[00:03:03] Ben Miller: They are always thinking about big ideas, excited about changing the world, and he’s, you know, he, he really was, is remarkable. I mean, in the industry in the eighties and the early nineties, he did a lot. He never really talked to me about business directly. I think he didn’t think I’d be in business. I think he thought I’d be, I don’t know, some other profession.

[00:03:27] Ben Miller: And so I watched, he always would bring me places and he, because he’s, he was always working. So if I was with him, he was working. And so of course I saw a lot, but he didn’t actually think of me as like a business person until I was in college. And I got a job with another sort of real estate mogul. And that real estate mogul really liked me, wanted me to work for him.

[00:03:47] Ben Miller: My father was like, wait, what’s going on here? And then he became interested but wasn’t, he didn’t know I didn’t, he brought home the stress, but he didn’t talk about what was happening at work that I remember growing up.

[00:04:01] Patrick Donley: The gentleman you mentioned, he’s a Philadelphia developer, is that correct? Ira Luber.

[00:04:06] Ben Miller: Yeah, he’s not a developer. Ira Lubert, he’s not a developer. He’s a investor, a huge investor, you know, billions of dollars. Real estate, technology, hedge funds. He’s a, he’s a mogul, absolute mogul. I went to work for him in college and he and I hit it off and I actually, I brokered this deal that a deal fell apart that he had been working on.

[00:04:28] Ben Miller: It fell apart. And then I, I went off on my own and sort of got ahold of the people involved and brought it back to life and he was surprised by that. And then gave me like $40,000 of, of shares in the company I, that I basically brought back to life and my father, and this is like, I’m like a kid, right?

[00:04:44] Ben Miller: I’m like in college. And my father was like, what is going on here? No, this is, he’s, you know, this is mine. This is my kid. You can’t take him. And then all of a sudden he was like, really interested in me as a business person.

[00:04:57] Patrick Donley: So in what capacity were you working for Ira when you were in college?

[00:05:01] Ben Miller: I was working for him as an analyst, and Ira back then had just started his first real estate fund, and now I, I think again, he has 8 billion, but that time he had a hundred million, I think that was the size of the fund.

[00:05:12] Ben Miller: And this office was small and I was an analyst and I was working on a deal and it fell apart and I just went off on my own and brought it back, brought the deal back to life. You know, if you’re a really good leader or manager, you can look around the room and see who’s paying attention. You see who’s getting it.

[00:05:29] Ben Miller: And he, I think he thought I did and, and started using me as this, you’d call him politics, like his body, right? His like person who just, who would be with him everywhere and just get handed all sorts of work.

[00:05:41] Patrick Donley: Didn’t you leave to join a startup? And at that point, Ira, who’s your mentor and someone you’ve learned a great deal from, he said, I wish upon you a great failure.

[00:05:50] Patrick Donley: I want to hear more about that story, why he said that to you, and then also the experience at that company, which I think did end up failing. What were some of the lessons you learned about running a company, watching some of the mistakes that were made at that startup?

[00:06:05] Ben Miller: Yeah. Okay, so I, I’m going to date myself here, but that was actually 1999 and I, I left to work for a tech startup.

[00:06:13] Ben Miller: And in 1999, that was the thing to do. And, and he basically wanted me to stay and build his business. And obviously he grew from a business that had a hundred million of real estate to 9 billion of real estate. And so I saw him years later and he said, if you’d stayed, you would’ve made $50 million. I think he wanted me to stay.

[00:06:32] Ben Miller: But anyway, so yeah, I went to go work for a tech startup and when I was leaving he said, well, if you’re going to go do this at a young age, I hope you, I wish upon you a tremendous failure. Cause you’ll learn way more from that than from success. And the tech startup I went to work for was a tremendous failure.

[00:06:48] Ben Miller: It was out of, it almost could have been a book, how outrageous and the whole experience was. And so, yeah, and I learned a lot from that. You basically learned more from stressed periods than from when, from pe, when periods are, are normal, whether it’s 2008 or 2001. Those lessons really were key to Fundrise, basically my thinking on Fundrise.

[00:07:11] Patrick Donley: So what were some of those lessons from that failure? What would you have done differently or, or what were the mistakes you were glad you made that affected later on down the road? The success of Fundrise?

[00:07:21] Ben Miller: You know, 1999, I was a, I was just out of college. I think I was 23 when I was working for this tech startup.

[00:07:27] Ben Miller: And I, so I was not the executive, not the principals, but I watched them make mistakes and I was, you know, working a hundred hours a week. The biggest mistake they made was they let what they wanted to have happen, get in the way of seeing what was actually happening. And I came away from that experience with the lesson that staring brutal reality in the face and seeing it for what it is as fast as you can is critical to then knowing what decisions to make.

[00:07:58] Patrick Donley: Yeah. I remember as a young guy, I was, I went through a Tony Robbins phase, you know, I was really optimistic. And I remember asking my dad, who’s a developer, would you consider yourself an optimist? And he’s like, no, , I’m a, I’m a realist. You know, you’ve gotta, like you said, stare the facts in the face and adjust accordingly.

[00:08:15] Ben Miller: Yeah. It’s something inside the organization at Fundrise and sometimes in my family is I always first go to the problems. I go to the, the really tough negative things, and I focus on them first. And people then say like, why are you so pessimistic? And I, no, no, no, no. This is just how you get to, how, how you built up to accomplishing big things.

[00:08:36] Ben Miller: You have to start with the really ugly things and, and not just think this fun and do the things that are enjoyable that you really need to do. Things that are not enjoyable. That’s how you succeed.

[00:08:48] Patrick Donley: I was talking to my dad on the phone yesterday. I, we put out a newsletter at The Investor’s Podcast Network, and it’s called, We Study Markets.

[00:08:54] Patrick Donley: I’d encourage our listeners to sign up for it. It’s a hundred percent free, but I’m writing an article on traits of top successful investors and I asked my dad that kind of along the lines of making decisions and things like that, being a realist, as an optimist, pessimist, that kind of thing. One of his main points was, you’ve gotta look at the worst case scenario in this situation going into anything, any investment he first looks at, at the worst case scenario.

[00:09:19] Patrick Donley: Is that something you guys do also at, at Fundrise?

[00:09:22] Ben Miller: Yes. That’s definitely one of the key, it’s almost axiomatic and the people who don’t do that, I don’t know how you can be successful. Now, let me, I’ll add a caveat after this, but Seth Klarman, who’s a famous value investor, If you take care of the downside, the upside takes care of itself, and that’s definitely true for real estate.

[00:09:43] Ben Miller: Now the caveat is venture investing and technology is different. It’s really the adverse or opposite of real estate. Real estate’s value business with real things and, and technology is a virtual business. But the interesting thing is that they use similar language. So in technology there are software developers, there are software architects, there are designers who are a lot like architects, and the fact that they build things usually that look good, don’t work as well.

[00:10:15] Ben Miller: Now we have, our team has, we have great designers, but a lot of designers focused on, as they say, in, in, in real estate, you build a building from the outside in if you, rather than building from the inside out, right? You want to build a building from the inside out. But a lot of architects start with renderings and pretty pictures, and they may not work as a, as a building.

