And I always say they're trading relationships, but then they're real partner

relationships.

The trading relationship is just very transactional. You really don't know the

other person's just a

trade. But a real relationship, a partnership is that we know each other. Yeah,

we've got contracts,

we have agreements. But we trust each other.

If you want to build lasting success, there's one resource you can't afford to

overlook.

And it's not money, it's not talent, and it's not time. Welcome to How Leaders

Lead.

I'm David Novak, and every week I have conversations with the best leaders in

the world

to help you become the best leader that you can be. My guest is Ken Bacon. He's

the co-founder

and managing partner at Railfield Partners, a multifamily investment and asset

management firm.

And before that, he was an executive VP at Fannie Mae. Ken has built an

incredible career in real

estate. And I've had the pleasure of seeing his leadership firsthand as we

serve together on the

Comcast board. You know, one of the things that makes Ken so successful is this

understanding that

trust isn't just a feel-good concept. It's a real form of currency. It's

something you earn,

something you give. And if you're not careful, something that you can actually

lose. And just

like financial capital, trust compounds over time. As you're about to see, the

more you invest in

it during your career, the greater the returns. So here's my conversation with

my good friend,

and soon to be yours, Ken Bacon.

You know, give us a snapshot of Railfield and the business that you lead today.

Well, my way of background, I used to run a division at Fannie Mae that

provided loans for

apartments. So 12 years ago, when I left, another guy and I were doing some

advisory work and an

opportunity presented itself to manage the money for a pension plan. And I

remember a friend said,

"Oh, you're going to get just enough money to go broke." He was right. So I had

never been on the

equity side of the business. I had always been on the debt side. I had never

been a borrower. And

for years, I said, "That's something I wanted to do." So when the opportunity

presented itself,

I got some guys who used to work for me. And 10 years ago, we started Railfield

. We invest

in existing apartments. We manage money for some family offices and several

pension plans.

We're in six states and 12 different markets, biggest market being Texas, where

we're in Dallas,

Fort Worth, Austin, San Antonio, and my hometown of Houston. And what we try to

do is by kind of

what our Considicence and Conservative Operating Principles make a good return

for our investors

while making a good place to live for the tenants of our apartment buildings.

And that's kind of

our mantra. You have, as I understand it, a couple of other co-founders that

are in the business day

to day. What's the rhythm that you have, Ken, to stay aligned and on mission as

a leadership team?

I'd say there are a couple of things. Number one, I had managed a large

organization

for over 20 years. And so when I started my second career, I wanted to be a, I

guess,

as the model I consider like the Orthodox Church, I wanted to be first among

equal, so to speak.

I didn't want to be the leader. I was a person with gray hair. I was a person

who could bring

certain things at a table. But I really wanted it to be more of like a conf

ederation. In other

words, we each have a swim lane with each do-out thing. And it's worked

beautifully because these

guys once worked for me, they left Fannie Mae, built their own business. But we

trust each other,

we like each other, we have shared values, we enjoy each other's company, we

agree on what we

want to do with the business. So it's made it a fun thing to do. You mentioned

that you spent

20 years at Fannie Mae, which provides equitable access to affordable housing.

And there you

oversaw a portfolio of nearly $200 billion. One of the biggest lessons you

learned

in that role that you've carried with you. Well, one of the things I've learned

is that

know your partners, know who you're dealing with. I always distinguish in

business between what I

used to be an investment banker. And I always say they're trading relationships

, but then they're

real partner relationships. The trading relationship is just very transactional

. You know, you do

something, you really don't know the other person, you really don't care, it's

just a trade.

But a real relationship, a partnership is that we know each other. Yeah, we got

contracts,

we have agreements, but we trust each other. We're working towards the same

goal. And that's

what I did at Fannie Mae. We did our business through a network of 25 lenders.

I made it a point

to get to know each and every one of the lenders. I often do something about

their families. And

even my biggest borrowers, the people who borrowed hundreds of millions of

dollars like Sam Zell,

Steve Ross. I made it a point, I would go out and went to baseball games with

Sam Zell.

I went out to dinner with Steve Ross because people said, well, why did you do

that? You know,

you've got all these contracts. I said, yeah, but if I have to resort to

lawyers to do business with

somebody, that's not a good place to be. The legal documents add clarity, but

the legal

documents should be built on a foundation of trust. Where does that trust

really come from, Ken?

When you're, you know, you have to meet these people and you got to kind of

have your spell

around to a certain extent. How do you smell or sniff out the people that you

really,

really know that you can bank on? You know, you got to spend time with people

and get a feel for the sense of integrity and what they do. Look, real estate

is a tough business.

It's a sharp elbow business. And you understand that, right? I mean, everybody

's trying to make

money. If you're a lender, they're trying to get the best terms possible. But I

won't mention one

company, but Sam Zell's the Reedy Head, EQR, there were a couple of big reeds.

And the way I used to

contrast it, one, the big reeds would say, Ken, we need $200 million and hear

the terms we wanted.

And I'd bust my butt. I'd have my staff work. Again, I'd get to the table and

they'd say, well,

Freddie Mac is fine basis points cheaper or credential, give us more money.

And so I learned I said, okay, these guys just wanted free. They're going to

try to pick me off.

Sam's people were tough. They've asked for something. I said, guys, that's,

that's hard. That's

impossible. They said, that's what we want. I said, okay, I'm going to bust my

butt to do it.

But if I did it, they were good. So because of that, I always said, if they

asked me for something,

I will overextend myself because they set the bar high, but I know if I clear

it, they're not

going to retreat. And so, you know, and I tell that to people, they say, Sam Z

ell, he was the

grave dancer. He was this. I said, you know what? He never, ever went back on

his word to me,

maybe he or his people. Steve Ross, his guys, Jeff Blau, his sharpest, smartest

real estate

operators. I know, but their word was good. And so, you know, you, you, you do

business with people

and you learn. You know, I want to shift gears for a second kid and take you

back to the beginning.

