Podcast

Developing Entrepreneurial Competence to Solve Our Biggest Problems

4Q20

A wide-ranging and thought-proving discussion around the values of entrepreneurship, how we develop entrepreneurial skills, and how an entrepreneurial mindset helps drive professional success for small & big businesses alike.

Read The Transcript

For our last episode of 2020 for Real Wealth Real Health, we are excited to return our focus to the world of entrepreneurship, featuring an in-depth conversation with Dr. Al Osborne, Senior Associate Dean for External Affairs at UCLA’s Anderson School of Business. In addition to his role as Dean, Al is the Founder and Faculty Director of the Price Center for Entrepreneurship & Innovation. The Price Center aims to provide students with the problem solving, critical thinking, and collaborative skills that are key to entrepreneurial success, and to empower those students with the resources, access, and environment necessary to put their business ideas and acumen to the test.

During our conversation, Dr. Osborne offers intelligent insights into the qualities that set entrepreneurs apart in the professional world, and why even the largest, most established companies could still benefit greatly from adopting more of an entrepreneurial mindset. We speak about the different forms of entrepreneurship, and the advantages they offer, for both businesses as well as individuals. Al also offers fantastic insights into how one can (relatively cheaply) get involved with charity through their finances, and some of the key insights he has gained working with entrepreneurs at every level. Finally, we turn our discussion to the topics of health & happiness, and how we can ensure proper management of our personal lives to maximize our experience of the benefits we work hard to enjoy.

Key Insights

  • Why the entrepreneurial mindset is an invaluable resource for advancing today’s society
  • How entrepreneurial thinking can still be an important asset within a large, bureaucratic, corporate structure
  • Reflecting on the progress that’s been made in improving the behavior of business, and how the process creates opportunities for new companies to form & thrive
  • The reasons why, and advantages of, non-traditional forms of entrepreneurship
  • The importance of failure in developing one’s entrepreneurial competency
  • How the average American can easily get involved in giving back to the community, including some universally accessible financial vehicles
  • The importance of managing your health, as well as your professional success, so you may live to fully reap the benefits of your hard work

Guest Bio:

Alfred E. Osborne, Jr., is UCLA Anderson’s senior associate dean for external affairs, with oversight of a variety of key initiatives for the school, including resource development, alumni relations, corporate initiatives and executive education.

Osborne also holds an appointment as Professor of Global Economics, Management and Entrepreneurship and is the founder and faculty director of the Harold and Pauline Price Center for Entrepreneurship & Innovation. The Price Center serves to organize faculty research, curricula and student activities related to the study of entrepreneurship and new business development at UCLA Anderson.

Al’s areas of academic expertise include social entrepreneurship and the development of a leadership approach that applies business models and methodologies to the nonprofit world. Under his leadership, the Price Center created a number of management development programs, including five in partnership with health care giant Johnson & Johnson: the UCLA/Johnson & Johnson Head Start Management Fellows Program; the UCLA/Johnson & Johnson Advanced Management Institute for Head Start; the UCLA/Johnson & Johnson Health Care Institute; the UCLA/Johnson & Johnson Health Care Executive Program; and the Management Development Institute (MDI) for health care organizations in sub-Saharan Africa. Several related, innovative programs include the Institute for the Study of Educational Entrepreneurship (ISEE) and the UCLA/Los Angeles County Office of Education (LACOE) Head Start Leadership Institute.

A deep belief in the value of entrepreneurship has guided Osborne’s vision for what is possible throughout his decades-long tenure at Anderson. In addition to founding the Price Center, he facilitated the infusion of an entrepreneurial approach to leadership into the Anderson culture and curriculum, including and transcending the notion of business startups.

“Societies that don’t innovate are destined to die,” Osborne says. “My view was that our MBA students could benefit from understanding things from an entrepreneurial point of view.”

A corporate governance expert, he established a Director Education and Certification Program designed to help officers and directors of public, private and nonprofits prepare for the fiduciary duties and legal responsibilities of governance. This program also addresses best practices and topical issues confronting directors.

Education:

Ph.D. Business Economics, 1974, Stanford University

MBA Finance, 1971, Stanford University

M.A. Economics, 1971, Stanford University

B.S. Electrical Engineering, 1968, Stanford University

Resources:

Real Wealth Real Health

Alpha Investing

[email protected]

https://www.anderson.ucla.edu/faculty-and-research/global-economics-and-management/faculty/osborne

https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html

Podcast Transcript

Speaker 1:

Welcome to Real Wealth Real Health, the show that empowers you with insights, information and inspiration to achieve your version of financial wellness. Learn how to balance living a full life today with planning for the future. This podcast is brought to you by Alpha Investing, a real estate centric private capital network that provides exclusive investment opportunities to its members. And now, here are your hosts AdaPia d’Errico and Daniel Cocca.

AdaPia d’Errico:

Hello and welcome to our final episode of Real Wealth Real Health for the year 2020. It is such an honor to introduce everyone to our guest on today’s show. It’s such an honor to introduce our guest today, Al Osborne. Al Osborne Jr. is UCLA Anderson’s senior associate dean for external affairs with oversight of a variety of key initiatives for the school, including resource development, alumni relations, corporate initiatives, and executive education. Mr. Osborne also holds an appointment as Professor of Global Economics, Management and Entrepreneurship. And he is the founder and faculty director of the Harold and Pauline Price Center for Entrepreneurship & Innovation. The Price Center serves to organize faculty research, curricula, and student activities related to the study of entrepreneurship and new business development at UCLA Anderson.

