This episode of Invest Like the Best is sponsored by Catalyst, Catalyst is the leading destination for public company data and analysis. I'd heard of Catalyst over the past few years and became more interested after meeting the founder and CEO last year to pick his brain about SAS businesses founded by a former buyside analyst who encountered friction in sourcing, building and updating models, Catalyst is now used by over three hundred institutions, including the largest money managers in North America and by a number of guests on the show with detailed company specific models on virtually every investible public equity, Canalis clients are able to react more quickly.

If you've been scrambling to keep up with a deluge of IPOs these days, Canalis has models on Dorda, Palantir, Airbnb and everything in between. Their pre IPO models are built as soon as the sun hits and include all segments CPI's and Non Gap figures. If you're a professional equity investor and haven't talked to Canalis recently, you should give them a shout. Learn more and try Canalis for yourself at Canalis dot com forward slash Patrick. That's C and a list dotcom.

Patrick, stay tuned. At the end of the episode where I talked to Canalis Customer Fennimore Asset Management about how Canonist helps their firm better find and manage their investments.

Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date. An investor field guide, dotcom.

Patrick O'Shaughnessy is the CEO of O'Shannassy Asset Management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shannassy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shannassy Asset Management may maintain positions in the securities discussed in this podcast.

My guest today is Claire Cormier talkI, managing director of Asia-Pacific for Heintz, the largest private real estate investment development and management firm in the world, with over one hundred and forty four billion dollars in assets under management. Claire is responsible for acquisitions, development and new business generation for Hynde's in Asia and was recently appointed to the board of Zillow. I was first introduced to Claire two years ago and I've wanted to have her on the podcast ever since. Her personal story is also fascinating.

Claire finished Stanford undergrad in two and a half years and now teaches there on the intersection of technology and real assets. She was a professional track and field athlete competing for USA Track and Field, and she's run a marathon on Everest, which we discuss. Aside from her personal story and some of her amazing achievements in this episode, we dive into the world of real estate investing, including how to use pattern recognition to unlock real alpha in real estate, the ingredients that make a city special, and the surprising ROIC of public art.

Please enjoy my conversation with Claire Kambia Kilkivan. Claire, this has been one of the conversations that I've been most excited to have by far for a lot of reasons, mostly because of you. And second, because we're going to cover stuff that we just haven't talked about on the show before. I think a great way to orient the audience would be with what I always call a thumbnail sketch of your career to this point, the major steps along the way that got you to where you are today, culminating with you describing sort of what you spend your days doing now.

And then we're going to dive into cities and all sorts of interesting investing topics, like I said, that are unique to the show.

OK, I'm excited. Well, I guess like a lot of people in the real estate industry, I started out with an interest in residential 10 or 11 years old and the MLS and the online version of the MLS had started to roll out. I loved to get on the MLS, understand the different houses in my neighborhood. The thing is, I'm from Houston. So a city that is famous for its lack of zoning, the city was changing all the time so I could look and see what had been an old used car lot in just a matter of a year, transform into this really interesting mixed use place with restaurants and apartment buildings and a whole center of gravity.

And I just loved it. So I knew that that's what I wanted to do when I grew up. I didn't know what it was called, but that's what I was. I'd focus and went to university and studied urban planning and heavy construction. One day my advisor said that Jerry Hines was going to be on campus interviewing and Jerry Hines was a titan of this industry.

He built the entire skyline of my hometown. He shaped the skyline of most of the major cities on globe. And he was really the person who invented this intersection of art and commerce, getting star architects to build buildings that people actually used, that build office buildings that people would go into and every day. But he had this real focus on what was next from a design and a people perspective. He loved young people. So I was fortunate. I met him and he brought me into the fold.

And so my first project was building a campus for Shell. They wanted to build their first campus that was focused on millennial users. And then ever since I spent my time investing in everywhere from Texas to Poland, Brazil, China and everywhere in between, but really always focused on what's next.

What was it about, Jerry, in your early interactions with you? I like this idea of art and commerce, the intersection of these two things. We're going to talk a lot about this kind of Venn diagram, urban planning and real estate investing. You seem to find your way into interesting overlaps that not a lot of people populate. Talk to me a little bit about what you've learned from him. The in real estate, specifically on the intersection between art, the qualitative aspect of things and commerce, sort of the quantitative.

So Jerry had this theory around a flight to quality.

He believed that people were willing to pay more for design that was better, but that they could really feel so not just a beautiful building, but inside he had the view that having a taller door, a nine foot door into your office created a stronger sense of presence. Or having a lobby that spoke to you meant that it built the brand of your company. His first big project was building this campus for Shell, and it was the tallest unreinforced concrete building in the world, beautifully designed by Philip Johnson.

Even to this day, it has this unbelievable sense of place. You want to be near it. It uses the same materials for the skyscraper as it does for the plaza when you're on the ground. So it pulls your eye up. And so when you're arriving there, there is this feeling that I'm coming here to visit a company that matters. I'm coming here to do work that matters. Deeply believed in this.

He went and built buildings all around the world and built the firm around that concept. Today, the firm has evolved. We do much more than building office space, but that DNA and that sense of detail has remained within the firm and that flight to quality, meaning that whether the markets are up or down, that tenants will be drawn and that these these buildings, these towers, these logistics facilities, that they will stay more full and have better occupancy because of it.

One of the great things that now we get to talk about is cities. And I would love you to begin by laying out I don't know what to call it, like a theory of or philosophy of cities that you've developed. Because, again, I talk about weird bean diagrams earlier. You have this really cool, unique intersection of urban planning, academic study, deep study of what makes cities go and I guess just places go. But then also this very practical, pragmatic investment lens and business lens.

And I think the intersection represents a lot of unique insight that you bring to the table. So talk. Through what you've learned about just cities, generally speaking, I want to talk about all weird aspects of cities, including highways and projects and all this stuff, so just at a broad level, set the stage for us on what you know and think about cities.