[00:10:32] Ben Miller: So there’s just uncanny how many actual really similar patterns there are between real estate and tech and language, even though you wouldn’t think they’re at all related. Yeah,

[00:10:41] Patrick Donley: I’m a big fan of Seth Klarman. We do a lot of, you know, focuses on the newsletters, a lot of value investors. So Seth, we’ve definitely written about the whole idea of margin of safety and that kind of thing is really important.

[00:10:52] Patrick Donley: I wanted to circle back to your experience in 2008. You’d mentioned 2008 and some other two, maybe 1999 as tough periods for older guys that lived through that. There’s a lot of younger listeners that we have that maybe haven’t gone through a downturn like 2008. I don’t know that we’re necessarily going to experience that again, I could totally be wrong.

[00:11:12] Patrick Donley: We’re definitely in some sort of correction here. Also, want to get your thoughts on yeah, what’s going on in the market. But I wanted to hear, I think at that point you joined your father’s company and that you guys had maybe 500 million of under construction, and then your biggest lender, GMAC, went bankrupt.

[00:11:28] Patrick Donley: Bank of America stopped doing construction loans. So many developers at that time, especially ones with a lot of leverage, obviously got crushed. I think it turned out pretty well for your company. But tell us how it was for you going through the great financial crisis and then how it affected your view of Wall Street, the financial markets and banking in general.

[00:11:48] Ben Miller: Yeah, tough times for sure. I joined my father’s real estate company, I think of more like 2005. I can’t remember now, but it was, so we, I saw the run up and, you know, really the peak of liquidity was 2007, and then I saw it all come crashing down. And so for us, basically we had some big institutional capital partners on the equity side, like, like GMAC commercial, which changed their name to Cap Mark when KKR and Goldman and Square Mile five Mile bought them.

[00:12:21] Ben Miller: And then as usual Cornerstone and AFL, CIO. And, and that crisis was a, Debt crisis turned out that all the institutions that were providing money didn’t have any money. They were just borrowing it. And so the amount of leverage in the system was astronomical. And, and, and when that leverage had to basically come down, there were all liquidity, left the market.

[00:12:44] Ben Miller: There’s, there was no money in the market, which happens basically every 10 to 15 years. And last time it happened was 1990, 1991, 1992. And, and now I think it’s happening again. And so much of our, our learning, I think as a professional is just learning things. Everybody else has to learn and should know.

[00:13:02] Ben Miller: For whatever reason, it takes a while to learn it. That one is simple. It’s just don’t over lever, you know, you have low amounts of leverage, have more equity in deals. And so, you know, we had a deal, big deal, a couple, a hundred, a hundred million deal. And we, I think our leverage was 83% from gm, a c commercial, which is, you know, general Motor’s Acceptance Corporation, which used to have a big lending arm until they spun it off.

[00:13:26] Ben Miller: because GM ultimately went bankrupt in oh eight and 83% at the time it seemed smart. Like, oh my God, we got this really cheap loan and then we got equity and like, does real estate sponsor people don’t know? Look at a real estate developer and, and look at their big deals and you’re like, you know, they only have probably 1% of the money in that deal.

[00:13:44] Ben Miller: Maybe half a percent. The real estate industry’s changed over the last, let’s say three decades, where a lot of real estate developers and inve and, and managers are basically middlemen. I mean, they do a lot of the work, but there’s not actually like the old school like Larry Silverstein or or any big old developer where a lot of the money is their own money.

[00:14:03] Ben Miller: They own that building and they may not have any leverage. So it’s. So anyways, and so when you have investments where most of the money, 99% or 99.5% of the money is not your money. Lo behold, people behave a little differently than if it was their all, all their own money. They take on more risk, they don’t necessarily behave like a fiduciary.

[00:14:25] Ben Miller: And I think that was what was happening really broadly in 2008. And so another lesson was basically, I, I no longer believe institutions when they tell me that they’re so big and so smart and so sophisticated. I think that’s like salesmanship. And generally there might be okay, but they’re not what they seem to be.

[00:14:46] Ben Miller: And that in 2008, every major institution that I know of was insolvent. I mean, they were insolvent. They basically, they hadn’t gotten bailed out by the government. Many more would’ve gone bankrupt other than Lehman Brothers. How smart can you be if you’re insolvent, maybe not as smart as you say you are.

[00:15:02] Patrick Donley: Right. Yeah. I had the same experience just to called into question everything. I was a finance major and called into question everything I’d been taught about finance and money and banking. And it sounds like kind of similar experience for you, main takeaway. It sounds like be really careful with leverage.

[00:15:16] Ben Miller: Yeah, I mean, it’s like if you want to be successful, don’t try to happen overnight. Take your time, you know, be methodical. We always say the company, be the tortoise, not the hair. What’s your goal? My goal isn’t to be the richest person in the world. I want to do interesting things and to do interesting things.

[00:15:33] Ben Miller: You need to be able to take risk and to take risk, you need to have a stable foundation.

[00:15:38] Patrick Donley: I want to get more into understanding Fundrise. Imagine you’re sitting next to a guy on a, on an airplane, just kind of a Joe Blow kind of guy, and he asked you what you do for a living and what your company does.

[00:15:49] Ben Miller: What do you say to him?

[00:15:51] Ben Miller: So I would turn to him and we were talking, he says, what do you do? I’d say something like, Hey, do you invest in stocks? It’s like, yeah, I have, you know, Schwab, fidelity. Do you invest in bonds? Yeah, I have bonds. Do you invest in real estate? No. Why not? I don’t know. It’s not really available. The same way stocks, you know, I can buy stocks and bonds easily through, you know, my brokerage account through an app.

[00:16:13] Ben Miller: And I said, well, that’s a problem. And real estate’s a great asset. It’s actually one of the best performing assets in history. It should be as easy as seamless, as low cost to invest in real estate as to invest in stocks and bonds. And that’s what we do. We make, we basically democratize investing in real estate.

[00:16:30] Ben Miller: We digitize it and make it basically available to you so that you can diversify your portfolio the way every institution invests today.

[00:16:40] Patrick Donley: How’d you come up with the idea for Fundrise?

[00:16:43] Ben Miller: So after the 2008 great financial crisis, it was about 2010. And I was like I would say like pretty jaundice about institutions and I, cause you know, I, I mean we had to go buy our, that a hundred million deal I was describing that were the lender and the equity were both bankrupt.

[00:17:02] Ben Miller: We had to go buy it out of bankruptcy from our partner. We went through like a 2 56 G bankruptcy proceeding where you had to go buy it and you had an auction. And I was just like, what is this nonsense? And so I was walking my dog thinking about like how to raise money for real estate deals. And I was just said, well, why can’t I raise another internet?

[00:17:20] Ben Miller: Like, why can’t we just Democrat, well, why can’t anybody do this? Why is it just these institutions who don’t know what they’re doing or just are maybe not the best at what they as, as partner? And I just started thinking about why, why can’t you raise money on the internet for real estate? Like why can’t people invest in real estate?