It was a story from your childhood that shaped the kind of leader you are today

.

I tell this to people sometimes it kind of amazed. I grew up in the 50s and 60s

in Texas. It was a

time it was segregated. And some people hear, oh, that must be horrible. I said

, I had a wonderful

childhood. And part of that was due to the way my parents raised me. I got

something from each one.

So my dad had grown up in Illinois, where his parents were servants in Lake

Forest.

So he had gone to school with very rich white families. My mother, on the other

hand, was from

a Creole family. Her parents were from Louisiana. She grew up in Houston. So my

parents were very

different, but they each brought something to the table. So from my dad, I got

my intellectual drive,

my sense of values, my sense of integrity and honor. In fact, I used to tell

people my dad because

he grew up in Illinois sounded like a Walter Cronkite. And my dad would sit up.

He was a physician.

And at the end of the day, he would sit up. I could still see him sitting in

his favorite chair

with his bourbon and the cigarette. And he might put on music, but he told me a

story about the

musicians. It might be Count Mason, Duke Ellington. And he was active in

politics and civil rights.

And he really gave me that sense. And I got a chance to see a lot of leaders

like Barbara Jordan.

My dad ran the campaign for state legislatures run at her first run at Congress

.

So I kind of got there for my dad. My mom on the other hand was not really what

I call a high-minded

person, but she was one tough, tough lady. I mean, they had tons of common

sense. And really,

a lot of her sayings kind of got me. So for example, one of the things she used

to tell me,

she'd say, "Look, love with all your heart and soul, but never love with your

mind."

And by that, she meant never let your feelings of love or even dislike for

something affect how

you think, right? Always try to be tough and objective when you're thinking.

And another thing

she told me when I was older and I was an investment banker. And I once got, I

thought,

jipped out of a bonus and my mother used to call my parents every Sunday. And I

was complaining

and my mom said, "Boy, you're too old and too black to expect life to be fair.

Get over it."

Now, when I tell that to people, they say, "What did she mean?" I said, "Look,

my mom's thing was,

there's going to be a lot of stuff in life that's going to be unfair. It might

be because of your

race. It might be somebody that like whatever it is, don't sit around and cry

about it. Do something.

And when I told her about that thing about the bonus, she said, "You either,"

she said, "You can quit,

you can suck it up or you can go in there and that boss and demand something.

But don't sit here

and have a pity party." So what'd you do, Ken? I got to ask you. What was the

end of that story?

I went into the boss, told him how I fell. We reached an agreement and he didn

't give me the

money for that year, but he treated me right the next year. But the reason I

always like to tell

that story is when I say my mom was tough, her thing was, you have to be assert

ive and you have to

stand up for what you believe and don't let people push you around. Hey,

everyone, it's Kula. We'll

get back to the interview in just a second. Before we do, though, I have a

question for you.

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take 20 seconds

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How Leaders Lead app.

In the app every day, you'll get a two-minute video that'll give you a

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download the How Leaders Lead app and start your day every day with two minutes

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wisdom. It'll take 20 seconds. Go to the App Store, download the app, and you

'll be able to watch

every day, just like me, the leadership inside from How Leaders Lead. You

actually were in segregated

schools for the first 11 years of your life. Give us a sense of what that was

like and what

it really taught you. You know, I tell people, look, segregation was a doubly

bad evil system and

needed to go, but there were two benefits of it that I think, in some respects,

were good.

One was when I went to school, my kids here in D.C., my kids went to private

schools.

And yes, there were some poor kids with scholarships, but you know, it's kind

of like upper-middle class

and very wealthy people they went to school with. When I went to school, I had

to go to school.

There might have been some other doctors and teachers' kids, but you know, I

had to go to school with

some hoot-lum sometime. I remember when I was a banker, I once came through

Houston and stopped

at a gas station in my old neighborhood, and I was with a senior person from

Kidder Peabody,

the firm I was with. And as I was getting gas, this guy came out with greasy

overall, said,

"Kitty." And you know, we started talking. So when I got back in the car, my

boss said, "Well,

Ken, who is it?" I said, "That's the guy I went to elementary school with." He

said, "Is he on this?"

I said, "On it." He said, "Man, he's just pumping gas." So I had to go to

school and interact with

people from all different classes. So that was one good thing, because there

was a sense of community.

And the other thing was when I went to a football game, that quarterback was

black. And in my neighborhood,

the first black graduate of the University of Texas Dennel School lived on my

block.

One of my friends, Dad, was one of the first two or three guys to graduate from

the University of

Texas Law School. Another friend of mine's dad was the first graduate of the

architecture program.

So I grew up with people who were pioneers. I grew up with people who were

leaders. So as a result,

when integration came about, I had no hang-ups, no, you know, I was used to

seeing people who

looked like me in a leadership position. And I think that's something I see in

your book. You had

something from Carol Dweck, who's a psychologist at Stanford. Carol once did a

study about looking

at students from different ethnicities and how they did at Stanford. And one of

the things she

discovered is it wasn't uncommon for some black students at the time to, if

they got a bad grade,

to get discouraged, because they felt, you know, they didn't have that inner,

like, what I call,

model of somebody successful doing what they were doing. That's not all the

time. I'm just saying

that some people came up in situations when integration came and people like me

started leaving

the neighborhoods, some people didn't have role models. And it was something

that they had to

acquire later in life. And I'd say that's, I mean, and I've talked to some

friends about who grew up

in the South. And people have often said the same thing that like the teachers,

when I went to

class, if somebody didn't do their homework, the teacher might say, now, Johnny

, you did do your

homework. I'm gonna see your mom at church on Sunday. I don't want to tell you

you didn't do your

homework. So that sense of community, that sense of seeing people in positions

of authority,

that was one of the good things I got. You know, I also understand that, you

know,

I was fascinated by this. You're growing up the late world, you know, renowned

jazz musician,

Count Basie.

