Robert Stevens - Strongbow Advisors

Morning.

Welcome to another Founder Wisdom Podcast. We have Robert Stevens with us. Robert is a court-appointed receiver. He's the president of Somerset Capital. He's a federally admitted expert witness in SEC enforcement in the Denver area. So he runs Strongbow Advisors, Somerset Capital, and Stevens World Taekwondo, which is pretty interesting. He's been an investor since 40 years now. So Robert, welcome to the pod. Tell us a bit more about yourself and what you're up to.

Good morning. Thank you, Charles. Uh, I am just enjoying a beautiful end of summer here in Colorado. The weather's been just outstanding. Um, times have been really busy for us, a lot of shakeups in various industries, private and public companies. Most of our stuff for the last few years has been focused on private company turnarounds, has been the deal. I'm working on a case that's a bottled water producer in Hawaii, as well as kind of tipping my toe back into some of the public company space transactions right now, which is really where I came from and is where I add a lot of value is that stuff, different strategies and workout and things like that.

You had a long career, right? Started out as a broker, then you were the branch principal/owner of your securities broker. dealer firm. How would you describe your evolution throughout the years? And how did you land in court-appointed receivership?

So my, my career has taken a lot of twists and turns. I started as a stockbroker in the, in the '80s. And that's, at the time, I didn't know it. But that's a career that's been in the family tree since before the Revolutionary War, someone's been doing something along these lines. And from that stage, I kind of realized I wanted to own my own firm and not necessarily work at somebody else's place. So we opened a broker-dealer, and I had, at my heyday, I had 15 reps for the BD. And I routinely describe that as one of the dumbest things I've ever done in my life. And I've done some really stupid things that after the fact, you look back at your decisions and think, Oh man, what was I thinking? Um, that business, for me at least, was like the difference between buying a stock or trading commodities. Because when you buy a stock, you know, you can make some money or whatever else, but, uh, when you're trading commodities, you're making or losing a lot all the time. And that was really what got me in and got me out of that particular space. Um, but the, the, the segue that really pushed me into, into venture capital and into private placements and that sort of stuff was a company called Blackhawk Casino and Gaming. It was a local company that— gaming became legal in Colorado and they were raising some money, some private money. And I put together a financing round and it was priced at, I think, $4, something odd, $4.55. But by the time that thing closed and the people got their securities, it was at $28 or $29 a share.

Wow.

So everybody that got in was able to get right back out and make these monumental returns. And I immediately had this light bulb moment and go, well, why don't we just do that? Why don't I just focus the business on that? The private company needs money and we can make exponential returns on it or we can lose our money. Let's go that way. So from that point forward, the thought of talking 10 grand out of some old lady, to buy a bond fund just went completely away. So that, that, that was the genesis of getting involved in the transactional stuff. That was really it. And we've owned— I've owned a variety of different regulated entities in my day, but got into doing the receivership side of the business when I was asked to be one on a case for a client. And I said, what's a receiver? And then away we go. The rest is kind of history from there.

Football? Like, is it football stuff? Investor since 40 years. What was your first investment? And nowadays, how did your risk profile change with the years?

Unfortunately for some of the people around me, I've always had just ridiculous risk tolerance. And the reason being, I think in order to do something big, you've got to, you've got to take, uh, take an effort. You've got to take a step. You got to take a risk.

Yeah.

You know, you can't— the biggest lie is people that sit around and, uh, and look at their cash balances and think they're doing great. You're not doing great if you're not, uh, putting your money at risk somewhere. It's not, it's not going to happen. Um, you're not going to make anything, anything consistently big. And that's really what's always been interesting to me. Also, what's been interesting to me is all— is, uh, is business, because this happens all the time. where somebody comes up with a product or an idea, they develop it and they sell it, and then, you know, then they can monetize it for their investments or whatever else, whether it's a— some kind of— some sort of a private company acquisition or a go-public transaction or whatever. That's, that's always what interests me.

And the ridiculous risk tolerance, is it just genes? I mean, you've run a taekwondo business in which you guys technically kick each other in the face. So it's like, where does that come from?

