Louis Carter and Billionaire CEO Pat Ryan: Up Your Psychic, Financial, Professional Value

It's wonderful to be here today with Pat Ryan, CEO of Ryan Specialty Group. Such a treat to be here with you today. Hi, Pat.

Hello, Lou.

I'm really looking forward to this and really understanding who you are, the leader is, Pat Ryan, and what your values are and how that's been integrated into the fabric of Ryan Specialty Group and what it really means to be an excellent leader. So let's start with that. Tell me about the leader himself, Pat Ryan. What are your values? Who are you, Pat Ryan?

Well, my values are quite old-fashioned, but I think timeless, um, and sometimes possibly even trite because you know, the golden rule is woven within them. But, um, I— when I got out of the university, out of Northwestern University, graduated, I wanted to be an entrepreneur. I knew that for most of my conscious life. And, um, I chose the insurance industry because you could be an entrepreneur and build and build a business without capital because I didn't have any capital, but I had human capital and I had a lot of motivation. So in becoming an entrepreneur, I knew that I needed to be in a position to attract really quality people to join me, or, you know, the venture would be quite small. And so I really thought long and hard about the values of what I wanted to have in a company. And, um, so we set a core set of values, and I founded a company right 5 years, 5 years after graduating. That became a New York Stock Exchange company, and those values carried on to the creation of a second New York Stock Exchange company, and now a third in Ryan Specialty. So the values are really quite simple. Um, insurance industry, which I chose because the limitations were all self-imposed. You could literally sell insurance 24/7, 365, but I didn't spend that much time, but I spent a lot of time. And so, but I wanted to build an organization, and so I knew that in the insurance industry, trust was everything because all you were doing is giving your word. And in those days, a piece of paper committing the insurance terms, and that integrity was absolutely critical. So I think everybody who gets in the business believes that integrity is a foundational value. But in our industry, it's even more important because of what I just described. So it's built around integrity, but it was also built around the fact that I knew that I needed to build an organization of people who thought as builders, who wanted to build something of value with me. And so I set some principles because when I was just out working and in my earlier college working days, I always realized that I really needed to be empowered. I didn't like people telling me what to do, when to do it, how to do it, why to do it. I wanted to be empowered, to be given the opportunity, be given the responsibility, and then be held accountable. And so I thought that's what people really need. So empowerment was a value that I quickly brought into a foundational cultural value. Secondly was the ability to put people in a position to help them self-optimize. Because this sounds terrible, but I was pretty good at selling insurance, but I knew that I had to train, recruit, train, and develop others to be able to do the same thing I could do, to really get into the multiplier effect of of not having just myself but people who could do what I did. And so I knew that, um, giving them an opportunity to self-optimize, and so giving them developmental training, um, you know, continuing education program, but very importantly, sharing my vision with them. And I just intuitively knew that I couldn't get people to follow me unless they knew why they should follow me and what it was that they were following. So I was very clear in my mind to set the vision for what I felt was important, um, in becoming an entrepreneur and getting people to buy into that vision. But I knew very early on that empowering them to become what they were capable of being would give us that added opportunity for them personally, but for the company itself. You know, I was never a great athlete, but I was a good enough athlete to be on competitive teams and through high school and a little bit in the university. And so I valued teamwork greatly, and I still do. And I think that, you know, a culture of teamwork where people work together— and over the years I learned how important it was for people, you know, sort of rowing the boat in the same direction at the same pace, using that sports metaphor. And so I applied sports metaphors often to building our values. So teamwork was really important, and understanding the old cliché that there's no I in team, and that amazing what you can get achieved, accomplished, if people don't care who gets credit for it. So we set up a meritocracy to begin with, but also non-hierarchical. I never liked bureaucratic situations, you know, having served a bit in the military, you saw the strengths of the hierarchy, but you also saw the weaknesses. And so I wanted to be a leader that did not act hierarchical. But was, uh, really working with people to help them become what they're capable of being, but having a vision that they could buy into and then rewarding them. So as an entrepreneur, I owned the whole company, but I knew that that wasn't the best thing for the future. So very early on, I