250 | Retiring With Purpose: Living into Financial Freedom with Robert Hendershott

Hilary Hendershott: Well, hello, Money Lover. Today is a follow up interview between me and my husband, Robert Hendershott. If you listened to episode 249, you listened to us talk about our financial journey leading up to the 10 year anniversary of my company, and how we thought about and hung out with our money, and dealt with our money and allocated our money, and how it took care of us as a result. And now we’re gonna talk about what comes next, because in the last 12 months it has come to fruition; it has come to bear that my husband is winding down his hedge fund and has no future employment prospects, which means he’s retired. So what’s it like in your first week of retirement, honey?

Robert Hendershott: It’s amazingly busy. I don’t feel retired. I mean…

Hilary Hendershott: Yeah.

Robert Hendershott: We moved out of a house and out of office, and we’re finishing up things here, and there was a lot of work in wrapping up the hedge fund in a responsible way. And that’s mostly done, but it’s not 100% done so to be honest, I don’t feel retired yet, but in a sense I do. I don’t have to be on task at 9am Eastern time every work day, and that’s very freeing.

Hilary Hendershott: That’s true. For many, many years this man has been at his desk at 6am Pacific time for the stock market’s open and that has been quite a commitment, especially on Friday mornings after date night, because we usually tie a few on.

What do you wanna share about how the hedge fund came to be wound down? What do you wanna say about how that happened? Because it wasn’t planned.

Robert Hendershott: It was not planned. I mean, we have been talking about the transition, and if you had asked me two years ago how much longer you’d be doing this, I might have guessed five years. And if you had said it’ll only be two years, I’d have been, “oh, shoot, that’s not good,” but it turns out that it’s absolutely fine.

The accelerated move was really catalyzed by the banking crisis that happened about 17 months ago, when Silicon Valley Bank failed, everything changed in the banking market. That doesn’t mean it will always be different. But everything changed.

And our strategy had always been to look very carefully at, and in a very detailed, data oriented way, at what had been happening, and then extrapolate into the future. And suddenly that sort of extrapolation, it just didn’t make any sense.

And so we struggled with it for about 10 months to see whether it made sense, and you could have made the same argument after COVID hit and things bounced back quickly, and the fund did great in 2021 and in 2022. And you know, we were open to that being the case. And then, earlier this year, there was a second mini crisis that sort of convinced us that it was going to be a long slog. And you know what we do is fun and lucrative when things are going well, and it’s not as much fun, and it’s not as lucrative when they aren’t.

So waiting it out, trying to hold on and rebuilding after things recover just didn’t didn’t seem very attractive, especially after we looked at, you know where we were financially, and you know you can always say, “Well, you know, it’d be great to have a little more money. But that’s a never ending cycle, you know. You never get to a point where you would…

Hilary Hendershott: The next dollar hurts, right?

Robert Hendershott: Exactly. And so that’s really how it came to be. The attraction of keeping it open went way down and we decided to wind it down.

Hilary Hendershott: So I just want to point out to those of you who are listening. If you listen to episode 248 where I talked about the worst financial advice that I hear, read, see on the Internet. And I was talking about how active management 99% of the time doesn’t pan out. It does for some people. And Robert is an example of someone for whom it did pan out for several years, and then it stopped panning out. So I said, the stock market, in that episode, I said, the stock market is vast and brutal. And you came upon the brutalness of it, and decided to opt out.

Robert Hendershott: Exactly.

Hilary Hendershott: So let’s talk about the conversations that you and I had about our finances that had us say yes to… I guess it’s fair to say you’re no longer gainfully employed.

Robert Hendershott: I am temporarily retired, and that’s the same as not gainfully employed.

Hilary Hendershott: Yeah, correct. So we talked about, and you can speak up anytime, anytime you think of something that’s material. We talked about how much money there was, and we mentioned in the last episode that some of our money is in the diversified portfolios that I build for clients at Hendershott Wealth. A meaningful piece is in the equivalent of a 401(k) at Santa Clara University, I think it’s actually a 403(b). And then a good amount of our money was in the hedge fund.

Robert Hendershott: That’s right. And then, in the last five years a good amount of money has been in real estate.

Hilary Hendershott: Well, say more about that.

