Annual Meeting: Featuring A Fireside Chat with Tony Ressler

Well, I'm not sure I ever thought about pursuing a career in asset management. I have to say, I actually went to Georgetown University School of Foreign Service because they had no math or science requirement. So I'm not sure the path was exactly as expected, as I thought I was going to go into the foreign service. And had an experience at the State Department. I've always been enormously grateful to the U.S. State Department as a result, because as a senior when I worked there, I was so amazingly disappointed that I thought, why not just go into the goddamn business sector, you know? Whenever you work at the State Department in those days, this was the early '80s, that might have been 1980, '81, '82, you know, and my focus was on the Cambodian desk, and there was literally a holocaust, and the lack of understanding at the State Department at that time, and then the disappointment in those days where everyone said I want to be an ambassador, but ambassadors are only successful rich businessmen, which growing up I never even knew what that was, and I'm like, I'd rather be one of those. And so I've always been grateful to the State Department ever since. But so my path was a strange one. I worked because I didn't want to go and stay in foreign service. I actually worked in the international department of a bank, which for the older folks in this room maybe you remember the Manufacturers Hanover Trust Company, now part of J.P. Morgan. I went through their international group and training program. I went to business school at Columbia, and then I came out and worked at a firm called Drexel Burnham Lambert, not around anymore. So there's a recurring theme, I guess. But at Drexel Burnham, where it really was one of the more extraordinary periods, at least in my career, but from 1985 to 1990, I worked at what was at that time, again to folks that are a little bit older in this room, I would say it was the most extraordinary firm because it had absolutely the best people I have ever run into, and a meaningful number of the worst. And I will say, if you're at a rather young and tender age, seeing the best and the worst hopefully gives you a sense of who you'd like to follow and emulate. So all I could say, between seeing an extraordinary group of people and working with them, but also, and again I'm dating myself, but in 1985 in the investment banking world, most firms, most investment banks were not focused on companies that really needed capital. That might sound strange, but you know, the whole idea of the high-yield bond or junk bond market didn't really exist because most of the borrowers, most of the participants in the marketplace were high-grade companies, and the smaller businesses, the less-than-high-grade companies, really had to figure out different ways to find money from rich people maybe, from insurance companies maybe, from smaller banks maybe, but there were no, the markets were not nearly as sophisticated as they are today. And if you think about 1985 to 1990, we were financing companies that really needed it. And if you, at least to me, what made that so extraordinary is we thought we would be able to evaluate businesses that would and might not survive. And that, in my opinion at least, gives you an enormous ability to evaluate companies, to do what is most important: determine whether they'll be bigger or smaller five or ten years from now. And what I even like, even today, it's moving fast forward. If you look at today's market, you know, it's a really interesting time. And you know, when interest rates are one percent, everyone is a great investor. And all I can say is, I think we're going to find out who are in fact good investors in the next several months and years in this country. But I would say over the past five or seven years, if you had money, you were generally a good investor because one percent interest rate environments are very attractive environments to buy things. Now, of course, what you have is, we'll get into this market discussion I'm sure, but you know, if you have 12 years of low interest rates, we shouldn't be so surprised that everything is so expensive. But again, from the Drexel experience, I would say for me that was really my formative years. I thought gave me enormous background. And from that, I started one investment firm with five or six other folks called Apollo Management, still a very successful and strong firm. And while I was at Apollo, around seven years into my tenure, from 1990 to '97 I was a full-time Apollo person, and from 1997 to 2001, we actually started a credit arm called Ares Management inside of Apollo that was a partner with Apollo. And over the, and some of my Ares colleagues here know this story of whatnot, but and again under the category of not just turning this into a one-hour Ares commercial, which is my nature, so Ernie's going to smack me, but I would say from 1997 to 2001, we had great success running a credit shop at Ares within Apollo, but many of my Apollo partners appropriately were, hey, I'd like to have an Ares too, as it was growing. And really after four or five years, we had to make a choice about whether or not we folded Ares into Apollo or Ares, of course, would spin off entirely. And that, I guess, was the second most important, I would say, my experience at Drexel, so I could understand the markets as I thought, but really deciding did I want to run a business where I really was, where I had partners but no senior partners, or stay at a firm where I had partners including senior partners. And I made what most everyone in this room would suggest to be the absolute worst financial decision in January of 2002, based on paper value, I promise you, the worst financial decision, because I thought it would be better to be a partner without senior partners than a partner with senior partners. And we separated entirely. Many of my colleagues at Apollo thought that was a horrendous financial decision. Who knows, but I do think in January of 2002 we became an independent firm. For five years prior, we were partners with Apollo. To this day, well, I guess we're celebrating, as our Ares colleagues, we're celebrating our 25th anniversary at Ares Management this year, because really the first Ares fund was 1997 while we were still, shall we say, partners with Apollo. We were the credit arm for those five years, and then in 2002, January 2002, we separated. So depending on, with large investors, particularly our large institutional investors, we always use the 25-year title because we think it sounds more substantial, but you could probably use either one.