Would actually come over to your house for dinner when he came through town.

You know,

you got to tell us one of those stories. Well, what happened? My dad was a

music

nut, right? He really loved music. He knew a lot of blues musicians. I mean,

like,

Lycan Hopkins, Bobby Bruh Bland. And he knew a guy who was a drummer for Count

Basie.

And what happened, one time Count Basie was coming through Houston, and the

drummer was coming to our

house. And my mother was an incredible cook, an incredible cook. I mean, my

mother, one time another,

she served Count Basie, Sam Cook, a mayor, a governor in Texas.

People raved about her cooking, particularly her gumbo. So anyway, this drummer

was going out,

Count Basie said, where are you going? He says, look, my friend Bob Bacon's

wife is an incredible

cook. So Count Basie heard this and said, let me come along. And I think the

first time he came

in my house, if our memory seriously correctly, I think my mother heads, red

beans and rice,

and maybe she had some gumbo. And Count Basie said, he liked greens, collard

greens. So the next time

he came to town, my mother takes the collard greens and stuff. She knew the

weight of the man's

heart. Oh, that's right. That's right. And so that was one of the, like I said,

that my brother

in a house and laughed it when we grew up, we think about all the characters

and all the people

we met. And it was like it was a wonderful child. Absolutely. And I'm a little

surprised, Ken,

you have to do some of my research that you don't have a hint of a English

accent because

you were a Marshall scholar while you were at Stanford, which meant that you

had the opportunity

to study in London. Tell us about that experience and what it taught you.

Well, you know, I'm in business today because of what happened when I went to

England.

I was kind of a left-wing intellectual when I was at Stanford.

You know, I was involved in student protests, nothing destructive or violent,

but you know,

I was always looking at what was wrong with the system. And I get this

scholarship because I

wanted to be a professor. That's what I wanted to do. I wanted to teach. And I

get to England,

I'm going to study economics. And I still remember there was a guy who was a

Marshall in my year.

And he once probably told me, says, well, Ken, you know, I've got a part-time

job. I said,

what's that? He says, I'm going to be working at Lehman Brothers. I said, what

's that? He said,

Lehman Brothers is like Morgan Stanley. I said, what's that? So he sat up and

explained to me

about investment banks. And I said, OK, this sounds interesting. Sounds like

another kind of

like this capitalist thing. Well, all of a sudden, I was in this dorm with

people from all the British

colonies. I mean, from Africa to West Indies, India, Pakistan. So one day I was

talking to one of my

Nigerian friends and he was studying a currency and he was very proud. He was

going to get something

at Royal Dutch Shell. And I said, well, why do you want to go work for a

company that's

exporting a country? He says, Ken, I just don't want to work for the company. I

want to own a company,

or run an oil company. And what I realized in this unfortunate, a lot of people

, let's go,

you don't get this. When you get on an international stage, everybody's a

capitalist.

You know, when I realized when I was there, I said, you know, all the Africans

and West Indians,

I know these guys are making plans to go back to their countries and run things

. So that got me

looking at business from a different perspective. And when I went to England,

it was also the

labor government was empowered. Jim Callahan was prime minister. There were

labor strikes.

I had to deal with national health. And I started saying, man, just socialism,

you can have it.

Getting back to the go USA. So that's what got me interested in business. So I

started talking to

people. And I think if Margaret Thatcher, I'm not a huge fan of Margaret

Thatcher, but she did

get England back on the right course. And one of the things, and the reason I

say that,

I had an opportunity to go work at Royal Dutch Shell. But the reason I didn't

is when I figured

out what the taxes were, I said, hell, I'm living better as a student than I

would if I took this

job. So when I finished my studies, I did my thesis, I traveled some, I got

back to Texas,

I shaved my beard off, got a white shirt and tie, and my father's minister,

Reverend Lawson,

his wife, news, there was somebody in a church who belonged to who worked at

IBM. And I went down

IBM and that's how it all started. I got a job at IBM and sales, shaved my

beard, put on that

white shirt and tie every day. And blue suit, I'm sure. Oh, yeah. Yeah. IBM was

famous for that.

And so you work your way to Wall Street. And I know throughout your career,

can you've seen crisis time and time again, you know, you had the stock, a

stock market crash

in '87, the Russian bond crisis, 9/11, the financial crisis of 2008, the pand

emic, all these things.

You know, what's your approach of leading a team through such uncertain times?

And how do you keep

people motivated when their future isn't so clear? You know, I'd say that up

until the financial

crisis, most of the things that happen, I can see the kind of temporary in

terms of the economic

impact on people. Like 9/11 was clearly devastating, talking the other day that

someone, I remember,

I had teams all over the country and how do we get people back home. But the

global financial

crisis, I'd have to say it was the hardest one because, if I ain't make that

taken over by the

government, people stock got wiped out. And I remember there were people, I

mean,

I was feeling bad for myself because so much of my net worth got wiped out. But

then I realized

there were other people who made a lot less than I did who were really feeling

it. So one of the

things I did is I didn't try to sugarcoat it. I held meetings, I traveled to my

different offices,

and I started off by acknowledging the pain that people felt. You know, being

honest and said, look,

I know what you're going through. So one is to be honest with people. And at

the same time, point

away out to deal with that hurt. And the way to do it is not to lie a pain, a

funny picture,

but what I told people is I said, look, we're all hurting. Yes, your stock's

been wiped out.

