Yes.
[00:44:18] Martin Tarlie: And this, it was slow and clunky and, and it's gotten better, but it's not where it needs to be to jump the chasm.
[00:44:25] And so that's where we are actively flat out working on. What is it like, not just what does it need to look like, but actually building the whole infrastructure to have it be mainstream, but also fully API enabled.
[00:44:40] So think
[00:44:42] Martin Tarlie: about Nebo inside, like Intel inside, so we can power anybody's town. And we've had firms that come to us with their own planning philosophy and their own investment philosophy.
[00:44:55] And they say, what we're missing is the bridge between our planning philosophy. So [00:45:00] you often see very sort of insurance oriented planning philosophy, like LDI types of approaches. And then they might have a tamp on the back end and they say, well, how do we put these two things together? Will you, will you license Nebo to us to be the model strategist that connects what we're doing on the planning side with what we're doing on the investment side.
[00:45:22] And so that's fully API. So we just sit right into their, into their text deck.
[00:45:27] Stacy Havener: Fascinating. I mean, the chasm's no joke. It
[00:45:31] Martin Tarlie: is no joke. And it's scary when your feet are right over the edge of it.
[00:45:34] Stacy Havener: Yes. Yes, it is. Um, and I will tell you, because also, by the way, for everyone who's listening, like even, it doesn't matter what industry you're in, because that curve applies to all.
[00:45:46] You can actually find writer's adoptions curve, uh, adoption curves that don't have the chasm. Never print that, never print that one. Don't draw, don't draw that one on the whiteboard behind you, because that is, [00:46:00] that's a fallacy. That doesn't exist. Chasm is real. So the thing with the chasm, you know this and you said this, but I want everyone to hear it.
[00:46:09] Again, one of the best things about the early adopters and innovators is that the product does not have to be perfect. That's not what drives them. That's not their decision making and the jumping the chasm. Perfection starts to matter. And I use perfection loosely. It just to your, your example was so spot on on the investment side, what happens?
[00:46:33] And resonates with you. If you have a fund, when you're talking to early adopters and innovators, you're typically talking to people who understand what you do as an investment person. Okay? So if you're talking about your strategy, the allocator is like, uh huh, uh huh, uh huh. They're nodding. They get it.
[00:46:54] When you go to jump the chasm on the fund side, The investment person gets it, they give [00:47:00] it the stamp of approval, then they have to give it to a client facing person who's not in the investment management space, or like mindset, and they have to be able to explain it. to the end client. That's fun. That's real fun.
[00:47:17] Now you have to have a whole different type of material and collateral. So how, is that like, how does that apply or does it?
[00:47:27] Martin Tarlie: Oh, it very much applies. There's, there's sort of, so as the business has evolved, we get more and more questions. So now, how do I explain this to my client?
[00:47:39] Stacy Havener: Yes. That's it.
[00:47:41] Martin Tarlie: And I really want to show what Nebo does to my client in real time.
[00:47:48] And you
[00:47:48] Martin Tarlie: can't show them the East German version. It looked like the cockpit of an F 15.
[00:47:54] Stacy Havener: Which I just love that the early adopters and innovators probably thought that was so cool. Oh, they loved it. They [00:48:00] said,
[00:48:00] Martin Tarlie: this is great.
[00:48:03] Stacy Havener: It's like the nerd out session happening, right? Like. I mean, this has been such a fun conversation.
[00:48:10] I it's really cool what you're doing.
[00:48:12] Martin Tarlie: Thank you. Do you feel
[00:48:13] Stacy Havener: like it's cool?
[00:48:14] Martin Tarlie: Oh, yeah, it is. Well, it is exhilarating. There is no question about it. And it is also terrifying.
[00:48:22] Stacy Havener: Oh, yeah.
[00:48:23] Martin Tarlie: You know, there's, we're really passionate and we really believe, but we've been told that it's a new category, right? So that this, this gap between the plan and the portfolio, like it's a new category.
[00:48:37] Well, new categories are really hard to commercialize
[00:48:41] Stacy Havener: because
[00:48:41] Martin Tarlie: there's no budget for you.
[00:48:42] Stacy Havener: No.
[00:48:43] Martin Tarlie: And everybody wants to protect their own budget who already has a budget.
[00:48:47] Stacy Havener: Yeah.