[00:17:37] Ben Miller: It doesn’t make any sense. It should. You should be able to. So that actually was, is a big idea, but it’s a simple idea. Doesn’t seem like some idea that no one else has ever had. And like a lot of ideas all about execution, right? The execution is what makes it work or not work.

[00:17:53] Patrick Donley: I heard you mention that you don’t like to call Fundriser crowdfunding platform.

[00:17:57] Patrick Donley: I think you mentioned you at one point called it online syndication, but maybe that name hasn’t taken hold. Have you settled on a name that explains what you guys, what Fundrise does?

[00:18:08] Ben Miller: Yeah, I mean, I, again, I, if you’re thinking about investing in stocks, you’re investing in bonds and you’re going through internet, you’re just investing in stocks.

[00:18:15] Ben Miller: You’re buying stocks, you’re investing in real estate. You’re just investing in real estate. Our fund structures are like the same fund structures you would buy stocks in, they’re mutual fund structures, or 40 act, it’s the same as buying stocks except for it’s buying real property. And so that’s why I think of it as just like, you know, BlackRock or Vanguard who raises a lot of money through the internet, invest in stocks.

[00:18:39] Ben Miller: Like no one calls them a CrowdFundriser or Amazon who, who does everything through the internet and their apps. Like what transactions do you not do through the internet? Everything. So it’s just like, it’s just cause the real estate industry is so old fashioned that they’re like, what’s this crazy whizbang stuff the kids are doing these days?

[00:18:58] Patrick Donley: Explain to us how Fundrise, you mentioned BlackRock. Explain how Fundrise along with your fee structure, which is lower, I think, than most typical REITs. Explain how Fundrise is different than a typical REIT along with the fee s.

[00:19:11] Ben Miller: Public companies, public res or public tech companies are usually mature. They’re mature public res, usually low growth, and it’s a really a asset management company.

[00:19:23] Ben Miller: They sit there and they are a steward and they sort of own these properties and they mostly chug along. That’s the public markets. The private markets are where businesses get created, where mostly real estate gets built. You know, if you think about what’s the difference between public tech companies like IBM and venture capital, you know, venture capital is where businesses get created and Fundrised and high risk, high reward, and that’s what the private markets do.

[00:19:49] Ben Miller: And so the exact same thing happens in real estate. You know, private equity in real estate is higher risk, higher reward, more growth, more dynamism. And when it’s basically mature and stable and a little bit more boring, it goes public. And then basically you sell it to public markets at a premium. And that’s the difference between like a Black Stone, which is a private equity fund, and Black Rock, which is a public equity manager.

[00:20:16] Ben Miller: And so that’s a Fundrise, just democratizes investing into private markets, into the part of the market that people used to not be able to invest in. And it’s. Real estate in the private markets is I think, again, a little bit more dynamism. I think a generally a higher return, maybe higher risk, and you kinda where the where, where the new things happen.

[00:20:39] Ben Miller: New things happen in real estate and tech in the private markets Wasn’t

[00:20:44] Patrick Donley: Fundrise maybe the first platform to attempt to raise money using the internet. And I think the building that you were trying to raise money for, if I read this and studied correctly, was right next or very close to the SEC building.

[00:20:57] Patrick Donley: And it took two years, around two years to fund the first project. I’m real interested what the regulatory hurdles were. It’s super ironic. I think that you guys were next to the SEC. What were those hurdles like to jump through in the early days of the company?

[00:21:11] Ben Miller: Yeah, so it’s September, 2010 when I’m walking my dog and I think about this idea.

[00:21:16] Ben Miller: And it’s August, 2012 when we actually launched the first offering. So it took a long time, almost two years, right? That’s 23 months from conception to launch. And so we always say we launched in 2012, but it took a long time. And we had to do three things all at once, right? We had to go buy a real estate property to have a real estate deal to do this with.

[00:21:39] Ben Miller: We had to build a technology platform so people could transact and, and we could manage it through software solution. And then we had to get regulatory, basically like green light. And that regulatory green light or regulatory like qualification was novel. No one had ever sold real estate through inter ever, or at least not in the modern or modern.

[00:22:04] Ben Miller: I went to law firm after law firm just saying like, how do I do this? And I went to big law firms, officers of law firms, everybody’s heard of and they, you get sort of reactions like, that’s cute or I know how to do this, but actually I didn’t know how to do it. And I most, most like, sort of like the best story from that period was I went to second most fancy law firm in the country.

[00:22:26] Ben Miller: I mean certainly top three, the law firm that most investment banks use. And their office was at the con ass building, which is, it’s a times square, really, really beautiful building. Top floor. I go in, meet with the head of their real estate practice and head of the securities practice. And I think if anybody knows how to do this, it’s them.

[00:22:43] Ben Miller: I tell them like, we gotta to prioritize real estate. And the, you know, the financial system’s broken 2008 financial crisis proved that we need a new model and I have this big pitch. I remember looking over the horizon as a sun setting on New York and I finished and I sort of dead silence. And the guy says, well, why would you bother with a little guy?

[00:23:04] Ben Miller: Like why bother? And I said like, I got like a little upset. And I was like, because it’s Wall Street’s screwing them. And he said, what’s your opinion? And I was like, well, isn’t there a lot of people downstairs protesting Occupy Wall Street? Like isn’t it really like a off for debate at this point? Like didn’t they divide financial system, just melt down and get bailed out by the government?

[00:23:22] Ben Miller: Anyways, that didn’t work. That was dry hole. And by pure luck, one of my friend’s brother-in-law had just retired from the SEC and he was head of internet enforcement at the SEC. So I go, oh, meet to this guy that, that sounds like what I need, right? And I go, I didn’t know anything about the SEC back then.

[00:23:41] Ben Miller: I go to his office and he just like started private practice. And I said, here’s what I want to do. And I told him and he said, you know, I’m from enforcement. I don’t know what that means. He said, I don’t know anything about this stuff. Like, I’m a lawyer basically, right? I, I’m like a, a prosecutor, like you need to go to Corp Finn and go to the guru Marty Dunn.

[00:24:01] Ben Miller: And I was like, who’s Marty Dunn? So he’s the guy. He’s the guy. And you know, as you know, always in any place or any sector, there’s the guy or the woman, there’s a person. Like if you try to build, like, I remember trying, we built a development in Asheville, North Carolina way back, and there’s a guy, and the guy was the ex mayor of Asheville.

[00:24:20] Ben Miller: And he was, you know, Lou, and he was like, he’s how you got everything done in Asheville? There’s always a person. There was always a guy. So I went to Marty, got a lunch, lunch meeting with him. He comes down, he was worked at a Melvin Meyers. He comes down to like B l t steak, this fancy restaurant. And I was so nervous.

[00:24:38] Ben Miller: And he says, I told him what he wanted do. And he says like, oh man, that sounds so fun. Like, that’s so fun. That sounded like a really fun project. Let’s do that. And we did. And we spent a, you know, he took me into the SEC. To meet with them. And they’re like, that sounds fun. And they’re, and they’re trying to figure out what regulations you use.