Again, under the category of dating myself and appreciating the market 30 years ago versus today, we actually did have a vision in 1995, 1997, certainly 2000. We thought a firm that had a really high-quality credit shop that complemented a high-quality PE shop that complemented a high-quality real estate shop, where each of the pools of capital complemented each other, helped each other with flow, with relationships, with institutional investor relationships, marketing, whatever the case may be. Now, again, if you look at the alternative asset management or even the asset management industry overall today, that seems painfully obvious. But I promise you in 1995, the KKR's of the world, the Blackstones of the world, the Apollos of the world, the TPGs, all they cared about in those days, true, was their private equity franchise. That's the only place you could make real money in the eyes of company buyers. And again, under the category of maybe I came up in the distressed debt world and I worked on the trading floor at Drexel and I understood credit a little bit more maybe than private equity, but my view at least was the credit business could be easily as important and as exciting as private equity, as liquid credit, as real estate, for different reasons of course. And in those days, that was a fairly unique perspective. I would say that our friends at Blackstone did it the best, the fastest, the biggest, but we were at Ares, strangely enough, we were pretty close behind them.

You know, again, I get asked this question a bit of, you know, where was the great epiphany? I'd like to say I had one, but you know, the decisions you make at a fork in the road, for me at least, were two. And one was when I was on the trading floor at Drexel, when I was asked to be a bond salesman at a three times salary increase versus stay in capital markets, earning literally 25 or 30 percent of what bond salesmen were making at that time. And I'm not criticizing bond salesmen or suggesting capital markets is a better profession, but for me at that moment in time, I wanted to understand and see every company I could get to. In capital markets, we touched every company, evaluated every company, and I thought it was a much more impressive and important job for me. And at that time at least, my boss was Michael Milken, they just couldn't believe I would stay in that role rather than want to get paid. Who were the highest-paid folks at Drexel? It was bond salesmen. And I just didn't think that was as interesting a job for me. So that decision, and then frankly the decision to roll out independently at Ares, also the weaker financial option at the time. So my argument was do what you have that passion for, that you think gives you more substance, rather than, you know, it's long-term, I would argue hopefully it's not greed, but long-term objectives versus short-term objectives. Great, I always say it's not a sprint, it's a marathon.