Robert Hendershott: Well, you know, we talked about it, but we decided to buy a home in 2017, and then we decided to remodel that home in 2018. So by the time 2019 rolled around, we had a lot of equity in our California house, and then we put a deposit on the house here in Puerto Rico…

Hilary Hendershott: Which we then couldn’t get a mortgage for.

Robert Hendershott: And then we were in a position where we weren’t in Puerto Rico and getting a mortgage would have been…

Hilary Hendershott: We couldn’t get a mortgage because we couldn’t get anyone to create a tax return for us because our daughter got leukemia. It was really messed up. It was really messed up.

Robert Hendershott: Yes.

Hilary Hendershott: You have to have a tax return to get a mortgage. We didn’t have that, so we did not get a mortgage, so we had to pay cash for our house in Puerto Rico.

Robert Hendershott: Yeah. So we had a lot of money, we still have a lot of money, in residential real estate, but now less because we’ve sold the California house.

Hilary Hendershott: So we now only own one house. I have said to a few people, I know no one feels sorry for anyone who owns two houses. However, it was a tremendous amount of hassle. I did not enjoy it. I will miss that house, but I’m glad to not own it anymore. So we looked at the amount of money that was gonna come out of the hedge fund, the Santa Clara University–your employer-sponsored account–our investments at Charles Schwab, and the house, and we imputed a spending rate. Which, this is exactly what I do for my clients, we said, we can spend somewhere around 3 or 4% of that balance assuming it’s invested in a diversified portfolio on an annualized basis. I plan to keep working. So right now we think my income will largely cover our expenses. The nice piece of having to pay cash for a house that you didn’t intend to pay cash for is, of course we don’t have a mortgage payment.

So that’s nice when it comes to planning for cash flow because our spending needs are lower than they otherwise would be. And we basically said, well, I said, and you agreed, I think we can afford this. I think it’s okay if you don’t have earned income right now. So that was, I don’t know, it was like a life passageway or something.

Robert Hendershott: Well, I wasn’t focused on it as much as you were initially because I was focused on the decision like, were we gonna do this, if we’re gonna do it, how are we gonna do it? And so I was in the weeds. And then at one point I remember coming to you and saying, well, does this work? And you said, “we are overfunded.” And so that took it off the table; I trusted your analysis, and it just became a question of, well, do I want to keep doing this? I clearly don’t have to. Do I want to?

Hilary Hendershott: Do you want to say anything else about that? Because you’ve been a man whose intellectual capacity has been fully engaged for many decades. What’s that like for you?

Robert Hendershott: Well, there’s a book I’ve been referred to that I haven’t read, but I did get that the framework from this book was that there are four stages of retirement, and the first one they called “Vacation” and I’m still waiting for that, and I’m looking forward to it.

And then the second, which I can understand, is loss, like you’ve lost your structure. You don’t have something that you need to do every day. You’ve lost part of your identity. You don’t have something you like, you know, when people ask you, what do you do? You don’t have an answer.

So I can get that. But then I’ve already been looking forward to the third stage of experimentation, some trial, like finding new things. Now you have all the space and time, what is it that you might wanna do? And then re-finding purpose.

So for me, it’s been waiting for the vacation to show up. But also, you know, setting myself up to jump over the loss part cause I do get it. You know, we had conversations for probably two years about retiring from Santa Clara. I mean, it made sense for me to do it. But I really had my identity wrapped up in being a professor. That was my first career, and I’ve been doing it for almost 30 years.

And so that, that was something that I struggled with. And once I got over the hump, and it was made easier because COVID made being a professor a lot less fun. And you know I’ve gotten disillusioned with education in general, formal education, and the hedge fund was doing well, like all of these things, made it easier. But I’ve been there. I do understand the loss, but I do think I can jump over at this time. So I don’t think that there’ll be a lot of sitting around, wondering, how can I fill my time? And certainly that’s my experience so far.

Hilary Hendershott: No, you do spend a lot of time there right where you are right now at your standing desk, creatively engaging your thought processes. So let’s talk a little bit about, what are the things that you have in place in the coming, in terms of, you’re not knitting socks right? You do have some things in place. Share a little bit about what are the things that are in structure right now?

Robert Hendershott: So it’s a hard question to answer, because I really don’t know. And I really don’t think that someone like me is able to answer that question because we sort of reached, when you hit retirement, you sort of reach the culmination, the summit.