AdaPia d’Errico:

Mr. Osborne has served as UCLA Anderson’s Interim Dean from July 1st 2018 to July 1st 2019. Mr. Osborne is interested in leadership development, specifically how young people in this turbulent world can find their voice and develop the ability to influence a challenging environment by being powerful. This speaks to my theme of moral value based leadership with an active practice of achieving desired outcomes in constructive and collaborative ways. Mr. Osborne’s areas of academic expertise include social entrepreneurship, and the development of a leadership approach that applies business models and methodologies to the nonprofit world. Under his leadership, the Price Center created a number of management development programs, including five in partnership with healthcare giant Johnson & Johnson: the UCLA/Johnson & Johnson Head Start Management Fellows Program; The UCLA/Johnson & Johnson Advanced Management Institute for Head Start; the UCLA/Johnson & Johnson Healthcare Institute; the UCLA/Johnson & Johnson Healthcare Executive Program; and the Management Development Institute for healthcare organizations in sub-Saharan Africa. Several related, innovative programs include the Institute for the Study of Educational Entrepreneurship, and the UCLA/Los Angeles County Office of Education Head Start Leadership Institute.

AdaPia d’Errico:

A deep belief in the value of entrepreneurship has guided Mr. Osborne’s vision for what is possible throughout his decades long tenure at Anderson. In addition to founding the Price Center, he facilitated infusion of an entrepreneurial approach to leadership in the Anderson culture and curriculum, including and transcending the notion of business startups. “Societies that don’t innovate are destined to die,” Mr. Osborne says, “My view was that our MBA students could benefit from understanding things from an entrepreneurial point of view.” Mr. Osborne combines his emphasis on innovation with a deep belief in the value of a broad based diversity that includes demographics, but just as importantly, a wide range of ideas.

AdaPia d’Errico:

“The value of cognitive diversity, the acceptance of different points of view as expressed typically by different ethnicities, genders, and cultures is the secret sauce of the American experience,” he says. And he continues, “I think we need to respect and cherish more of that. Life experiences shape people’s perspectives, and someone who grew up in a different culture is the gist of construction, connection and valuable conversations. I am a product of that diversity coming to this country from Panama. My goal is simply to encourage people to get out into the traffic of ideas and collide with somebody with a different point of view. Physicists say there’s no work unless there’s friction, and there’s no power or energy without collisions. Let’s collide in a more inclusive and respectful way,” he says.

AdaPia d’Errico:

Mr. Osborne is an active participant in the business community serving as a director of Kaiser Aluminum, Wedbush Inc. and First Pacific Advisors family of mutual funds. His nonprofit affiliations include serving as a trustee of the Geffen Academy at UCLA, Fidelity Charitable, the Harvard Westlake School, and the Los Angeles Police Memorial Foundation. He served many years on the corporate boards of the Times Mirror Company, US Filter Corporation, Greyhound Lines, Nuverra Environmental Solutions, First Interstate Bank of California, Nordstrom, and K12, amongst others. While on sabbatical from UCLA in the 1970s, he was an economic fellow at the Brookings Institute and directed studies at the Securities and Exchange Commission that contributed to changes in rule 144 regulation D and other exemptive requirements to the securities laws designed to lower costs and improve liquidity and capital market access to venture capitalists and emerging growth firms alike.

AdaPia d’Errico:

Mr. Osborne’s research interests also include venture capital and private equity, family and closely held business, and the role of boards of directors in private, public and not-for-profit organizations. A corporate governance expert, he established a director education and certification program designed to help officers and directors of public, private and nonprofits prepare for the fiduciary duties and legal responsibilities of governance. This program also addresses best practices, and topical issues confronting directors.

AdaPia d’Errico:

In our conversation with Mr. Osborne, we touch on so many nuggets of wisdom, of practical wisdom, of his approach to everything that he does from entrepreneurial competence to viewing the world in a more egalitarian way. This is such an inspiring and I would say activating and hopeful episode in that what we take away from it is our own role, our own power, and our own ability to shape the world around us by simply taking the next right step, the next right action. And we’re all capable of this. And after such a challenging year, but also a year full of opportunities, this episode really hits home. And I hope that it affects you the same way it’s affected me and really showing me as Mr. Osborne says, “Never waste a crisis.” And we’re on the precipice of so much opportunity, and so many good things to come in our world because we are the ones that are going to make it so.

AdaPia d’Errico:

And so, if you’re listening to this before the end of 2020, I wish you a great end of the year, and to everyone heading into 2021. And even if you’re listening to this after that clock has ticked past that day, let’s make the most of 2021 and beyond. And let’s take every opportunity we can to really make this world what we would like it to be. Al, thank you so much for joining us on the podcast today.

Al Osborne:

This is my pleasure. Delighted to do this.

AdaPia d’Errico:

It’s such an honor to speak with you, and I gave a more detailed description in the introduction so that we could have more time to really dive into the current work that you do. And the piece where I would really love to get started and its current, but for you it’s decades old. So, it’s current, but also just so deep within you is your work at UCLA, and your work with the entrepreneurial program, and with entrepreneurs in your philosophy there. So maybe could you get started by just telling us what drove you so much to put such a big passion and emphasis on entrepreneurship, and especially your style of teaching entrepreneurship.