But you know what? We have a job. You're going to get a check. And most

important of all, we have a

mission. And what I used to tell people, like, look, you might be mad at the

company, you'd be

mad at the government. But you know who you work for, you work for your family.

And if you can find

a better job right now, come to me, I will help you, I'll give you a reference,

I'll do whatever.

With me, while you're here, and you have an obligation to your family, but you

also have an

obligation to your customers, because your customers are hurting too. So I said

, you know, we can sit

here. Again, my phrase, you can have a pity party, or you can get up, just

yourself off,

go get the paycheck, go help your customers, and keep doing business. And I

said, you know,

what's done is done. I can't make that come back. But we can move forward.

Your mom's a tutelage is really helping you there for no doubt about that.

Now, Ken, Ken, when did you catch the real estate to homeownership, bud?

You know, I wish I could pay you this was a result of something long,

bought out logical process. It wasn't. When I was in business school, I told

you I got

interested in business. But I never lost what I call my liberal, do good,

impulse. So when I was

in business school, Kenner Peabody's public finance team came to campus. And I

just went,

I'm not going to lie, I went to the reception just to get some free food, right

? Because, you know,

all these best of banks would always have great food. So I went to get some

great food. And I met

the people, and I love the people, the guy who was running that division in Mic

ronandis,

just a great guy, met some other people. So I joined public finance because

again,

it was going to deal with governments and municipalities. I said, look, I can

make some money. I'm not

going to make as much money as like Bill Lewis, who's a good friend who was

going to M&A. But I'll

be able to make a good living. And one of the senior people I was talking to

him, and I mentioned

that my girlfriend, who's not my wife, was in Houston. He said, well, let me

get you on some Texas

accounts. And the business they were doing in Texas was primarily taxes and

housing bonds.

So it happened by happenstance because I would go to Texas every week. I was

going to Dallas,

Waco, all types of places. And some people were concerned about me going to

Texas because I don't

know if they said, well, I don't know if we can send this black guy down there.

Some of these

clients were kind of rednecky. And I remember I said, you know what, I'm going

to do better than

you. And they said, why? Because I said, it's my home state. I said, I know how

to deal with people.

And we went down and it was Grand Prairie, Texas, which is at that time was

just a tiny spot. It's a

big suburb, tiny spot. And they wanted to do some housing bonds. And I remember

the guy in charge

of the housing finance agency was a builder. And he was a Texas tech guy, a big

barely guy. And

my boss went up there and she, you know, got started talking to my football.

And I started

talking about Texas tech and wrestling you, the Longhorns. And then something

came up about hunting.

I asked, you know, what are you shooting? And she just lost it. She said, it

was a horrible

people. I don't want to deal with them. You deal with them. So what happened, I

would go down to

Texas every week. And that's when I really started kind of falling in love with

real estate, because

I realized that, you know, you do a lot of things in finance and it's just

moving paper.

I got to see things out from the dance come out of the ground. I really liked

that. And one of the

most moving moments in my career came when I was at Fannie Mae. And we were the

largest investor in

the low income housing tax credits in the country. And one of my wife's

grandmothers died. And I

was going back to Houston for the funeral. And I went to the neighborhood that

my grandmother used

to live in. My mother used to live in. I was going to the church, Catholic

Church, that the Creoles

had built back in the 1930s when they came over from Louisiana. And I just hadn

't been in the

neighborhood in decades. And I'm riding along and I remember myself, you know,

this Broussard used to

live here was because a bunch of people, French, speaking French, French names,

and a lot of them were dead, but the houses were dilapidated. Everything was

kind of old.

The neighborhood had really gone down. And then I was going, man, this is

really, really bad. And

all of a sudden I saw this sign. Senior apartments built by such and such a

church,

financing my sessions at your bank with financing from Fannie Mae. And I saw

that right before I

went to the church. And that just made me feel so good because I said, you know

, the best thing

happening in this neighborhood is a project that my division is financing. And

to this day,

I still like seeing properties because again, it's tangible. I'm sure David,

like,

the pride you would feel if you went to a well-run franchise and, you know, the

food was just right.

So when you get a chance to see, and when I mentioned to you earlier how I

would go spend time with

some of my borrowers, I remember when they were building the time, well, I

think they call it the

time Warner Center, a Columbus Circle. And Steve Ross invited me and my wife

for dinner.

And I remember we were walking through the condos of wires hanging from the

ceiling. Steve was going

here, and this is going to overlook the Hudson. And this is going to see the

part. You know, he was

just animated about it. When you see people identify with their projects, and

you see a neighborhood

change, it's just nothing like it. That's great. And you were quite the innov

ator in this field.

You were the first to securitize commercial mortgages at scale. First, explain

to everybody

what that means in layman's terms, securitizing commercial mortgages. And then

what it took to

really pull this off. I had left Kitter P body. I was at Morgan Stanley, and I

was doing,

I had gone from taxes to taxable financing when securitization first started.

And I left Kitter

to go to Morgan Stanley. But most of my clients were savings alone. So 1989,

they're all going

under. And I was going to have to do something different in their firm. And

there was a guy I

knew who was a partner, Michael Youngman at Benson Elkins. And Michael had left

his law firm to go

work for the board of the resolution trust corporation. That's what they formed

to deal with the

bailout. And he used to call me all the time to ask me questions. And one day

he just happened

to say, you know, boy, we could really use somebody like you with your

knowledge of the markets. I

said, well, why don't you make me off? He said, well, Ken, you would have to

take a tremendous

pay cut to coming. I said, well, you did it. So much to my wife, the chagrin,

and to the people

everybody thought I was crazy to leave Morgan Stanley. But I took this job in

government,

one of the best things ever did. And we got there. And what I discovered, I was

in charge of policy.

