00:00:00 – 00:00:07 Nitin Bajaj
Welcome to the industry show; I’m your host, Nitin Bajaj, and joining me today is Haren Bhakta. Haren, welcome on the show.

00:00:07 – 00:00:08 Haren Bhakta
Hey, thank you for having me on.

00:00:09 – 00:00:12 Nitin Bajaj
Great to have you here. Let’s start with who is Haren.

00:00:13 – 00:00:48 Haren Bhakta
Yeah, well, who is Haren? Well, I recently created an index about 2 years ago. But basically I’m in financial services. I’ve been in financial services for about 16 years now, since 2010. And in that time I’ve mostly managed money for high-net-worth individuals, but in the last 2 years I created what I think is a very innovative way of indexing to the stock market and basically a competitor to the S&P 500.

00:00:50 – 00:01:02 Nitin Bajaj
Very cool. And I know a little bit about it, but I’m excited for you to share with our audience what inside ownership is, and most importantly, why did you start it and how did you go about it.

00:01:03 – 00:01:40 Haren Bhakta
Yeah, well, I actually created it out of fear. So I’m actually a very big Warren Buffett fan, and since I got turned on to Warren Buffett, he’s just done amazing things for my investing philosophy and success. And I got turned on to him around 2016, and I started attending his annual meetings live in Omaha every year since 2017. I haven’t missed one. And so I invested a lot of my own money, as well as clients’ money, in Berkshire Hathaway.

00:01:41 – 00:02:16 Haren Bhakta
In 2024 I was at the meeting. This was the first meeting where Charlie Munger had passed away. So it was this on my mind: what am I going to do with Berkshire Hathaway when Warren Buffett dies? And it was deeply just on my mind the whole time. And in the middle of the meeting, someone asked Warren Buffett a question about the S&P 500, and that’s when I got triggered and I started thinking, wait a minute, the S&P 500 will actually be buying more Berkshire Hathaway when Warren Buffett dies.

00:02:16 – 00:02:46 Haren Bhakta
And a lot of people don’t know that, because the S&P is what’s called free float adjusted. So meaning, most people know the S&P 500 is the 500 largest companies in the U.S. And what they do is they weight those stocks by size. But one thing that most people don’t know is they exclude shares held by controlling shareholders, like Warren Buffett, who controls Berkshire Hathaway. So when he dies, those shares will become free floating.

00:02:47 – 00:03:07 Haren Bhakta
And I just thought, who in the right mind would want more Berkshire Hathaway after Warren Buffett dies? And the same thing could be applied to almost any company. Who would want more Tesla if Elon Musk were to die, or sell Tesla? Who would want more Amazon without Jeff Bezos? And the list goes on.

00:03:07 – 00:03:35 Haren Bhakta
So I came home from Omaha and just looked into this. What if we could just weight the portfolio according to the ownership of those leaders? And how would we have done? We would have done much better than the S&P. So I actually looked around for it first. I said, somebody must have created this already. It’s such an easy concept, but it didn’t exist. So that was my journey.

00:03:36 – 00:03:52 Nitin Bajaj
Very cool, very interesting, and very introspective of you to look at something that is available to everyone. And millions of people do this pretty much day in and out, and no one had that insight.

00:03:52 – 00:04:14 Nitin Bajaj
Tell us a little more about, you know, in the past couple of years, and I know it’s not a whole lot of time, you’ve been experimenting, you’ve been kind of diving deeper into a lot of this. What kind of impact you’ve been able to create, what kind of results have you seen over the past 2 years of you working on this?

00:04:14 – 00:04:44 Haren Bhakta
I’ve been able to partner with an ETF issuer. So I’m basically the index provider. I’m partnering with the ETF issuer, and it took a lot of work. I contacted every single ETF company you could probably think of: Vanguard, BlackRock, all the big players, and all the small players as well. And finally I found someone willing to take on the job of launching this as an ETF.

00:04:44 – 00:04:50 Haren Bhakta
So I found that partner in Corgi Fund. So the ETF will actually be launching next week.

00:04:52 – 00:05:02 Nitin Bajaj
Very exciting. And I’m glad you’re going to be able to bring this to a much larger population that can now access what you have figured out.

00:05:02 – 00:05:38 Haren Bhakta
Yeah, and since launching the index itself, the index itself went live in 2024, and we’ve been outperforming the S&P since in that timeframe. But more importantly, we went back 20 years to see what would investing in the leaders look like over that 20-year period. And I would have went back further, but it’s actually very hard to get ownership data amongst the insiders beyond 2004. So we went to 2004 and fast forward to today, now 21 years, you would have outperformed the S&P by over 300% in that timeframe.