So I think like a lot of investing cities and real estate investing, it's about pattern recognition, cities, a lot of them rhyme with each other. I mean, a city at the end of the day, it's an API for industry. There is existing infrastructure, there are roadways, there are electrical grids. There are these rules that you're playing within and trying to plug into. When you start to see those principles, you can identify a trend, see where it's investable in that market, make some choices.

I use the example of what is a neighborhood where you wouldn't have followed one hundred dollar bill blowing across the street three years ago, but now is where all of the coolest bars are and some emerging coffee shops that people like to walk to in the morning. Every city has that. You go, you walk around, look, and you say, well, what's the investable opportunity in that zone? So my team hears me say this a lot, but I make a joke.

I think everybody knows you should develop your own metrics around this, your own set of rules. But one thing I talk a lot about is the tattoo index. So in any city you wander around, I guess I like to talk to people a lot, ask them where do they live, where do they like to hang out? But when you look around and you see somebody who has like a super edgy haircut, cool neck tattoos and arm sleeves are follow them and see where they're hanging out.

And that is the next place. That's the next thing. I would create an entire fund off of just following tattoos.

Say a bit more about this really cool concept of cities rhyming with each other. I assume that with pattern recognition as part of the key thing, deciding where to invest or where to develop and build a building, that seeing something like the tattoo index in a younger city, let's say, or in a city that's not quite as far along as an older one is a real distinct advantage. But what are the key ways that cities rhyme with each other? Maybe even give us a few examples of cities that people would be aware of where you've seen something happen in both at a different time.

A lot of cities went through this period where they have their founding area, which is a downtown center, often right by a waterfront, an American example. But this is pretty global and then they build infrastructure outward. So in the US, the Highway Act, S. highways out of the city for people to build suburbs and then subsequent suburbs beyond that, often leaving behind a city center where people went to work but maybe had a declining tax base and school.

So it sort of gets left behind. Not so much residential activity in that CBD. So this is a story across Houston, Dallas, name your market. People realize, hey, actually downtown is pretty cool. I go down there, there are some really neat old brick buildings that might be pretty interesting. And so the tattoo kids go back next, maybe they marry and they get a dog and they start living there and it becomes how can this become a twenty four hour place again?

You see these patterns and again, you think, OK, well, how can I invest into that? Another great one is waterfront's often get left behind as they change. So they start out being very industrial, serving a purpose to deliver goods. They're also a great place to build a highway or a fast roadway along them. So if you think about in Chicago, Pittsburgh, along the water in Minneapolis, but then the city matures, people come back to these city centers and they want somewhere to walk their dog or go for a long run.

Often it's private citizens who gather together. They raise money and form a public and private partnership to say, hey, can we clean up this waterfront and make it nice? And you know what's nice? Living and working next to a nice waterfront. So that's a pretty great place to go and start thinking about building the next great office tower or mixed use center. The whole game of this is how can you be early, find those themes and figure out how to really ride that wave and shape.

What was the Highway Act? I don't know anything about that gets to the US, the Eisenhower National Highway Act that really provided funding around defense and also transportation to build the highway network that we know today across US cities. So a lot of cities, they had one straight highway that led out of town and then often they had concentric circles. You have cities that grow in rings. Turning this back to what does that look like in a city that you might know today or what does that feel like?

Well, a lot of times and unfortunately, those highways, they had to find a path of least resistance. Unfortunately, that meant a lot of times they were going through poor immigrant or African-American neighborhoods. What you see today is a lot of activity to try to rebuild those communities that were really split and torn apart by the highways themselves. But there's also a lot of really interesting and investible growth along those as folks in many cities moved away, you know, 30, 40, 50 minutes outside of town.

But, ah. Now trying to think about their commutes, there are a lot of inner rings that are actually quite close to meaningful infrastructure with pretty good square footage and a nice house. If you want to start a family and you're starting to see those, come back so you could go and find a pocket, really transform the start of your old malls that are left behind that can maybe find their next life. You sort of find the patterns. You think about a bigger theme that you believe in and press in until it's not a good idea anymore.

Does the rhyming break down between countries? I'd love to hear a bit about what you've learned since spending so much time and doing projects in Asia and China based in Hong Kong. What's different around the world about how cities are built, how investing considerations are different? Where does the rhyming breakdown? Or is it pretty consistent where you are today and the cities that you grew up in?

Yeah, I think looking internationally you can find the patterns wartimes based on the age of that city. European cities are quite old, but in Asia you have this explosive growth and this commercialism that's actually quite recent. So as an example, US retail, you have a lot of these old dead malls in China. You don't have that because they didn't go through this period where they were all built back then. So now you do have malls, but they're built around this omni channel world of virtual reality shopping and social shopping and this modern experience also, again, China.

China is only as urbanized as the US was at the end of World War Two. Step back and think about that. Its cities are still consolidating in a way that's decades behind the US. They are actively building infrastructure to connect all of these places and to house these people, but on a modern standard. So speed trains that connect the entire country and offshoots of those trains for local trains and local roads and bridges to connect them. In a lot of ways you can see these ways in which China is really far ahead because it skipped some of these things generationally.

But then on the flip side, it's almost like you have the cheat codes because, you know, from the US, you know what happens when you get certain nodes of infrastructure so you can look at the playbook and see how to find those. Last year, we spent a lot of time looking at logistics and logistics delivery networks. You search for the nodes and there you just have incredible scale. Whatever the really exciting projects is a site that's forty five minutes driving to forty five million people.

You take that concept and it's just hyper scaled.