believed in sharing equity with key people. So that was really important in the first company, became even more important in the second company, which was Aon, which is a large public company now. But also, I took that, that value proposition very seriously. So when I started Ryan Specialty, it was really all about attracting builders and sharing the equity with them. So, you know, that, that has really worked in the sense of sharing. So I tried to share my knowledge, I tried to share the opportunity, and, um, and share, share the responsibility. So that sharing, you know, carried over into our personal lives as as to, um, you know, philanthropy, as we got prosperous enough to engage in philanthropy. So those were fundamental principles. I think a really very important further principle was this ability to adjust the vision with the strategy, have a solid foundation of cultural values, but a vision and strategies around that vision that would give us the opportunity to learn from mistakes, but also to learn from the past, studying the history of our industry, but also taking those forks in the road as a leader and doing audibles to stay true to the vision but adjusting for the changes that come along the way. And, you know, so at different points in time we had to change the business model because competition got to a point where they were commoditizing what we were doing, and I never wanted to be in a commodity business. I always wanted to build a value proposition. That people would pay appropriately for, but we could differentiate ourselves. So the first idea was to differentiate ourselves from what others were doing, and we were able to do that. And then as we expanded in scale up to becoming— going from a local insurance broker to a regional insurance broker into a national, um, it was— there's a need for flexibility. And so I've always believed in the principle and value of flexibility so that you don't get rigid and get stuck in, well, this is how we do things and, you know, we don't change. We change with the time. We're flexible. So that's been an important, important value of contributor to both my own personal, um, rewards and building these businesses, but, but for those who joined me. So as we were building the enterprise and the culture, cultural value, building it on teamwork, we attracted people not who were necessarily great athletes, but people who participated in sport because we wanted people who had a burning desire to win. And I had a burning desire to win, but I realized that there was even a more important desire than winning, and that was the hatred of losing. And so we have a very competitive environment And I've always had that, but we're always striving to serve our clients, um, in an ever-improving way by being flexible, by adjusting to change, having the courage to make the changes, but also remembering that the constant improvement of our value proposition to our clients. So interwoven into this creation of values was that the most important thing that we could do is to build a continuing evolving value proposition to our clients and for our clients, and that we couldn't build the value of our company the value for our teammates unless we were serving the client first. So we were client-centric, recognizing that our people were critical, but without the client, we don't need the people. And then without good people, shareholders can't prosper, and we were all shareholders. And so we, we wanted to put in sequence: the client, and keep that paramount in mind, and our people, and then the shareholder. Because the shareholder, the investor, is absolutely critical, but without the first two, shareholders don't get any value. So those are core values, Lou, that we, we set up the company and then continued that. So after I retired from Aon, um, I felt that I, I still needed the challenge, the intellectual challenge of keeping my mind active and creating and innovating. A core value had been innovation all along with empowerment. It's always been innovative to adjust to these changes that I described. And so innovation has been a fundamental value and goal for us. And so as I started Ryan Specialty back in '10, my goal was to meet the changing needs of our industry. Now, I had enough experience that I could anticipate change, and I'd always prided myself on anticipating change as a leader and having the courage to affect that change, to implement the change, to get out ahead of change. And so those were values that we carried on through the creation of these three companies in different stages. So when I take it now to Ryan Specialty, we did anticipate change. We got out ahead of them. And people say, well, now you're, you're clairvoyant, you're visionary. Well, I'm not clairvoyant, but I do believe in vision, but I believe in learning from history. And studying what, what the changes are and what that change in point A is going to mean to point B and point C, and then avoiding the unintended consequences of that change. So being very careful in thinking through how you adapt to this change, um, but recognizing change is an ally. It's not an adversary. Life is changing around us all the time, but your core values shouldn't change. And so your vision changes and adjusts, your strategies have to change and adjust, your tactics have to change and adjust, but your core values don't.

