Welcome to an unusual Walker webcast where we are going to go back and look at the highlights of the first 5 years of the Walker webcast. Clearly, on a highlight reel, we aren't going to be able to take snippets from every conversation I've had with my over 200 guests over the past 5 years. I'm deeply thankful to every guest who has joined me on the webcast. It has been an amazing group of people who have shared their thoughts and insights in the world we live in. I'm also deeply thankful to all of you, our faithful listeners, for listening to the webcast on a consistent basis. I get feedback in elevators, in the back of Ubers, walking down the street, meeting with investors around the globe. It is a real joy that so many people provide me with face-to-face feedback on the Walker webcast. I've actually had someone standing in line at Starbucks who heard my voice and turned around and said, 'Hey, are you Willie Walker?' Really fun stuff and a real honor to have been able to have the discussions I've had. So, enjoy the highlight reel. Thank you for listening in, and I hope you enjoy what our team has pulled together as some of the highlights of the first 5 years of the Walker webcast.
Pre-pandemic, normal-ish activity. We haven't really had widespread reopening. We know this is coming, and we're hopeful it's coming in 2021. But I just want to point out that everyone wants to go back to where we were in January or February of this year. It's a convenient framework for a lot of people. But I would suggest we need to think about what parts of the economy have increased in size, which behaviors have changed on the part of corporates and consumers, and what a go-forward economic activity might look like. The shape of the economy might be different even if the size returns to pre-pandemic levels.
I'd say by the end of the year, the Dow will be down 10% or so from where it started.
His home is somewhere in California in a modest house, just like Warren Buffett's, I'm told. You don't get a chance to talk to somebody who lived through the Great Depression. He was supposed to be asking me questions, I was asking him all these questions, and Charlie said, 'Look, this isn't the Great Depression. It's not going to be like that because the government is putting money into people's pockets. The government didn't do that back then. They didn't ease like this.' And though unemployment reached 30%, he said there were no prospects of finding jobs. We actually know where all these jobs came from in the last six weeks. They came from retail, hospitality, tourism and leisure, and the airlines. They didn't come from Netflix, Apple, Google, or Star Capital Group. We haven't laid off a person. So, we know how to put them back to work. We know what industries have to be revived, and they are not industries going the way of the dodo bird. People will travel, go to hotels again, visit families, attend graduations, concerts, and parties.
Let me do a quick table setting on where we see the economy right now. Where we are in the cycle — that's a tough one. I think we're at the bottom of the cycle today, and we've been preparing for that. I don't think anybody expected a global pandemic with the entire world shutting down. A friend who runs a very large bank told me their disaster recovery plan was targeted at one big building going out. The idea that all of them would go out at the same time was beyond belief. Where we find ourselves today is far beyond what anyone anticipated, but we expected we were late cycle, and we felt it in our pricing, opportunity, and the risk-reward tradeoff.
You went to TUS where you studied English. Your father was a lawyer, as was your future father-in-law. Any pressure to go into law and Harvard Law School like your partner Jim Cramer?
It's an interesting question, Willie. I haven't thought about it, but I was an English major and didn't have an idea of what I wanted to do. Law school was always something I might default to, but I found I didn't want to be a lawyer. I was lucky to have enough belief that it wasn't worth going to law school if I didn't want to be a lawyer, even if I didn't know what I wanted.
Go back six months ago or eight months ago. I kept getting asked, 'What would you invest in today if you could?' I started thinking. I'm not going to invest in zero yield. I looked at multifamily. You could buy at a four and a half cap. It's not a crazy number. You can borrow — a 10-year, 30-year amortization at two and a half to 2.8%. I started doing the math: if income rises, NOI rises by 2% a year for 10 years, I can't lose. I looked at cash on cash and coverage. Then I said, what if it falls? What if NOI falls 10% and then another 8% over the next couple of years? You still do great. Even if the day after you buy, NOI goes down 10%, then another 8% the next year, then takes four years to get back to where it was — that's not a crazy recovery. Then it goes 2.5% a year after that for another four years. You get a 9 to 9.5% IRR. In what world can I always have interest coverage, debt coverage, and get a 9 to 9.5% IRR when income has fallen 18%? Ten years later, income is only up by 10% total, and I get a nine and a half? Sign me up.