[00:24:56] Ben Miller: And Marty said in there, he’s like, well, in 1996 I wrote this regulation free, you know, he is like spouting the numbers. He would always like know every regulation and then the number of it. And, and he’d be, we’d use that one. And basically all these people used to work for him who were at the SEC. And so he just shepherded me through the process.

[00:25:15] Ben Miller: And the SEC saw it as like, at that time in 2011, they really were worried about capital formation, which basically means raising money for businesses because there was no money, right? There was no liquidity in after the great financial crisis. And they wanted to show that they were like helping. And so that was, this was like more of like a showcase demo and it cost me a hundred thousand dollars of legal fees to raise $300,000 from, you know, 300 people.

[00:25:42] Ben Miller: But it was like not meant to be economic. It was meant to be like proof that we could do it. And you know, we did, I mean we did, it just, it was . If you were a securities attorney, I could get into like Howie test and all this sort of really silly things happened that were interesting for securities attorneys, but like it, we created the model.

[00:25:58] Ben Miller: I mean like the checkout, how does checkout work? And then a lot of people who ended up starting companies that were like ours signed up for, I mean I know every single person that started a company that sort of on this idea of raising money, internet. I can tell you when they joined Fundrise, their username, like I, they all came to Fundrise and like they modeled it after us.

[00:26:18] Ben Miller: And, and it’s funny because we then stopped doing that business in 2020, sorry, in 2015 because we thought it wasn’t the right way to scale and we changed our business to more like a Blackstone model. And they all went that other path. And I think that’s like we created it and left it. Cause we thought it wasn’t the right model to scale.

[00:26:37] Ben Miller: And it’s, I think it’s why we were successful. And then they basically mostly haven’t, haven’t been or don’t exist anymore, but that’s a different story.

[00:26:45] Patrick Donley: What are you doing differently now? What was the change that you made that they didn’t do?

[00:26:50] Ben Miller: I have been through crises and I was worried that, so syndication in real estate means you raise money from people for a deal, a single deal, and it’s an old fashioned way of doing real estate.

[00:27:04] Ben Miller: You know, if you went back to the fifties or 1960s or seventies, like, that’s how real estate was done. And that’s how we started. And we did 44 single deal fundings. Like we’re, we had hundreds of investors or something in a, in a one deal. And I was freaked out by that structure because I said, if there’s another financial crisis and we need money to recapitalize a deal or pay down a loan, or just work out the deal.

[00:27:34] Ben Miller: Because there’s a misperception of how much real estate’s in motion there. This single deal structure is brittle. It doesn’t let you do that. It’ll break under stress. It’s not too fragile. It doesn’t allow you be to have a dynamic. If you think of real estate as a business, not as a, as a like a piece of property as a brick, then you, you would see why it might need more money and needs to be flexible.

[00:27:57] Ben Miller: And so we moved to a fund model like a Blackstone or a Starwood, or like the real estate industry is now structured as funds. Those really were invented in the early nineties. The fund model is the dominant model for real estate. It’s the better model, the more resilient, it’s the more flexible, it’s the more scalable.

[00:28:16] Ben Miller: So we moved to the fund model in 2015, and when we did that, we lost half our customers. Half our customers said, well, we don’t want funds. We want deals. And I said, I just, I’m too risk averse. I don’t want to be doing just deals. And so we changed, we left and, and that was painful. Lose half our customers.

[00:28:34] Ben Miller: Did you expect that to happen? But it ended up when you made I knew that a lot of customers didn’t like that. I mean, I knew it was going to be unpopular, but I didn’t know it’d be that bad. Cause our investors liked, like some people are, are stock pickers and they’d like to buy Tesla, buy Apple or, or you know, underwrite this real estate deal and have an opinion about this deal versus that deal.

[00:28:56] Ben Miller: Ultimately there are way more passive fund investors who buy long-term, diversified portfolios of stocks than there are stock pickers. And so that was an insight we had, even though it was different than we originally conceived. It’s a bigger, better business. Safer and I think more appealing to more people.

[00:29:18] Ben Miller: So how many people want to go say, oh, I have this deal of apartment building in Bend, Oregon. You know, it’s, there’s a price per square foot. Here’s the debt structure, like how many people know how to underwrite that and want to mostly like people who are like, it’s just a different customer.

[00:29:35] Patrick Donley: It’s a good explanation.

[00:29:36] Patrick Donley: It’s really so, I mean, there’s way more index fund investors than, you know, Warren Buffets, right? Invest in index for the average person. Invest in index funds.

[00:29:44] Ben Miller: Exactly. So we did that for real estate. We indexed, we were indexing the real estate private markets. We index, we can index build for rent, we can index multifamily.

[00:29:52] Ben Miller: There’s, we’ve created a way to index it. But real estate people and financial types and venture types told us we were wrong. We were idiots. I had partners who were thought we were dead wrong and, and I’ve said, no, you guys are building a product that you want and you think everybody is like you. So you’re you, which is a key way you build software or products or real estate.

[00:30:17] Ben Miller: You gotta build it for the customer. And so you have to understand the customer and put yourselves in the customer’s mind and seat and shoes. And that’s like, that’s not something that everybody can do, but it’s critical to building great products.

[00:30:31] Patrick Donley: This brings me to my next question. One of my newer investment heroes is a guy named Nick Sleep.

[00:30:37] Patrick Donley: He’s featured in William Green’s book, Richard Wiser, Happier, which if you haven’t read any listeners haven’t read, I highly recommend the book. And Nick says that he wants to invest in companies that practice what he calls scale economy shared. So these are companies like Amazon and Costco that are completely customer focused and they create a flywheel in their business model such that their efficiencies as they grow larger and larger in scale, they’re able to pass along those savings to their customers.

[00:31:04] Patrick Donley: They create customer loyalty and satisfaction and lifelong customers. So, and from my research of fundraise, it seems the company is also completely customer focused. Tell us how the company’s using technology to lower costs for your investors and how The company, which I think is completely vertically integrated alliance incentives and produces maybe higher returns than the average reit.

[00:31:27] Ben Miller: Okay. Two given questions. Let me do the first one about technology and the second one about economics and fees and incentives was, man, our incentives, I. Technology. So this is not something we intended, and I feel like many great inventions were not intended that to be a great invention. So we started with the customer and we started with having many customers.

[00:31:50] Ben Miller: We have today we have 383,000 investors, so we have a lot investors and we built a website and apps and then infrastructure to make that possible. So we have payment processing and and performance reporting and a lot of different kinds of software. Basically to have a huge number of customers processing and investing and reporting seamlessly.

[00:32:16] Ben Miller: There’s all ulcers of sneaky complexity or on APIs and about having the website be respon responsive and performant. And the whole team, all they do is focus on the speed at which something happens on the site or on the apps. I think we successfully democratized real estate, but that gave us a foothold that was unique.

[00:32:36] Ben Miller: Because the real estate industry does not have technology from this century. The real estate industry is built on technology from the nineties and that technology, if you’re a real estate person, you know exactly what I’m talking about. It’s a PC computer, personal computer, and Microsoft Office suite. In particular, Microsoft Excel.