You know, you go to school, and then you get your jobs, and you get your promotions and you get… And then suddenly it turns down. And I don’t mean that in a negative way. I just mean that there isn’t a natural… You’ve climbed that mountain. And the question is, you know, finding your next mountain, and then you have to go look for it. But I do have some work that I’ve been doing now for three years, what we call ingenuism. Where, at this point, I basically riff with my good friend Yaron Brook about different topics that relate to how we view progress, how we view technology and innovation, and how we view the best way to run a business and so that…

Hilary Hendershott: Tell them what ingenuism is. Sorry to interrupt you, saying you’re excited. Tell them a little bit about what, cause it’s…you have a podcast.

Robert Hendershott: Ingenuism is a framework for thinking about how you get stuff done. And it, it would be for how do countries get things done? How do companies get things done? How do individuals? How do clubs? How do? And it, it relates to a pretty simple, economic, but very powerful economic model that distills out to the way you progress is a product of the learning that you do. And by learning I don’t mean learning other people’s stuff, but learning about how to impact the world, like how to do things better.

So we call it new insights times how connected you are with the rest of the world, and it just makes a ton of sense, because if you come up with a great idea and you don’t tell anybody about it, it impacts your business and your life, and that’s meaningful. But if you tell people about it, then it impacts billions of people’s businesses and lives. And so it magnifies the idea of connection. So once you get into that simple framework, there’s a lot of nuance. But you start seeing the world differently.

Because you look at things that get proposed, and the current administration has a lot of ideas and potentially good intentions about how to get things done. But they’re all inconsistent with ingenuism. They’re all very centralized, very top down where somebody somewhere makes a decision and then makes everyone else try and work with it. And that’s the opposite of, of how we think and all the evidence suggests things get done.

Hilary Hendershott: What’s a perfect example of something getting done through ingenuism?

Robert Hendershott: SpaceX is our go-to example. We had big success with NASA, which is a centralized government agency getting to the moon in the sixties and that was amazing. So ingenuism isn’t that you can’t get things done with a centralized organization. It’s that the most powerful and sustained progress comes from where you allow people to be creative on their own, rather than having…

Hilary Hendershott: Which is what Elon Musk did.

Robert Hendershott: And then Elon Musk said, no, I’m gonna do space differently because we had this massive stagnation for decades. And I’m gonna build rockets. They’re gonna be reusable. They’re gonna blow up. But every time they’re, we’re gonna learn. And they’re gonna get better. And people largely laughed at it. And now SpaceX is one of the most valuable companies in the world, not like in the single digits, but in the top 100 because they’ve lowered the cost of putting payloads into orbit by a factor of 10.

And it was all through what we call ingenuism, you can call it when you want, but the basic practice of learning things, and then putting them into practice to learn more and always being connected to, what are the other options that you can use, what’s the other knowledge? What are the other insights that are out there? It’s incredibly powerful and it changes the world.

Hilary Hendershott: So everyone who’s listening can obviously tell you are not a man who is uninterested in the world around him. I mean, I think there’s an obvious comparison to draw, because I think the primary zeitgeist about retirement is, it’s a time to stop doing a crap job that for the most part you don’t like, right?

So retirement is like, yay, you don’t have to do that shit anymore. Right? Or maybe it’s, you worked for decades to save up enough money to finally do this, right? And I think it’s a little different for you both professionally. I mean, I guess I’m saying professionally synonymous with intellectually and financially. Do you wanna comment on that?

Robert Hendershott: Well, I know what you mean. Because that is the sort of conventional wisdom of what retirement would mean, and I’ve been fortunate to not have had that experience. I’ve had two careers that I loved at least 80% of what I did.

Hilary Hendershott: I don’t think it’s, you said fortunate. I don’t think it’s pure serendipity. I think you created that, and I think anyone who’s listening has the opportunity to create that.

Robert Hendershott: Yes. I’ll take the compliment. Thank you. And so retirement was never like this golden castle on a hill. If I could only get to it, then I’d be happy. And at the same time I’m pretty committed to having… well, we moved to Puerto Rico in a large part because I wanted to be able to go to the beach every day.

Hilary Hendershott: Yes, you did.

Robert Hendershott: And to build some blend of vacation and work and life that would bring us joy. So there was no waiting like, finally, after I retire, now I can go to the beach. It does make it less of a fork in the road. It doesn’t feel like things have changed that much, except I don’t have to do committee meetings at the University, and I don’t have to get up early for the stock market.