Al Osborne:

I’ll be glad to do that. It was something I didn’t come to early enough in my life because if I had done it a lot earlier, I might be doing the some of the things that Daniel and his partners do, go out and try to make it happen, and build real wealth, and create jobs, and innovate. And entrepreneurs do real work in our society, and we don’t have enough of them. But when I was in Washington D.C., I was at the time a… I’m an economist, and so I was doing some work on capital markets, I got to meet venture capitalists and business developers.

Al Osborne:

I got to meet some entrepreneurs, and I said, “These folks are doing what needs to be done in our society. So when I get back to UCLA, I’m going to start an entrepreneurship center,” which is what I did. And I said, “We need the energy, and aspirations, and the dreams of young people coupled with the ability to understand what makes a business works, how to organize how to lead, how to finance, how to manage an operation. And if we do those things, our society will be better served.”

Al Osborne:

And so, I endeavor to establish right there in the middle of the UCLA Business School, an entrepreneurship center. Over the years it grew, and it came pretty successful. And we had as far as these things go, excellent ratings, most of the time from national organizations, and students came to the management school to develop what I’m calling an entrepreneurial competence, develop an ability to be able to make things happen. To put together, see things in unusual patterns where others didn’t see and innovate and create real value by understanding what the need was finding unmet needs, and then being fearless about their ability to execute and make something happen.

Al Osborne:

Knowing of course, that there will be stumbling blocks along the way. But you got to dust off and get yourself up, and you’re not discouraged. Because the research shows, nothing pays off like persistence. Even in the darkest days, light will be at the end of the tunnel. And indeed, some entrepreneurs I’ve encouraged fail a number of times before they actually do what they set out to do. And for me, it’s developing that ability. And I call it an entrepreneurial competence to be able to work through those issues. And then in the business if you do this well you’ll get the right kinds of concepts, you’ll get the right kind of resource assembly, you’ll know how to go get them, you’ll manage the operation, and then you’ll exit successfully. And if everything goes well, you’ll remember your professors who helped you think through those things, and maybe give a little bit back. Philanthropy is important to me as well, too.

AdaPia d’Errico:

Yes, it is, and I want to talk about that too. It’s such a big part of who you are. It’s really incredible. One of the things that really stood out for me with the Price Center was the management development programs and the partnerships that you created with some really big companies. And for you was this… I guess the question is, is this about helping people who want to be entrepreneurs or was it to establish an entrepreneurial mindset in somebody going into a big company, or maybe it’s both?

Al Osborne:

Well, it’s a little bit of both because I believe in entrepreneurial competence. One of the problems is large companies sometimes lose their ways they forgot about their entrepreneurial roots. Sometime in the history there was a founder or there was an acquisition turned around a company. And if you lose that, and you become, let’s just say too bureaucratic, then the ability to see around the corner or deal with a context that’s new, or innovate, or deal with the disruption that we have today. Look at what we’re having in our society where a lot of bright young people are disrupting old established businesses with technology and innovation and having a smaller barrier to entry.

Al Osborne:

All of that happens because in my view here is you have this entrepreneurial competence, which is actually helpful in large companies as well as small companies, non-for-profits, and yes, indeed, bureaucracies. There’s nothing… The structure itself, it is the people that make up the structure. And it’s important that the people be able to have the skills and capabilities that allow them to innovate, to lead, to respect one another, and other values that we might see that are important. And if you get sloppy, and lazy, and fat, and dumb, and you think you’re entitled, you’re not going to win anymore because the world is totally disrupting every day. So every day, every week, you’ve got to be thinking about how can I improve myself? What things do I knew, and this is where it’s important to have, I believe an attitude about learning.

Al Osborne:

Continuous improvement and learning is an important part of how you get better and in many of our markets if you aren’t doing that, you’re dying. And so, an entrepreneurial competence is all about that survivability of adding capital to your stock of what you know, your human capital to then be able to be successful, and that’s what I try to do. Bring this entrepreneurial competence to the non-for-profits I work with. Same way I deal with it with our students. It’s just a different context. But leading and managing and making something happen, understanding your goals and your missions and how to put together resources and get it done doesn’t change. You can have a heart, but that doesn’t mean you lose your head. And if you have a head, that doesn’t mean you don’t have to have a heart. So, my idea is that you can do them both. Today’s generation is very much content in and why I think the phrase that best characterizes you can do well by doing good. And there’s nothing inconsistent with these things.

AdaPia d’Errico:

I love that. Sorry, it was just something that you said it a couple different ways. You also talked about human capital. And so, maybe we dive into the nonprofit work as well. Because there feels like a shift. There seems to be a shift, and it has been underway for a few years. And this has nothing to do with COVID. And it has everything to do with a more heart based leadership approach, it seems, more than before. What do you think about that?