00:05:38 – 00:06:31 Haren Bhakta
Yeah, so it’s dramatically a better way of indexing. Indexing, I think everyone’s familiar with indexing, using index funds in a low-cost way of getting exposure to the market. But, you know, one thing academia hasn’t really talked about is indexing to the leaders instead of the corporations themselves. Because at the end of the day, a corporation is a group of people, right? And if you take a corporation, a successful one that was largely responsible because of its leaders, and then you go and replace every single one of them with new people, is it really the same corporation? You know, I think most people would say no. And the track record also agrees with that, basically. Once the leaders leave, the organizations typically slowly erode. And there’s exceptions to that as well.

00:06:31 – 00:06:45 Nitin Bajaj
Of course. And, but yeah, there are many such examples of where things, the vision, what the visionary founder or group of founders had, that kind of gets lost in most cases. In some cases it continues.

00:06:46 – 00:07:07 Nitin Bajaj
Now, you kind of talked about a challenge you had as you got to launch. But amongst the many other challenges that tend to come through in a highly regulated industry such as finance and investing, is there one you would want to call out today?

00:07:07 – 00:07:52 Haren Bhakta
Well, my biggest challenge in life happened prior to actually launching the index. Now, I was at Morgan Stanley in 2017, and in 2017 I left Morgan Stanley to start my own investment advisory business. And the reason why I did that is I found a tiny company, a publicly traded company out of Las Vegas that sold show tickets on the Strip of Las Vegas. It’s such a niche business, it shouldn’t have been public, but it was public. And I purchased 5% of the company, decided to do a proxy contest, which means get the other 95% of the shareholders to vote for me to lead the company. And I was successful.

00:07:52 – 00:08:20 Haren Bhakta
By 2019 I got on the board of this company, October of 2019. Now, in March of 2020, just less than 6 months later, the entire show business of Las Vegas shut down due to COVID. So it was terrible timing. And that was just a blow to what I was working on. And it ended up working out okay, but it was a very tough struggle. We ended up selling the business in 2023.

00:08:20 – 00:08:46 Haren Bhakta
And, you know, without that struggle and that space, I probably wouldn’t have thought of this idea in the first place of indexing to the leaders. So when you index, when you buy index funds, you’re actually letting go of your ego. So whenever you purchase a stock, you’re basically telling yourself and the world that, you know, I know more than the market. But, so I had to kind of go through that struggle to really develop this index.

00:08:49 – 00:09:13 Nitin Bajaj
Very insightful. And again, thanks for sharing your vulnerability. And it’s tough to go in and for it to not work and then be able to switch gears and continue to remain insightful. Now, on the flip side of challenges come opportunities. In addition to the launch that’s coming up, what’s the one thing you’re most excited about?

00:09:13 – 00:09:28 Haren Bhakta
I’m just excited to be able to offer people something I truly believe in. For one, getting broad exposure to the market via index funds is really the way to go. And I believe I created something better than what currently exists.

00:09:28 – 00:09:54 Haren Bhakta
Indexing to size, as S&P does, is, no, size is not better, bigger is not better. But leadership, now, that I think really correlates to what a good corporation is when leadership really owns a significant stake in its own company. They go to sleep thinking about it, and they wake up thinking about it. And that’s what you want in your leadership, right? You can’t hire that.

00:09:54 – 00:10:02 Haren Bhakta
So I’m just truly excited to be able to have something that I truly believe in that I can offer people. And yeah, it’s a joy.

00:10:02 – 00:10:15 Nitin Bajaj
Exciting indeed. Now, I typically, as we look about what’s coming in the future, I take this moment to pause and reflect and talk about some experiences in the past.

00:10:15 – 00:10:25 Nitin Bajaj
One that hasn’t worked out, there’s been disappointment, failure, lessons, and another that has exceeded your expectations and has been a success beyond your imagination.

00:10:26 – 00:10:50 Nitin Bajaj
Now, you talked about one experience where things did not work out, like especially the company in Vegas that didn’t perform because of the causes you shared. But if you have any others that you want to share in terms of something that didn’t work out as you would have expected, and another one where things did exceed your expectations.

00:10:50 – 00:11:18 Haren Bhakta
Yeah, well, I’d like to touch on that Las Vegas investment again. I mean, this was a publicly traded stock. It was a penny stock. And I, you know, purchased the company. I had many other people who followed my lead and purchased the company as well. And running a proxy contest is not an easy thing to do. I had to hire a lawyer, invest a significant amount of money to basically take out the present management.

00:11:18 – 00:11:58 Haren Bhakta
And the reason why I did this was that you have this company selling show tickets on the Strip of Las Vegas that never bothered to sell show tickets online. And we’re talking about a sub-$10 million company. The CEO was paying himself $2 million a year. So I just thought this was an incredibly easy fix. Simply create a website and sell tickets. It could reinforce the foot traffic you have in Las Vegas with some online presence and simply reduce the cost of a CEO, right?

00:11:59 – 00:12:29 Haren Bhakta
It was a good thesis, and COVID really messed that up for me, and it created a lot of stress. So we ended up going to bankruptcy, but we ended up buying the company out of bankruptcy. So we ended up with a much larger position in this company had it not gone bankrupt. And we ended up selling it. But after all is said and done, I would not have done that again. Yeah, so that, I can’t think of a bigger failure than that one. So yeah, I’ll reiterate that.