So the martial arts thing for me has always been more of a grounding element than anything else. I started in the '70s as a little guy and just continued to practice and train over the years. I was a competitive fighter in my late teens, and that was really a formative experience for me because anybody that's been a competitive athlete, you learn things like you learn what it's like to lose. Or to, or to train super hard and then produce no result. And then you realize that you're chasing a medal or you're chasing some sort of an award, but the real reward in the training is the training itself. It's not the medal you got afterwards. That's really the, the thing. And it's always been a very, very solid grounding element for me. I started with my dad when we were— when I was little, and then I've got my daughters in it. They're both 5th dan. black belts. So it's multi-generational in the family, but that's just all about consistency.

Right! And how is it to run your own dojo or academy for 44 years? I've never seen anyone run a business for that long.

So the magic with that is people and what keeps me putting the belt on every week is the people that are— that I work with, the people I'm involved with, and it, it expands from there. So I, I don't manually teach all the classes myself. I have students that do that, and I've got some, uh, students that are just amazing. Um, my top guy is a, is a 7th Don. That's the highest my, my students have gotten thus far. But he— the one of them that I'm thinking of in Pueblo is, um, runs a a large commercial school and give it a few more years and he, he'll be ready to test for his 8th degree, which 8th and 9th you have to go to Korea to test. You can't do it, uh, anywhere else. You have to go to the world headquarters in Seoul to do the ex— to do the test. So, but the way that I do it is just like anything else, you know, you leverage other people. So I've got, um, I've got really talented instructors that, that teach most of the classes.

Interesting! And what's your day-to-day as a founder and investor? You manage all these companies, like where do you have physical activity or Taekwondo fit in there?

For me, you know, one of my many challenges and many flaws when it comes to the martial arts is that I'd rather do it than teach it. So, every time I would get to a new stage in my martial arts career, I'd miss the one before. So when you, when you're, when you love doing the kick and practicing and training your body, all of a sudden you're, you're thrust into this position where you're having to teach someone else. And then you go, geez, I wish I could just train. And then the next phase beyond that is administration. So then you've got more than one instructor and you end up mentoring the other teachers. And then sometimes you think, I wish I could just teach just for myself. Uh, and then beyond that, when you get to the higher levels, then you end up in administration on a, on a larger level, and then you end end up managing, uh, the other instructors, the other schools, their other, other things. But for me personally, um, I don't let myself go less than 5 days a week of personal practice and training. In fact, what time is it now? It's about 8:45. In about another hour, all my machines will be off and I'll be, I'll be working out. My magic time is about 10:30 in the morning. It took about 20 years to figure that out. What's like for you, Charles? What's your magic time for For training? What's time of day?

Uh, it's weird. It's actually going to a meta— metamorphosis right now. It's, uh, so usually it's at 5 PM, believe it or not, because, um, I front-load my day with like as much business as possible, and I don't need sports to put my brain in a great state nowadays. You know, I do it so much. So a lot of people, they start their days with sports so that they can flood their brains with biochemical. But yeah, 5:00 PM, sun goes down, I can just go with my dogs, run in the mountains, business day's over, right? Nowadays it's a bit weird because my days end later. So for example, yesterday it's been in like 2 hours from now. So you're 10:30, right? Something like that.

Interesting. Yeah. So it, I think when you say 5 o'clock, then that's— that was probably the first 30 years of my practice. That's when class was. It was after the work hours, right? That was kind of it. So yeah.

Yeah, Muay Thai, right? Like, I used to do Muay Thai and my— yeah, the classes would always start at like 6 or 7 or 8, right? So I think when you have a dojo, there's like 2 classes. There's 2 main ones, right? Like one in the morning, one in the evening? Is, is that like usually how you run it, or is there more classes than that?

So it all depends on the layout. So if you're talking about a commercial school, I, I, I see like commercial and non-commercial. So you can, um, you can start like our original program in Stevens Point was at a YMCA, and it's, it's still going. And there are 2 classes, I think 2 or 3 nights a week, that, that go back to back there. Um, and that, that, that's that way. But if you're talking about a, a commercial school where you've got a physical location that you pay rent on or or you own the building or whatever else, then typically they'll have something in the morning and that's for people that have shift work. Maybe you work nights and then you'll have 2 or 3 classes in the afternoon that are— that you wouldn't go to all 3 of them. Like there might be little ninjas at 3:30 after school and then you've got a color belts class and then advanced that goes into the evening. That's primarily how it runs. I ran into a cohort who's in Silicon Valley, and I was looking at his timing of his classes, and I said, you really have 4 days a week a class that starts at 5:45 AM?

Whoa, that's crazy.