So again, I always have a tendency to overly simplify the world, which sometimes works and sometimes people get angry. But I do believe that this liquid world is far more efficient generally than the illiquid. So to me, what that would mean is over time, whether it's equities or high-grade bonds or whatever is traded, that information is much more efficient. And over time, I would argue that the fee pressure and the ability to outperform, and I felt this literally for 30 years, maybe more, that over time that would just grow and grow. When you find great stock pickers, great prognosticators of the direction of interest rates, they deserve all the success one could get because it's remarkably difficult to do that over an extended period of time. But the world of privates, and again, it's not just private credit, but it's private real estate, it's private equity, so there's this world of private is so much larger than what most people appreciate, so much less efficient. And we felt that if there would be increasing pressure on those that managed liquid and public securities, there would be increasing, shall we say, interest and focus on high-quality private investors because they had, if you will, greater advantages to outperform, at least we thought. And generally speaking, if you look at what large pools of capital are trying to do around the world, the idea of privates taking up a larger percentage of the overall pie is continuing to grow. And as recently as today, as Carl Drake knows well, because I always seem to email him criticizing some research report that I might have read about Ares or the private assets market, and like, why the hell did they say this? And then he explains to me why and I understand. But as an example today, they said that the private debt, I believe was the direct lending market, they were saying was a trillion dollars in size, BDCs had 200 billion round numbers, but when you appreciate really the addressable market, it's much larger than people realize because what was once considered a small medium-sized loan was, again, 20 years ago was 25 million to 250 or 150. Today that's 25 million to two and a half billion. So the market is even, we don't even know the true size of the private marketplace. And the ability to self-originate product, whether it's real estate debt or real estate equity or corporate debt or corporate equity or ABS, consumer loan portfolio lending if you will, or secondaries or infrastructure lending, any of the products that we happen to perform or provide at Ares Management, yes, I guess I am giving it a commercial, but the truth is all of these products are self-originated that you can't create elsewhere. Now you might say, well, I have other people that are originating product that are better than you, okay, but there aren't that many ways to create high-quality assets that really are tailored to what you're trying to do in your portfolio. So a long-winded answer of saying privates will continue to grow as a percentage of the overall pie, and I continue to believe will be not just the outperforming asset class, but more importantly the less efficient asset class. And again, today's world, it's hard to make things look positive when we're looking at what's happening in today's marketplace, but there are positives out there, it's just you gotta look more carefully.

All right, so I'm going to make the argument that when markets go down, it hurts everything. All right, we don't short stock at Ares Management. So when markets, when interest rates go up, markets go down, to suggest anyone should celebrate makes no sense. All right, but again, if you happen to live in a world where you at least appreciate markets going up and down, and that we had 12 years of low interest rates as I mentioned earlier, you have to, particularly if you're hopefully overseeing 350 billion of assets, you have to say that we have a world where virtually every asset we are buying or investing in is at very, very high prices. So what does that mean? One, we have not yet met an investor, and I'll defer to many of our market, we've not met an investor that gives Ares Management investments or money capital to stay in cash. Nobody gives us capital to stay in cash. So what are we supposed to do? We're supposed to look at, particularly if you believe interest rates are very low and asset prices are very high, what are we supposed to do? We're supposed to be predominantly floating rate, predominantly first lien or senior in a capital structure, and above all, if you're buying equity, whether corporate or real estate, focus on quality of asset rather than multiple. But truly quality of asset, or even versus return, because it's the quality of the asset that gets you through bumpy markets. So does that mean private equity returns could conceivably go from 20 to 12 or 14? Emphatically yes. But if you're making 12, 14, 16 instead of the 22 or 24 we feel we've earned and evidence we've earned over the last 20 years because we bought high-quality assets, because we're forced to hold those assets seven years instead of four, virtually every investor we have says I get it. But if you buy shitty assets in an effort to make more return in a high-priced environment, that's where your investors say, nice knowing you. And I do believe that distinction is where firms grow and where firms disappear.

Well, again, under the Ares crystal ball, I'd rather just give my perspective on, you know, the Ares crystal ball sometimes is still being formulated. I think we've had a view at Ares that prices were very high for an extended period of time, interest rates were too low, and we should have yellow lights blinking, and we've been saying this for three, four, five years. So again, Ares commercial, but truthfully, we have less technology exposure, less private equity exposure, less growth capital, less non-cash-flowing companies, I would say, than most of our competitors, because we've been arguing this is, we're cash flow buyers in London. But if you are a believer, which I am, that inflation is very real, and I know there's politics involved and everything seems to be political, I happen to think that we had obvious inflation, we saw it, and the war in the Ukraine, which exacerbated our current problems with inflation, because when you have higher energy prices and food prices as a result of a war, it exacerbates inflation. So when people say certain sides of the aisle, oh, it has nothing to do with the Ukraine, I disagree. And when people say, oh no, we didn't have real inflation before the war in the Ukraine, I disagree. So to me, yes, we have a, we also have a series of issues that again, we have a government and an administration, both the current and the previous, that when we saw the pandemic, we thought throwing trillions of dollars against it was the right thing to do. And I can't speak for everyone in this room, but I can speak for myself, I agreed that we should have meaningful government support for what I thought was an economy about to shut down. I can't speak for others in this room, but I was trying to move to cash. I was at a basketball game playing the New York Knicks, March 11th of 2020, we were told to stop playing at halftime because the Knicks had played Salt Lake before, and we were like, stop playing based on this COVID thing, what are you talking about? So we thought it would be a week or two, but then the next day Adam Silver closed the season. We all were trying to figure out, but if you put yourself back in those shoes of March 11, 2020, I did think one, two, three trillion dollars in government spending to keep the lights open in most American businesses was fantastically obvious. What I think surprised everyone, myself included, is how remarkable the U.S. economy adjusted to the pandemic, where businesses and individuals, in not all but many industries, worked remotely, sometimes more effectively than when we were in the office. Extraordinary. And again, I laugh only because at Ares Management we had people working longer hours remotely than we had them in the office. I mean, my wife got worried about it, I was like, this is great. Again, I'm not, but this is something that you have to, I don't think we saw this, I don't think Democrats or Republicans saw this. So the fact that we overspent was not because anyone was evil, and in today's political discussion and discourse someone is always evil. I actually think we just misplayed the strength of the U.S. economy, and that added to what is today a very serious inflationary environment.