00:12:29 – 00:13:20 Haren Bhakta
But my biggest success, honestly, is this index. Now, it came out in 2024, and I’ve had tremendous success in bringing it out to the market. We’ve already raised $30 million in separately managed accounts. So the index has been live, and there’s investors tracking the index now. I’m excited for the ETF to come out. Now, the ETF creates an ability for investors to participate in that without having a lot of money. So right now we have $250,000 as a minimum to participate. But the ETF, anyone with their own brokerage account can just go buy the ETF themselves. So I’m really excited about that.

00:13:20 – 00:13:32 Nitin Bajaj
That’s amazing. Now, we’ve been talking about work, money, finance, investments a lot. I want to change gears and ask you, what do you do for fun to de-stress, to just kind of get off the treadmill?

00:13:32 – 00:13:49 Haren Bhakta
Yeah, yeah, well, you know, I’m married. We’ve been married for 8 years now. We go for a lot of walks, to be honest with you. It’s one of my favorite things to do is go for a walk and, you know, we listen to a podcast or something while I walk. We go out for dinners. That’s also one of my favorite things. I’m a big foodie.

00:13:50 – 00:14:04 Haren Bhakta
I do also play beach volleyball. I haven’t played as much as I’d like to, but I play about once a week on average. Yeah, we head down to Newport Beach and play beach volleyball. I’ve been playing volleyball since I was in high school.

00:14:04 – 00:14:04 Nitin Bajaj
Nice.

00:14:04 – 00:14:05 Haren Bhakta
Yeah.

00:14:05 – 00:14:06 Nitin Bajaj
Yeah, one of my favorite games.

00:14:07 – 00:14:10 Haren Bhakta
Yeah, it’s a very good social game as well. Yeah.

00:14:11 – 00:14:20 Nitin Bajaj
True. Now, you mentioned podcasts. I want to open that up and see if you have a podcast or a book that is a favorite that you’d like to share.

00:14:22 – 00:14:52 Haren Bhakta
I listen to a lot of My First Million. I listen to a lot of The Knowledge Project with Shane Parrish. Listen to a lot of those. And Founders Podcast. David Sensor, I think his name is. What he does is he reads these biographies and really does a good job of laying out the facts of these founders. And you can get in the mind of these founders and really how they created their companies. And he does a really fantastic job of that. It’s almost better than reading the book itself.

00:14:52 – 00:15:11 Haren Bhakta
I’ve read a lot of the books that he covers, but I’ve actually been able to get more insight from what he puts out in the podcast. Yeah, and then if you’re an investor, if you’re picking stocks, there’s nothing better to read than Warren Buffett’s letters. That, yeah. So I’ve got a lot of value from that.

00:15:11 – 00:15:38 Haren Bhakta
And listening to his annual meetings. I’ve listened to every single one of Berkshire annual meetings since 1994. It’s all available on YouTube. And I’ve listened to them multiple times. So I like to tell people, you know, I could actually ask Warren Buffett a question in my mind, and I really believe I can get an answer. Yeah, because I’ve just absorbed so much of him that I could ask him a question. I believe I get an answer.

00:15:40 – 00:15:49 Nitin Bajaj
That’s awesome. Now, onto my favorite part of the show. We call this the one-line life lessons. Haren, I would love for you to share some of your life lessons with us.

00:15:51 – 00:15:54 Haren Bhakta
Well, the best one I got is from Naval Ravikant. I don’t know if you’ve heard of him.

00:15:54 – 00:15:54 Nitin Bajaj
Of course.

00:15:55 – 00:16:34 Haren Bhakta
But yeah, well, you know, his saying is it’s better to read one book twice than two different books once. Now, because learning is rooted in repetition, and learning is not just an intellectual exercise, right? It’s really in how you behave. So I actually read the book Skin of the Game about 7 times. And, you know, without reading that book as many times as I did, I probably wouldn’t have come up with this, essentially this Skin of the Game stock market index. So yeah, I believe find some really good books and reread them.

00:16:34 – 00:17:09 Haren Bhakta
He talks about how, you know, if you read everything, it almost cancels out to zero. Yeah, so it’s like you got to find the right things to read and just keep reading. And get bored of the book. Don’t get bored of reading itself. So if you’re bored of a book, move on to another one. You don’t have to finish books. So, you know, a lot of people feel like they started a book, they need to finish it. No, because it could prevent you from reading the next thing. So get bored of a book, put it down, read another one.

00:17:10 – 00:17:29 Nitin Bajaj
Perfect. Haren, thank you so much for sharing your journey and story. I’m really excited for the launch of the ETF and looking forward to sharing that with our audience. Wishing you continued success and really looking forward to seeing this grow and scale as it should.

00:17:29 – 00:17:30 Haren Bhakta
Thank you.