Al Osborne:

Well, that’s a very good observation. And I think you captured what’s essential about this. I think today’s young people, and I see it in my son and his friends, they want to leave the world in a better place sooner rather than later. And to them, it’s important that we develop lifestyles and issues that for example, take care of our planet, or take care of our bodies. Eat well, exercise, worry about the carbon footprint, and the forest, deforestation for example in Brazil. These are all things that my generation, the Baby Boomer generation didn’t care about. We exploited the world. We messed it up. We put effluence, and we made the air dirty. Your generation and the millennials have the responsibility now to clean it all up. And by cleaning it up, you’ve got business opportunity.

Al Osborne:

So, in a sense, we messed it up, you guys get to clean it up, and people will do well if they do it right. And that’s what we’re seeing. There’s a demand, for example, take electric vehicles, for example, just a matter of time before the carbon guzzlers and those use of petrochemicals and that kind of form of energy is going to be replaced. So there’s a huge opportunity now for electrical. And again, all of that is going to need things like batteries, and so on, and are all going to have to get better. As I think about all of that, there’s a chance here then for us to have a cleaner world, a safer world, one that is more valuable of all of our resources, a world that’s less selfish, and more empathetic. Things that were permitted to little babies working in sweatshops. Well, your generation wouldn’t stand for that. That’s just wrong.

Al Osborne:

And so, there’s a better moral compass that’s being developed here now that’s willing to take and respect one another. That doesn’t mean we don’t work hard, or that we don’t have uncomfortable moments. And we are finding out that there are lots of things that if we think about our political situation, that makes us uncomfortable that we’re trying to do something about, but we’re willing to go deal with it. And unless we face the facts, and try to understand them, you can’t do anything about it unless you understand what it is you’re trying to do. And I see that that kind of honesty and transparency is part of the value system of the new millennials, and I think that’s just great.

AdaPia d’Errico:

Yeah, it’s really coming forward. And I wonder, with the opportunity that the COVID pandemic has brought to us because yes, it’s a crisis. But there’s also an acceleration of trends that we’re already underway. And there’s also going to be so many opportunities. It seems like a perfect time for that entrepreneurial competence to come forward, and bring forward solutions that bring let’s call it health and wealth to everyone through this different set of leadership that’s coming forward.

Al Osborne:

Well, you hit it straight on the head. That is exactly what COVID has done. You never want to waste a good crisis. And part of this problem here then is seeing the opportunity. And that’s what entrepreneurs and the entrepreneur competence is all about. Both threat and opportunity is something you can do something with. And while something may hurt some segment, it really creates opportunities for another segment. And if this is done right, society moves forward to a better place. And there are shared assets and resources that can result from all of that if we have a government that’s sensible, and a government that’s truthful, and a government that really understands what its role is.

Al Osborne:

I think that we have learned a lot about democracy in this last time period. And I think we understand a little bit more about our responsibility as citizens, and what that mean for our ability to be entrepreneurial in a positive sense by worrying about each other, and developing what I consider the respect we need to value what each of us can bring to the party without necessarily thinking that if I win you have to lose. Participatory regime, so the ways of working together and aligned, if you will, about what it is we’re trying to accomplish are all things that move to a closer society, a more knit society, a more accepting society, a more inclusive society that awaits us. So, I’m optimistic about where we’re headed, and let’s hope I live long enough to see some of it happen.

AdaPia d’Errico:

Wow, I mean, I hope you Well, I’m sure you will, because you’re already doing it. I mean, you’ve got… Do you still have students? Are students going?

Al Osborne:

Yes.

AdaPia d’Errico:

Okay.

Al Osborne:

I do. In fact, I’ll be teaching a class in the winter, and it might be worth a second or two to talk about it. We all talk about entrepreneurship, entrepreneurs go out and start ventures. But another way to be entrepreneurial is what I call through acquisitions. One way into entrepreneurship is to buy a business, or to search for a business to buy. So entrepreneurship through acquisition is a course I am teaching. And the vehicle I’m using is what we call search funds. So, I’m teaching a course on search funds. I myself have been an investor in search funds, and so on where somebody decides that they have a passion to go do something. So, instead of starting it, go find one that’s not working as well or can be improved and buy it. And so, automatically, you have an opportunity to have something that’s generating cash flow. Maybe it needs some improvements, and you can do that, lower costs, change customers, all to improve margins. And if you do that well, you got to where you want it to be a little quicker through acquisition as opposed to starting at de novo.

Al Osborne:

So, those are a couple of ways that I try to share with my students of how they can get to be a business owner. Because the real end game here when I talk to students is everybody wants to be able to have the time and freedom to enjoy their life the way they want to enjoy it, which is cool. And you can’t do that unless you’re successful or you’re born into wealth. So you’ve got to figure out a way in which you’re going to be a business owner.

Al Osborne:

There’s nothing with the great American experiences, we all get a chance to be business owners, which is why it’s important to have a small business sector. Not everything has to be a big, large international company. You can do very, very well, with a small revenue base. But the important thing is to have good margins. And the only partner you really need is the IRS and own it all. And guess what, you can go live in Santa Barbara and click coupons in Hawaii and life is good. So I say that to suggest that, well, what is it that you really want out of life? Maybe time with family, maybe opportunities to do other things, being a business owner helps that. And I think that that’s the spirit that exists in this country like no other country in the world, the opportunity to be entrepreneurial.