And I discovered that at that time, the government thought they were going to

end up with over $100

billion, $150 billion in assets. Now that doesn't seem like a big number today,

but in 1990, that

was a huge number. And what I discovered that the biggest bank failure that FD

IC had ever dealt

with was continental Illinois, which is, I think, we see the $8 billion to $10

billion. And it took

them over a decade to resolve it. So Michael and I were talking, we said, look,

we'll be here forever

getting this done. And so Michael one day said, well, couldn't we bundle this

stuff and sell it like

like that? And I said, well, you know, no one's ever done commercial war, which

is a bank single

family. And we started talking to the rating agencies and exploring it. And

people said,

you couldn't do it. We said, why not? So first battle was to convince the

powers of being government

to do it. And there are some people who I don't think get enough credit. Nick

Brady was secretary

of the Treasury. So my board, the board I reported to was Nick Brady, Jack Kemp

, Alan Greenspan,

a guy named Bob Larson, who was here at the topment organization, and another

guy named Phil Jackson,

who was a retired governor of the federal reserve. And there were people at the

FDIC,

there were people in the Senate, everybody didn't want us to do it. And I

remember that one guy,

we got into a meeting, Greenspan, who was not quiet in private meetings. And

one guy said, well,

you know, if you package these things, Wall Street's going to make a lot of

money. And I remember Greenspan

said, precisely, this is America. That's what people do. People make money. And

if they make a

lot of money, other people will get into it. And over time, the price

equilibrium will set in,

the taxpayers benefit. But the government should not hold assets. So Alan

Greenspan and Nick

Brady, to me, were two unsung heroes who really made a difference. So they let

me and Mike do it.

So Ken, what does it mean to securitize that commercial mortgage?

It means that you put a bunch of mortgages together, which allows you to divers

ify risk.

You get them rated, you do a filing with the SEC. So now you have a publicly

traded,

rated security, which means that the universe of investors is huge, right?

When we first did it, most insurance companies, people didn't know what to make

of it. But once

we educated them, all of a sudden we had the biggest pools of capital in the

world available

to us. Insurance companies, bank pension plans, who couldn't buy either, couldn

't buy because of

regulatory reasons, individual mortgages, or else it just wasn't worth their

time.

All of a sudden they could buy a security, they could trade it, they could go

to Goldman Sachs,

they could go to Salomon Brothers, who was still in business at that time,

and they could trade it, they could repo it. And so it allowed that part of the

real estate market

to play in public markets. So there was more liquidity that led to better

pricing,

and it was just a win-win all the way around.

You mentioned people who have such powerful reputations like Alan Greenspan,

an incredible leader in his own right, and you've had these huge jobs with all

kinds of power.

How do you really get to the real truth? Because a lot of times people are ang

ling for something

to their own benefit. How did you really get to the real skinny?

You know, I didn't plan on it. It just happened. And I think one of the things

is that when I had that job, I got to meet with people like Ace Greenberg,

and Bear Stearns. I met the heads of every major Wall Street firm, Dick Foll

and I met them all,

because I control a lot of business. And I learned that when you have something

that's of value to people, a lot of people want to talk to you, but I also

learned something

less than I joke about today, that I said, you know, and you have a big job,

like when I ran

Fannie Mae and I controlled all this money, I told people, you know, I was a

visionary leader,

strategic genius. Till the day I walked out the door, then when I walked out

the door,

I was just another schmuckler who would have died a dream.

So I learned sometimes, some people confuse their position with themselves. And

so one of the things

I learned is like, hey, you got this job where you have a lot of power, you can

use it, but realize

it ain't you, right? It's that title, it's that job, and when you leave it. And

that's why I think

some people, it's so hard for some CEOs, for some politicians to walk away,

because their identity

gets wrapped up in what they are, not who they are inside.

We'll be back with the rest of my conversation with Ken Bacon in just a moment.

Chili's recently reported this third straight quarter of double digit sales

growth this year.

And if you want to see what's driving their incredible comeback, check out my

interview with

Kevin Hochman, the CEO of Chili's parent company, Brinkers International.

I'm in a Chili's in Chicago just outside of O'Hare. I'll never forget this. And

we call it the

heart of house. So the back of the house of the kitchen, we call it the heart

of the house at

Brinker. And I'm in the heart of the house with a team member, and she's

counting shrimp. So her

job for the first hour of the day was to count date shrimp, put some in a

little bag, twist the bag,

count date shrimp, put some in a little bag, twist the bag, and so on. And she

'll do that for

probably 45 minutes. It's called portioning. And so when I asked her the

question, hey,

what's the one thing that you would do if you were CEO tomorrow, she'd say, I

stopped counting

these darn shrimp. And I said, well, what would you do if you didn't count the

shrimp? And she said,

when the customer orders a shrimp taco or a shrimp fajita, I'll count a shrimp.

I'll put

them on the grill. You know what? Sometimes I'll count seven. Sometimes I'll

count nine. But

guess what? Most of the time, I'm going to count eight, right? So we took that

idea back to the

restaurant support center, and they said, hey, we got to test this. We're going

to have a bunch

of shrimp waste. I don't know about this. And I said, well, what's there to

test? Like,

she's right. Like once in a while, I should get it wrong up or down, but we're

not going to have

big waste issue. So we rolled it out and guess what happened to shrimp waste?

Absolutely nothing,

right? Literally didn't change. Like we measure this stuff literally every day,

we get reports

every day. It didn't change. And then most importantly, that team member, she

doesn't want to do that.