[00:48:48] Martin Tarlie: That's a challenge.
[00:48:50] Stacy Havener: Well, you know, I get it. I totally get that. And one of the things that we've done with clients who are in that situation, again, different kind of side, different part of the [00:49:00] business, but similar, is when you come up with your impact stories, meaning, like, case studies of clients that you work with, think about coming up with two different ones.
[00:49:12] Like, two different sort of, Vibes some like some clients put us here and some clients put us here not more than two because guess what? The mind doesn't like lots of options, right? I would say two, not even three, which is usually my favorite thing, but not even three, just two. And then, and explain it, like say it, and then show it.
[00:49:37] So you're like, they use us here, this is where kind of they put us or budget us, or, and, and here, and let me give you some examples. And then you sort of tell a story about client A who uses it, One way and client B who uses is the other and you let them tell you going back to our asking questions. Let them tell you, let them make it [00:50:00] their idea, right?
[00:50:01] Because I think what happens a lot of times is we feel like we need to tell them where to put it. And maybe if you just show them, here are some ideas of where. And then let them come back to you and it kind of becomes their idea. We do the same thing on the asset management side. If there's a product that doesn't fit neatly into a box, also most things, um, that anyone would want to buy don't fit neatly into a box.
[00:50:25] And so you have to sort of give people a frame of reference. So for what it's worth, I mean, it can help.
[00:50:32] Martin Tarlie: Well, it's really interesting. Yeah.
[00:50:35] Stacy Havener: All right. I want to ask you some more personal questions. Here we go. They're not like rapid fire, but they're sort of faster. Okay. We'll start with an easy one. Maybe, I don't know if it's easy.
[00:50:48] There might be too many choices for you. What book inspires you?
[00:50:53] Martin Tarlie: Oh, this is going to be an interesting answer.
[00:50:56] Stacy Havener: Okay.
[00:50:57] Martin Tarlie: I'd say recently.
[00:50:58] Stacy Havener: Yeah. [00:51:00]
[00:51:00] Martin Tarlie: The Bible.
[00:51:01] Stacy Havener: You know what's so interesting about that? Only one other person has ever said that on the podcast in 70 episodes. And I love it. Do you want to say more about it?
[00:51:13] Martin Tarlie: There's well, I mean When you look at it from the perspective of what is it telling us about human nature? So let's just take kane and abel like adam and eve They weren't really people. I don't think like when you read the stories they're like kind of in this garden of eden and they're but kane and abel are like the First two people and first story about people in the Bible.
[00:51:35] King kills Abel , and Abel was the good guy. It's not funny.
[00:51:39] Stacy Havener: Yeah.
[00:51:40] Martin Tarlie: So like right off the bat it's like, okay, here's human nature. And so you don't have to read it from a perspective. Like there's a lot of different ways that you can read it. Right. And there's a lot of, obviously a lot of different interpretations, but I think there's a way to look at it that can be very inspiring.
[00:52:00] And
[00:52:00] Martin Tarlie: so. There's a lot of adventure stories in the book. So I've, I, I sort of, like, I've always been sort of drawn to the adventurous path. And I think there's a lot of those kinds of stories. It's, there's a lot of sort of archetypical adventure stories in there. And it's one of the oldest books that we have.
[00:52:20] So it's not like the faith in my opinion is about the faith that if you, it's really about grit and determination and not giving up and that if you do these things. That gives you the best odds that things are going to work out. I mean, that's, that's sort of it in a nutshell. And I think that's a universal appeal, but I think that book kind of captures it.
[00:52:40] Stacy Havener: Gosh, we could have a whole other podcast on this. Because also super interesting that someone who's from the science side Of the world would say the Bible, because again, lots of impact there, but I will say I agree with you. I took a class in college again. Literature major. Hi. Um, I took a class in college.
[00:52:59] That [00:53:00] was the Bible as literature. And so there was no religious context to it. It was all about it as story, as book, as, you know, and it was fascinating. Fascinating.
[00:53:13] Martin Tarlie: Yeah, I mean, there's obviously enormous depth to it because it's been around for thousands of years and people have spent, like, thousands of lifetimes on that, so.
[00:53:23] Stacy Havener: Yeah. Okay, great answer. I love it. So good. Wow, I can't wait to see where this goes now. Okay. So next question, what place inspires you?
