Thomas A. Barrack Jr. ’69 made his name and his fortune by identifying high-risk opportunities other investors shied away from. The Colony Capital founder and USC trustee sat down recently with another legendary risk-taker – big wave surfer Laird Hamilton – to discuss the value of going where others fear to tread.
Hosted by the USC Marshall School of Business and the Lloyd Greif Center for Entrepreneurial Studies, the Feb. 25 “Investing, Big Waves and Risk” event was moderated by David Belasco, co-director of the Lloyd Greif Center, as part of his class on the entrepreneurial mindset. The presentation drew a capacity crowd at Bovard Auditorium.
The evening paired the two men, seemingly very different yet actually very much alike in their approach to life. Both think there is gain to be had in approaching risk with preparation, control and respect.
As chairman of the Los Angeles-based Colony Capital, which he founded in 1991, Barrack has invested $60 billion in assets around the world. He practices what he calls “cautious contrarianism,” specializing in investments others find too risky. “You buy when everyone else is selling, and you sell when everyone else wants to buy,” he said. In 2010 he snapped up troubled Miramax Films in part because he saw the value in its film archive when everyone else simply saw aging media. He became its chairman in 2013.
My advantage is being prepared at every moment for that uncertainty.
Thomas A. Barrack Jr.
“Risk is about taking that uncertainty and saying ‘that is my advantage.’ My advantage is being prepared at every moment for that uncertainty. My advantage is to hone my body, my mind, my focus, my integrity, so in that unexpected moment, you’re prepared to meet the challenge,” he said.
As it happens, it’s not unlike being able — and willing — to ride monster waves and emerge unscathed.
Barrack, who surfed as a teenager growing up in Los Angeles, first got to know Hamilton when he cold-called him to speak at his annual investor conference.
The two understood each other immediately. “I have more in common with Tom than I do with 90 percent of the surfers I know,” Hamilton said. “We both have mathematical minds. His is in finance, mine is in the ocean. Tom is a surfer, too, at heart.”
Both men grew up as outliers. Hamilton was born in California, but growing up in Hawaii, with his blond hair and slight build, gave him both an outsider status as well as ample opportunity to aggressively hone his physical abilities.
The ocean was the one place where I found equality.
“The ocean was the one place where I found equality,” he said, where he was judged on ability alone. Always fearless, he excelled at the “sport of Kings.” But despite his athletic prowess and fearless approach, he avoided the competitive circuit, preferring to challenge himself against his own abilities instead of relying on judges for validation.
Barrack also struck out fearlessly on his own as a young man. The son of Lebanese immigrants who owned a grocery store in Culver City, he attended Loyola High School. Although he had what he described as “a normal, wonderful life,” growing up, he recalled sometimes feeling the odd man out with his black curly hair surrounded by redheaded Irish kids. As a USC undergraduate sociology major he took a business communications course, and was encouraged by his professor to try his hand at law. After graduation he entered the USC Gould School of Law, where he served as an editor on the Southern California Law Review.
His first job was with the firm of then President Nixon’s personal lawyer. He then took an assignment in Saudi Arabia, learning Arabic and working as an adviser to members of the Saudi royal family. Back in the United States, he launched his real estate career.
Barrack has maintained close ties to USC. Two of his five children are Trojans. In 2012 USC President C. L. Max Nikias named him a university trustee, and his family made a $15 million gift to the Marshall School that will transform its first building, 87-year-old Bridge Hall, into a state-of-the art facility – renamed Barrack Hall – that will house the school’s many international programs.
The art of crashing
Being prepared and ready for the worst case scenario is essential to succeeding at risk, both men agreed. It is important to fail, learn, and fail again so that when the big chance comes, you can survive. “I’ve crashed in a one foot wave and a two foot wave and on up,” Hamilton said. “I know how to crash.”
Barrack agreed on the need for total preparation when approaching risk. “Your tools should include preparation and perseverance,” he said. “And quite honestly, being able to absorb more pain than anybody else.” The discussion was the latest in a series of talks hosted by the Lloyd Greif Center at USC. Previous guests have included Pete Carroll, Cindy Crawford and Will Ferrell. Upcoming talks will feature guests such as Jessica Alba and Mark Cuban.
“Investing, Big Waves and Risk” was made possible in part by generous support from John Bendheim ’75, MBA ’76, president of Bendheim Enterprises and a member of the USC Marshall Board of Leaders.