She doesn't value that to her that thinks it's a waste of time. So that makes

her job way more

engaging when we're like, Hey, we listened to you. We got rid of that. And go

do something that

you're excited about deal. Go back and listen to my entire conversation with

Kevin episode 183

here on How Leaders Lead. So what led you to start your own firm, a railfield

partners?

You know, I still like real estate. I still like the essence of what I did. But

I didn't like the

luggage that came with having to manage people. I didn't like committees. So

when I

opportunity presented itself, I decided, well, you know, let me go out here and

try it. And I

like to tell people to be an entrepreneur, you should either be 25 and broke,

55 and have your

kids educated. So when I started my son had already finished college and was

kind of out of my pocket,

not completely but kind of out of my pocket. And my daughter was getting ready

to graduate.

And my parents were were both to see. So basically, I didn't really have a lot

of obligations. And so

I could be a little selfish. And so I decided, let me give it a try. Someone

asked me, Well, did

you miss Fannie Mae? I said every two weeks. That's funny. Miss that regular

paycheck.

On the other hand, though, the sense of freedom, the sense of what I call you

eat what you kill.

I've enjoyed that. I've enjoyed it. In your business today, you have to be

extremely intentional

about building relationships. And you're really good at it. You know, what's

something that you

think everybody can learn from that you put into practice when it comes to

building relationships?

Well, you know, I talked earlier about building trust and about conducting

yourself in a certain

way. I mean, look, I dealt with hundreds of people at Fannie Mae. And I said,

you know, if I dealt with

a hundred big real estate people, I said, they're going to be 10 who are going

to be

good to me when I leave. I said, the thing is you don't know who that's going

to be.

And we got some deals. I remember I was once at a conference, was walking along

and I ran across

a guy whose company had almost gone under in a financial crisis. But they

handled it so nicely.

They didn't try to go into bankruptcy. They didn't try to fight me. They work

with me.

And so I didn't deny them credit. I just put the, you know, on more

conservative terms.

So they survived and I ran across the CEO and he said, Ken, what are you doing?

I said, man,

it's hard out here. I said, I need some deals. He said, you know what? We've

got some properties

for sale. He says, look, I've got a fiduciary responsibility, but I'll let you

get a last look.

And so I got a deal like that. Another time there was a guy who had worked at

one of my lenders.

I called him up and I used to call it knee pad and chapstick time. I'm on my

knees begging and

I got chapstick because I'm having to kiss a lot of you.

You know, when you come from a big company, David, I don't know if you've

experienced this,

you know, if you're a big company, everybody comes to you. All of a sudden, you

're not a big company.

You have to go to them. And some people can't make that change. But I went to

another guy and

I said the same thing. And he called me up and said, look, I've got a deal. I'm

going to put it

along the market. I'll give you notice. He called me back the next day, said,

you know what? I'm

not going to put it on the market. I'm going to get a broker's price opinion

and you and I will

negotiate the price. And I saw we did the deal. So I had people I built

relationships with

because I had treated them honorably in the global financial crisis presented

an opportunity. I

could have shafted a lot of people, but I tried to treat everybody with respect

. And there's some

people who remembered that and returned a favor. That's great. You know, and

you know, you just

mentioned negotiations and you've mentioned earlier that, you know, you're kind

of in this sharp elbow

business, you know, you know, what are your rules for negotiation? Do you have

any or what's really

key from your perspective to find that when when my key and I used to tell this

to my staff is

don't kill over the last nickel. Even if the other guy is trying to do it, let

people walk away

feeling they got a victory to the degree you can afford to do it. Because that

builds good

will and trust. Now, there's some people you do that with and they walk away

saying, oh, sucker,

you know, I got him and they don't appreciate it. But the other people will say

, you know what?

I like doing business with this guy. So I never tried to just pen people

against the wall.

You know, when I got close to what I wanted and, you know, it was hard.

Sometimes my staff would

say, we should have got another five basis points. I said, you know what, it's

not going to change

our life that much. Let the customer win. And some people forgot about that,

but there's some

people appreciate it. And again, I did my fiduciary duty, but there comes a

time in any negotiation

where it's the point of diminishing returns. You know, I've heard you say that

you actually

got your PhD and bad deals. Tell us about one of those deals and the key lesson

that you learn

from it. Well, what I learned when I was at the ROTC, there was a guy Tim Ryan,

I think he's now

they had a centender US. Tim was the guy who the regulator who would close down

the savings

loans. And if they closed them down on Friday, you know, that weekend, my team

would go in to

look at the books. And what I learned a lot of times is that I talk about trust

, but they're

Reagan had a great thing, trust, but verify. So I'll give an example, I would

go in and see a deal

and you'd say, well, why did this deal go go belly up? I mean, it looked like

it was fully leased. And

then you start pulling the leases and you'd say, Oh, this person said they were

a dancer. Well,

they might have been working the strip club. Oh, this person said they were in

the auto business.

And you found out maybe the guy was like a taxi driver. In other words, people

would

sometimes the some of these landlords would inflate people's income or inflate

their profession

in the documents. So I learned that the first time you do business with

somebody, check all the

little things just don't take things that face value. You know, trust is

something that should be

earned. And so I learned that that's number one. And number two is a lot of

people do deals

assuming that the world will always be as it is. Another saying for my mother

assumes spells ask out of you and me. I think my mom taught me that one too.

