Lately, I’ve been thinking that if I have one particular skill, it is finding great partners and building trust with them.
I love discovering the topics and areas to which each person I meet brings unusually high credibility, and constructing systems that have as many people as possible doing what they love to do. When it works, those systems are less fragile, anti-fragile even, because of the way everyone is operating in their zone of genius—that area beyond their zone of competence and even their zone of excellence, the thing they most love to do.
For me, there is no end to this activity, no prize or summit where I’m done and will feel satiated. To build trust is enjoyable in its own right.
It’s what the philosopher James Carse calls an “infinite game”. A couple of years ago I had the chance to ask Carse how he had come up with the idea of an infinite game. He told me a story about watching his kids play.
Sometimes, their goal was to end the game—to win, to get that trophy. Carse called that a finite game.
Other times, their goal was not to win, but to play the game as long as possible and to recruit others to join in—an infinite game.
As Carse sees it, the rules of a finite game are unique and fixed. If the rules change, a different game is being played. Think poker. If you change the value of the hands, you’re no longer playing poker, you’re playing something else.
The rules of an infinite game, in contrast, can change in the course of play. While finite games are, in Carse’s explanation, like a boundary—you can approach and step across, infinite games are like a horizon—as you move toward it, the horizon keeps moving away from you. Finite players play within boundaries; infinite players play with the boundaries themselves.
When I asked Carse for examples of infinite games, he said it was up to the player to determine that for him or herself. For him, however, Buddhism and Judaism are prime examples. Neither has a central authority or army, yet both have persisted for thousands of years. How this has happened—how their way of being-in-the-world persists across generations—is a puzzle for religious studies scholars. Carse believes that the answer lies in the fact that, when you ask “what is Buddhism?” or “what is Judaism?”, the question is unanswerable because there’s no one answer. Everything depends on context, the game adapts and morphs every time you try to pin it down. They are hard to define because they are not tied to a specific set of rules.
That same adaptive quality explains how a handful of investment firms have transcended their founders. I have a theory that Goldman’s competitors feel puzzled about Goldman’s game. They try to copy the playbook and steal Goldman’s people. But it doesn’t work. Something intangible doesn’t transfer. What is Goldman? From my perspective, Goldman is actually quite hard to define. At times it’s like the largest hedge fund in the world; other times it’s a bank. It’s constantly morphed to seize commercial opportunities over the last 150 years—but the words “bank” or “hedge fund” don’t adequately capture the changing nature of its game.
When I asked a former Goldman partner why the firm’s dominance persisted, he responded that he wasn’t aware of any other firm where people felt confident enough to hire and promote people who were smarter than they were. At Goldman, they placed the value of recruiting new valuable players to the game ahead of getting some short-term bonus, or some other form of trophy; they had a sense of abundance about the opportunity to make money together.
That resonated with me because that’s how I think of my own version of an infinite game: finding people who are better than me at doing something, then, doing what I can to help them construct their platform so that they can thrive while operating in their zone of genius.
For the last fourteen years my main playing field has been East Rock Capital. Our core skill as a firm is finding and keeping really incredible partners—family clients, the investment managers we partner with, and our team at East Rock. Our guiding ethos to everyone—clients and investment partners—is “let’s make money together.” We find there’s ample abundance to go around if you work in the right way with the right people.
We’ve had three eras so far in our East Rock game, conveniently lining up with three different office leases.
The First Era: In the first era—2005 to 2006—we actually had no lease at all. We were camping with my former boss, who generously gave us space, and focused entirely on building credibility and earning decision space with our founding family client, who were enthusiastic but still in trust-but-verify mode when it came to me, a guy they had just met who always needed a haircut.
When I look back, I realize I built the most trust with that first client when I introduced him to my partner Adam Shapiro, who I’d convinced to leave Goldman’s proprietary investing group. Over the course of our first handful of meetings, I had this moment of clarity: the client would actually like to hire Adam, but couldn’t, because Adam wanted to build and co-run East Rock with me.
I think that lovely tension still exists today: our investment partners and clients regularly want to hire our entire team, and my and Adam’s job is to make this playing field hard to leave—thanks to the high level of trust, the decision space we each earn, and the constant challenge to find our uncomfortable growth edges.
The Second Era: In the second era—2007 to 2017—we had our first home base, a former textile manufacturer’s office on 53rd Street near Fifth Avenue, with a backstage view of Central Park. Our focus was on building trust with each other and adding four other families in the midst of a financial crisis and then the recovery.