Well, when we talk markets and what can we learn from the pandemic, and I must say this is where I'm supposed to turn it over and say, Ernie, goddamn, you work at UPS. I mean, the world of logistics, I mean, if you think of logistics, if you think of online retail, if you look at how that world has changed, I still don't believe we're feeling all of the ramifications. But what is, of course, the global supply chain, and how do we bring more important manufacturing back on soil? And that's happening, and that's happening, I think, almost more rapidly than many folks can appreciate. So yes, that, I don't know, that's a positive, but it's, I think it is actually, but it's happening very quickly. But the world of retail and what that means, and the world of remote work and what that means to office space and the cost and developing cost of offices, and whether or not, Andrew here today in our own U.S. real estate business, but you know, retail, everyone now it's like, I love industrial, I hate retail, I'm scared of office. That's a function of, if you think about it, I would argue online retail has driven all of that to a large degree. So all I'm trying to argue is yes, we've learned many things from the pandemic. How to respond to a pandemic, I think, would be one. Yeah, I hope. How not to make it overly political would be two. And I would say global supply chain and core, important, whatever defined, important manufacturing beyond on U.S. soil.

Well, it has a play on real estate, it actually has a play on the community we all live in. Because again, we have many problems in this country, and I still think the positives wildly outweigh the negatives, but one of the serious problems we have is the inequality of wealth. And that's going to be and has been exacerbated for a whole bunch of reasons. I would argue access to technology and access to low-price capital are two of the leading reasons. But as time goes by, and we have office workers that can work virtually, but we have UPS delivery drivers or construction workers or other delivery drivers that have to work five days a week at their job on site, that separation will create and exacerbate some of the natural tensions. So again, under the category of how do we make the world a better place, what this is going to lead to, I hope, is that some of those folks that have to be on site should get paid more as a result of being in the office every day, and people that want the flexibility to work remotely, if it's five days a week or four days a week, they should take pay cuts. Maybe if it's one day a week in most companies, maybe not. But again, the environment is going to change, and the American worker is going to change in terms of their requirements. So time will tell.

Well, again, as I get older, I think the ability to compromise becomes more important. In today's political discourse, the word 'compromise' has become a negative or dirty word. I do believe you're better off in the office for a meaningful period of time as a young worker in most any industry, and the ability to collaborate. But I've also learned over the years we've lost some fantastic women at our firm that were moving into very senior roles because they wanted to stay at home and take care of kids. The idea of having those people stay at our firm and work remotely—and whether or not we're allowed, I'm not in the politically correct business—but are we allowed to have women with children work remotely more than men that don't take care of children? To me, that's common sense. But if it retains great women at our firm, I'm all for it. So again, having really stern and fast and hard rules in remote work, generally speaking, I think every industry has to come up with their own rules. If Elon Musk wants to play one way, it seems to be working for him right now. But there's a lot of ways of running a business.