Say a bit more about this. You have this amazing line. When we last talked about how you travel a lot. Airplanes aren't planes. Sometimes they're time machines and that you can sort of travel back and forth in time. So maybe they're at the World War Two stage in one way, but the malls are way, far ahead. The time machine to the future relative to the US. I'm especially interested in what you've observed in China that feels like the future that may migrate back to older, maybe not to Europe as much, but certainly to the US where there's a little bit more space, even the Omni Channel Mall experience.

What are some of the things that you think, ah, I'd walk around having not spent time there and just be like, holy cow, this is so cool. I hope this happens back home.

I'd say one of the ones that jumps out the most, it's less real estate but is payments. China is effectively cashless and if you pull out a credit card there to pay for something, people feel highly inconvenienced. Everything really works through the phone. China penetration for contactless payment on mobile is well over 80 percent. In the US, it's less than 30. There is this reality that within WeChat or Alpay, you're using that to get into your building to pay for your lunch.

In parts of southern China like Gwangju, it's actually your ID card.

You transform that and then you go and you're in the US and there is this thing of like, why can't I do a lot of these things with this phone device that's always on me? Why can't I unlock the door to my house? Or if I'm going to my building every day and going through the same motions, can it know that if I've arrived in the parking lot that I can now be in line for my coffee order? That seems pretty logical when you see these things in one part of the world, you know that it's only a matter of time before it comes to another in real estate.

You can make that tremendously investable because you can change the user experience of a building by using or picking apart pieces of either technology or that experience and trying to carry it over. But it works the other way, too. Within the US. Looking over to China, one thing that's been a huge focus is this concept of building a workplace in the US that feels dynamic and we call it creative office. This concept of what is office space doing for me?

How does it make. Make me feel more engaged and energetic and creative, and that concept doesn't exist so much in Asia to that degree. And so when you think about a company, perhaps it European or American company that sees Asia as their future. Well, they're thinking how do they create a portable culture? And for us, real estate in a non portable product, how do they take the brand of their experience for their office workers and for their company to feel that creativity in another part of the world that sets off all of my real estate dopamine receptors because, again, you kind of have the cheat codes to pull it over to another part of the world.

Can you walk us through sort of like a standard project, the timeline of it, maybe the early decision process? A little bit, the economics of it. From the standpoint of an investor, I don't really understand if you're building something, whatever it is called, storage building or an office building or some mixed use building, how long does it take? What sorts of returns are you after? How does it differ from the investing world where I spend most of my time in equities?

What are the key differences that you've learned about the style of investing in real estate?

You have a couple of different approaches. So you development versus an acquisitions deal where you may be in and out relatively quickly. It's not a deeply liquid asset, of course. Can't move your building. It's one strategy of real estate called value add, and that could be coming in, identifying starting from a theme. You believe that a neighborhood is changing or an office building maybe is undervalued. It's under leased maybe only 40 percent full. But you think that you can come in, make some physical improvements, maybe improve the actual asset management, the human element of it?

You do some pretty simple Sharpey math around the cost. So how many dollars am I in? How many dollars do I need to pay to improve it? And then what can I rent it for as a result? What's that up with then. What can I sell it for. Makes it sound simple but basic principle and that might be three to four years. Sometimes you have an up tick market and it can make sense to sell it within even shorter than that.

A year or you're eighteen months. Really, depending on the size of the project, development could run the range. There's so much value in the entry level of the land. As a great example, in China, we delivered a building last year about a million and a half feet in Shanghai that bet on an emerging neighborhood. But it was very complex. It was coming into land where a building had already been started with a foundation in place. And so we needed to come in and completely redesign the underlying structure to begin with.

There was a new subway station that was being delivered and figure out a way to build an enormous superstructure and brand new building on top of it and lease it out. So the math and the dollar ranges can run a full spectrum value add project.

You may be looking for a high teens IRR to these developments where some of them you're thinking more from an equity multiple because it's something that is a huge investment. But you look to hold it for a very long time because you've created incredible value there. At the end of the day, the principles are very simple. It's Dolorean, think of the time. What am I delivering to on the other side of this? And again, most importantly, what theme in my pressing into, particularly if it's a development because you'll be delivering into a quite different future.

So you need to have very strong convictions about the location in the story that you're building into other examples in that last piece.

Because I can think of that pattern recognition, I sort of think about that is the alpha in the space. Like if you pick the right place, you're going to earn a return above just a generic project that's being built, even if that project's done well. Are there examples where you've gotten that wrong? If so, what did you learn from those examples?

Actually, I looked at the other way. We think of the choosing a right place or choosing the right time in some ways almost part of the data, and that the real alpha is the building execution, the development and adding that direct value because it's very difficult to do. It's the intersection of design, the cost, the budget management, the actual construction itself or redevelopment itself, and then the leasing, finding the right tenant base, creating the right story, building correctly to the market, not overbuilding for the market.

And within that timing, the cycle, of course, there have been examples where we've delivered new buildings, beautiful, shiny, perfectly built office buildings into the wrong time, into the depths of the recession, or where we've come into challenges where there may have been a structural issue that could not have been foreseen, a water table matter that developed later because of city construction matters unrelated to us. But that's why you solve through the design that to that point, a flight to quality.

You're building a building that's resilient, high market or low market. You know that you can keep it full and hold through.

I started my career really during the recession, in the downturn, and we were working on some very large. This building did a very tough time, but during the downturn, people saw it as an opportunity to leave, there may be lesser quality building and take a step up at the end. All of the stories were actually success stories.

If you were designing a brand new city from the ground up, you just have a complete blank canvas.

How do you attack that problem? What are the things that matter most to create a wonderful brand new city?

You're building a city from scratch. You want to create a place where at its core, people can have a great quality of life. Businesses can execute well and attract great talent.

People are going to vote with their feet to do that.

If you want a logical and diverse transit network so ways people can move around the city by train or bike or foot scooter. Second, you want nodes of mixed use. So places where residential, commercial and entertainment uses can coexist and vibe off each other's energy.