[00:53:35] Martin Tarlie: Home.
[00:53:36] Stacy Havener: Oh, I love that so much. Do you travel a lot?
[00:53:41] Martin Tarlie: No.
[00:53:42] Stacy Havener: Yeah. Home. Good, that's so good. All right, I'm gonna keep going. That speaks for itself. Okay, so let's pretend that you are giving a talk, lecture, could be on theoretical physics, but that might [00:54:00] not be that fun, or I don't know what the crowd would be like for that, so let's say it's not that.
[00:54:05] Um, but you're coming out, you're in a stadium, you've got a crowd, you're backstage, about to walk out, what song do they play? What's your walkout anthem?
[00:54:16] Martin Tarlie: Um. So I'm a big Bruce Springsteen fan, but his really old stuff, his really old stuff, the stuff from the 70s, um, probably Promised Land.
[00:54:27] Stacy Havener: Oh God, I don't, I can't even like catch that tune.
[00:54:29] I'm gonna have to listen to it after this. I'm in a family of very big Bruce Springsteen fans.
[00:54:34] Martin Tarlie: So that's an old one. Um, the second one, I mean, there's, there's obviously, um, You know, Born to Run is like, I mean, that's an anthem, right? Yeah,
[00:54:43] yeah.
[00:54:43] Martin Tarlie: But Promised Land is probably a little less well known, but is really solid.
[00:54:48] Okay,
[00:54:49] Stacy Havener: I'm gonna listen to it on my way home. So, playlist, check. Okay, what profession, other than your own, would you like to attempt?
[00:54:58] Martin Tarlie: You know, it's funny, [00:55:00] like, that's a really hard answer, because I don't feel like I've ever chosen a profession. I feel like I just keep wanting to, well, It's a bit of a random walk, right?
[00:55:12] And it's being drawn to really interesting problems. And so I am seeing this one, like I've gotten over the last few years, a lot more involved in sales marketing than I ever imagined, but I love it. I really enjoy it. And it's tied into a lot of things. And where is that going to take me? Where's all of this going to take me?
[00:55:33] I don't know. I mean, right now the goal is to build a great business, right? That we're on a mission. We want to build a great enduring business and we're very mission driven. Where that leads. I don't know, but that that's kind of the profession. The profession is be drawn to really interesting problems and just keep trying to solve them and be as fully engaged as you can.
[00:55:57] Stacy Havener: Well, also, um, we'll [00:56:00] know because whoever walks into your office or invites you to lunch or that's where it's going to come from.
[00:56:08] Martin Tarlie: Right. Well, necessity is the mother of invention, right?
[00:56:12] Stacy Havener: I mean, listen, I think that is an amazing part of your story because every idea, even this one. Even Nebo was from having a conversation with someone that you respect and you know, like gave you an idea and you're like, Oh, you know, they sort of presented that problem and you followed the thread, which I think is super cool.
[00:56:31] But also I'd be watching like who's coming in or I'm going to come take you to lunch then. Yeah. So talk sales. Okay. What profession would you not like to do?
[00:56:42] Martin Tarlie: Um, anything that's bureaucratic.
[00:56:45] Stacy Havener: Oh, the worst greed. Okay, last one. What do you want people to say about you after you've retired or left the industry?
[00:56:58] Martin Tarlie: Made a difference.
[00:56:59] Stacy Havener: [00:57:00] I think I think entrepreneurs really vibe with that and it's inspiring to listen to you talk. I have to be honest with you. I didn't know. I'm like, this podcast could be really boring. I came in and I was like, I don't know. I don't know how this is going to go. And guess what? It was anything.
[00:57:23] Martin Tarlie: Well, So this
[00:57:24] Stacy Havener: has been an honor. I have loved talking with you, Martin. You are A great mind in this business and I hope we get to talk more. Thank you.
[00:57:34] Martin Tarlie: Thank you very much.
[00:57:35] Stacy Havener: This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. The information is not an offer, solicitation, or recommendation of any of the funds, services, or products, or to adopt any investment strategy.
[00:57:50] Investment values may fluctuate and past performance is not a guide to future performance. All opinions expressed by guests on the show are solely their own opinion and do not necessarily [00:58:00] reflect those at their firm. Manager's appearance on the show does not constitute an endorsement by Stacey Havener or Havener Capital Partners.