That's excellent. And there's so much there that you have said. And I wanted to bring it to kind of the fabric of the company, right? How your values and your core values really have shown up into the fabric of the company. What you've seen— you mentioned your development programs, the way you recruit, train, and develop, how you reward with sharing equity. So many more principles and of your values. Where do you see it showing up and integrating into the very fabric of your culture and your company?

Well, it shows up, it reflects itself in many ways, but we're in a professional service business. And in professional service today, all professional services there's a lot of capital that's available to attract talent, to move talent. So talent moves rather quickly in our, in our, uh, our field, our niche. And what we keep, 97% of our, of our, of our talent, which is unheard of as a statistic in our industry. Because we're constantly working to make them more productive. We're constantly working to increase their— help them increase their incomes, but also increase the value of their, of their involvement in our company, both psychically, professionally, and financially. So it's really manifested itself, Lou, in our recruiting and training program. So we're constantly recruiting experienced people to join our culture and our platform of— and our vision. And we've been quite successful at that. But where we've really distinguished and differentiated ourselves is in attracting people right out of college. Who have a passion to win, who hate to lose, who are willing to work hard and looking for professional satisfaction and financial reward. But what's really gratifying and where it's manifested is that many of our top talent are in their late 20s and early 30s, mid-30s, 40s. I'm the old-timer. We have a few who are early 60s, and we have some in their 50s, but we have enormous percentage in their 20s, 30s, and 40s. And the psychic reward I get from that, Lou, is that they, they attribute our success and their success to the values and then the opportunity. But I've had people throughout my career say, you know, the reason I've stayed with you is because you've empowered me, you've empowered us. And I just know— I went to Catholic grade school and we had the academics, and we had what they call deportment. And for 8 years in grammar school, I got D, which was obviously the next level up from failing, and takes corrections graciously. It drove my father crazy, and he would say, why can't you take corrections graciously? I said, because I don't like it. And I, I, I live that myself. We correct people, but we, we do it in a way that's constructive. You do it in a way that empowers them. And so to see these people just become great leaders and building their teams on the same core values and on these, all of these principles, and And speaking of my father, a core value of our company from the beginning has been listening. I learned as a person selling from my dad that if you listen to the person, they're going to tell you what it is that they want, that they want or need, or what's bothering them about what you're your offering. And so he said to me, remember this: if God wanted you to talk more than listen, he would have given you two mouths and one ear. So be a good listener. And so we've taught that to our people. Listen to your client, listen to your people, listen to your teammates. They will tell you what they need. The client will tell you what they need, and they'll tell you what they're unhappy with if you listen. And if you apply that same principle to the people that you work with, they'll tell you. And so that gets the buy-in to be rowing the boat in the same direction at the same pace. I've always believed that the greater question from what are we doing, it's why are we doing it. So our culture constantly answers the why. Why this change? Why these rules? Why is it important for you to do this? And the why— I just went through a budget meeting and we have to budget to expand our margin. And we're growing rapidly. So I said, look, if we reinvest to grow, but we have to expand our margin. Why? Because that's the metric that the public markets demand to show that you're willing to share the value of scale with the investor. If you just keep reinvesting, all the value of scale You're not sharing it. So you can say to the investor, we want to invest for future growth, but he says, yeah, but I need something now. And they're right, they're entitled to that. So the why of margin expansion is to prove that we have a responsibility as leaders and as custodians of their capital to be constantly aware and driving an increased value to them through the margin expansion. That doesn't have to be a lot, and we believe in the margin dollars as being very important, but there is a metric of effectiveness that you're constantly sharing the improvement. And so, you know, that listening but then sharing the why So I've been asked to talk to people about companies or institutions that they're involved in, and they just came in as new leaders. What would you do, Pat? I said, I'd walk around and ask, why are we doing it this way? And people will tell you, we tried to tell those other people that it was wrong, but they wouldn't listen. So the why is a very important word in our company, and the why to our clients. So that builds the trust. If the client says, this is what I need, we understand why they need it and why it's important to them. And, you know, people's needs, they vary, and they vary over time, and they vary as people age. So always understanding the why of of their needs has been critical. So it manifests itself through all those important trigger words, but values that are reflected by that.

So essential, uh, explaining the why behind what we need and accepting the truth behind them. So, so essential. Great, great learnings around that, and corrections as well, which is— it sounds like a very important course. And, uh, One I'm sure you're now expert at, what I'm hearing. So let's go to that, actually, because you talked about what it means to be really an excellent leader. I'd like to hear from you. What does it mean to be an excellent leader?