As the chairman rather than the CEO, so it's okay. I play the crazy uncle role now. So to me, hybrid and flexible work is kind of one and the same, so long as you can make everything work, juggle everything. You add your values on days it could be in the office five days, some days it could be something's going to be done. As long as the value's there, you're creating value, you're connecting with the team, you're helping grow the team, and you're benefiting yourself and everybody else, whatever works. It's just making sure that everybody is on the same page. I think whatever works. I really do think the employee of today is different from the employee of 30 years ago. They want their employers to be more active in the community, more active in the social justice discussion, more active in the diversity discussion—at least the majority of the employees in our firm, as an example. So what we're seeing is companies that are supposed to be more active. That doesn't mean a focus shouldn't be on being profitable and being successful and growing your business, but the fairway has gotten wider in what I think the private sector plays in today's America, which I think is a good thing.

That's higher than you do for us. Sure. Again, I don't really look at myself as active in philanthropy. I look at myself as trying to use whatever we have access to to make the community we operate in better. As an aside, in Atlanta, we are—and it's actually a for-profit activity, and I know this sounds crazy—but I couldn't give a damn if we make money in the Centennial Yards development. But we're building 8 million square feet in downtown Atlanta. If you look at the last 50 years of Atlanta, downtown has not gotten its fair share. To put five billion dollars in the ground to literally transform downtown Atlanta, I couldn't be more proud of that. To create a partnership with the Russell Center—for those of you that have interacted with the Russell Center—to create a center for minority entrepreneurs and to help actually introduce BCG, a great consulting firm, who's helping to match small minority-owned businesses with large corporations that want to increase their exposure to minority-owned businesses and to help them get mentored and have access to capital. The Russell Center, the Atlanta Hawks, myself, trying to build minority-owned and run businesses in this country is a huge endeavor and, as far as I'm concerned, hugely important for what has to be achieved in this country going forward. Going forward, it's all about economic access and getting folks, particularly folks in the minority community, to be playing on the same playing field that I've been on. I do think the Russell Center is extraordinary for that. As you mentioned earlier, the Financial Literacy for All is basically saying in today's world, strangely enough, sadly, and people of all color, 90 percent of high school kids in this country graduate high school do not know how to get a car loan, a business loan, a home loan. My chemistry teacher in 11th grade told me I would end up in jail. But I didn't graduate with any financial acumen from high school, and I went to a large public high school in New York. But today's world, we must transform education, financial literacy. I had a sit-down, and I do obsess about financial literacy for everyone I do business with. We have a player at the Atlanta Hawks making—I don't want to say exactly what you figure—but between 10 and 20 million dollars, had no understanding of how to invest that money. Most kids, 22 years old, do not. It just so happens NBA players could be making 20 million dollars a year. At 22 years old, I was making five dollars an hour working part-time. So all I'm saying is the point of financial literacy, whether you're making 18 million dollars a year or 18,000 a year, is of critical importance. The ability to introduce financial literacy is actually not that difficult. This program is actually trying to create a website that has different levels of certification using Sal Khan—for anyone that knows who Sal Khan is and the Khan Academy—but basically coming up with basic financial attributes. At each level, you can go online—we're not there yet, we're going to get there—where you can basically get certified so you have a certain amount of financial literacy, at least the foundation. As an example, we're doing something at Ares, frankly, that we're enormously proud of, something called All Finance Corps. In the alternative asset management industry, we've had a tough time finding training, mentoring, keeping young men and women of color because they haven't had mentors that look like them that were able to leverage and help them the way I did. I had a brother-in-law in the business, I had a brother in the business. When you have a brother, mother, uncle, sister in a business, any business, that generally helps you move along. So what we did is with four historical black colleges, we created a curriculum with the University of Pennsylvania, and then we hire, train, mentor, and position for success young people of color. We think with a 10-year commitment, we think that over 10 years, meaningfully diversifies our industry. When you get into the diversity discussion, the idea of saying every company and every industry has to know that this is an enormously important role of the private sector. We don't expect companies to do things and change the world overnight, but I would argue that every company should have a 10-year plan to become more diverse. That doesn't change the world overnight, but it makes the private sector far more effective over time. So those are the things we've been doing. Under the category, right or wrong, but if you own a basketball team in any city—and I would argue certainly in the city of Atlanta—you're a community asset. So we're partners with the community. Yes, with the Russell Center, every business—if you come to games, for what it's worth, and we do want everyone coming together as possible—we advertise minority-owned businesses that have had success on our jumbotron. Why not? It's great, it helps the community, helps the business. So we do that. All I'm saying, those are things we could do. And so far, it's—of course, if you're saying that versus making the Eastern Conference finals, I don't want to—the argument is hopefully we can do both.