[00:32:58] Ben Miller: And that is the backbone technology of real estate, doing things in Excel, modeling things in Excel, setting that Excel spreadsheet to different people. It’s, that’s basically how real estate thinks about, I mean, my God, how things they think about real estate. They think of it first as a financial model and maybe they think about it as like a building and they don’t think about it as a consumer experience.

[00:33:19] Ben Miller: That’s like some rarely think of it as like, you know, someone’s living there, shopping there. It’s an experience as a product and the financial success of the product is a derivative. Of its product experience, but that’s not how most people in real estate think. So anyways, if you’re trying to penetrate the real estate industry with technology, the real estate industry basically will reject you.

[00:33:42] Ben Miller: They’re not going to change their behavior. And the thing about technology is that behavior is the primary barrier to change that. We saw this in the pandemic. We adopted work from home overnight. The technology was clearly there. Nobody was going to adopt work from home without something forcing them to do it.

[00:34:02] Ben Miller: And that happens over and over and over again with technology actually usually takes a whole generation and young generation will adopt it. The old generation will not, and it takes like, you know, there’s a max plank famous physicist said like, like, progress has made funeral to funeral progress in science.

[00:34:19] Ben Miller: So the forced adoption of, of work from home or remote work was like an aberration. Normally it just takes generational change. We don’t have to seek institutions or real estate companies approval or change in behavior to adopt new technology. We can basically build technology for ourselves and then use that technology in the way we do business.

[00:34:42] Ben Miller: Slowly but surely. We started with the sort of customer. We start with the money. We worked our way back. So now more and more of our processes, more and more of the way real estate’s done is done with software, with databases. And it’s so complicated and, and subtle that it’s probably requires own podcast.

[00:35:00] Ben Miller: But we are, we’re in the process of radically changing how real estate’s done. And then when we’re done with that, Or, or at least have gotten to sort of a, a phase where we’re ready to, we’re going to offer that software infrastructure to everybody else. And that will probably, we’ll start offering that next year, maybe 2024, depending on when we’re ready.

[00:35:21] Ben Miller: But like the way that we do real estate, the infrastructure we use is how, you know, if you think about Amazon or Google or any real technology company, they don’t use Microsoft Excel, they use infrastructure, these databases. So we, we built that because we could, you know, we have half our team’s software engineers, like we’re different animal.

[00:35:40] Ben Miller: And that’s like, there’s so much in it makes us better, I think different lower costs and that, you know, is a great business. But then we’re going to, then we’re going to basically express that technology for everybody. because a technology company, well here, a financial company, when they get an advantage, they trade on the advantage, right?

[00:35:58] Ben Miller: They, they, I have inside information, I have a better mousetrap. I’m going to make more money. A technology company gets an advantage and they share it so everybody can take advantage of it. So they can basically have the infrastructure that expands and make money as infrastructure company. So we’re going to basically share it and I think it’ll make us better and everybody better.

[00:36:17] Ben Miller: And that’s like a long, it’s a long answer because it’s so complicated. It’s big, it’s a big change for real estate.

[00:36:24] Patrick Donley: Yeah. I mean it’s creating a larger and larger network effect in essence, right? Is that what, how you would describe what you’re doing?

[00:36:31] Ben Miller: Yes. I mean it, it’s about data and process. And that is ultimately about scale and network effects, but the advantages of data and processes that change, you can measure it ultimately by sort of adoption and compounding scale through sort of like the system gets better if more people, you know, data gets better, the processes get better if more people use it.

[00:36:57] Ben Miller: But you using like AWS using ink infrastructure, like you don’t experience that. You just experience it being cheaper, faster, easier. It’s a good business because of the network effect, but it’s a good product because of the outcomes from that.

[00:37:10] Patrick Donley: So I wanted to get back to the fee structure and how what you’re doing, I believe makes the fees much cheaper than a typical reit.

[00:37:20] Patrick Donley: Can you talk specifically about how the fee structure works?

[00:37:24] Ben Miller: Yeah. It’s so different. It’s, so, I would say it’s different than a typical private equity fund and that’s, you have to know a little bit about real estate and private equity to appreciate how different it is. I’ll, I’ll try to explain it to you and then maybe you can explain the listeners what a cared interest is in real estate, a real estate developer or real estate private equity fund, they get fees, asset management fees, or development fees.

[00:37:46] Ben Miller: They get fees to run their business, but they make the money the big upside. The profits are in the promote, the carried interest, the share of the upside and typical real estate company would get 20 to 30% of the upside, and a typical fund would get about 20% of the upside. And venture capital, same thing venture capital companies would invest in.

[00:38:08] Ben Miller: Tech companies get 20% of the upside or more. That’s really where the big money’s made, and that’s the big cost to the investor. So everybody focuses on fees, you know, is it 1%, is one and a half percent, but the carried interest like this is vast, vastly bigger. On the upside, it can be 10, 2000 times more than the the fees you make.

[00:38:30] Patrick Donley: And Fundrise isn’t taking any carried interest.

[00:38:32] Patrick Donley: Is that correct?

[00:38:34] Ben Miller: Right. Or, or a nominal amount no cared interest in our funds that are publicly available. And that’s, there’s two ways that’s different, right? The funds that invest the money don’t take cared interest. And, and we were vertically integrated, so we started our own real estate operating platform.

[00:38:50] Ben Miller: And real estate operating platform doesn’t take a cared interest. So there’s typically two carriage interests in a, in a real estate investment for our end investor. The California State Teachers Pension Fund will pay Starwood, a private equity fund, cared interest, and then they’ll pay, the Starwood will invest it with Holland Group or some real estate company, and Holland Group will get car interest.

[00:39:10] Ben Miller: So there’s two credit interests equal to about 50% of the upside, and that is zero. And so our investors who are putting in small dollars compared to institutions are paying lower fees than the institutions, which defies all. It’s like almost like the laws of gravity are reversed. Cause that’s not how any institution thinks it should work.

[00:39:34] Patrick Donley: So I wanted to get into how 2022 has been for, for Fundrise. You were featured, we were talking earlier in Fortune Magazine. Congratulations. That was a really cool article.

[00:39:45] Ben Miller: I really enjoyed it.

[00:39:47] Patrick Donley: As you mentioned, you’ve got, I forget the exact number, 370,000 investors, mostly millennials, age 25 to 40, and you’re gaining about a thousand new users a day.

[00:39:58] Patrick Donley: I think you’ve got about 200 assets under management with 6 billion roughly market value. And I think that puts Fundrise in about the world’s top 20 private equity real estate firms. Since 2017, Fundrise has delivered annualized gains of around 12%. And correct me if I’m wrong, but you’re up about five and a half percent this year when both stocks and bonds are in double digit negative returns.

[00:40:23] Patrick Donley: Looking back on 2022, how’s inflation and the current market broadly impacted your current real, real estate portfolio? And I’m wondering what keeps you up at night lately?

[00:40:36] Ben Miller: Ooh, a lot. Again, a lot of questions in there, , and those are some deep questions. Lemme try to take it one by one. And as you can tell, unfortunately, a lot of my weaknesses, one of them is, I’m not succinct, I can’t help but give a long answer.