Hilary Hendershott: In that way, your retirement is more of a gradual off ramp than a, this bright line, right, where they give you a silver watch and throw a party for you. And then the next day, you don’t have a login to the company email.

So let’s talk about our plans for the next 5 to 10 years. So first of all, I am not stopping working. And something really interesting, because the resort we now live in, I mean, before we were part time in California, residents of Puerto Rico. But now we’re full time in Puerto Rico, and for the most part, and it’s largely due to the way people get here. But for the most part our neighbors are couples where the husband is working, and the wife is not because her job wasn’t virtual, right? And so I’m rare in the resort, in our community, that I work. And now, it used to be that we are both working, and now I’m even more rare because you’re the one who’s not working. So you could start playing mahjong; pickleball.

Robert Hendershott: Yeah.

Hilary Hendershott: I mean, I remember we were out at dinner with that couple a month or so ago, and she said, “Oh, you’re still working.” And I said, “Yes, I’m still working.”

So, I am still working. I asked a question about our next 5 to 10 years and then I interrupted myself. Please, tell us about, what do you think we’re gonna do in the next 5 to 10 years?

Robert Hendershott: Wow. I was hoping you were gonna answer that question when you proposed it. Part of the being in exploration is not knowing that, and not trying to know it. Because if I said, okay, well, I wanna start another investment fund, I would immediately be limited. Or if I wanted to learn how to knit socks, I would immediately be limited.

But there are a few things that I can definitely see happening. For me personally, I’m looking forward to being better rested, and being in better shape, you know, having that that little bit of extra time is not just freeing in terms of your schedule, but it’ll be freeing in terms of being able to do things that maybe were the first things to get cut, you know, when things got busy.

The second is, you know, there’s a lot of things in life that I have the capabilities of maybe a 10-year old. Like I can cook, and I can do a lot of things…

Hilary Hendershott: Oh, you’re gonna cook better? Wow.

Robert Hendershott: Well, I’m interested in a few things of elevating where I am, and it’s just ironic, and I don’t know if that’s the right word, because, of course, Harlyn is 8. So I’m looking forward to finding some things that she gets good at and I get good at, too, because we start at the same level and do that together. And then as far as the family goes, a lot of it is gonna depend on really how temporary my retirement is; where your career choices go.

And right now it’s easy, because we both want to be in Puerto Rico, and you want to be running Hendershott Wealth Management, and I want to be retired. But 10 years from now not all of those, actually, maybe none of those, will be true.

Hilary Hendershott: I’m getting some feedback from my producers that when you said you’re looking forward to being more rested, they heard “arrested.” So I just wanna clear up.

Robert Hendershott: Well, I never have been arrested. So, in the exploration phase…I can end up in a Puerto Rican jail.

Hilary Hendershott: Oh, goodness, I really have no comment. Okay. And then, you know, it’s worth saying, just as a point of information, that as a couple we, of course, are waiting, like a large part of our plans are potentially bifurcated. We’re waiting to see what happens with our daughter’s health, and neither of us feel comfortable or excited about making plans that ignore that possibility. You could also call it a fork in the road for us. So in terms of making plans, in many ways we’re waiting. And that’s 20 more months as we record this today until she’s considered cured.

Robert Hendershott: I’m gonna argue that cause she is definitely cured right now.

Hilary Hendershott: Oh, okay.

Robert Hendershott: And it is true that we both struggle with the fact that there is a risk that is very well known and quantified and it would be hard to ignore, but it would also be irresponsible to ignore. And what this entire episode, the dual episodes with leukemia has taught me is that those risks are always out there. They’re usually ones you’re not worried about. In this case, it is something we are worried about and it does cloak the future and in ways that, a lot of me would like to just ignore and put it aside and just get through the next 20 months. But the reality is, 20 months is a lot of the rest of our time with Harlyn liking us. So we’re going to take full advantage of it.

Hilary Hendershott: I have to remind myself that it’s more typical for the mom to stay home and the dad to go to work. Kids don’t grow up having 10 times the relationship with their mom that they do their dad. And I’m envious because you’re gonna have more time, duration of time, to spend with Harlyn, and I have to remind myself that doesn’t necessarily mean she’ll forget my name.