Daniel Cocca:

So, what can we do, I guess, as a country, as educational institutions to foster all these positive things that we talk about when we mention entrepreneurship, right? The building wealth, the creating jobs, the innovating, all that stuff. And I think search funds actually are really interesting. They’ve become fairly popular over the last few years or so. But when I was an attorney, I actually used to work on a lot of SPAC deals, special purpose acquisition companies-

Al Osborne:

I have been in SPACs. In fact, we built a couple of great businesses with SPACs before it was popular now. But you raise a good question. I think education has to create… It’s not so much that we’re going to talk about what you should do in theory. We need to have a chance where we deal with it in practice. We need to have that as part of the educational complement. So at Anderson school, for example, we have an accelerator. We have a place where if you have a… Let’s talk about venture initiation. If you have an idea and you want to develop it. Well, we say all “All right, kid, go do it.” “Oh, my God, you mean I have to do it?” Yeah, let’s go do it. You could apply to be in the accelerator. You’ve already shown how you can write a business plan and feasibility study and the rest of it. You want to make it real? Yeah, yeah, yeah. Okay, you can get six months in the accelerator through the business creation option and see what it looks like.

Al Osborne:

And if you can do it, and we have many businesses that have started that way, and I might invite others. You just go to the UCLA Anderson Accelerator. It’s part of the Price Center. It’s one of the things we started in building out what you think is an opportunity. And the reason you want to be able to try it out because when you move out into the real world, you don’t have this sanction free environment, or this safe area. So if you can try it out in a safe environment, like an accelerator, an incubator within the academy as part of how you get course credit. I think that gives you a real head start. And we might just be able to arrange for financing or partnerships and the right kind of mentorship to get you started as part of our educational process by making a commitment for not just talking about it, but showing and working with you to try to get it done.

AdaPia d’Errico:

That’s phenomenal. That’s phenomenal. So let’s switch gears really quickly because I would love to talk next about your work in philanthropy, and how you clearly are bringing entrepreneurial competence into philanthropy. And just more about maybe the work you’re doing there. How did you get started in philanthropy? What drove you in that direction, first of all, because you’re so active in it today?

Al Osborne:

Well, let me see if we can do all of this in two or three minutes. First of all, I got into trying to bring an entrepreneurial conference to nonprofits by our work in a management development for entrepreneurs program. And I had the serendipity where Johnson & Johnson came to us and said, “Can you do for Head Start directors, what you have done for entrepreneurs?” They were concerned about building this capacity in what they thought was one of the most significant programs for children in our country. It’s called Head Start. Head Start serves over or close to one million children every day in this country, all across this country. And these are the children that are the poorest among us, and is below what we call the safety net. So, Head Start is the last of the programs that President Kennedy, you guys are too young to remember that was around called the Great Society and the War On Poverty. You may have read about it in your classes growing up.

Al Osborne:

So, that’s how we got started. We said, okay, and here we are 25 years later. The program has matured, and developed. J&J was my partner for 25 years in trying to reach the leaders in these agencies, and helping them to be more strategic to think about what they were doing. Their commodity was the early development of children, but it was business. And if we adopted some of those principles that would help them do their job for these families better. And we were able to translate that into a whole series of other programs working with J&J as my early partner. Now, my partner is the office of Head Start, and we have other entities involved in what we’re doing. But it took us into a whole area where J&J over the years would say, “Can you do this? Can you do that?”

Al Osborne:

So we went from working for Head Start and continuing that, working then with community clinics and community that, and we started to work with ministries of health and civil society organizations in Africa. So we took it to Africa and did that for about 10 years. And so now, we are in the process of doing it again with Johnson & Johnson, a program. In this case, we’re working with community healthcare workers who are on the front lines, and there’s a management issue here.

Al Osborne:

So, this whole thing of what we call entrepreneurial competence, you have to do something that is strategic. Depending on the organization I’m working with, I develop a series of what I call IP projects, improvement projects, management improvement project, leadership improvement project, business improvement Project, you get the idea right here, and community health improvement project, a salon improvement project. So, we have tried our framework and our view of the world in a whole variety of settings, and it works. And so, I felt very good about making that translation. And even thinking of different populations like working for example with disabled veterans as part of what we’ve done. I mentioned working with owners of salon, hairdressers, and the rest of them. Working with creative people.

Al Osborne:

So, the principles are fundamentally the same. The problem is understanding the context in which they’re to take place, and if you understand the context, you can then apply what we know there is and then now you can develop a plan, an improvement project to make it work. And that is where I think we have had a comparative advantage in dealing with non-for-profit organizations. Now, in my own philanthropy, we’ve been generous. I believe that I’ve been blessed, and I got a great education. I’ve had a great career. Giving back is an important part because you can take it with you. But I was fortunate a few years ago to become a trustee of Fidelity Charitable, which is the largest charity in the country. And I’m chairman, and so I’m able to see and work with donor-advised funds, which is the vehicle that we use at Fidelity Charitable to get billions of dollars into charitable organizations using the donor-advised fund.

Al Osborne:

I’m a big advocate of the donor-advised fund. I have one. I’ve had one since the beginning. And I think that it’s important for philanthropy not to be left to just the upper one 10th of 1%. Philanthropy is something that we can all do. And if you have a donor-advised fund, you have what I will call a savings account that’s for charity, for philanthropy. So, you set aside some savings that can only be dedicated to philanthropic purposes and donations. And that’s what the donor-advised fund allows you to do. You take a deduction this year, you put the money into the fund, that donor-advised fund, and then you can spend it out because it’s no longer yours now. It’s for charity. It belongs to another donor like Fidelity Charitable, and you can then make your sensible decisions without facing the crush of trying to do something at the end of the year.