And he said, number one attended. I said, you're kidding me. He said, no, that's the number one most attended class. The place is packed at 5:45 in the morning. So I can't do that. I, I used to when I was a runner. I would run before the sun was up, and that's fine. But at least for me, maybe at my age, but in general, I did get those endorphin lows afterwards. In the middle of the morning, I'd be just exhausted and starving and, uh, no reflexes. No, I mean, that doesn't make my brain fire. Maybe that's also because I, um, and like yourself, Charles, I mean, we tend to really put into the workout. It's not casual. I watch people that will, that would edit one place. He's reading the paper. He's on a recumbent bike and he's reading, reading the paper.

I'm going on their phones nowadays, right?

Like on their phones. Yeah.

Like phones. Like, I know that I can't talk.

I'm, my heart's, heart's going and I'm pushing it and stuff. It's not, not like that. So.

I did a mastermind here and some founders, investors the other day, and I was running uphill and She was like talking to me while running uphill. I'm like, okay, we're not pushing hard enough, you know?

No, that's exactly it.

Listen to the max. If you're still talking, this is not efficient, correct?

You're not getting any— anything out of it. And I've watched people try to use that for weight loss. Maybe they're a little obese, but the problem is if you sit on there and sweat for an hour, guess what you do next? You replace all those carbs and you're exactly back where you were, except You just wasted an hour and you smell awful. I mean, that's really the— that's the only thing. You're not gonna get anything out of that.

Yeah, I mean, there, there will be some benefits, but I mean, weight loss, right? I just hate that, these 2 words, um, because if you got there in the first place, there's something fundamental, and then you need to have something to like shock you back into sanity, right? Like, because You get like slowly but surely into obesity, and that's that's a fundamental problem. Like me, I couldn't live without sports. Like I have an addict's personality, and this is my number one drug. You know, probably entrepreneurship like first, right? Entrepreneurship is so addicting because you can see your business grow, and it's so hard, and it's so rewarding when you get victories, right? But right, I couldn't live without sports. Sports is fundamental, and. I think our ancestors have been hunting for lots of time and we sort of lost that. And now there's all these psychological issues nowadays. There's anxiety, there's depression, there's suicide. And I think people should start with the very basic, right? Like maybe start with a very long walk, then start running because running is simple. It's like put your shoes on and then find your groove, you know, move your body and You know, hunch it up. I think we lost that, and that's, that's a huge, um, pain for society nowadays.

No, I'll tell you, that's 100%— you're 100% correct. And I think that that's the best, the best solution, because it's, it's not just that it's natural, but it's something you can control. If you try to take a pill or start down this path— and I, I think along those lines of what you were saying, we, we give people too much credit. We give them too much of an out. Um, you know, oh, you know, maybe you need this, maybe you've got that. My, my first question would be like, what do you, what do you do for your body? For your— I mean, is— do you, you know, do you run? Do you lift? Do you box? I mean, look at boxing. I have a dear friend that has Parkinson's.

Yeah.

And they started her on a boxing class.

Yeah.

And it helps Parkinson's. Did you know that?

Well, you told me last time.

Yeah, that's good.

And high coordination. Hmm. Yeah.

That's good.

And the nerves firing, right? And the reflex, the dodging, that just the sheer consciousness of your body, right? 'Cause when you box, you're like, look, I'm not sure about you, right? But when I box, of course I'm looking at my opponent, but mostly I'm looking at my body from a 3D perspective, right? Looking at my body, my opponent's body, and where it stands, you know, and then some tactics. So basically I'm paying— I'm playing chess, you know. Um, and I guess that's, that's a specific zone in the brain.

Absolutely. Yeah, that's, that, that's the solution, is, is to move the body.

Yeah.

Um, and I, I do agree that, you know, we're, we're so much more sedentary than we were even 100 years ago that, that, that— I don't think that that's a shock why we've got more obesity and all these mental things that are coming up as well too, is because we're not, we're not supposed to sit.

Yeah, we're not designed to face your fears as well, right? Like, uh, you brought me to my Muay Thai days, like from 15 to 20. I, uh, I sat down too much with the bottle, right? And, uh, Muay Thai sort of got me out of these bad habits. Sometimes I would show up hangover on the sparring court, right? And I, I got my ass handled for my decisions the last night, right? And it taught me discipline and it taught me to also face my fears, right? Like I would spar guys sometimes twice my weight, right? Talking about the obese guy, I remember this guy that was doing Muay Thai classes to lose weight. He was like 300 pounds and once he caught me with a head kick.