I think an excellent leader starts with the fact that he understands, or she, understands that people follow you because they believe in you and they trust you and they respect you. So if you lose those, you've lost your leadership. You're not a leader anymore. You may have the title, but you're not the leader. And so, um, character means a great great deal. And I always say to our people, your people watch what you do much more than listen to what you say. I've had situations where leaders have said to me, I've told them, I've told them, I've told them. And I said, well, it's because They're watching you, and you're not living this. It's not enough to say this is what you are, have to be, and do. It's, are you doing it? So I've always said to myself, I'm not going to ask people to do something I won't do, can't do. So that's building the trust with people. For example, when you hire financial people We don't take shortcuts. We don't paper over things. We address the issues. And so people know. And we have a principle in our company. It's an old cliché, but I passionately believe it: do the right thing because it's the right thing to do, not because it's the political thing to do. Or the economic thing to do. That'll all follow because the right thing, it avoids the pitfall of mistakes. We all make mistakes, and I constantly tell our people, look, we are all imperfect, we're all imperfect, so let's accept each other's imperfections. But let's always put people in a position where those imperfections can be minimized and the strengths can be optimized. So I know what I'm good at, Lou. I know what I'm not as good at, and I know what I'm not very good at at all. And so I, I don't do what I'm not good at all. At all. I don't even try to do it. I partner with people who help me do that. And, but I don't feel lesser of myself. I don't think that I should ever think that I'm ever going to be perfect, nor should anybody else. So when people can't accept that they made a mistake, I really work with them and say, look, you can't learn from this mistake until you understand that everybody makes mistakes. Even you. So let's talk about your learning from this. The most important thing about a mistake, it's an opportunity to learn and not repeat it. But often we repeat the mistakes of the past. I, I've repeated the mistakes of the past, and I found that when I do, I said to myself, I violated a principle. You know, there's this old principle: in order to expect, you have to inspect. As a leader, you don't want to micromanage, but you have to know what's going on. There was a point in time in my career when I was really busy, we're going very fast, very quickly, and these people talked me into empowering them to make the change, and I did. They said, now, because you're so accessible We can't just let people end-run us and come in and appeal to you, plead with you to, uh, overrule this or change it. I said, I promise I won't do that. So for a couple of months, I violated the principle of inspecting. I didn't really know what was going on. Two months later, I had to make all kinds of dramatic changes. Or I could have corrected it had I known. And that wouldn't be micromanaging, that would be empowering people, enabling people not to make that step that was a pitfall. So I just use it as an illustration that's very common. And I've made a lot of mistakes in business. I try not to repeat them. But sometimes I find that I do, and I just say to myself, shape up, pal, get your A-game on, up your game, because you, you are imperfect. You make mistakes, but learn from them. But own up to them. Own them. A lot of people won't own their mistakes because they think it's a sign of weakness. I believe in owning your mistake, admitting it, correcting it, and moving on. So we try not to say to people, well, that's a terminal offense of failure, now if it's integrity or not treating people right, so not treating people right will give them a chance to change that. It's an integrity issue. We won't, because that's— that violates the trust, and then that's terminal. But if people make mistakes in how they deal with others, you got to coach them up. And then if they don't accept the coaching, then they have to move on. Or if people are blockers on an idea of change. And that's very common. A lot of people who hate change, and I say to them, it's going to change around you. So you can hate change, but you have to deal with it. It's happening. You can't control that. What you can control is how you adjust to the change. But if they continue to block after you've warned them, then the only responsible thing to do is to say, look, you're not, you're not buying in, and so I really think you have to move on. So it's a decision that's critical to deal with blockers, coach them up, give them the opportunity. If they keep blocking, you gotta have the courage to take them out, and they're better off for it because they're not happy. Because they don't agree with you.

That's right. And sometimes we have to share with others or help others make choices, right? And when it may be moving on, and perhaps they just aren't aware of that in their own, in their work, right? And I think that's, that's just a wonderful insight. All of your insights were wonderful there about helping people to get better, uh, to understand really, you know, when there are blockers, to to consider change, right? You might hate change, but you need to deal with it. And you're sort of assisting people and coaching them up.

You don't have a choice.

You don't have a choice. And we'll help you with your choices. It's a really wonderful way of looking and coaching them in that way. And, well, so important. I mean, everything you said is incredibly important. I've taken many pages here of notes. I could probably take many more pages of notes in my own learning today. Learned so much from you, Pat, and the, uh, in, in our talks. It's just been incredible. I thank you so much.

Thank you, Lou. I really enjoyed visiting with you and having this opportunity, and we're proud, uh, to be a very desirable place to work.