[00:40:49] Ben Miller: I love it. Cause I just, that’s just, I, I just can’t help myself. So unfortunately, bear with me here. The lesson I learned in 2008 and I carried with me was not to over-leverage the deals. And so broadly, the real estate indu industry. Like if you’re a private developer, your leverage is probably 65% to 75%, maybe 80% on a typical deal.

[00:41:12] Ben Miller: And our average leverage across our funds today is about 43 to 46%. So much lower leverage. That means that when there’s a shock to the system, like there’s an economic shock, we’re able to absorb the shock. And if you have 75% leverage rate, leverage or debt is an amplifier, amplifies upsides and amplifies downsides.

[00:41:35] Ben Miller: People forget about the, that it’s like both up and out. And so that shock which is happening in the market today, there’s a shock in the market, is going to basically cause some people to lose their deals or really lose a lot of money. So that’s like the, hopefully the perennial philosophy we apply, we, I think we invested in the right strategies.

[00:41:55] Ben Miller: Like another belief I have and, and this we could almost debate this cause you’re, you know a lot about real estate if you’re a operating at, at some scale, like if you’re buying, we, my goodness, we invest in a lot of real estate deals. We buy a lot of real estate. I learned this in 2008, two actually, which is that the macro is more important than the micro.

[00:42:16] Ben Miller: A real estate person is obsessed with a deal. They’re just deal, deal, deal, deal, deal, deal. It creates lots of management challenges because they, I’m like, what about management? What about like cash checking in with a team and how they’re feeling? They’re like, no, I just want to talk to them about deals. So deal, deal, deal, deal.

[00:42:31] Ben Miller: And so they think that all the alphas created at the deal level but is, is not created at a deal level. This is the same thing we saw with stocks and bonds and, and index investing as good as stock pre carrier as you are, the index beats you net of fees. And why is that? And so real estate used to be, I think it used to be about the deals like 20 years ago, 30 years ago, 40 years ago.

[00:42:54] Ben Miller: No question. It was about the deals because the, the market used to be inefficient, but now the market is efficient. There’s almost no such thing as an off market real estate deal of, of any consequence. Like if you’re going to buy a 20 million apartment building, The price is set by the market, by the auction.

[00:43:11] Ben Miller: There’s no world where you’re buying that thing and it’s worth 40 million and you’re buying for 20 million. That just doesn’t happen. It used to happen. I mean, maybe it happens like I think I, in my career, maybe bought like two deals out of 500 or some that, where that’s happened. So this just not if you’re going to buy one deal in your life or one deal every couple years, like maybe you can pull that off, but I don’t, I don’t believe it Now, that’s what every real estate developer and investor says they’re doing.

[00:43:39] Ben Miller: They’re all, say they’re doing off market deals and they all say that they’re doing all this analysis, but the market is set the price or the price is set by the market. So, okay, the price is set by the market. When, where the returns, where do you get alpha? So it’s, it’s not at the deal level. I mean, there is a little, I’m not saying there’s none.

[00:43:55] Ben Miller: It’s just like it’s way, way overblown in the minds of the real estate industry and you have to be able to execute. I mean, execution is like, it’s almost like, what are we talking about that’s that’s like table stakes. So I’ll go macro, I’ll go top down. If you are a great office developer, you’re a great retail developer, you are hosed today.

[00:44:16] Ben Miller: You are completely, if you’re an office developer today, and you could be the smartest office developer with the best execution, but office is getting wiped out because the macro, the macro was one work from home destroyed the office industry. So technology was the big disruptor. Just like technology in e-commerce destroyed retail.

[00:44:37] Ben Miller: Then the cycle or the, what’s happening with the overall, you know, high inflation and high interest rates, that’s basically crushing real estate. And then geography, if you’re in San Francisco versus in Austin, the asset allocation office, the geography, you know, Austin versus San Francisco, and just the general cycle that dictates 80, 90% of returns.

[00:45:02] Ben Miller: If you were in residential or industrial and you bought that in 2010 or you did great. You did great. And so at Eden, whether you bought this deal or that deal, rising tide lifted all boats and are, and a falling tide basically withdrew returns. And so if you, if you aren’t in the right asset class, in the right geography with the right leverage, you did or didn’t do rate returns.

[00:45:26] Ben Miller: And that’s just not how the real estate industry, that’s not the narrative the real estate industry tells about how returns are generated. because that’s, I think they want to believe that they, it’s their day-to-day work, which is again, table stakes. So that’s just a big, big difference. And so we were in the right asset classes and we were not in the wrong asset classes, we’re not in office, we’re not in retail, we’re not in hotels, we’re in rental, residential, and industrial.

[00:45:53] Ben Miller: And that basically, and we have low leverage and we’re in the sunbelt, we’re in the right geographies. And that basically generated great returns. That sounds more like index investing, right? That’s what we believe in. And so, and we didn’t have a carried interest. Like, so when inflation went up in 2021, rents went up in our properties, 20, 30% across billions of dollars for a real estate.

[00:46:18] Ben Miller: If we had a carried interest, we would’ve made hundreds of millions of dollars. I would’ve made hundreds of millions of dollars, and I made zero off of that because we don’t take a carried interest mm-hmm. , because basically we think it’s more scalable and more differentiating and disruptive in the long run.

[00:46:35] Ben Miller: So we were in the right asset classes and we are still in the right asset classes. And that’s basically what drove our returns. And, and yeah. Okay. We also bought good real estate and, and we have good underwriting. And I just don’t think that that’s as like it’s just not what we’re selling and not what I think is the reality.

[00:46:53] Ben Miller: And, and same thing happened in 2008. Man, you, we had, I, I did so much work on like, what design is the fixture on the, on the door. I mean, it’s just really, really micro, what kind of screws are we using? And door hinges and, and that stuff got killed by the 2008 financial crisis. You know, you’re sitting there working on your little, like, hand carved statue and there’s a tsunami comes along and you’re like, good luck.

[00:47:18] Ben Miller: You get a tsunami, just shoot, everything got wiped out. So this is like, people are not thinking about it in the right way. If they, if they’re thinking about it, they’re only, they’re staring at the, like the little sculpture they got in their hand and not keeping an eye on the big picture.

[00:47:34] Patrick Donley: So what’s your outlook for 2023 as we go into 2023?

[00:47:38] Patrick Donley: What do you anticipate to be some of the changes in specific asset classes? You mentioned office, you know, commercial office, just getting wiped out. What asset classes do you like, what’s Fundrised, focused on. Are there any changes in the strategy going forward? Or are you going to continue to focus on what you’ve been focused on?

[00:47:56] Ben Miller: I mean, these opportunities and problems come around once every half generation or generation. It’s such a big change. I mean, we’re the real estate industry and the entire financial system is going to go through a lot of distress next year. I have a podcast, I called it the Great Deleveraging, and it’s about how we went from a low interest rate environment to a high interest rate environment.

