Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYC and at ICE's 12 exchanges and six clearing houses around the world. And now welcome inside the ICE house, here's your host, Josh King of Intercontinental Exchange.
Josh King:
What was the greatest innovation of the last half century? How many of you're thinking of the metal boxes that have been stacking up in ports across the world since the 1970s. Containerization has transformed the world as much as the technology we now packed into those containers. At any single moment, there are thousands of ships crisscrossing the oceans supplying the global marketplace with the raw materials and finished products that fuel the economy. There's even an entire podcast by Alexis Madrigal, aptly named Containers devoted to how the modernization of shipping has transformed the world. Today shipping companies compete in a logistics and infrastructure arms race. Success depends on a firm's ability to raise capital and acquire their gargantuan ships, ports and support systems needed to create an efficient global delivery system. The business requires adaptability to provide what the customers want from converting a fleet to carry liquid natural gas, to assessing a new emerging market. One company that's been making waves in the shipping world since the naming of our guest today, David Sokol as its chairman is Seaspan. Our conversation about charting the path for Seaspan with David Sokol right after this.
Speaker 3:
Farfetch is a platform that connects the most beautiful boutiques brands to people who love fashion from all around the world. We have customers in 150 countries. We have 300 designers. What Farfetch has created is a fashion community. The New York Stock Exchange is such a strong brand, and we're in the industry of brands. So for us it was a perfect fit. Farfetch is listed on the New York Stock Change.
Josh King:
Our guest today, David Sokol joined the board of Seaspan Corporation in April, 2017, and was appointed its chairman three months later. Over his career, David has founded three companies, all of which he successfully brought to the public markets. And in 2000, while he was chairman and CEO of MidAmerican Energy Holdings Company, he oversaw its acquisition by Berkshire Hathaway. David also runs his family holding company, Teton Capital, which is a part owner of Seaspan, and has diversified investments in banking, manufacturing, consumer products, energy, real estate, and technology. Welcome to the ICE House David, how's your visit to the NYC today?
David Sokol:
Glad to be here at all. All three of those companies, not only are public, but they came to the New York Stock Exchange.
Josh King:
Thank you very much for the business. And we look forward to watching Seaspan continue to grow. How have you spent your day here so far?
David Sokol:
Well, we had an investor day this morning to begin a process that'll now go on for as long as we're a public company to meet with investors on the equity and the debt side, give them a four or five hours of an opportunity to hear where we are, not ask them for anything. No road show, just actually doing it for their benefit. And then letting them ask questions as to what they'd like to know more about.
Josh King:
As I'm watching the news this morning, there's reporting on increased air travel during the holiday season, David, the air traffic radar lights up with thousands of commercial aircraft stacked up on roots, flying around the world. And few people really get this, but the airline is often a brand leasing their planes rather than owning them, the same as true at sea level where the ships that bring goods from Asia to the US and Europe and vice versa, are owned by companies like Seaspan and leased the shippers with their names painted on the keel. Can you share essentially how this core element of your business model works?
David Sokol:
Yeah. Effectively you take some of the major liner companies, Maersk, COSCO Shipping, or China Shipping, if you will, Hapag-Lloyd, et cetera, CMA, their model is basically... Well, it's evolving. It was that they took a container, these containers that you see stacked up various places are on trucks or trains from a port saying Shanghai, and they delivered to a port in Los Angeles. Their business model has actually expanded much like a FedEx or UPS where now they're dealing with manufacturers, they're picking that container up at their warehouse, taking it to the port, getting it on the right ship, getting it to another port and then delivering it to their customer's customer. And so they're looking a lot more like FedEx and UPS over time.
David Sokol:
Our role in that is, we operate and lease the ships to them for about half of their fleet typically. The industry on balance owns about half of their ships and they charter out from people like us the other half. And so we'll be the ones that our captain and our team will crew the ship. They will direct it to be at the port of Shanghai at oh 11:00 on a given day. They'll load it. And they will then direct it to go to wherever Long Beach or wherever it goes. And so we are, what's called a wet operator. We not only charter the ship to them, but we also maintain it and operate it for them.