So again, the NBA is a very different type of business because, strangely enough, you keep score very differently than most companies we invest in at Ares. I assure you, in the private sector, it's about revenues and cash flow, maybe it's about stock price, but generally it's about revenues, cash flow, growing the value of the business. In the Hawks, it's about winning. Now, it's also about running a good business, but in the NBA, to win a championship, to be great—and let's state the obvious for a moment—I've owned the team now, this is my seventh year, but the team's been in Atlanta over 50 years, never won a championship. If you don't win the championship—not that I'm obsessed about it—but if you don't win a championship, you cannot be a great franchise. It's a weird name, it's hard to use that analogy in the private sector, but I'm not trying to push it on yourself or you guys or me. You cannot be a great franchise if you don't win a championship. Every great franchise in the NBA today has won at least one. If you think about it, nobody thought of Dallas as a great franchise, but you win one championship, you're now in the top tier franchise. And right now, we are not in that category, and that drives me crazy. I would use curse words, but I'm trying to be—I use a lot of curse words, especially when it comes to it. So all I'm saying is, that's part of what we're trying to do. But if you're saying, have I learned running a good business? Yeah. Are there things? Yeah. We have many people at Ares—no one here, of course—many people at Ares, many people on the Atlanta Hawks that think they're underpaid. For most human beings, they're remarkably well-paid. There's a parallel, there's an analogy there. Extraordinary people—which is not criticism—some extraordinary people think they can never be fairly paid. It's what makes many basketball players—don't forget, these kids are 450 of the best players in the world. Now, I don't know if any of us think we're amongst the 450 best Wall Street investment professionals or whatnot. Hard to—but in the NBA, it's pretty clear you're one of the 450 best in the world. Whenever I sit down and we talk business, I don't tell players how to help with their mid-range or their crossover. I still play on Sundays, and if you saw me, you'd understand why I don't give advice. But I do love basketball. I talk money and I talk business, and I try to explain to every person I've ever talked to at Ares and every person I talk to at the Hawks: this is a business, and you're supposed to make as much money as you can make, but you're also building a career, and you have to think of both. We don't at Ares or at the Hawks—and I say this—what I love about NBA players is, 22 years old or 20, when you're talking money with them, they don't pay attention. At 25, they start to listen. At 30 years old, they grab your leg. They don't want to talk about basketball; they just want to talk money. So as they mature, as they see that their career won't last forever, my point is that some of these players have to understand that, yeah, you may not get paid what you think is fair, but it's not just your decision of fairness. There are circumstances. But are you building a career? I always say that you have to take a 10, 12, 14-year view, and are you doing what's best for your 12-year accumulated earnings? I often try to say living in Atlanta is a lot more attractive than LA or New York. Look at the house you could buy here versus—and they're like, 'Just pay me the same.' And then—no.