[00:48:19] Ben Miller: And that is a big difference. Like for 15 years, interest rates were basically zero. From 2008, 2022, there were, there were zero. And from 2000, sorry, and from 1981 to 2022, interest rates fell consistently over a long, long period. So we went from 21% interest rates in 1981 to zero. That is a megatrend.

[00:48:45] Ben Miller: That’s what I’m talking about, the big mega trends. And now we’re going into a rising interest rate environment. It’s already happened and we’re not going back to the way it was.

[00:48:57] Patrick Donley: You can’t unwind time, you don’t foresee rates, you can’t rewind time, you don’t foresee rates coming back down.

[00:49:03] Ben Miller: It’ll come down from, I mean, I think they’ll come down from where they are.

[00:49:08] Ben Miller: They’re going to be likely 5%. Next year they might go to 6% and they’ll likely come down to 3% or three and a half. But we’re not going back to the way it was. If you look at the major forces in the world for some time, we’re going to be dealing with rising, rising inflation, rising costs to fund our debts.

[00:49:28] Ben Miller: And you know, there’s just a lot of drivers that there’s labor shortage, so there’s going to be more wage push. So you have to assume that the inflation and high rates are the new normal. And a lot of mistakes are made by investors when they don’t embrace. The new normal. Like they don’t stare reality in the face.

[00:49:50] Ben Miller: They they, they say, oh, they’re letting what they want to be true. Get in the way of what is true. And that’s exactly, you know, my 2001 experience. So I think inflation and interest, high interest rates are unfortunately new normal at this point. You have to basically assume that’s base case. Maybe they go away, which I think is possible, but maybe they don’t.

[00:50:10] Ben Miller: Okay. So that’s macro on a micro office is going to get destroyed because of work from home. The average physical occupancy in an office building is 50%. And so as leases roll over, in least occupancy comes down, you know, you’re going to just see tens of billions of dollars, maybe hundreds of billions of dollars of own defaults.

[00:50:33] Ben Miller: And that’s going to drag down the whole real estate industry. Cause every lender has office exposure. And then when you go from a high interest rate environment, sorry, when you go from a low interest rate environment to a high interest rate environment and you have 75% debt, you’re likely to have to pay down that debt because you just can’t support a six or 7% interest rate at a 75% debt level.

[00:50:58] Ben Miller: And that’s a de-leveraging or loan pay down. And that amount of loan pay down’s going to be across the whole industry in the billions and billions and billions. And that’s going to cause a liquidity crunch. It’s already here. This is like, this is, this is a fact of like today that there’s liquidity’s just gone from the market.

[00:51:21] Ben Miller: If you have a loan and it comes due and you think you’re going to extend it, you have not talked to your bank yet. Good luck. So we’re a liquidity crunch, liquidity crisis maybe, but definitely a crunch that has all sorts of cascading consequences. But a problem is an opportunity. So we did all this work so we could be resilient and stable in a downturn, which I think we will be.

[00:51:45] Ben Miller: And now we’re going to go on the offense. We’re going to start, we’re starting a credit fund. We have a, and we’re going to basically, hopefully be a lender into this environment, provide a lot of gap or rescue funding, and hopefully make phenomenal returns from stepping into the breach.

[00:52:01] Patrick Donley: So are you raising, are you stockpiling cash right now to get ready for that?

[00:52:05] Ben Miller: One of the learnings from 2008 for me is that you have to prepare for the crisis before the crisis. It’s like that story about the ant and the grasshopper and the ants like are saving for the winter and the grasshoppers like singing and, and just having a good time. Cause when winter hits, it’s too late.

[00:52:25] Ben Miller: Right? You can’t go gather food when winters hits. There’s no liquidity. They can’t go gather liquidity today. So we, we’ve been. I’ve been somewhat paranoid for a while. We, we have crossed the platform 598 million of liquidity, so a lot liquidity and so like now it’s time to put that money to work. We’ll raise more money.

[00:52:48] Ben Miller: I, I believe, but we’re going to, I mean, my plan is to take some advantage of this environment and I think we, we’ll definitely be in a better investment environment than we’ve been in in a long time.

[00:53:03] Patrick Donley: Are you seeing opportunities already to provide gap funding like that, that you mentioned?

[00:53:08] Ben Miller: Yeah. Yeah, for sure.

[00:53:09] Ben Miller: I mean, we have four multi-family deals that we’re, are under contract to fund gap funding, mezzanine funding. The interest rates are 14%, 15%, 13% for really good real estate, really good debt. I mean that’s great, great yield, I mean get paid 12% current. Wow, that’s phenomenal.

[00:53:35] Patrick Donley: So you mentioned Venture technology fund, and I’ve got tons of questions here that we haven’t gotten to, but I, I do want to touch on.

[00:53:42] Patrick Donley: I’m good till 1230. . Okay. Well, okay, we’ll get into more then if you’re, if you’re willing, talk to us about the Yeah. The Venture Technology Fund as well. And you guys do obviously a ton of, you’re exposed to a lot of different technology. I think the platforms you’re using. You’ve got firsthand experience of companies that you may want to get involved in.

[00:54:01] Patrick Donley: I’m interested in hearing more about why you chose to do a technology fund being obviously focused in real estate. Why not just focus on real estate?

[00:54:11] Ben Miller: Fundrise is a technology company. People don’t yet fully appreciate that they will over time. It’s not something we talk a lot about cause it doesn’t mean anything until you actually can experience the difference.

[00:54:23] Ben Miller: So we use a lot of technology and we have, of the 300 people at the company, 200 of them are doing technology and a hundred of them are doing real estate. And I’ve been doing this now for 10 years, till 11 years, 12, whatever, doing this company for a while. And I worked at a tech company 99 to one. So I have some experience in technology, 15 years technology, and 20 some years real estate.

[00:54:48] Ben Miller: And so I have like strong opinions about it. And I’ve also raised a lot of technology monies as a company, a tech company. I, I’ve worked for multiple tech companies that raised money. I’ve learned about what’s good and bad about venture capital. It’s not a flawless industry as we, everybody’s seeing now in the news.

[00:55:09] Ben Miller: Problem is an opportunity and the bigger the problem, the bigger the opportunity. So I’ve been watching venture capital and I’m saying, well, there’s like some inefficiencies here. There’s things that could be different and better. And we can be different and better because we’re different. We’re different.

[00:55:24] Ben Miller: I mean this, we’re not like a private equity fund, we’re not like a venture fund. And so that differences can translate to being something that’s better in the market. So we started a A fund to democratize investing into pre IPO tech companies and we started it at a great time because we started it basically just this year and we’ve only just started investing it.

[00:55:47] Ben Miller: So we’re investing into the tech industry. Why I think it’s the bottom or near the bottom of the market. So great timing, a very different proposition. And we just know so much about technology. It’s one of those things you think of enter capitalist knows a lot about technology and some do, but just like real estate, it’s been professionalized.

[00:56:09] Ben Miller: You’re much more likely to be a venture capitalist or private equity and fund investor. If you went to business school, you worked at an investment bank, you worked for an management consultant, right? Not that you were a software programmer, not that you were doing construction and development, right?