For me that decade is summed up by Charlie Munger’s observation:“in a long lifetime that the people who really love you are the people where you scramble together with difficulty and you’ve jointly gotten through. And in the end, those people will love you more than somebody who just shared in an even prosperity through the whole thing. So this adversity that seems so awful when you’re scrambling through, actually is the sinecure of your success, your affection, every other damn thing. The idea that life is a series of adversities and each one is an opportunity to behave well instead of badly is a very, very, good idea.”
For the rest of our lives, Adam and I will remember the moment at the bottom of the market in 2008 when the patriarch of our founding client came to our office and—at a time when his own business was facing serious challenges—took us aside to say, “Stop moping around and play offense you idiots, there’s money to be made out there…we knew we were taking risk when we signed up for this program, get out there and hustle like I am.”
Talk about an infinite player choosing to play a completely different game from most other of the participants. Almost everyone’s instinct in that moment would be to contract rather than expand trust, to micro-manage every investment we were making, to second guess this relationship.
Our founding family’s gift of trust in us in during that dark moment has created an amazing comparative advantage for us ever since—we can partner with families and managers in a way that is just different than our competitors. People seem to sense that our time horizon and our web of relationships are not like others’, and the people who are awake to this better game often choose to join and partner with us in creative ways.
The Third Era: January 2018 marked the beginning of the third era, our new lease on life. I think of this third era of the trust game as playing with the boundary of the firm.
Today I like to ask who is actually part of East Rock, where precisely do we mark its boundary? We have beautiful offices on 55th and Park Avenue, and in addition to the twenty people who technically work at East Rock, we house a client, an investment manager who we backed to start a real estate platform, and a number of other friends of the firm who are incubating new financial businesses.
I think all these players are part of East Rock; they’re playing the same game we are. They, like us, take immense pleasure in coming in every day and earning more trust.
I remember calling a reference on a manager. The first thing he said to me was, “Look Graham, I’m really busy, let me just tell you I would wire my entire net worth on a handshake to the guy you’re calling me about, everything else I could say beyond that is commentary.” Think how pleasurable it would be to hear that from someone you respect.
We aspire to have that level of trust with everyone we interact with. While we don’t always achieve it, even the aspiration unlocks incredible efficiencies and opportunities, there’s a sense of shared values that emerges when you have a collective sense that the goal of the game is to keep playing, not to cash out or take advantage of others, that the goal is to create more value than you capture.
To me this third era is about expanding this web of trust to build further nodes all over the country and all over the world, recruiting new players to this game, strengthening our team of teams through the diversity of the web and the real time reconnaissance that all these teams looking for opportunity create. It’s like a standing global search function for good investments.
Or rather the rules change so that the game can go on. Carse ends his book with a meditation on the poet as an enabler of infinite games, by unveiling and thus helping us escape the finite games we play unwittingly. I’ll close with a favorite poem of mine by Louise Gluck, in which she unveils some of our finite games:
First divesting ourselves of worldly goods, as St. Francis teaches,
in order that our souls not be distracted
by gain and loss, and in order also
that our bodies be free to move
easily at the mountain passes, we had then to discuss
whither or where we might travel, with the second question being
should we have a purpose, against which
many of us argued fiercely that such purpose
corresponded to worldly goods, meaning a limitation or constriction,
whereas others said it was by this word we were consecrated
pilgrims rather than wanderers: in our minds, the word translated as
a dream, a something-sought, so that by concentrating we might see it
glimmering among the stones, and not
pass blindly by; each
further issue we debated equally fully, the arguments going back and forth,
so that we grew, some said, less flexible and more resigned,
like soldiers in a useless war. And snow fell upon us, and wind blew,
which in time abated — where the snow had been, many flowers appeared,
and where the stars had shone, the sun rose over the tree line
so that we had shadows again; many times this happened.
Also rain, also flooding sometimes, also avalanches, in which
some of us were lost, and periodically we would seem
to have achieved an agreement; our canteens
hoisted upon our shoulders, but always that moment passed, so
(after many years) we were still
at that first stage, still preparing to begin a journey, but we were changed nevertheless;
we could see this in one another; we had changed although
we never moved, and one said, ah, behold how we have aged, traveling
from day to night only, neither forward nor sideward, and this seemed
in a strange way miraculous. And those who believed we should have a purpose
believed this was the purpose, and those who felt we must remain free
in order to encounter truth, felt it had been revealed.