Hello, I'm Honor Blue. Welcome to the From the Top podcast series where we have interesting conversations with interesting business leaders. Today we're talking to Eric Sats, who's founder and CEO A into things that most retirement accounts don't, like crypto, art, real estate, and some other private market assets. Very interesting. Eric, thank you for making time to talk with me today. Honor, thanks for having me. And like you nailed it, I should step away and you can just take my place now. Yeah. Well, I think you have a lot more to add, but I just wanted to kick it off. Tell us more about what you do. So, honestly, you sort of hit it down the middle of the fairway there, which is to say, we make it easy and cost effective for individual investors to access their retirement accounts, to access that savings, tax advantage savings, and to invest it in those things that are not traded in the public market. So, they're non registered securities. And that includes private companies. It includes real estate. It includes investing in funds, like private equity funds, venture capital funds, credit funds. It includes artwork and other forms of collectibles, so long as those security interests are packaged appropriately, and it includes crypto. And so, pretty much anything that you'd like to invest in that's not publicly traded, also can likely help you figure out how to do so. And it can help you figure out how to do so with your retirement money. That's how Altos started all the way back in 2018. There has been a big update as of the fourth quarter of last year in that we got our broker dealer license. And now you can go to the Altos marketplace and look for these investment opportunities. So, you no longer have to be part of this connected crew or networked with the right people. If you're just interested in learning about alternative assets and potentially finding an investment opportunity that you'd like to participate in, you go to altoiray.com/marketplace. I think that's it. Or you just go to altoiray.com and find your way to the Alto marketplace. And you can look for different opportunities. So, for example, you and I are both here in Nashville. One of our more recent investment opportunities is the JBJ, which stands for John Bon Jovi. Everybody knows who he is. The new John JBJ bar that's going to be opening up on Broadway, I think, Broadway and fourth. I believe next month in June, which is pretty exciting. Very exciting. Yeah. So, how did you just think of this idea? I mean, how did this come to pass? Because it is super fascinating. I mean, all of us are interested in our retirement, how we invest, but we feel like we've been limited into where we can put our money. So, it's really fascinating. So, the limited part is true in the sense that fidelity or schwaab or another kind of investment platform like that is not going to allow you to use your retirement money to make this type of investment. And there are lots of different reasons why that's the case. But that creates the opportunity for a firm like ours. And in terms of how and why we created Alto, I tend to solve problems that I have myself. And so, if we go all the way back to 2013, I had what I thought was the super bright idea of using my retirement money to invest in some private companies that I was involved with. At the time, I was a venture capitalist and the portfolio, the fund was making investments in a number of private companies, which are referred to as the portfolio companies. And I thought it would be a good idea to invest alongside the fund in those portfolio companies. And I was like, well, I should use my retirement money. And I thought I should use my retirement money because it's tax advantage. And it's long-term money. You can't take it out without penalty until you hit retirement age. And these ill-liquid private company investments are long-term investments. So, it sort of makes sense to match this long-term investable dollar with this long-term investment opportunity. There were only two problems with that thinking. One was that I didn't know if it was legal. And two, if it was legal, I didn't know how to do it. But a quick Google search told me that it was legal, but the same Google search didn't exactly tell me how to do it. And so that took a bunch of time to figure out. And then once I figured it out, actually executing this investment, which in a non- IRA constructs can take 10 minutes, took me 10 weeks. And so I thought clearly maybe I chose some of the wrong vendors along the way. And I tried swapping them out and made two more investments. So I made a total of three investments using IRA money. And I just had these really frustrating experiences, which led me to ask the question whether or not, actually it was a series of questions, which was that was I the only person trying to do this, because the opportunity was actually created back in the 1970s when ERISA was created. It allowed for this sort of investment of retirement money into private opportunities. And if I wasn't the only person, how much money are we talking about? Was this a big enough problem to solve? Would anybody care? And so it turns out, as I dug into it, and I didn't realize this at the time, because it's a little bit counterintuitive, but there's more money in IRAs than in 401ks. And that was sort of like the first, you know, real, wow, that's interesting. And the reason is that people no longer work at the same company for 30 years and then retire, they probably work at eight different companies over the 30 years. And every time they move from company to company, they take the first 401k and they roll it into an IRA so that they can invest it as they wish. And so that is the main driver. And then, of course, we have the gig economy where those people don't have 401ks. And so while 401ks are still growing and growing nicely, IRAs are now larger than 401ks and they're growing faster than 401ks. And so, okay, we have a big bucket of cash here. It's actually today about 13 and a half, it's probably somewhere between 13 and a half, 14 trillion dollars. And, you know, so we have this big bucket of cash and it's like, well, is anyone investing in alternative assets with this money? And it turns out, you know, a really small percentage, maybe 1%, maybe 2%. And the reason being is actually due to some of the reasons we were talking about earlier, which was most people don't know you can do this, right? We have this huge knowledge gap. Okay, well, maybe we can begin to fill the knowledge gap with some marketing and some education, some intelligence. But then the other