The third is cultural catalysts, an art hub, a college museum, just something that creates a hub of energy.

And then finally, just an overall sense of adaptability. Call it a freedom for buildings to evolve with technological or demographic changes. So think about last mile delivery services or flex office today and how that's really changed how we live.

The good news is that you can piece together a lot of these parameters without starting from scratch in transit can be tricky. Sometimes you need to supplement that with neighborhood shuttles or private shuttles, bike services. But there are a lot of ways to attack it. At Hynde's. We think about this all the time, just thinking about placemaking, especially because we work with so many companies that are trying to carry their corporate culture across international markets. So as an example, in Washington, D.C., we created this project called City Center and it's a mix of office, high end condo, but also rental apartments and hotel and retail and and its own cultural activities and cultural programming.

What we were able to do there is really just build a city within itself. You can plug that into an existing urban infrastructure. So it's a play we really like to do in Atlanta and Houston and and in Milan. And people really consistently are drawn to it. Interestingly, in Asia, particularly in China, you many instances where cities are actually being built from scratch. And so that creates a really neat, investable opportunities because the principles of urban planning are pretty universal.

So you can kind of follow the cheat codes of the transit network so you can see where the waterways are, plug into the universities and that API and definitely get pretty creative.

I'd love to talk a little bit about both America and maybe even your hometown as a great example and what you're seeing in Asia, the contrast, but also just to learn a bit about each, maybe starting with America, what do you think are the major real estate changes that we will see over the next one to two decades? Whether that's you know, I just saw epic games, bought a mall or repurposed as a campus. I thought that was such a cool idea.

What will be repurposed, renewed, forever forgotten? What are the winds of change in American real estate, do you think?

I think first within office, it used to be people thought as the Internet, the early ages of the Internet that it was the end of office. Office was dead. Everybody could work remotely. This is like early two thousand. Instead, the opposite happened, which is people started to ask more of their office space. When you saw the rise of these Google campuses and these interactive places that you want it to be, well, covid made us realize that you can work from home.

Most companies are asking themselves and their employees are asking, well, if I'm coming into the office, why am I here? What is it doing for me? Am I here to collaborate? Because I can do that better than I can do so remotely. Am I here to meet and to focus on sales for my business? Well, then what does this space say about my company? What about the space makes my company feel more creative? One thing I do deeply believe is that offices will start to feel more like your college campus.

It doesn't mean it's Parisotto and still be very vertical buildings. But, you know, in college you felt like you could go and work on a couch over here, go collaborate with your teammates, or maybe go sit at a desk. It was a place for extemporaneous thought and happenstance collaboration. I think that is a very important thing that we'll start to see more and more.

Sounds amazing. It sounds go right. There are more distributed for that. I think alternative and more socially based living is one.

It's something we're tremendously focused on out in Asia as well, which is young people are getting married later. They're living alone for longer. So what does that mean? I think there still is definitely that search for community and so co living or we call alternative living where you have your own personal space, your own bathroom, small area to cook and prepare. But there's a common area where you cook most of your meals and you spend your time that's larger, like an adult dorm.

So you can hang out with friends, you can build a sense of community. Maybe there's even a community, dog or pet and amenities that make it interesting because we're searching for that. And so I think that is something that we'll see more of, not just in the US, but frankly, globally and the.

To connect, that is so much better than it was 10, 15 years ago when some of those concepts were trying to emerge, I love one of the things I've loved studying in both Africa and China is that they sort of skipped the stage of infrastructure and went straight to mobile for so much for payments and other things. I think you're committed to spending. You already have a lot of your time and thinking and effort in Asia. So setting America aside for a minute, what is so interesting to you about Asia?

What are the things that maybe most Americans listening wouldn't appreciate or understand, whether that's scope or technology or rates of change? What are the things that most fascinate you about all your work in Asia and maybe China specifically?

I think there's an incredible dynamism that is new industries being formed every day, the rate of adoption of new trends or technologies. It's not just that it's fast, it's the depth because it can iterate at such great numbers. The companies grow to such scale and then are able to move into so many different verticals. And so you look at something like WeChat that within that spins off WeChat pay and Pinda and all of these other tools that become part of people's everyday existence.

Back to that point of having these APIs that you plug into from a real estate perspective, there are all of these just really different ways to come and participate and build into that. You're able to create the physical infrastructure to match this incredible technological infrastructure that is building on hyper speed in real time.

Could you give like one or two examples of that? I love this concept of real estate plugging in to these other platforms, order like one or two examples of that.

So a great example. In China, you have see a way fewer cars and you have these cities that didn't develop around a huge amount of car traffic for buildings. You're able to have a lot of them, frankly, be more to a human scale or a scooter scale. And so Dakhla Spikes rental, small electric scooters and then standing scooters are very common. You can create these sort of mixed use plazas in a way that's very natural and builds this density.

You can incorporate a lot of public art because buildings relate to each other and a more human scale. You're not trying to make up for parking garages or parking lots like you might have to be doing in other cities. Not only are you coming in with a new building and adding to the skyline, but you're making really an immediate impact at the human level, which is something that's really interesting. I think also the working population is so young, have this young generation coming in who have been raised in the world of technology.

And so for us and we think about new buildings, they're deeply enabled. I mean, our office buildings have real time indoor air quality monitors. You can look at the wall and see the air quality that's world leading.

You don't just have that in any office building, but it's because there's this expectation around technology and general access to data and people's own data that's just always pushing the bar forward. The most interesting companies as users are really thinking about this because they're thinking about as they're moving into this part of the world and opening new offices or hiring, how do they stay competitive, build a culture of their office, take the things that are transportable, and then also plug into this super futuristic Blade Runner world.

It's really fun.