So I'll give you an example. In my little business at railfield, we did some

deals from 2014,

I'd say 2018 to 2019, we would get a an adjustable rate mortgage. And we would

buy a cap. And

we would do that and we would watch it. And we'd always say if rates, you start

seeing rates go up,

we'll lock in a fixed rate. When we got to 2021 rates were really low, we

started saying, you know what,

this is, you know, I hope the people draw on power forgives me, but I felt the

fear was like,

like a drug dealer. And they were getting everybody free drugs and everybody

was getting high off

low interest rates. And I said, you know, this can't last. So I said, if we can

get a good fixed rate,

let's lock it in. And we were losing deals to people doing these bridge loans.

And it was a

temptation to go doing, but I said, you know, these bridge loans, this isn't an

adjustable rate mortgage,

it's purely floated. And I said, I'm not going to do it. So part of our

discipline was knowing that

sometimes you see the crowd going one way and you got to just sit on your hands

and say, look,

this doesn't make sense. I'm not going to do it. That's how we stayed out of

trouble. You know,

we just sat on our hands because there were times when, I mean, it's just like

investing. I've had

people remember when crypto was hopping that say, you know what, if I don't

understand it,

I'm not going to do it. I'm not going to invest in it because I don't know what

I'm doing. So

when interest rates got crazy, when they were so low, I just said, you know

what, I'm not going to

do a floating rate deal because there's only one way for rates to go when I set

up. And there were

people who did bridge loans, that is they did short term loans floating rate

when

sofa, which is like live boards like an index was at five basis points. A

couple of years later,

it was 500 basis points. And so people said, Oh, I'm going to do this loan at

250 basis points

over sofa or a live or five bits. They said, Oh, this is cheap money. But I

said to index is

floating guys. This is historically, this is very low. I didn't think it was

going to go to 500. I

knew I'm going to stay at five basis points. So I just said, I'm not going to

do that kind of loan.

And it proved to be a good move for sure. You know, I like to say that in risk

management,

the biggest impediment to good risk management is imagination. Because people

often assume that

this is how the world is and this is how the world's going to stay. And you got

to be able

to imagine that things could get worse. You know, kids so much wisdom there and

just

spend so much fun. And I want to have some more with you with my lightning

round of questions.

So are you ready for this? I'm ready. All right. The three words that best

describe you.

Empathy, integrity, humor. If you could be one person for a day beside yourself

, who would it be?

I tell you, somebody just passed away Quincy Jones, the music producer.

Your biggest pet peeve. People who dissemble. In other words, people who don't

really come out

and say what they want or what they're trying to do. And they kind of dissemble

and beat around the

bush. I can't stand that. Who would play you in a movie? Try to think of

somebody good looking

with free places. So I can't say Denzel Washington, who would play Jeffrey

Wright?

What's something you'd only know about Houston if you're from there?

Now I'm going to call some controversy people from Houston. Where to find the

best barbecue?

You're only able to answer this next one in French. Okay. Do you still speak

French?

Oh, je pardin flue. What's the one thing you do just for you?

Hunting. Your most prized possession. A painting by John Biggers. Was a friend

of my family.

He's a great artist. He's deceased now. And I have a painting of his. And I saw

it when he first

was doing the drawing for the painting. And I got a lot of videotaped on a

super eight camera.

I just found the little cassette the other day. If I turned on the radio in

your car,

what would I hear? Serious radio, the jazz station. No surprise there. What's

something

about you a few people would know that I'm a good cook. Pick that up for your

mom. What's one of your

daily rituals? Something that you never miss my coffee. All right. We're out of

the lightning

round now. Good job. That was great. You know, Ken, I've had the great honor of

being on the Comcast

Board with you. And I have to tell you, of all the directors, I don't think

anyone ever asked for

extremely insightful and thoughtful questions. How do you stay current to be

able to bring such a

studied point of view to the table? Because it's all your questions seem to

have always been

rooted in reality or something you experienced. Comcast was the first board I

got on. And I learned

a lot of lessons. And I only want to go on a board where I know respect and

like the management team.

And I like the business. Even if I don't fully understand that I have to like

the business.

And with Comcast, I have Google set up. So every day I get all the headlines

about Comcast.

I read about the competition. I read about broadband.

And I'm fascinated. I have to say, of all my boards, Comcast is probably the

most intellectually

challenging. Because when I first joined the board, it was just, so what's dish

doing?

What's AT&T doing? And now, I mean, we're looking at Amazon. I mean, everybody

's free for all.

So I find it very stimulating. And I just try to, you know, I'm a voracious

reader of newspapers and magazines. I get a lot of newsletters. And if I like

something,

I just like reading about it and finding out about it. And Comcast is, I think

Brian Roberts is one of

the best CEOs in the country. But the whole, the board, I always thought all

boards were like the

Comcast board. But it's a very collegial board. And the management is

accessible. I've never had

anybody from Comcast, pushed me away to assemble. And because I love the

company, I love what they do.

It motivates me and keeps me excited. What have you learned about leadership

just watching Brian

Roberts in action? What strikes you most about leadership from him? Brian

Roberts does something

that's very rare. He goes into every meeting. He parks his ego at the door. He

listens extremely

well. And when he gets ready to make a move, he never tries to sell you on what

he's going to do.

He says, I'm thinking about doing X. Here's the pros. Here's the cons. And he

will argue that

conside just as much energy and much thoughtfulness and integrity as he will

the pro side. And so as

a result, you feel comfortable pushing back or agreeing or disagreeing. Now I

always tease him

that I say, when, look, when you want to do something, I'm the wrong guy to ask

, because I'm

going to say put the pedal to the metal, let's go for it, baby. Right? But but

I do that because

I know that he started through completely. And that's to me what makes him

great because I've been

around a lot of people. And by the way, I'm not saying this in a critical sense

, but a lot of people

say, here's what I'm going to do. I know it's right. And get on board. That's

what I'm going to do.