Al Osborne:

Plus, it’s earning. So you’ve got a donor-advised fund that’s providing a return, and in my case if it generates at least the S&P long term average of say 12 to 15% with a kicker here or there. If you set aside say $1,000, all of a sudden now you have 1,000 plus 112. So you could give away that and not touch the principal, but you want to use the principal too. But my point here it is you get to act like a philanthropist, like a Rockefeller or a Carnegie without necessarily having to have a private foundation.

AdaPia d’Errico:

Is the donor-advised fund, is that like an IRS vehicle? Or is this something that is sort of an official thing? Or do people do this either just personally?

Al Osborne:

No, it’s an official vehicle. And many of the investment banks, Morgan Stanley, Google… I mean, Goldman Sachs, whatever, go to the website, Fidelity Charitable, and it will explain it to you. They have a wonderful explanation right in the beginning that’s very simple. Anybody can establish a DAF and just get started. This year Fidelity has already given away close to $7 billion to charity. And that’s the thing, it’s education, it’s health. We suggest to our donors, we have about 225,000 donors. And now I’m speaking as Fidelity Charitable’s chairman.

Al Osborne:

We have over 225,000 donors. And we suggest how about giving to the hurricane relief? Or maybe you want to do something for COVID. Or maybe you want to do something for social justice in addition to what else you might do in terms of education, or veterans. And if you look at the annual report, I think you’ll be enlightened to see just how charitable Americans can be. And this is a vehicle that I think makes the average person feel like they are a Rockefeller, and without incurring the cost because the economics is such that you need at least 10 to $15 million to establish a foundation. You got to pay investment management, you got to pay administrators, you got to… It’s a whole, you don’t have any of those costs if you have a DAF. So, it’s very cost effective and tax efficient.

AdaPia d’Errico:

Wow, I did not know that existed. Thank you. I think that’s going to be really helpful for a lot of people. I speak with so many people all the time, and there is this underlying wanting to do more. And the thing that always comes up is I don’t know how. I don’t know where to start. And so, this seems like a fantastic place to do just that.

AdaPia d’Errico:

There’s been so much that as you can see, and probably you’ve known this more than most was what I found that this year really brought forward was the level of inequality that exists, and I think even for myself and I’m willing to admit it did not understand how great, how deep, how broad it was. And it’s shocking, and it’s heartbreaking, but we can’t stop there. We can’t stop in the shock and just sit there. We have to do something about it. And so, it’s really inspiring that you’re doing so much for it, and that there’s these easy actionable ways for others to do something as well because there’s so many people that need more help than ever. And if we’re building our wealth, then we’re not just building it for ourselves.

Al Osborne:

Right, right, right. Well, in fact, every… Pick your financial planners and your wealth advisors. There are a few things. You have your assets, and the things that you want to do for your family, children, and then things you may want to do for society. And so, you have different vehicles and different managers to help you with all of that. And the way to think about the donor-advised fund, that’s just one more tool in your philanthropy circle. And some of you, you may have a foundation, but you’ll find that they’re somewhat vast. In fact, DAFs are more generous than private foundations. The average private foundation only has to give away five to six percent, and that’s about all that they typically do, the private foundation, but the average graph gives away easily 20 to 25%. I think the number last year was 22%. And Fidelity is right up there, and it is…

Al Osborne:

But you don’t need to have a lot of money to start. You can actually open up a DAF with nothing. Put in 50 bucks to get the thing started are. But the beauty of the DAF is that you can be philanthropic, whenever you want to. You don’t have to wait for the rush at the end of the year to do it, and see something you want to do, three strokes on your computer. Of course, Fidelity has an amazing technology platform, and a lot of the others do too. Some community foundations not to sell them short have. But you can just do it all electronically, and you send the money to the Red Cross. Or in my case I was very comfortable giving a fair amount of support to the Los Angeles Regional Food Bank because I saw all the lines, and so boom just do the two clicks and send them a check. I didn’t have to do anything else. And so, it allows you to be I think, more generous because you don’t have the hassle anymore of having to deal with all of it.

AdaPia d’Errico:

You brought up such an incredible point that I would love for you to elaborate on is the idea of real health, and why our health is so fundamental to wealth actualization, if you could speak on on that.

Al Osborne:

I use the word health because to me, if you’re not healthy, as a fundamental state of being, you can’t be wealthy because wealth is more than just financial assets in the bank. Wealth is a portfolio of your human capital. And if it’s not healthy, then you’re not wealthy. It sounds like a simplistic statement, but think about the person whose health is suffered. They can’t go to work, number one. Or they’re draining resources that need to get better. So they can, in fact, go to wealth. So, a part of my point is we have to pay more attention. And I appreciate that as the older I get. I have to pay attention to how we develop and take care of our bodies, how we exercise, the things that we do to have real health so that we can do the things that we need to do to accumulate.