reason, it was incredibly complicated. And so I've kind of been in the investment business for a long time, because I'm really old. Most people aren't in that business. So I actually knew what to do and it still took me 10 weeks to execute, you know, my first turns action. And so I sort of recognize, you know what, if you don't know what you're doing, if you've never made this type of investment before, it's highly unlikely that you're actually going to succeed in making it, you're going to give up, you're going to throw up your hands, you're going to say, you know, I got better things to do with my time. And then the third thing is cost. So when we got started and you know, sort of things were brewing in my head from 2013 to around 2016. And then we got started in 2016 and we launched in 2018. But until we came into the industry, this was a people and paper based process. And whenever you have people on paper involved in a lengthy, complicated process, you're talking about a lot of expense. And so the industry charge for that. And the other thing that was, you know, readily apparent to me was unless you were participating and making an investment, you know, probably a six figure investment, you couldn't make the cost side of the equation pencil out to do this. It wouldn't make sense to make a small investment. So the idea behind ALTO was really to rip the people and paper out of the process, to put a technology platform in place with a solution that could scale to serve millions of people. And in the process, do for self directed IRA investing, what we call alternative IRA investing, do for that industry what TurboTax had done for self filing, which was, you know, make it, make it so that anybody could do it. And that's been ALTO's aim. Wow, very cool. So what are your aspirations over the next five or 10 years? Are you looking out to the future? Future. Yes. Always. Although I would say, you know, my my crystal ball, you know, the limitations of my crystal ball is probably about 24 months out. It's always nice to have a vision and a mission that's that's sort of, you know, 10 years out. And what I will tell you is that our mission is to present all investors with alternatives to achieve financial freedom. And and alternatives in in this sort of construct isn't just alternative assets, alternative investments, but it's to say, hey, there are other ways to do this than to just, you know, put your money in these passive public mutual funds index funds, ETFs and just sort of gray that you're going to get there. Because what we know is that that's not working. And that's not to say that public markets are bad, by the way, I don't think they're bad. I think they're good. They just shouldn't be 100% of your investment allocation. Right. Right. Okay. Yeah. And they likely shouldn't be 60%. You know, so the old model was 60 40, which was 60% public equity is 40% public bonds. But, you know, because of the pandemic, because of inflation, because of world economies and how we're now all interconnected, nothing exactly works the way it used to. Yeah. And so it used to be that if equities went up, bonds went down and if equities went down, bonds went up. And you sort of had this, this balance and you had this risk balance and return balance. And that's all kind of gone out the window. And so, you know, I like to say that knowledge has a half life. Yeah. And a great example is eggs. Eggs are great for you. And then eggs were bad for you. Yeah. And now eggs are good for you again. Right. So knowledge has a half life. And so 60 40 was it forever. And now it's not. And so the way I think it's kind of changed is people have recognized that most individuals need to have an allocation of their assets into alternatives, not all in one single alternative bucket, but across. And the idea here is to build a truly diversified portfolio, because what we know statistically when we have a diversified portfolio, the overall risk of our returns goes down. And the average return goes up. We're right. So volatility reduces and returns increase, which is of course, you know, what we all want. And I say it's probably more important than ever because what is understood today. And this part I think is just math. It's not, you know, how is it's not subject to knowledge half life, which is that if something doesn't change come, you know, 2050, we're going to have tens of millions of Americans who would otherwise like to be retired who can't. And so what are we going to do to change that? Well, I'm glad there's people like you out there thinking about these things. So, Eric, tell me what this always fascinates me that people have such different definitions of success. Tell me how you define success. You know, you actually sent me that question in advance, and I appreciate you having sent questions in advance. And if you were asking me that question, you know, 15 years ago, I think I have a very different answer than than than I have today, you know, 15 years ago, maybe even 20 years ago, and I've been an entrepreneur for that long, it would simply be defined by economics and financial success. And, you know, the Eric today thinks that's short-sighted. Of course, we want a profitable, sustainable business that can, that can, you know, continue to build and not have any needs for outside funding. That's 100% the case. And, you know, we have a light at the end of that tunnel. But there are lots of other things that, for me, anyway, now contribute to how I might define success, including, by the way, actually achieving the mission that I was just talking about, which was to present investors with alternatives to achieve their own financial freedom. And financial freedom, by the way, is defined differently by every single person. And so, you know, we don't want to define for them what their alternatives are, nor do we want to define for them what financial freedom means. That's up to everyone. And so, I think one of the things that attracts, we like to refer to ourselves as "ultonians." One of the things that I think attracts "ultonians" to "auto" is our mission. And so, I think that plays, you know, as we make progress against that, you know, objective, which is a far-out objective. It doesn't happen overnight. Hopefully, it happens before 2050, though. So, as we make progress against that objective, that plays into how I define success. But then also, it's kind of my own personal growth as a leader. And understanding how to continue to motivate a group of 70 individuals and make sure that we're all rowing in the same direction and working as a unit. And, you know, so one