I love the scale and scope and pace of some of these enormous Chinese businesses that have grown in the last decade. Other aspects of you watching some of that growth happen and interacting with the people that you wish we were doing in the West, whether that's how they work, when they work, what they're doing are the things that are portable that you think we could adopt, because in many cases it seems like the rate of change is just so much higher than obviously we've had great successes in the West as well.

But what do you think would be great to see transported to the US?

So it exists in both the Asia and the West, but there is this sense of deep entrepreneurship and getting started. One of the things in Asia that is you do have a very the adoption rate can be so fast because your population is so large. So they can just iterate very quickly and evolve very quickly. I wish I could see. I think it's actually more that there could be closer bridges between the east and the West. I'm constantly surprised how in times where the world is so connected and when young people are so connected, it's considered this whole different world.

So it's starting to break down. You see some things like light dance and tick tock that.

Make their way over, unfortunate that there isn't that sharing of knowledge and practice, because so many of the principles are the same, it is the same thing of a young, hungry, creative engineer thinking about something and iterating on it, and a young guy at Amazon who comes up and is using his time to think about the next big idea that's happening under Marty Lao's group in Tencent cents. And that leadership, it's out there. And there are so many stories of all the what are its drone startups or the gaming industry that are reflective of that in Asia.

But I do think there's a lot of collaboration that could happen just by taking patterns from the other side. There are a lot of things that China can learn, a lot of things that the West can learn from China as well to close our chapter on cities.

Broadly speaking, is there a city or an experience running through a city for the first time that stands out in memory as this special moment of discovery around some of these principles that we've talked about, the need for gathering, the need for convenience, the rise of technology to make cities better, the changing needs of cities. Is there a place that comes to mind that when it's all done, you would urge people to go and go for a run and walk around to understand some of these principles in a visceral way?

I'll give you to everybody is talking about Miami now and what Mayor Francis Suarez doing. Creating this zeitgeist of movement in real time with Twitter Receipt's is fascinating, but Miami has been there and it's been awesome and there have been no state taxes for a very long time. But I remember the sense of running through Wynwood in its very early days.

Talk about tattoo index. Exactly. Exactly. It was a warehouse district. You definitely would not have run there at night. Pretty ominous. And you can see what happens when there's this decision of like, let's let some artists loose. Let's see what they do with permission. Next thing you know, food trucks start showing up.

And every time I would show back in Miami, the area felt a little bit safer. It felt a little bit more interesting. More people with tattoos hanging out. And then now, I mean, it's one of the most exciting places, not only in Miami or the state of Florida, but I think it's one of the most interesting nodes in the country. And it all came from some street art. It's so fascinating. It's an example. I think another one that might surprise folks today would be Detroit.

I think Detroit is might be the most dynamic city in the US right now, while it is incredibly low cost of failure.

So you have experimental artists, really sort of groundbreaking chefs who are taking a shot at opening their own restaurant, who may not have been able to afford to do that in New York or in San Francisco. Cost of living is low by comparison.

This incredible story, Dan Gilbert really identifying opportunity and moving in Quicken Loans and starting bedrock buying up block after block.

But you find that the people who came, whether it was through Quicken or some of the other companies or who were just drawn to it, musicians, artists, entrepreneurs, there is this deep sense of being part of that underdog story that just exudes. So you get there and there is this energy of possibility and you see scrappy startups plugging into it and you see Ford plugging into it, having their traditional outside of town headquarters, but then putting that innovation hub and those innovation people close in.

It's totally infectious. I love it.

I think we need to add to the fresh city plan some sort of just open permission for creatives and artists and entrepreneurs. That's it seems like find a place to give them a canvas and let them go to work. I mean, when one thing is so visceral, like having brought my family there recently, like, it's just you have to go and check it out. It's unlike anything else. And it probably could have only ended up the way it did with that permission granted, no one was going to plan that top down.

So the bottom up component seems like a really interesting aspect, too, for the future.

Back that point about just the very human responses of people wanting to gather, people wanting to see cool things or experience something new. You asked earlier about secrets or surprises. I mean, something that just often blows my mind is the ARO eye on public art and not even by a famous artist. I mean, it can be art by children or dynamic art that comes in and moves. It's just so undervalued, it's so easy to do and it creates so much interest.

In some cases it's frankly free. It's not often thought of. I think it's definitely something we should explore. I mean, just to that point of making an entire investment thesis out of fixing waterfront's or following people with tattoos, I think if you just took a regular what was a former parking lot and added a little bit of landscaping and said every day at three o'clock we're going to have symphony music, be a high school symphony, it doesn't even have to be that great.

That's something interesting. People would start to gather. They start to make plans around it and start to be kind of nice to live near that or to have an office near that, it's so easy to do and it creates a sense of place.

I'm going to take kind of a strange detour here, which is into track and field. This is sort of the highest level of track and field and the potential for you to be the best in the world or among the very best in the world. I think people that get to that level of athletic performance often have really interesting coaches and really interesting lessons learned along the way. Talk me through some of the coaches that were most impactful on you and some of the things that stick with you into your investing and business career that started with them.

So first, I think the thing about track and field is you're asking everything you possibly can out of your body every time you step out onto the track. So you're starting with a set of genetic gifts and then the next layer, which is a lot of hard work. And then the next, though, is this cultivated other that comes from the people who are there to help make you better. That's your teammates and that's your coach who's there to get inside your head and push and get more out of you than you think you can get from yourself.

And as you become more and more elite, that becomes more and more important. One of the stories that always sticks out for me was I was coming into a new coaching relationship and was on the cusp of taking these very big steps in my track and field career. So running for the first time at the US Open, racing on this big international stage. And I had this coach named Dina Evans and she's coached some of the most prolific female athletes in the country.

For those who follow running, Lauren Fleshman, Sarah Hall, who's the most dominant marathon runner today out on the circuit, and Dina said something to me is we were really almost interviewing each other for this coaching relationship.