When I met you, and as your hedge fund was getting bigger, I just want to acknowledge you because a lot of your life philosophies are coming to fruition. It’s this very gentle, like you’ve described it, it’s not a major lifestyle alteration for you, because you’ve always had a sense of trading a few things so that you could have more rest and more peace and more sanity in your life.

And I didn’t have that when I met you. I mean I was a major workaholic, and I don’t, I maybe am like, I don’t know, 30 percent recovered. I’m not saying I’m no longer a workaholic. But I used to tell people, my husband has two full time jobs and he naps every day. The man takes naps in the middle of the day. I used to say to you, if we could bottle what you have, we would be billionaires, because it’s so much of what people want, right?

I mean, there’s whole industries that are about getting the kind of peace of mind that you just sort of naturally have and cultivate. And so, yes, you know the part time. What did you call it? Beach lifestyle, beach vacation lifestyle, something like that. What’s the phrase you’ve been using for years?

Robert Hendershott: I don’t recall, living vacation or something.

Hilary Hendershott: Something like that. Yes, and so we’ve been doing that. So thanks for what that’s done for us and for me, and kudos to you. Again, I’ve been living with you for 10 years, and it hasn’t fully rubbed off on me. But maybe I’m just a big resistor. You know, you always used to call yourself in the hedge fund, the man behind the curtain. And it’s so obvious, if you pay attention to my podcast or my company brand, or anything that I created myself as the woman in front.

And there’s been a handful of times in life when I have run headlong into the massive capacity problem that that can lead to. And I’m not saying personality brands are always a losing proposition. I mean, my business is great and profitable, and makes me happy. There are ways in which you are just, there’s been more peace of mind possible for you. So I’m watching. I’m learning.

Robert Hendershott: Oh, thank you. That’s very sweet.

Hilary Hendershott: Thank you. I am sweet. Is there anything else you want to share about retirement and your outlook before I ask you my signature question.

Robert Hendershott: What is your signature question?

Hilary Hendershott: My signature question is, if your money were writing you a love note, what would it be thanking you for?

Robert Hendershott: You know, when you first mentioned this question.

Hilary Hendershott: I know, you criticized the question. I know.

Robert Hendershott: Because, my first reaction was, well, I should be thanking my money because… What was immediately there is, in a loving relationship, it goes both ways. So if you’re gonna talk about love your money. It has to go both ways. So it’s a cool way to think about it.

And my money would…well let me back up. So my experience of life with money has been that it shows up when, when we need it. You know, a good example is before our wedding, you know, we were talking about how we’re gonna pay for the wedding and dipping into savings, and I’ll make it short. But in 2008 we had started working for a hedge fund, and we had just started….

Hilary Hendershott: How short, how short is this going to be?

Robert Hendershott: Gonna be about four years.

Hilary Hendershott: Okay. Okay, go ahead.

Robert Hendershott: You know, you can remember 2008. Everything went to hell, and they had their assets custodied at Lehman Brothers, which failed, and all the assets were frozen and they were frozen, it turned out, for five years. And so we, our engagement was interrupted. We went on to do our other things, and you know, four years later we launched the hedge fund.

But, five years after that, the assets were unfrozen. They finally worked through the whole Lehman bankruptcy. It took five years, and the hedge fund was able to calculate our profits on our positions that have been locked up for five years. And we got paid our incentive fee, our share of those profits. And it happened to be 10% more than the cost of our wedding.

So we ended up not having to dip into savings because this money showed up from things that we were doing years and years before. And I think my money would say, thank you for setting me up to help you.

For me, when I expressed it to you the first time, money, it just seems like it works out. You said, but that’s because you did things and took actions in the past. And I was always there for my money, even when it wasn’t obvious, like it seemed like the money was gone.

And then the money would always show up for me and for us. And that is what my money would thank me for. Thank you for taking those actions. Thank you for doing those things. Thank you for setting me up to support you just like I would, I would say the same thing to you.

Hilary Hendershott: Yeah. And there is something a little bit inexplicable, or some might say, woo, about how money does show up when you’re in what I’ll call right relationship with money. It does show up when you need it. So I second that.

Well, good luck with your retirement. Let me know how it’s going.

Robert Hendershott: Every day, I will do that, every day.

Hilary Hendershott: Let me know if you need any money. I’ll send it to ya. Alright, love you.