Josh King:
I was struck on the idea of maintaining and operating the ships because we recently had here inside the ICE House, Admiral John Richardson, the Chief of Naval Operations for the US Navy, talking about the rigorous training that every officer and sailor undergoes to have a career on an American warship. The same is true for Seaspan, which operates what looks like an international naval academy to work on commercial vessels. It's an incredible opportunity to spend a life at sea. I want to hear a small portion of a video Seaspan created about its cadet training program.
Speaker 5:
Then of course, various other practical jobs on deck like repairing twish locks and so on is what I have in mind. In the evening, we send them to the bridge, they keep two hours of watching pairs. In port, they are on cargo watches together in groups of two. By the end of this whole program of about 16 weeks, they are going to be well molded.
Speaker 6:
When I was just a child, I talked to my grandfather, I want to be a captain of that ship. When I saw one ship, then I was shown that dream.
Josh King:
The video shows these immense vessels of yours, David, and the joy that these cadets have in having the opportunity to travel the world.
David Sokol:
Yeah, it's actually a neat part of our business in that we've got 4,100 sea farers and that's ranges from captains to cadets. And we actually have a training program that begins with cadets. And in fact, this last year, I think everybody in the organization was really proud to have the first cadet that became a captain of a ship. It's a neat industry. I'll tell you one thing that's been unique for me. I spent most of my career in the energy sector, which travels around the world quite a bit. This company has employs from over 50 different countries. And it's really a truly global company.
Josh King:
I mean, I looked at their faces. I gather several are Indian, many are Filipino as well, but where do you find the best future seafarers ?
David Sokol:
It's from those island nations typically where they have had a history of going to sea. A lot of European nations, actually, Greece and Germany for many, many decades, the Netherlands. And now it's shifted very much to Southeast Asia.
Josh King:
We take so much for granted when we go into a store to buy an item or go online and get something from Amazon, that everything that comes to this country is housed in a container. I want to hear a clip from one of your crew members aboard the Santos Express, your 4250 TEU vessel.
Speaker 7:
The first day I saw the ship, I never thought it'll be this big. Once I just climbed up the gangway, I asked the first person I met, "Do I have to climb some more?" And then he was like, "You just got started." The whole night, I couldn't sleep. I was just thinking, "Wow, did I join such a big ship?" It was amazing for me.
Josh King:
The verticality of these ship, tell us about the Santos Express ships like it, and its role metaphorically as one of those thousands of these massive container ships that move from port to port unloading its cargo in these vast facilities bound, as you said earlier, for trains, trucks, warehouses stores, and ultimately our businesses and homes.
David Sokol:
Yeah. Well, it's an interesting question. I must say it's... If you ever get a chance at a port facility to go and see one of these ships, you'll be amazed, they're huge. Our ships, in many cases, are over a quarter of a mile long, they're wider than a football field is in length. They often have cargo that goes down 7 or 8 stories into the ship, and then 10 to 15 stories above the ship on the deck. And interestingly, they operate with a crew of 26 to 27 individuals moving them around the world. They're really engineering feats because one of the things that you have to recognize is all those containers are not coming from one place and go going to one place.
David Sokol:
One of them is a container full with someone's household goods, that's moving around the world. Another one's full of tennis shoes, and another one could be filled with some form of lead weights. So they can range in weight from a couple thousand pounds to 40 tons. And they can be refrigerated items that need... And we have refrigerated units, et cetera. And so the ships are actually engineering marbles so that they can carry the loads that they carry, at the efficiency they carry, in a relatively new industry.
Josh King:
You go to your website, I looked this morning at a live shot of your fleet map. Right now you've got ships in the red sea, the Gulf of Oman, the Arabian sea. I even saw a ship about to enter the Persian Gulf. So these massive ships with these small crews, security has to be a huge concern for your company as well.