Ouch.

And I was like, holy shit, I'm seeing stars now. Um, but you do it more and you, you face your fear more, and then you discover you have it in, in you, right? And I guess you can do the same with like less extreme sports, like just running, and discover that you can go from 1 kilometer to 1.5 to 2 and, and see the improvement. I guess people don't have a, a source in their lives nowadays in which they can see like the gradual improvement, and I think that's That's essential because imagine if you're losing every day, like in society, your life must suck. You know, like we're wired to win as a species and to have like the upper hand. And most people cannot find these daily victories and source of daily improvement.

Absolutely. And I read an article years ago in Men's Health magazine. It was about a guy that started to, you know, Try weight training for the first time. He never had never crossed his mind, and then one of the things he said was, you know, let's be honest; it's it's pretty simple. There's not a lot to it. So it's easy to start feeling good about yourself because all of a sudden you go like this: Hey, I used to do ten. Now I can do fifteen. You can see it; it's tangible. So you feel that satisfaction of progress, which is really great.

Very caveman-ish, right? Like like a cave room lifting a rock, and then I guess a hack. I mean, people naturally. do it, but you look at yourself in the mirror and you look at the muscle working, right? And you—

Right.

You're like, oh, muscle fires, muscle grows, muscle is inflated. Now I look better, I feel better. And yeah, you're proud of scaling. And yeah, weightlifting is hard, right? Like I've tried, I've A/B tested bodybuilding or strongman at least about like 2, 3 years ago. I scaled from I think 170 pounds, which is my normal weight, to like 180, 190, right? And it was so hard to— it's such a different sport than ultra running, right? It's like I needed to condition my metabolism in a different way. And that one is still on my list, right? Because I couldn't succeed really in reaching these goals. But I wanted to do it for the same reason as ultra, right? Because I could see my weight go up, my body shape change.

Mm-hmm.

the weights of the weights I would have at my home gym, like slowly raise, right? So—

Yeah, it's satisfying, right?

Yeah, yeah. Hey, I want to talk about the receivership stuff because it's fascinating. I didn't have like a lot of people on my pod talk about that. What were like flagship cases? What's the biggest one the last year? Like FTX, right? Like, can you give me a couple?

Yeah, so, The business of receivership, and we have a trade association that I'm a member of, it's called NAFER, N-A-F-E-R, National Association of Federal Equity Receivers. And most of the members, and not me, but most of the members, they do a lot of fraud. So the big scams, the Madoff case, that was handled by one of our guys. But the media is all about negativity, but they don't mention the fact that In the Madoff case, he's recovered billions of dollars for people. Billions of dollars. Yeah, it's not all gone.

How did he do it? How did he pull that out? I thought everything was gone. No.

So Bernie bought a lot of stuff. So there's a lot of things, a lot of assets to take, to, you know, to auction, to sell. And the other thing is, and it's a little bit of a tricky thing, that in a Ponzi scheme, Uh, if you lose money, they, they of course they owe it back because it was fraud, right? But if you made money on a Ponzi scheme, you owe the profits back. So a lot of what, what he did in that case, I think last, last I looked, he had 3,500 or so lawsuits going at one time.

Holy shit.

To get money back from the, from the large institutions that made money off of it. So basically you're trying to level logistically.

My brain is like, oh, agents. I need to feed my army of agents all of that. They can triage it, find out which one's a priority, right? And build an algorithm to see who gets paid first or something.

Um, it, yeah, it's, it's along those lines. It can be a little bit, um, in terms of how you manage the litigation is you make a lot of friends in the legal profession.

That's how Um, because that molasses— because every single case will take some time and the legal system is incredibly inefficient. That would kill my soul.

No, it can't. It, it can. Um, one of the, one of the value adds for me as a receiver is that I'm not a lawyer. I have a law degree, but I'm not a lawyer. So I think like a business guy. Um, lawyers think about things in terms of civil procedure and rules and steps and things. And I can look at a case— in fact, I did this last night— and save everybody about $100 grand in fees in about 2 years and just say, don't do it. This is exactly what is going to happen. Don't start down that path.