Sure. So I'm going to do the second one first, and then I'll—because I think the bank discussion is a longer one. In terms of whether people work from home and whether New York becomes—and London for that matter—becomes less relevant, I joke around, I really don't—if people want to work remotely, I actually just think young people, particularly early in their career, benefit from human interaction. Older folks, more experienced people, I actually think are the ones that don't benefit as much. So I just think it's better for the career, at least in our industry. That's why I actually push young people to work in an office environment. But the truth is, we happen to be doing beautifully with this increasing hybrid. As far as I'm concerned, as long as we're doing well, why would you really complain about it? The world is changing, and whether it's three or four or five days in the office, it's certainly not five. So I actually think it's more important for young people than others. This is the first question: will banks come back into our market? Are they regulated out of our market? Is that the great benefit to firms like ours? I must say, I actually don't look at it that way at all. I think banks play an incredible role in the world's financial system. Their customers are governments, large corporations, and individuals. But they also lend to alternative asset managers like Ares as a lender to our large funds so that we could provide a turn of leverage on large funds, as an example, and they don't have the people to actually make the loan. So I do want to make clear there's a role for both alternative asset managers and large money center banks. But the other point that I think is lost in this discussion: we make loans to companies, generally whether it's real estate lending or ABS lending or corporate lending, but we're basically saying we'll lend to three, four, five, six times cash flow, 50, 60, 70 percent of the asset value. We're obviously doing work on the underlying asset or company. But please understand, we're unlevered pools of capital making these loans. We certainly don't take anyone's deposits. Large banks are something in the neighborhood of 15, 17, 18 times leveraged with deposits, with government insurance. Who's better off making relatively aggressive loans for their own account—a firm like Ares with institutional capital and no leverage, or JP Morgan with 17 times leveraged individual deposits and government insurance? So what JP Morgan is forced to do—and I do believe regulations are simply saying if you want to be 15 times, 17 times, 20 times levered, then your balance sheet, to get government insurance, to get government support, to have access to the bank holding company and to the bank window, to have all of the government support—you have to run a very different balance sheet and have a very different pool of assets on your books. In 2008, much of what we did in ABS lending was on the balance sheet of big banks with 15 and 17 times leverage—I mean, that was different, actually 35 and 40 times leverage. 2008, now banks have delevered for sure, and thanks for helping. But the question is, what should they be doing, and what should institutional capital be doing outside the bank holding company? I think each pool of capital has a different role and far less leverage to pursue one versus the other.

We are—I'm going to define—I think we are actually growing in Atlanta, and I think that's a pretty good thing. Listen, Atlanta is a booming market, guys. So the simple answer is yes. We do a bunch of things out of our Atlanta office. I'd say real estate, direct lending, our two biggest activities. We also want our investor relations activities out of there. So yeah, we do a whole bunch of things out of our Atlanta office, but we have pretty sizable offices in other markets. But I think what you're going to see—and I know this wasn't necessarily the question—you're going to see more people at Ares and firms like Ares because of the ability to work remotely, moving to lower-priced, attractive urban environments. So if you could make the same money, wouldn't you work and live in Atlanta versus New York or San Francisco? That's going to happen in many companies. You're already seeing it happen. All I'm saying is, I think a lot of companies have to adjust to that.

I'll tell you this. For anybody that's been watching hockey, this city—it seems like we've had two at-bats, if I understand it correctly. For those of you that follow the team in Calgary or in Winnipeg, they're incredibly successful. It seems that Atlanta has a couple of great years and then—and maybe it is ownership and maybe it is the way those teams were funded and run, and I actually believe to a large degree it was. I think hockey could work here, so I hope that's clear. And the economics of having a hockey franchise in a building that's already built, I promise you, is attractive. But in a weird way, I actually am a big believer—this is not as popular these days—but if you're going to own a team, a sports franchise, if you're fortunate enough to be in that position, you should really understand and hopefully play, but certainly understand the sport so that you have a passion. I do believe people in the community know whether you have a passion or frankly just money. I love playoff—I never played hockey. I don't know hockey as well as I wish I did, so I'm not so sure I'm the right owner. But listen, I actually do think hockey at some point is going to come back to Atlanta. By the way, I don't know if it comes to State Farm Arena, but when you see what it's doing in Nashville, it makes no sense that we don't have a hockey team. But we have five or six really successful professional sports teams right now, so sports parking here is pretty good. As long as you show the respect and appreciate that the University of Georgia football team is first, we all can fight for second, third, and fourth. As long as you don't go there, then you're okay.

I say this only because we have a bunch of colleagues. I've made so many, it's hard. Honestly, it's hard to—I'm going to say the mistakes I feel that have been the most significant always were tied to letting people that you knew were not up to a task stay in the role too long. Almost always. And I don't know if that's a mistake that's correctable because I just always feel you've got to give a person more time, more—and every time, once you know, and then you're still just hoping for a turn, it never happens. After a certain period of time, you know. So it's always been because I have a really tough time firing people. Always have. The positives is you give people more room, more time, more rope to do whatever they have to do, but it's always been a mistake at me.