Al Osborne:

So, wealth is more than just money is really part of my point right here, and resources. While it’s great to have some real estate in our portfolio and some financial assets, if we aren’t healthy, none of that really matters for what we need to do. And that’s the point I want to make. So, I ask myself, and I’ve always done is trying to actualize my resources is if you’re going to be an investor, for example, your analytical skills have to be sharp. If you’re going to go visit companies that you might want to invest in, you need to be able to walk or see them or talk to them. So, if you don’t have the personal assets that allow you to actualize your ambitions for a healthy and wealthy lifestyle, you’re going to have to hire others to do it. And then you will miss the fun and excitement of what it is to be involved and engaged in wealth actualization.

AdaPia d’Errico:

Yeah, absolutely. Yeah, I’ve had periods of not feeling well, and it takes away like you said, it just takes energy. It takes time. Whether it’s mental fog, there’s so much about it. And on a much broader, deeper level, there’s a lot of people who are unhealthy because maybe they’re underfed. There’s so much that if we want to build a wealthy society, this equals society, so much of it in what I’ve been learning is that they’re not healthy. And so like you said, they can’t get a job. They just can’t operate in a society that asks us all to show up.

Al Osborne:

Or they’re not educated. The other part of this is what we know about early education. And if you think about families, most of your trajectory in life is set by the time you’re three, maybe six, depending on the evidence. And what is that? Well, that means that the nurturing environment that you grew up with, and I feel this now that I’m a grandfather. I see the things that my son, and my daughter-in-law, his wife are doing with what is now our grandson who is now 10 months old. It’s amazing what it is you need to do. You may both have children. I don’t know if you do or you don’t. But what you really have to do, to do it right to be a parent. I sometimes facetiously say that anybody could wake up and be a parent. But to be a dog catcher, you need to have a license.

Al Osborne:

So, one of the issues is really understanding, what is it that we really need to do this right? So there’s a lot of education in having a healthy lifestyle, a healthy family, being a healthy parent, being healthy at work, so that you can have a positive attitude toward what you can accomplish. And to me, that’s really where… So, mental health, let’s not forget about that is a big part of all of this. And we don’t pay enough attention to feeding and nurturing our psychic. And I am not the best person to talk about these things because I don’t do it all well either myself. But you need a balance in how we do all of these stuff. And it appears when you may really work hard, like entrepreneurs are sometimes unhealthy. Sometimes they have great difficult family lifestyles because they’re so driven with the idea.

Al Osborne:

And so, I find myself while I encourage that persistence, I mentioned that a little earlier, I also have to pull back and say, “Well, I understand that there could be some other things that you might need to worry about. But you need to be sure you can make the right choices. And you have to be healthy with the right frame of mind. To put them in perspective, as you go forward. You may then choose to say, “Well, children is not for me now because I don’t have the time. I’ve got to do this,” then that’s what you got to do. But if you say, “Well, I want it all now. And I still want to go build my business.” You’ve got to understand that sometimes it’s costly, and it doesn’t work out well. And many entrepreneurs have high divorce rates, and things like that, or you have children that never saw their father or whatever.

Al Osborne:

You have to figure out how you’re going to manage all of that. And it can be managed, but it requires the ability to communicate, to be transparent, to understand how you make the time, so that the people who you care about, or who are working with you can be part of the journey in a way that they don’t feel they’re missing anything, anyhow.

AdaPia d’Errico:

No, it’s great. I mean, I don’t… Like you said it’s not talked about that much. Maybe mental health this year started to get talked about a little bit more. And there’s unfortunate studies that are showing how much of a toll the pandemic and all these different things are having on people’s mental health,

Al Osborne:

Well, depression, trauma, I mean, these things are real.

AdaPia d’Errico:

But we didn’t used to talk about them. The fact that you talk about it, that there’s… It’s all communication, like you said. The fact that more people talk about it allow more people to talk about it. And by at least acknowledging that it exists, we can start to acknowledge, “Hey, I’m not so alone in it,” because maybe I’m suffering from some depression. And I’m ashamed to say it but if other people are talking about it then it releases a little bit of that shame so that I can start to heal, I can ask for help. A lot of the culture here is go, go, go, make it. But asking for help is not necessarily something that we always think we can do. And also having conversations about things that maybe traditionally before were off the table to talk about.

Al Osborne:

Yeah, I think you’re right. But this is why being transparent, I find if you… If you reach out and say I need help, somebody will give you a helping hand, and you’ll be better for it. But you have to own it. You have to be willing to say, “Hey, I can’t go anymore, can somebody help me?” You will find that. In the university, that’s a good place to find those kinds of resources. So students who are struggling while they’re in school really don’t have to, if they’re willing to own it and reach out. Nobody needs to flunk a class. There’s a lot that goes on before you flunk the class that could be handled. Anyhow, just a plug for the business.

AdaPia d’Errico:

Of course, no, of course. So, maybe the last thing actually wanted to touch on this because it’s really important. And it’s your work in corporate governance. And I think it’s really important to talk about because it’s the stewardship, and it’s this sense of knowing that there’s someone or a group of people that are holding other people accountable, which doesn’t always feel like the case. And you obviously have a really high level of empathy and compassion. And so, could you just talk for a few minutes here about your work in corporate governance and the full, your ferocity.