person is not rowing forward while the other person is rowing backwards, right? You know, and that's always, that's really interesting to me, which is just, how do you lead? And what do you do when you're getting up in the morning and what is going to motivate the people on the team to bring the best of themselves every day? And to the extent that, I feel like we're doing that right, that feels like success to me. All right, good. So, if you think about somebody that is successful, who comes to mind for you? Oh, that's a good question. I'm going to have to think about that one for another minute while we answer some other questions. Okay, all right. I can, I can, I can, I'm sure I can come up with people across the spectrum. Okay. Well, going back to what you said a minute ago, talking about professional growth and development, how do you, I can tell you somebody likes to learn, you know, you're always thinking about the future and kind of what's going on in the world. How do you stay on top of what's going on in the world? How do you become a better leader? So first of all, this is, we didn't make this up, by the way, you know, but we, we try to consume as, by we, I'm talking about our executive team, we try, we try to consume as much sort of information as, you know, as is reasonably possible without sort of getting in the way of actually working on the business. But one of the really important things that, that we've come across and, and we hope to instill across the team, is the idea that you have to be willing to say the thing that nobody wants to say, which includes, you know, somebody telling me, I got it all wrong. Yeah. Right. Right. And, and so we try to have a culture where everyone understands that good ideas don't come from titles, good ideas come from people, they come from people who are thinking. And, you know, really sort of thinking in, in a way that maybe is non obvious, and, and is not constrained by what has always been done. So, so there's that. And then, of course, you know, I, I'm lucky in that I have a life partner, my wife, who, who, who makes sure that I know that maybe I'm not getting right all the time. So, and it's not that she just says, hey, yeah, you know, you, you didn't get it right. She also, because she's smarter than I am, is able to offer up other possibilities and share them, and that I wonder if, and that that's always hugely helpful. Awesome. It's great to have somebody that kind of balances you out, challenges you're thinking, right? That's, that's good. A hundred percent. Good. So, if you think about, you've been an entrepreneur for a long time, you've done some things in different ways and different things, what have been some of the biggest learnings for you in business and in life? So, I think the, the, the, this again, I don't, I don't think I have any particular insight that, that other founders, entrepreneurs, CEOs don't have. But one of the things that I think is so important is to recognize that failure is actually a learning opportunity. And it's probably the greatest learning opportunity. It is. You know, when, when you do things right, you think you're so fucking smart. But honestly, especially if you do it right on the first time, you actually don't know whether you did it right or how you did it right or why you did it right or what, you know, what really happened there. It's not until you fail at things and have to run some trial and error to learn that you understand what a winning formula actually is. And at least I think very few people get it right the first time and know why they got it right. Whereas people who get it wrong and continue to work at it and figure it out and get it right, you know, they really know. So I, I sort of use failing as just a learning opportunity. And, and of course it's you know, people often quote Mike Tyson, which is say everybody has a plan until you get punched in the nose. Right. Yeah. You know, it's like, so, so it's not how you fall. It's how you get up. Yeah. And, and to me, that's, yeah, I'm a scrapper. So. Well, it's good. You know, I mean, I think that every, we all hear the quotes about, you know, failure is the best teacher, things like that. And, but it really is a mindset. It's really believing it. And it's really, you know, responding in that way because it does, it can knock you down sometimes for sure. But being able to say, and once you get kind of past the shock of whatever it might be sometimes is, okay, what are the lessons there? How would I do this differently next time, right? And being able to really process that and internalize that makes all the difference. So. Yes. Thank you for sharing that. Anything else about all the exciting things you do, anything else you want to share with any new entrepreneurs out there, anybody thinking about getting started? Any advice? It will likely be the hardest thing you ever do. It's not a curve that or a line that goes up and to the right. It's, you know, incredibly challenging mentally and physically. I believe that you are interconnected. And, you know, a lot of people are going to tell you no and tell you why you shouldn't do it. And why you can't do it. And if you continue to get up in the morning still believing in yourself and thinking that you can, well, then you should. All right. Well, that's a great place to close. It's very insightful and very heartfelt advice. And I know that it will be meaningful to a lot of people because it is hard and it's easy to to quit. And I think to your point earlier, having somebody there to kind of, when you want to quit, balance you and say, you know, are you sure you want to do that? And kind of remind you of what you, why you started this and what you get out of it and what you enjoy and what difference you're making, right? What impact you're making. You know, that's a, that, that sort of brings up one final thought that I'll share, which is. If you think you have an idea and you think it's a good one, you don't have to just quit the job that you have in order to do it. You know, go ahead and work after hours and try and build the build on this idea and business opportunity that you have to see if it's real, to see if someone is willing to pay for it. Figure out how to do that before you just go kind of quit your job and, and, and sort of put all your eggs in one basket. Go, go prove it out first. That's what I would say. Also great advice. Thank you. So Eric, it's been great talking to you today. I really appreciate you taking the time again. Great information, great insight. And thank you very much. Honor, thanks for having me.