This is a market I'm personally very excited about. We as a company are making big investments towards it. If you zoom out, you have three million armed service people in this country protecting it every day. From a health standpoint, there are few groups more important to help understand if they're doing right from a health and performance standpoint. There are different chapters to think about that. One is if you're a member of the Army on site for training, how is that training affecting your body? Are you overtraining? Do you need more recovery? How can we optimize a training plan knowing you may go to combat? Then, if you go to combat, are certain individuals redlining or need more attention, whether healthcare, medical care, or general self-awareness? We did a study on Navy SEALs. They are some of the mentally toughest people in the world, but that mental toughness can be a setback because if your mind pushes your body past where it's comfortable, you'll push to a place that's not good. We had 40 Navy SEALs with access to their Whoop data and 40 without. The group with data dramatically improved their physiology compared to the group without. This idea of self-awareness and managing what you measure leads to positive behavior change. They saw that with more sleep, they had higher recovery. When people get competitive about sleep versus just strain, positive things happen quickly.
When you hear 'was' an American rock band, do you wish you guys were still together?
No, I don't wish we were still together. It's jarring to hear the word 'was' applied. I still think of it as ongoing even though we're not making new music, because it never really goes away. We still exist on vinyl and radio. But I don't wish we were still doing it. I went to a YouTube concert a few years ago, and for the first few songs I thought, 'They're having so much fun, I could be doing this.' Then I realized they'll be doing it tomorrow, the night after, and for the next six months. I said, 'I'm good.'
I guess the core question is: why should we care about when we eat? We always thought the sun controlled sleep, but the hormones the sun affects are not just melatonin but also insulin and receptor sensitivity. Over centuries, because our lifestyle was tuned by the sun, eating earlier, less later, and in a smaller window — an eight-hour window so you get ketosis every day — changes your circadian rhythm genes and the genes related to metabolism and aging.
You were there at your desire, and if you decided you weren't going to do it, your parents would still say come on home and figure out the next step. That's well put and accurate, Willie. My parents stressed effort over results, which gave me that soft landing to fail. They didn't say I was destined for greatness. They focused on day-to-day stuff: be a good person, behave in a way we'll be proud of, do your best, and eventually good things will happen. Unlike peers who had expectations of destiny and, implicitly, if you don't become great you're a failure. I was never propositioned with what failure would look like other than a lack of effort.
Jamie, as an aside, back to 2010. I'm on my IPO roadshow, and you say, 'Are you going to Kansas City?' I say, 'I am.' You say, 'Would you meet with my money manager and pitch Walker & Dunlop to him?' He runs a successful mutual fund called Buffalo Funds. I go in, I don't impress him. He decides not to invest. To which you say, 'I'm going to invest a million dollars in Walker & Dunlop's IPO.' How'd that turn out? Pretty darn well.
Persuasion is key to life. You have to persuade your partner, spouse, children, employees, investors to do what you want. You can do it through talking, writing, or leading by example. In building my firm, I had to persuade people it was a good organization to join. Persuading Jim Baker or George Bush to join a small firm wasn't easy. Persuading talented people to come to Washington DC instead of New York, and investors to buy into a global firm, wasn't easy because people wanted to invest in firms that only did buyouts, venture capital, or private credit. I've tried to be persuasive; sometimes it worked, sometimes it didn't. You learn from times of adversity. One thing I learned is to make the most of every day and give it everything I've got.
I have roughly a year left as governor, term-limited until January 2023. I'm still running through the tape, working just as hard every day. I get up asking, 'What else can we accomplish? How can we help people?' It's about making the most of every day. Sometimes you can prepare and plan, but things hit you from out of the blue — like your largest city breaking into riots or a scary personal diagnosis. Working through those things, keeping focused, and moving forward is key to success.
For someone in Ghana to have the same access to information as an MIT student is incredible value to the world. But there is a point where we have to question when is enough. As we started our conversation on the three inevitables — AI has already happened, won't stop, and will be smarter than us — this is because of the prisoner's dilemma we've created: if Google develops AI, Facebook has to; if China develops AI, America has to. That dynamic will not allow us to stop.