She said, do you want to be the best long sprinter in the country? I said, Of course. Do you want to be the American record holder or do you want to be world class and on the podium? And of course, my answer is yes, yes, yes. And then she said, do you understand that for you to do that, that builds my track record as a coach. The better you do, the better. I am doing so, of course.

And she said, as long as you understand that through that we have the same goals, your success is my success. I will never tell you that you ran well, if you did it and if you screwed up, I'm going to let you know how, because that's how you get better. But at the end of the day, if you understand that core principle and that direct feedback, I can never hurt your feelings that you vigorously open. Feedback loop is how you improve.

And I'm so grateful for that lesson early on because she was teaching me how to work with her.

She was teaching me how to ask more of myself in that environment and also helping me to recognize the opportunities to grow as they presented themselves. So I think about that, and I use that lesson in that story all the time, not just within the teams that I work with, but also with external partners, LP's getting to know how we work or contractors or folks on the other side of the deal. It's just that open feedback and laying there, that honesty and that trust is just incredibly valuable.

And I think it helps you to get into the same mindset of teamwork to move forward together.

Can you tell me what tomorrow time means in track and field? You have just a few things that matter. You're just running in a circle as fast as you can. It's not that complicated. Each season we would put a sticky note up on the ceiling above our beds. The last thing you saw before you went to sleep and the first thing you saw when you woke up in the morning was the time that you were chasing that season at the beginning of the season.

That time seemed so out of reach. It was an audacious goal. It's by itself, its nature measurable. And there's a lot of bravery involved in not just writing it down, but putting it up where you're looking at it. It forces you to say every day, what did I do today to get closer to that goal? And then when you wake up in the morning, it's what am I going to do today? So it was this built up accountability.

The third part of what you described, I think you called it this, cultivated others to your past, even the physical kind of into the mental. I certainly have never visited that place where I've had to push myself that hard after training so hard. And my guess is that in that space, you gather tools that are very broadly applicable to life in business and everything in between. What are those tools like? Say a bit more about that cultivated other part of the training equation, the eight hundred, which was my primary then.

It's running half a mile as fast as you possibly can. It's a sprint. So everything in your body. Saying, don't do what you're doing to me, this really hurts, you have to go to another place where your body is shut down. You're in oxygen debt usually for the last part of the race, and it becomes a point of who wants it, why are you here and why do you want to win?

And the thing that separates, frankly, the elite from the world class and you learn this the hard way or the easy way, but is you almost have to hate to fall short more than you love to win.

You're constantly comparing yourself to what you think you can do or even more what others believe you can do with that coaches you believe you can stretch to. This is the stuff that kept Kobe Bryant up until four a.m., shooting free throws over and over and over again because you're always chasing this version of you that's just beyond yourself.

You try to take that process, that calculus into everything else that you do. And so I retired from professional track and field in twenty thirteen. But from then on, I made a commitment that I would do at least one thing a year that fall into this category where it seems impossible but is merely improbable, something that would force me to push myself so hard that it seemed like it could not be done. And then when you actually do it and you complete it, you run sort of the math of the weighted average outcome of can I do this and then what can I control?

And you do it. Then the next time you're there doing something really hard, you think back to this improbable thing that you achieved. I'm so grateful for it because it's taken me on adventures all around the world and doing a lot of weird stuff.

What's the weirdest thing that a few years ago ran a marathon on Mount Everest?

But what does that mean? Like a base camp? Like, well, elevation.

My brother ran with me as well. He's an incredible athlete himself as well. And so first you have to get to the start up base camp, which is a lot of work, about seven days of walking. And there is a race that the local village villages hold to celebrate the climbing season every couple of years and to celebrate Tenzing Darma Sherpa, the Sherpa who climbed with Hillary to the top. So the race starts at the back of the base camp, which is actually surprisingly long.

It's like almost a mile long. And then you start running and scrambling up ice and rock and tremendous altitude as high as you could possibly go without clipping in. And then you corkscrew around the mountain even higher on and through to the villages. Definitely more people die doing this than I realized. I'm beginning to plan. But there are all of these stages along the way that like the eight hundred, your body is saying, why am I out here?

What are you doing? I want to stop. But you push through it and at the end you think about all the things you went through to get there and it's all the more rewarding in the next time you're there. It's familiar.

There's something very unique about the physical component of this, right? Like the pain, the body screaming at you. What is the closest feeling you've had to this same sort of pushing yourself in a professional context that wasn't physical?

A lot of real estate deals or sometimes even funds hit a point where you can say there are steps that make this make sense. There are steps that it's going to take working harder to assemble this piece of land or to figure out this puzzle. What is that extra step of work that you're willing to do to address a tax issue or to try to adjust height limits to get that much more square footage out of your site that can make the difference of pencilling or not?

That being a true outperformer, knowing where to push that extra bit, knowing where to identify something special about an opportunity that really jumps out. Often there is a physical element. Are you willing to sort of stay up and work harder across time zones and and make something come together, close that deal, work with more tenants to fill that spot? There are a lot of similarities there. I think the idea that it takes a lot of folks playing different roles to make things happen, putting back to that track and field example, as an elite athlete, there are probably nine or ten people in a circle around you who are making a lot of invisible sacrifices or putting in a lot of work to get that one athlete out there performing body guy, a chiropractor doctor's a massage therapist, your coach, a mental coach.

You're the one out there. But it's really a win for all. And it's a lot of folks working towards the whole. That's very similar as well. A lot of people playing their part to get a deal over the finish line.

One of the many things you do is teach at your alma mater at Stanford. What have you learned about being a good teacher? With teaching, I try before any lecture or any interaction with the students to be the professor I wish I'd had I had a lot of phenomenal professors at Stanford and some of the best in the world, and I learned so much from them and still do. But I feel a responsibility as a person coming from industry to try to give the students the access or the nugget of knowledge to then be able to go and dig deep and unwind and pull out those threads wherever they most find interest.