I was just real quick, but one thing—you didn't ask what decisions we did make that helped us. All right, but just twist real quick. When we first started Ares, we might have been 30 people. We had 2 billion of assets, 3 billion of assets supported worth of credit. We actually said you don't get fired if you make a bad investment. You get fired if you can't work with people around you. We had one rule when we started the firm, which was no assholes. That literally was the best decision.

All right, as good a softball as I've ever been pitched. Only because—you're welcome, thank you—I actually built 27 schools in Los Angeles. I built 27 charter schools called the Alliance for College-Ready Public Schools. I still believe the single biggest issue in this country is K-12 education, and it's fixable. Yes, we build schools, just so you know, for 2 million of equity, 10 million dollars, 500 seats. Round numbers. LA Unified builds schools—not—again, think about this per student. We have 500 students in 10 million dollar buildings. They have 100 million dollar buildings for 700 students. So we are spending—and they exclude real estate costs—but we're spending 11,000 per kid just to send them through school. We do only middle schools and high schools, by the way, 27. As I said, we have 13,000 kids. We graduate 100 percent of our kids, 98 go to college. So if we're outperforming and we're spending 60 percent of what the public schools are doing, and we're spending literally 25 percent per seat, we thought we were building a research laboratory for public schools. Instead, it became a political discourse on union versus non-union in the classroom. And I'm actually not pro or anti-union. I'm just saying let's create new research laboratories for public schools. And we did, and we did so successfully that the public school union decided you need to be unionized rather than be successful. It's changed on that. So the simple answer is you could do very different buildings, and especially with the world of remote—it's not just remote, virtual—it's not just for office workers. We have to change the way we educate, and there are laboratories out there. It's why I've been a charter school supporter my whole life, and I actually believe this is enormously important. The idea of changing public schools without creating research laboratories for success—some will succeed, some will fail, but that's what charter schools are supposed to be. And ultimately, we should have no charter schools in public schools. Charter schools are public schools in most states. They get funded with public money, maybe they get supplemented by private money. But why not just have good schools?

So it's called All Finance Corps. I'm kind of disappointed that you haven't heard about it. So at All Finance Corps, we're recruiting kids, students, young men and women, and we're recruiting them now to basically go through a curriculum of what an alternative asset management firm functions, how it functions, what your expectations are, and how we help you hit the ground running. So right now we're at Morehouse, Spelman, Clark Atlanta. We're about to add a few more schools, by the way. So we're recruiting and training students as we speak. So we could actually introduce you—that should not be too difficult, but it should be on campus and completely available, as they say.

Oh, I had so many bad habits at 21. It's a long list. But listen, I actually only went through—and maybe it's a cliché or whatever—but my father did tell me. I've used one story my whole life about working, and I always thought if you don't quit, if you don't quit, you can't fail. And it's the only adage I've used, the only theme I've used, and since I'm 21, it's been the same. I mean, I know this sounds crazy, but in 2002—actually 2001, I'm sorry—we started our first private equity fund. We thought—I was coming from Apollo—we had a couple of billion in credit, we were doing our first PE fund at Ares, and I thought it would be the easiest fundraise. And 9/11 happened, all sorts of things, and I can give you many excuses. But we marketed that fund—I don't talk about it, I certainly didn't talk about it today—we must have been in the market for three years on that first one. Now we've got 850 funds since that time. But when you're in the market for a PE fund for three years, most of your friends would say you should stop. But we just didn't understand how people didn't see what we saw. So I think I would have said that to my 21-year-old self, and I've repeated it ever since.

Wow, impressive. Well, I have to say it is number two, the entrepreneurial business in high school. I was delivering camp trucks to sleepaway camps for little brats in the neighborhood, and it was pretty successful. That was my second summer, and I got a call from the Teamsters, and they said, 'You're now officially closed.' I didn't even know what the Teamsters were. But I didn't ask my father. He agreed with that. If they say you're closed, then you're closed. I tell you defensive, and I don't quite tell you, but all's good. I never auditioned for a movie. No, that would be bad. Anyway, thank you very much.