One thing we cherish about Colorado is Colorado for All. We celebrate everyone regardless of who they are, who they love, or where they're from. People will ultimately remember the work we do on issues that matter to them. Universal kindergarten and preschool in Colorado are huge benefits for parents and kids. Reducing traffic with our infrastructure package helps everyone.
There are academics who fight the idea that the pace of change has never been faster, saying it's always what we perceive and demonstrably not true. I don't buy that. Maybe it's a mirage, but it sure feels like the pace of change has never been quicker. The number one skill people need to develop is adaptability. Business models and strategies are not just tweaked but upended within a few years.
We have become so polarized that there is no political benefit in solving a problem. Take immigration: it's hard and complex, and both parties make money off it. Democrats say Republicans keep kids in cages; Republicans say Democrats want open borders. Almost everyone listening has gotten a mailer or email to that effect.
How do you deal with fear? I don't really deal with fear because fear happens when you've made a series of mistakes and realize it's not good. There are crossovers between athletics and business — looking at risks you take, whether an investment or a new business partner. A big part of my success as a skier and athlete has been looking at it from a business sense: what's the outcome I want, what's my tolerance, what am I willing to do to succeed? Jumping off a cliff as a metaphor for being a successful businessperson is quite poignant.
Part of any purposeful organization is a shared mission or vision. If I'm religious, I might have atheist friends, but I probably don't want an atheist at my Sunday religion club telling us we're wrong. That doesn't mean someone isn't a friend. An organization needs shared values, but that doesn't mean people are all the same. They rally around the vision and shared rules. This is true for sports teams, religions, and organizations that work and endure.
I knew what I wanted to do when I was 10 years old. Everything I did in college — jobs, connections, skills in media — was to get the skills and contacts for a career I loved. I loved the variety of jobs more than being in the classroom. From age 10, my grandmother turned me on to sports by listening to Chicago broadcasts of Cubs, Blackhawks, and Bulls games. I'm living the dream I've had since I was 10.
Being homeless is a full-time job. Homelessness is fundamentally a housing problem. Think of it as musical chairs: if you have 12 people and 14 chairs, even if someone breaks a leg, they'll find a chair. If you have 11 chairs and someone breaks a leg, that person won't get a chair. If you have enough chairs, you can have problems like mental illness or joblessness and still get a home.
Netflix was a catalyst making F1 a US sport, but there were other elements. In life, you hope you do the right thing, but there's luck involved. Before hiring Chase, we hired Shawn Branch from ESPN. Shawn understood the story needs to be about the drivers, not the cars. Sergio Marchionne thought the car was the star. Shawn told the story of the drivers, which was compelling. He went to Netflix with the idea. You can work hard and be thoughtful, but we got lucky Box to Box and Netflix did a great job. Fan festivals, driving cars around Trafalgar Square, opening up social media — the prior management wouldn't let drivers tweet or be on Instagram. We flipped that; now Lewis Hamilton has more Instagram followers than Tom Brady. We opened that world up. Netflix was an important part, but not the only one.
The main point is that entrepreneurs can start and scale companies anywhere, even more so post-pandemic. They build on expertise in sectors where domain expertise, trust, and relationships help. Freightways in Chattanooga, health tech in Baltimore due to Johns Hopkins and Under Armour, Cleveland Clinic, MD Anderson, Mayo Clinic — these aren't the typical cities like San Francisco, New York, or Boston, but interesting things are happening. Most people ask, 'What are the next one or two cities?' It's not one or two; it's several dozen. Our investment strategy proves that clustering and domain expertise in specific cities makes sense.
We've built a brand of authenticity, and people resonate with it. We weren't on anyone's radar until a few years ago when the business surpassed $50-60 million in revenue. We'll be north of $100 million this year, so I know we're on the radar now. You'll start to see more competition where people take harder looks at our product line and try to mimic what we do well, cheaper.
What segment of the real estate industry will provide the greatest training ground in the near term and growth opportunities over the long term? Data centers are an incredible emerging industry. There are only a few players. Most data centers are built by hyperscalers, so it's not as large as office, retail, hospitality, and multifamily. But if you can get a good job in data centers, it's the future. Capital will go there. I'd love to see humans working and living in buildings too, but data centers are a hot spot.