[00:56:27] Ben Miller: It’s, it’s much more about finance than it is about substance. And that’s has good and bad about it. But basically like we know more about technology than most venture capital companies. And that is not what people think, you know, if you didn’t know that much about us or venture. So we have advantages, real advantages, and it’s just, I mean, the application of technology to business problems is the way you create value in society today.

[00:56:54] Ben Miller: Like that’s the opportunity, that’s the work. That’s where the most fun is. That’s where there’s so much happening and we just get to do that all day. I mean, it’s incredible. I can’t believe I used to have to do like pure real estate. Now I get to do things that are so much more like dynamic. It’s, it’s so much more fun.

[00:57:12] Patrick Donley: So how are you going about building that fund out?

[00:57:16] Ben Miller: Like any good technology, you have a product or technology strategy, you have to start by doing a lot of it by hand. We are doing a lot of the first deals and deal flow by hand. You know, I know, you know, we’re in the market. There’s just, you know, we, for example, we have a data infrastructure strategy.

[00:57:36] Ben Miller: Data infrastructure is the next big thing. It’s already the thing, but it’s going to be a bigger thing. And we use all the software we want to invest in, right? And so we are going to, so it’s easy to reach out to them and say, Hey, by the way, you know, we’re using your software. We want to invest in your company. And the person’s like, oh, and I get introductions.

[00:57:56] Ben Miller: I mean, I got introductions to people that if I came in, I have a, we hired a guy, we hired some people from the venture industry and had this guy who used to work at a private equity fund. You know, tech private equity fund. And he said, it’s so funny because I, I’ve emailed all these people and they’ve ignored my emails.

[00:58:12] Ben Miller: And you come in through this other channel and you can always get the meeting. And again, this is why we’re being different is an advantage, right? One of the big differences we’re trying to do, and we’ll see if we can pull us off, but we, we want to index data infrastructure, which is very different. The real estate person or the venture person is opportunistic.

[00:58:32] Ben Miller: They’re, they’re reactive. They do a lot of meetings and they, the way they’re designed, their process is by having a big funnel, seeing a lot of flow, looking for patterns and being opportunistic. And so they’ll end up with a portfolio that’s a little bit random. We know what are the 20 technologies in data infrastructure to 20 companies in data infrastructure.

[00:58:52] Ben Miller: We want to own. And we’re going to figure out, I mean, our goal, I mean by damn it, we’re going to invest in those companies. That’s the goal. We’re going to index that strategy. And that is so different and we’ll see if we can pull it off. But we, one of the operating principles we have at the company, we have these operating principles that’s to help people basically make better decisions.

[00:59:11] Ben Miller: And they’re really, really simple. But I think all great insights are simple. So one of them is know what you want, just know what you want. Like you’re graduating from college. I don’t know what I want to do when I grow up. And then so if you know what you want, so we know what we want, we know what companies we want and it’s just a question of getting them.

[00:59:30] Ben Miller: And these days, most of them want and need money and so we, we have what they want and they have what we want. And so I think we’ll be successful. But again, it’s so different. That’s so different than typical venture fund.

[00:59:42] Patrick Donley: Yeah, it’s super interesting. It sounds like you’re really excited about that.

[00:59:46] Patrick Donley: I do want to go back to a little bit more about real estate and touch on the asset classes that looking into 2023 that you’re focused on. We talked earlier before the podcast started, a little bit about build for rent and how that’s changing home building. Talk to us a little bit about the asset classes you’re looking at, what you’re excited about, maybe things the public markets are potentially overlooking.

[01:00:09] Ben Miller: That’s such a big question. I’m running out of time, but the build for rent is a new space. It is. We define it as we build communities of homes for rent. So imagine an apartment building, but instead of it being stacked up, it’s horizontal, it’s detached, multifamily, we call it. And so it has a leasing office and it has a fitness center and a pool.

[01:00:33] Ben Miller: And so it operates like a multi-family property, but it lives like a single family home and say like, your financial success is a derivative of the consumer experience. And so I say people want single family living, but they want the cost and the amenities of multi-family properties. So it’s a whole new asset class that didn’t exist three years ago.

[01:00:57] Ben Miller: And in real estate, when you birth a new asset class, it’s usually where the most amount of money’s made. So you go back, I mean, hell, you go way back. My mo, my father was a mall developer. There were no malls. They built tons of malls and now they’re hundreds of billions of dollars in malls. And when e-commerce basically got invented, industrial got rebirthed and industrial was a huge success.

[01:01:20] Ben Miller: Data centers didn’t exist. And then data centers became a huge success. Cell tower res, they were no cell towers and they became, last decade. The data center res in the cell tower res were the most successful REITs because they were new when they had high, A lot of high growth. New things usually grow more so build for rent is the, is the new thing.

[01:01:38] Ben Miller: You can’t invest in it in the public markets too early. It’s too new. It’s, it’s basically getting birthed and we are building it. And we, I think will be hopefully the biggest, the most sophisticated. There’s so much infrastructure associated with it. It’s much more complicated than people realize. And and I think we’ve bought and are building 80 communities across the country.

[01:01:58] Ben Miller: So it’s like very big business. Yeah. And it’s, and it’s, and I, I think it’s, I still think forget the cycles, right? It’s just like, it’s a new technology, a new product like the iPhone and it will be adopted broadly cause it’s better, it’s just a better, or it’s a new mouse trap. Anybody who has a dog wants to have a backyard.

[01:02:18] Patrick Donley: I’ve been taking notes, like I said, like, no, I’m going to have many more pages of notes here to study. So Ben, this has really been great. I really appreciate your time. It’s been awesome to learn about you, awesome to learn about the company fund. If for our listeners that want to maybe reach out to you, learn more about you personally or, or Fundrise, what’s the best way for them to do that?

[01:02:38] Ben Miller: I’m pretty active on Twitter. I mean, Twitter’s just a good way to connect with people. So I’m benmillerise, like, like Fundrise, but benmillerise at, on Twitter. So you could just like DM me or tweet at me and I’ll, and I’m like, I love learning new things. Right. And you, the way you learn new things is you connect with new people.

[01:02:58] Ben Miller: So yeah, I’m like pretty open, even though like Twitter these days has gotten like a little strange.

[01:03:05] Patrick Donley: It’s a great place to learn though, if you properly, you know, do it. Yeah. You can get more news information on Twitter than you can get from newspapers. No question. It’s better. I learned about the pandemic in like probably late January, 2020 from Twitter.

[01:03:20] Ben Miller: That, and then you just shouldn’t hit the radar of media until March.

[01:03:25] Patrick Donley: So Twitter and then obviously we’ve got website, people can check that out and learn more about the company there as well. Right?

[01:03:32] Ben Miller: Yeah. fundrise.com or investments@fundrise.com. contact@fundrise.com. Yeah, I mean, we’re, we’re customer-centric, so you re reach out to us like we’re going to be responsive.

[01:03:42] Patrick Donley: Ben, this has been great. Thanks so much for your time.

[01:03:44] Ben Miller: Yeah, thanks for having me.

[01:03:46] Patrick Donley: Okay folks, that’s all I had for today’s episode. I hope you enjoyed the show, and I’ll see you back here real soon.

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