Al Osborne:

Sure, sure. I take my governance responsibilities on, for example, in corporations or on boards very seriously. I think we have a fiduciary duty, and the law requires, obviously, that you’re able to carry these things out in a way that protects in the context of public companies, investors. It is their resources that you are being a steward, or an agent for. And your job is to be sure that the organization that is using these resources are using them effectively. That’s why you have a role in strategy, and that you have the right people. That’s why you have a role in management, selection, and succession of the CEO and others. And those are your two big jobs. And that requires that you do your homework a lot.

Al Osborne:

The law calls about being careful and loyal. What I like to think about is just being responsible. If you’re going to show up to a board meeting, it’s helpful that you may have read the material in advance or that you understood it to be prepared to ask questions and challenge. Well, with an eye to your responsibility to those who have provided the resources to produce the value that you expect. And to me, that’s a serious responsibility. I’ve been on many, many boards. Some challenging some not so challenging. Big, large, public, private, throughout my career. And it has been a privilege for me to be part of the group that’s providing that oversight.

Al Osborne:

I develop, I have an approach and a way in which I do this. I’m privileged also, therefore, to help in the selection process of who the directors are maybe in one session or another in my role as a lead director or as chairman of governance or something like that. And so, I’ve been very fortunate to have situations that weren’t totally out of hand, although they’re sticky every once in a while. But if you’re paying attention I believe in something I call the duty of attention of what’s going on, you’re able to anticipate what they are, and give context to having those fierce conversations that might be necessary in a boardroom. When you’re looking for the performance the board has to come together as a decision making body. No one director is more important than the other. Everybody has to participate and contribute. I like that system, and it works very well.

Al Osborne:

Now sometimes it goes array. Some directors sometimes have their own personal interests, and they create conflicts. And that’s where I do some of my other work. I’ve become a gun for most of my career expert witness work where I am a governance expert, and the question was did the officers or directors carry out their fiduciary duty? Yes or no. And so, I’ve had a chance to testify in court and depositions and things like that on some very interesting cases. We’ll let it stay at that for now. But if you think about it, we have established in our society the rule of law in a very important way and it really matters.

Al Osborne:

You can’t have contracts that people believe in if there’s chaos, and there’s no rule of law. People have to be held accountable for the things they say they’re going to do, and the things they say they’re not going to do. And there are consequences, therefore, for bad behavior. And to me, that’s an important element of the mechanics and the infrastructure that allows our society to be successful. And entrepreneurs, therefore, to be able to claim and innovate and do things. Now, that doesn’t mean that sometimes people don’t stumble because they do. But there are ways in which you can redress all of that, or that doesn’t mean that there are discussions or conflicts between parties to a transaction. All of that can happen, it can be worked out. But we have too many lawsuits, as it is, in our country. And part of that is, is because people didn’t spend the time to be clear in what they want. And some of them use it for tactical reasons or as a strategy, but if everything is working well the rule of law prevails, and you have what I’m going to call trust.

Al Osborne:

You have trust in our society among all the actors that need to participate in our ability to grow wealth for everybody in our country. And if there is no trust, and no rule of law, no good governance, no oversight, no citizens that are participating in this process by being accountable and responsible, then we are in chaos. And we have a wild wild west. And in some cases, all of that leads is to the mightiest or the ones with the largest resources, like the guns, or whatever, to be in control. And then we wind up having dictators, the American experiment is to me, one of the… Democracy has its challenges. Don’t misunderstand me. But I think it’s the best way to so that everybody who maybe didn’t come into life with privilege or wasn’t the son of the king, or the favorite class can get on the ladder to economic success, and do that. And that’s what the American dream is all about. And that’s what I think is my hope, and why I’m interested in entrepreneurship because that’s where these possibilities with individual freedom can be maximized.

AdaPia d’Errico:

Al, thank you so much. That was just such a… So, beautiful, so eloquent. Honestly, like a perfect place to end our time together. Thank you for everything that you do, everything that you have been doing for all these decades. And I know that you were professor for Fark, our partner at Alpha Investing, and I can see why. And just so much gratitude for just what you’re doing for so many people. And I feel like we’re fortunate to have you out there teaching entrepreneurship and doing the corporate governance work and the philanthropy work. And thank you for your time today, too. It’s just been an honor.

Al Osborne:

Well, I’ve had a lot of fun talking to you. These are great questions, and we haven’t found all the answers. But we’ve made a beginning and but these are great things to think about. And thank you for allowing me the chance to chat with you and good luck in your work, and you guys, Daniel, keep on doing what you guys are doing. It just takes time.

AdaPia d’Errico:

Yeah. We’re working on it. We’re not giving up. That persistence is part of our DNA for sure.

Al Osborne:

Thank you very much.

AdaPia d’Errico:

Thank you. Thanks for tuning in to Real Wealth Real Health. We hope that you’ve enjoyed today’s episode and found it both informative and insightful. We welcome all your questions and your feedback about today’s episode and especially, we welcome your questions about specific topics that you would like us to cover. So, shoot us an email at [email protected] And if you have a moment, we really appreciate ratings and reviews as it helps us grow our online community and our interactions with you. And we’ll also be linking to a number of relevant articles on topics that we might have touched on during our conversations. Some of them are broad. Some of them are technical, but we’re always aiming to provide information that helps you better understand the mechanics of building this healthy financial foundation, especially if you’re looking to do this with real estate.