Brian doesn't do that. He says, I want to know what you think. And I told

someone maybe he deserves

an Academy Award. But I mean, I'm sure you've experienced this David, where he

will call an

individual board member and say, I'm thinking about doing something. What do

you think? And he

listens to what you have to say. Yeah, he's definitely sexy and putting is a

great lesson.

And you teach a finance course, as I understand it, for an MBA program at

Georgetown.

What's the key thing you wish that students do earlier on in their careers?

I wish that you hear people say follow your passion. Yeah, that's good advice.

But I also think that

people, one of the things I always like to tell people, what price are you

willing to pay for success?

And I say that because everybody wants to go to heaven, but nobody wants to die

.

So a lot of people say, I want this, but are you prepared? Whether it's the

time, whether it's the

moves. I know in your background, you moved around a lot when you were younger.

And you

excelled at that. You learned to embrace that and you're good at it. You're

comfortable at it.

A lot of people aren't. So I'll talk to somebody like, this happens a lot. I've

talked to a lot of

young people. Oh, I love to work for Comcast in New York. And I say, well, the

headquarters is

in Philadelphia. Well, I said, well, maybe that isn't the place for you. If I

could work in New York,

I just said, if you're not prepared to embrace Philadelphia, then maybe this

isn't the place for

you. I'm not saying that you're going to be your whole career. But if you

really like the company,

you should be prepared to spend time there. And I'm not saying that's bad. If

you don't want to

do it, I'm just saying this isn't the thing. That's what I mean about the price

. And I've gone

through this with my kids and my nephew, nieces and nephews, where I tell

people, look, if you want

something, you know, one of my daughter's friends, mother once commented, when

my daughter was working

at Morgan Stanley before business school, she's working so hard. Why do you

make her do that? I

said, well, first of all, hard work ain't ever killed nobody. She ain't doing

nothing that I didn't do.

And I said, secondly, I'm not making her do anything. I said, if you want

certain things in life,

you got to you got to put in the time. So hard work. And by the way, not

everybody wants to do

it. And I say, that's fine. When you when you think about your what's next for

you, Ken,

what's your unfinished business? My unfinished business, there's a ton of books

that I've started

having completed. I want to do more reading. I'd like to do a little more

teaching. Remember,

I once said that that's what I wanted to do to teach. I love my course at

Georgetown. I like to

teach more. And I'd like to, while I'm still mobile, travel more and more time

with family.

You know, I've been very, very blessed. I've been married for 40 something

years.

My kids are both fine employed. I love my end laws. I regard some of my nieces

and nephews

almost like my kids. And you realize as time goes by that sometimes your kids

have less use for you.

You realize that some of your friends may not be here. So I'm at the stage in

life.

Well, I still like being in a game, the business, but you know, I'm going to

start having to pull

back from some boards. And I think it's more time for like friends and family

and the mind.

Last question here, Ken. You know, what's one piece of advice you'd give to

anyone who wants

to be a better leader? Piece of advice is think hard and long about why you

want to lead and

which you hope to achieve by leading. I see people oftentimes I want to be

ex. I want to be the big chief. And I'll often say, why? And I'm amazed

sometimes some people say,

well, it's the money. I say, well, you know, you, you make money being a drug

dealer, right? You could.

Oh, that's illegal. I said, well, why do you want to do it? And what do you

want to accomplish?

One of the things I always like to do is to say I took something from A to B

that I

whatever I took over, I made it better. And once I made it better, you know, F

annie

made didn't fire me, but I looked up one day and I said, you know, I think I've

accomplished

everything. I've had several jobs where I say I've accomplished everything that

I wanted to do.

It's time to move on. And so I think to be a good leader, you should have in

your mind,

it might be fuzzy, but like, what does the end point? What does success look

like? And why are

you doing what you're doing? Now, for some people, I might just be money, but

for me,

it was building something, taking something that was good and making it better.

You know, Ken, you know, I've observed you now for a number of years and you

have a really

great moral compass and you do a fantastic job of finding that magic between

mission and making

money, you know, making money in a way that it betters the world. And you know,

anybody has the

opportunity to work with you always comes out better. And I want to thank you

so much for taking

the time to be on this podcast and sharing your insights. And I want to thank

you because

when I was looking at your book and the lessons there, I said, man, I wish I

would have had that

like 40 years ago. You can write your own book. I'm sure of that.

Wisdom is what does they say? Energy is wasted on the young and wisdom on the

old. So.

Ken is one of those leaders who just gets it. What really stands out to me is

how much he values

trust, not just as a fluffy concept because it's not fluffy, but because it's

real,

it's tangible and it's a form of currency and business and leadership. Trust is

what makes

everything else possible. You've got to have wisdom to extend it to the right

people and you've got

to earn it yourself by being consistent and true to your word. Do that and it

comes back to you

exponentially, both in the reputation you build and the opportunities you're

going to find.

So here's something simple for you to try this week. Ask yourself how you're

earning the trust of

others. Do you follow through on what you say? Do you show up consistently for

your team? Now,

pay special attention to those little moments because that's where trust grows.

So do you want

to know how leaders lead? What we learned today is that great leaders

understand that trust is a

form of currency. Coming up next on How leaders lead is Lindsay Snyder, the

owner and president of

In and Out Burger and boy, do I love their burgers and fries. We want them to

not only serve the best

burger or fries and drinks, but we want them to do it in a way where our

customers feel the

difference. They feel that we care. So the loyalty goes both ways. Customers

trust our brand because

they know we're giving them the best. Thanks again for tuning in to another

episode of How leaders

lead where every Thursday you get to listen in while I interview some of the

very best leaders in

the world. I'm making a point to give you something simple on each episode that

you can apply to your

business so that you will become the best leader you can be.

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