David Sokol:
Security's an extremely important issue. Weather conditions are extremely important. We're very proud of the fact that we lead the industry and safety rates. We have one of the lowest safety incidences in the industry. We want to keep it that way. You know, we have an obligation to these seafarers to make sure they get home safely at the end of every voyage. So you're right, it's security from bad people, if you will, pirates. But also security of weather and things of that nature to make sure that they're... And that they're given the tools to operate the ship safely and that the ships properly maintained. This is truly the industry that takes a village.
Josh King:
You mentioned some of these names earlier, but thinking about that operating fleet of yours and the names that you count as your customers, COSCO, Maersk, CMA, GCM, Mitsui O.S.K. Lines, you look at the keel and it says MOL. If you think about the countries represented China, Denmark, France, Japan, that's only four of them, but I'm sure they're many others. It's like you're operating the world's commercial navy.
David Sokol:
Yeah, that's right. When you think about the fact... And until I got involved with Seaspan, I didn't really recognize. You think about all the trade that happens around the world and how that is a recent phenomenon really from the seventies. Well, container ships moved last year, $12 trillion of goods. The average ship has somewhere in the order of 300 million of goods on it at any time. And it's moving products all over the world from manufacturers, a small company that our family owns, ships containers to Australia of small metal, fabricated pieces. International commerce has coincided with the invention, as you mentioned earlier, of the container. Prior to the 1970s effectively, if you wanted to move something of significance, you had to get it to a port, first of all, but then you needed somebody that... Because back then, these weren't regular routes.
David Sokol:
You found somebody with a ship that if you paid them enough, they would come to the port of Norfolk and pick up a container or a crate, and then they would tell you, "Well, I'm actually not going to Australia, but after I go to India, for this much money, I'll drop your crate off in Australia." And that ship owner back then was just doing that as filling the ship. And if your container was this odd or crate that you formed was this odd thing that looked like a small house. Well, it took up this much of the ship.
David Sokol:
When the container was designed and ships could be designed to fit 20 and 40 foot containers on them. It just changed the world because prior to then, shipping tennis shoes was really infeasible at a cost that made sense from Indonesia to the US. But once you could put them in a container and there was a standardized way of moving them and a schedule to move them. Today actually the cost of moving a container full of something from China to the US or the US to China is about a 10th of what it was in 1970. And you know, not a lot of things over the over that period of time have gone down 90%, 90%.
Josh King:
So David you're at the New York stock exchange today, as you mentioned earlier to hold an investor day, you're coming out of an aggressive first year as Seaspan's chairman, which included bringing in Bing Chen from BNP Parabas to be CEO, completing several major deals, filling out, as you said on your quarterly call the other day, Bing's management team, what's the message that you and Bing and the others who are up on stage are giving today?
David Sokol:
Really wanting investors to know what our long term thought process is. And the strengths of the company are AR, market position we're the largest by far in the industry. We've got a very sound financial base now with our major shareholders, the Washington family, plus Fairfax Financial Holdings, which combined with management owned a little over 60% of the company. And we've now been able to put in place a very strong management team with Bing Chen, Ryan, of course, in Peter Curtis and a whole number of other are folks that have joined us. And we've also then changed the board. So what we're trying to point out to investors is that, this is a very different company. We're building on the foundation that was very sound, but our focus going forward is on operational excellence, really making sure that everything we control, we control to the highest efficiency possible.
David Sokol:
That's critical in any business because any dollar we waste is coming from somebody, either we're not training our employees or paying our employees adequately. We're not providing the customer what he's paying for, or our shareholders. And debt holders aren't getting what they're entitled to. It has to come from one of those three. And so operational excellence just has to be at the forefront. And then so secondly, getting our balance sheet to where we're investment grade over time, which gives us unlimited access to capital. And that's a critical focus. Then third is capital allocation, making sure we only do transactions that are net positively accretive to our investors so that we continue to build a very sustainable and balanced to long-term business.
Josh King:
You mentioned Ryan Courson and Peter Curtis as new members of the leadership team that have come in. I'm looking at your third quarter transcript. They're the first people to talk along with Bing in the quarterly call, as you and Bing are in your new seats, you coming board and then becoming its chairman and bringing Bing on, what's the checklist that you look in these next senior management hires. How did you find these guys to help lead the business?