This is—

I can tell you, I can see the future. This is what it is. This is what you need to do. And that, that's kind of one of the, one of the value adds that, that I have, or we have, for receivership cases, is I can get to the chase. I got to the chase of it. Um, I had looked at a possible, uh, fraud case, which isn't— we do corporate turnarounds, that's really our thing. But I looked at a fraud case that was a Federal Trade Commission one, and, uh, I could have picked it up, but I said, I'll save you guys the time and the brain damage. You write it off, nothing's going to happen. You're never going to get it back. There's— it's all gone. You know, it was a fake token offering.

Oh, shit.

Yeah, exactly. You know exactly what I mean. It— he sucked in a whole bunch of millennials and Gen Zs, and he spent the money. There's nothing to get back.

He bought a couple Lambos.

No, I said that.

Yeah.

What about the car? It's leased. It's not even his. Oh, okay. And I mean, it's just, you know, so, so little— yeah, the little, little dose of reality. But I have faith in the legal system. At least here in the States. It, it takes forever is the problem, and it takes millions and millions of dollars to fight something out to get it ruled on with something that we all know should be right. And it, you know, so that, that's a factor.

Yeah, yeah. It's like Sun Tzu, Art of War— don't fight a war you cannot win, right? So it's like basic stuff, but sunk cost assumption in humans, right? Like, they're like, oh, I lost money, now I want it back, I want revenge. But No, that's not being a good operator. In the case of FTX, how does a company go into receivership first? And from what I recall from that case, a receivership has not been handled that well, or— yeah, what happened there? Did you study that case?

I haven't spent a lot of time on it just because I think the crypto-related receiverships. I did one that was a blockchain-related thing, but it was not— they weren't really investors in those things as much as they were like an educational course. And I understood that. Like, if you and I started a company and the company is about teaching people how to do blank, that, that was pretty much the model. But at least with the FTX, they were able to, to corner a whole bunch of Bitcoin, and Bitcoin appreciated a lot. I think when FTX hit, it was what, like $18,000 or $19,000?

The most surprising thing in this case I just remembered was that Sam Bankman-Fried was the best VC of all time so far. He invested in, what's it called? The company that X acquired, the AI, not cool here, right? I'll get it. But anyway, they acquired that. He invested like big money in that company and this company got acquired by X, an AI company for like $4 billion. And he invested in a whole bunch of startups like that. And if the shares wouldn't have been sold the day that FTX would have been insolvent, I think it would have been like a $10 billion return.

Wow.

Yeah. So that's crazy.

But that's one of the issues that I think will get worked out eventually by virtue of companies like Kraken that That if you're going to start trading those, trading those securities and whatever else, slide it into something that looks like the framework we already have. I mean, I know that from having owned broker-dealers. It's not, you know, there's a lot of things that you need, safeguards and rails that you need to put in place, customer assets, custody. And he didn't really do that. That was really, I think, the thing.

Yeah.

Flyover that really killed him was that. And you just can't do that.

Yeah, I know he fucked up massively. But the question is, do you think there's other degenerates running their company like that? I think there's way more than we think.

Oh yeah.

I was studying Robinhood today. I'm not saying that they did anything similar, but I think they had like a $2 billion short at some point during the GameStop thing and they needed to be capitalized extremely quickly. By the way, I remembered the company that Bankman invested in was Cursor. It's like—

Oh yeah, Cursor.

And Kraken as well. He invested in Kraken. It's like he had, he checked all the boxes. He had a crazy streak. Let's do a round 2, you and I, about like, let's go deeper into that. 'Cause I feel we spent like time in talking personal stuff and taekwondo and sports, but love to do a round 2 with you, Rob, working— Yeah.

I have to tell you, you're actually a very, you're a very dynamic and interesting guy. You have a lot of knowledge in a lot of different areas and it's just, It's, uh, I wish you lived close by. I'd show up with a bottle of something good and just keep going. It would be—

I hope you're here too. Yeah, yeah, it's around too. Where can people, uh, find out more about you till then?

So I've got a YouTube channel under Strongbow Advisors. I'm also on LinkedIn, I'm also on, um, Insta, and I'm on Facebook. Um, I'm all— I'm under robert.the.viking. That's, uh, that's me, Robert the Viking. Um, yeah, and it's, uh, yeah, it's kind of a poking fun at myself, um, and my lineage. My paternal line, it's all the I-M253 haplogroup. So my ancestors were the ones on the longboats doing terrible things, stealing wives for their buddies, these kind of things.

Stealing wives and real estate and—

Yes.

And riches and— Yes. Yeah, let's talk about