Really started teaching because I saw that there were so many of these students who had tremendous intuition coming from in urban studies background or a policy background about real assets and real estate or investing. But they didn't have maybe the language or some of the frameworks to know what the opportunities were. The great thing about real estate is there are so many ways to work in this field. But the tough part is a lot of times people just don't get the exposure if they didn't see it or know somebody who was in it.

And so I saw it as this way to try to approach maybe some of the underserved and underrepresented communities and students and sort of give them exposure to this business. And I hope I see my role with them is to show them where the doors and windows are and then from there, give them the tools to find their way and see what interests them.

When I was recently having a conversation in this format with Rich Barton, you came up and Rick was like, wait a minute. You know, Clara, there's a great overlap here, which is that you recently joined Zillow board, took me through that decision, what you hope to bring to the company and also what you hope to learn as part of that experience. I think that's a very different role than you strike me as someone that's incredibly hands on and active.

High energy knows what's going on. Involved in all the decisions of board members are quite a different role. So what do you hope to bring and what do you hope to get out of that role?

First, Rich and Lloyd, the founders, you're talking about pattern recognition.

I mean, they are just such incredible examples of taking that and taking this principle of democratizing information and applying it to these wildly different industries from travel to employment with Glassdoor and then Zillow. So much is happening at Zillow.

And I'd watched it from the early days. And as they moved deeper into this balance sheet side of real estate, it's a really exciting opportunity because there's so much data to unlock. And really, Zillow really opened up this whole new part of the residential real estate business that had existed in other industries, this access to information, this direct consumer experience. And it's just so exciting. But a lot of the opportunities there and the growth in the market are things that commercial real estate has encountered.

And so I hope to be able to bring those questions to the table and coming back to the cities or patterns and they rhyme with each other. Well, that's what this is about as well. It's been a ton of fun and a tremendous experience, I think pulling from it, having come into a hard assets business like Zillow did upon launch from the tech world, it just moves so quickly and goes deep and broad at such a pace. And on the other hand, traditional real estate moves incredibly slowly.

I mean, think about the framing of a house. If you took a black and white picture, you can barely tell the difference between a house being framed in nineteen eighty five and a house being framed today. That sense of possibility, that creative iteration is deeply energizing. And I come away from every interaction with them. And this a team just so energized and ready to change the world the way that they interact with a tech world, with that built environment and really where we're going and shaping that future.

It's really, really exciting.

I think you had an incredibly remarkable childhood and remarkable set of parents and a unique set of experiences. I'd love you to share a bit about that background. And I think it's especially important we're talking days now after this craziness at the Capitol here in the US. Tell me a little bit about what made it so unique. I know you've got to meet the Dalai Lama, Nelson Mandela and all that. I mean, just this incredible story. As a young person, I'd love to be able to share a bit of that with the audience as so fortunate.

I grew up with these pretty unique circumstances and that my parents had me fairly late in life. So I'm much younger than my siblings. In some ways. I'm often the youngest person I know whose parents came of age in the death of Jim Crow. My parents went to fully segregated schools. Concern of the KKK was and their safety was a regular issue. So that was the world that they grew up in and so in their community. So their high school sweethearts from a town in East Texas.

Growing up, the community resources were limited. The teachers and the mentors really rallied around it, put all of their time, their energy. And even personal savings into the kids, they thought that could make it out and that might be just four or five that they could really invest in and hope that they could push them beyond the community and reach what they couldn't to reach themselves. My parents went on to do these incredible things and my father was a football player and he was incredibly smart as well.

And that was a key and transformative ticket for him. But he went on to work on Watergate and advised presidents, my mother, a research scientist and later a doctor, but worked in a lab that later won the Nobel Prize. But it was this sense in every step of the way that there were these invisible sacrifices by so many other people to get them there. And so there was this urgency in this sense of stewardship to reach back for the people they left behind.

And they thought that was so important for my siblings and I to take into our lives. And so they had a huge focus on people who were fighting for others and for the underrepresented. And so, as you said, when Mandela had just been released from prison, was traveling for the first time, they hosted him in the US growing up, they hosted people like John Lewis. So to have him in the living room talking about his hopes and dreams and the things that he'd been through growing up in that environment, I today and I know my brother can say the same thing, that you feel an incredible sense of responsibility to the people who came before you and to do anything you can every day in the sphere in which you have control to pull those up that you can and touch in any way.

That is something I see it in others. I look to people like Mellody Hobson and what she's done to have an impact and to magnify her impact for others. Marvin Ellison, one of the only four African-American Fortune 500 CEOs. And you and you know that there's some 15, 17 year old who didn't know what executive jobs were, what those careers were, but who now not only can see that, but there are tools and internships and things that have been done specifically to pull them forward.

And yeah, I think about it every day.

I owe so much to them. It's an amazing story in that mindset is just so critical. We're a really interesting time in America right now. We're got so many good things, so many bad things, too. I think if everyone could adopt some version of that, not everyone is going to be as remarkable as it sounds like your parents are. But some version of that, paying it forward or paying it back, maybe bringing people along, it's a great excuse to turn to my traditional closing question, which is to ask you what the kindest thing that anyone's ever done for you, because so many of the answers are something in that camp of someone did something for me when I needed it and they didn't need to do it, something that people realize what made them successful or fortunate and then turning around and trying to provide the same.

So you don't have to have an answer in that category. But it's a nice transition.

I'm excited to hear your answer before I answer that question, because I don't want to leave it behind the times we're in of how can one person make a difference? Like how can we all find a way to be actionable? I do think that you can take stands within your industry or identify the specific problems to which you can say I can make a difference in this issue in six months or a year, like something where I can see an individual impact at an individual level that's then sustainable and that creates an on spark and a flywheel from there.

A great example is rigorousness put together the word challenge specifically because he wanted to address inequities that he saw in a sphere where he knew he had a broad network and could effectuate change and he set measurable goals. He called friends. He made the difference. I don't think that he even recognizes the compounding effect that it will have. I don't know that I do. I think we will look back thirty years from now. And that is a watershed moment of change, because you think about there have been African-Americans in government since reconstruction, but when you look at corporate representation, it's been effectively zero.

And the change that he isn't able to make, folks like Bill Gurley, others who have put this forward, I think you find something in your sector. So even if it's just deciding that maybe your company should have internship's not every high school or college student has the ability to have access to that job. And by the time that hiring the analysts, their past experience is more important. And maybe at that point they had to work at McDonald's or at Domino's Pizza to be able to pay their way through these opportunities, set the trajectory for the rest of their lives.

And I kind of begin to wake up every day thinking about how to help others. That's how you make the flywheel.

I'm appreciating that we pulled back to this because I think about back to your tomorrow time, there's something that everyone controls. The logical argument would be like if you agree, which is I don't know how you couldn't that there are huge. Problems and you agree that you have some sphere of influence, you don't have to solve the problem, but there's some tomorrow time for you, specifically Brad's amazing example. And we talked about this a bit when he was on with Rich, but that stuff, Cascade's and it can be a bottom up thing.

It doesn't just need to be a top down thing through policy and another way. So I think it's an incredibly powerful idea and imperative.

Yeah, a great group. It's specific to Cincinnati called Bonds of Union. That was started by a couple of Truman scholars and Debbie Warshawski and Lula Azfar. And it's sort of the concept that by the time you get to late middle school or high school for kids who are underprivileged or grew up in an unsafe background, it can be too late. So it was a super simple concept, around 10 year olds and just going to traditional educated two parent household, upper middle class families and saying, hey, you have a 10 year old, we're not asking much of you, but just next time your 10 year old is having a birthday party, will you invite this kid to join, get to know this kid, get to know their family, knowing that over time that family might take an interest in that 10 year old and then see what that 10 year old is experienced at home, maybe help them get an Uber to the library or take an interest in helping them get that first internship or high school job when they're 14 or 15.

That is how you make an incredible impact. And so you think about if 10 families did that, not only do the 10 year olds get that experience benefit, but also so does the host 10 year old. Now they're more sensitive to what they see, but also that child who's a beneficiary of the program, they're siblings, they're family. I mean, this is how you you help pull each other up. I come back to this concept of flywheels because I think about the triangle.

I know the single person with 10, 15 team of 10 or 15 behind them to get them there. I think this is the reverse, which is having that one example. You take one first time college attendee who becomes a college graduate. Well, their children are more likely to reach financial stability and to be able to rise out of a lot of these inequities. So there's so much we all can do. I love it.

Wonderful closing thought. Now, I do have to ask, what is the kind of thing that anyone's ever done for you?

I say the kindest thing anyone's done for me is in part their culture and take the time to teach their value system. When my husband Rick and I moved to Houston after graduate school, we didn't know many other married young people and we met these two couples that really went out of their way to pull us into their orbit. One was Taiwanese and the other was mixed heritage South Indian. And they really welcomed us fully into not just their own lives, but those of their extended family.

So pretty soon we were joining them for these very intimate religious and cultural rites of passage, learning from their parents who were in their 70s about the professional practices that were at the heart of their cultures, the personal practices. They embraced us. We coined this term that we called family more than friends, adopted as family. And and so today, you know, I've had this fortune of working across so many different languages and cultures, countries when I think back to the most important lessons and by far the most important skills about adapting and developing gunshy the act of building trust or about Chinese or about karaoke, as so many of those intangibles that help you build teams and find value and build a business, they track back to those initial gifts.

And for that I will always be grateful or clear if you can believe it.

It's been, I think, almost two years since you and I first talked about doing this conversation, which is just insane and crazy. I feel very fortunate to have gotten to know you in between then and now, and I'm deeply appreciative of your time today. It's a totally new topic for me. I love cities, but I've never thought about them. What a cool thing to consider. And that matters to everybody and is a big part of the future.

So thanks for teaching us so much today and for all your time.

This is a blast. Thanks so much. This episode was brought to you by Catalyst in this four part miniseries, I sit down with Canalis Customer Fenimore Asset Management to discuss the firm's history and how Canalis helps their firm better find and manage their investments. In this week's episode, Fennimore portfolio manager Drew Wilson and I discussed how Canalis is used by both analysts and portfolio managers at Fennimore. So how does the investment team built at Fennimore? How many people are there?

So how do their responsibilities divided? And then amongst those team members who are the Canalis users, how widely is the system used inside the firm?

So there are nine of us on the research team at Fennimore and all of us are analysts first and foremost. And then seven of us are also portfolio managers. We all use Canalis to varying degrees, given its many use cases. The way the Canela spreadsheets are built, there are a great way to divest a company or just get up to speed very quickly on it. For instance, if you understand the cost and revenue drivers of a company, you already know a lot about it in the Canela spreadsheets literally have a tab called drivers that isolates those factors.

So if a colleague mentions a company as an idea, among the first things I do is pull up the Canalis model to help me establish the business context. Another example, say, when we go to conferences, I may have 20 management meetings scheduled with new ideas. I'll download it before I go. I'll download all the Canalis models and they really help me as we're talking through the economic prospects of the businesses.

If you enjoyed this episode, you can sign up for a new email newsletter sent out each week called Inside the Episode. Each week I condensed that week's episode to my favorite big ideas, quotations and more. I've been recommending books to members of this email us for years and will keep doing so. In this weekly email, you can sign up at Investor Field Guide dot com forward slash book club.