David Sokol:
Well, in just one clarification, Peter Curtis, actually in a new role, but he's actually been with the company since it was founded, but he's now a critical member of our commercial team. Basically in putting together a team, when coming in, it was clear that, like many companies, Seaspan had grown from its infancy to a public company, basically with the same management team. And it was often the case, the management team that's able to start the business, isn't able to take it to the next level. And so we made the significant changes in 2017 to change out the number of the folks that were there. And then when putting the team together, the key to me is to identify what does the company need long term, what skills does it have? And then what skills do we need to augment for where we're going? And then what is the personality type and discipline type of those individuals?
David Sokol:
So obviously Bing Chen is the critical hire as CEO. He has to both have that discipline and that vision, and conservativism that we were looking for as a board. We found it in him, he's got an excellent track record of long term asset management and his vision for how to maintain assets long term, and get most value out of them through their life cycle. And he very much sees eye to eye with the board on where we want to go. And then it's some function of making sure we fill every position that we needed to fill beneath Bing, helping him find the greatest talent whose chemistry fits with that same formula.
David Sokol:
I learned a long time ago that, and actually it was Warren buffet who used the term. He says, "What we want are people that are incredibly smart, incredibly aggressive in chasing what they want to do, but that have enormous integrity. And if we can't have the third, definitely don't want the first two." And so integrity led the way on any of our hires, but then energy and intelligence has to come right behind it.
Josh King:
So David, Seaspan now has a number of long term focused major investors, such as Washington Companies and Fairfax Financial. But one topic that you've been vocal about is the need to improve the credit rating of the company. What's your strategy for doing that?
David Sokol:
Yeah, basically de-leveraging. The company got over leveraged in the past, and didn't take the opportunity it had in the upturn in the market back in the 2013, 2014 timeframe. It should have deleveraged then. Probably should have raised more equity. We've already taken down the leverage significantly. We anticipate de-leveraging over a billion dollars over the next four years. All of that will come just through the normal cash flow of the operations of the business.
Josh King:
You were asked in the quarter, whether you could increase dividends, but you put your hand up on that point because better to pay down the debt than to give more money back to shareholders.
David Sokol:
That's right. My job as chairman and our board's job is to maintain a sustainable long term built to last company. And dividends can feel good in the short term, but the reality is we need to get to investment grade before we ever consider moving the dividend.
Josh King:
In addition to the financial restructuring that you've done, what do you view, if you did a postmortem on the last 10 years of Seaspan before you got there about some of the steps the company made in addition to taking on too much debt over the past decade, and how have you been working on convincing the street that Seaspan has corrected those issues?
David Sokol:
Yeah, some of the strength and Seaspan had many, and Peter Curtis was responsible for many of their strengths. One of them was, they developed an incredible naval engineering capability. One of the strengths that Seaspan had was, it was able to take to its customers some very innovative ideas as to how to build these ships better, more efficient, better fuel economy, et cetera. So that was one of the big strengths. I think another strength of the company was innovative financing. Identifying sources of capital to keep the cost of capital for our customers down. The weaknesses were as the company built up over time, it went from being a small five or six ship business to a large company. And it had some conflicts of interest in and amongst its management team and consultants, to where they would make money if a transaction occurred, irrespective of whether it was good for the shareholders of Seaspan.
David Sokol:
Those things can happen in startup type businesses and that they should have been taken out the business much earlier. But I think that's what really led to the recognition at the board level, and the shareholder level that, we had to make a serious change in 2017, that the management was no longer aligned properly with the investors.
Josh King:
As I was reading your recent quarterly transcript David, a lot of the questions that you got were about the diversification strategy for Seaspan. Right now, it is solely focused on this core business of the container ships, but you recently announced plans to invest in a distressed offshore engineering firm, Swiber Holdings, should we expect more acquisitions outside of container shipping sector? Or is this a limited attempt?
David Sokol:
Yeah, one of our core focuses at the board level is capital allocation. And to us capital allocation means deploying capital to where we get the highest risk weighted rate of return for our shareholders. And so we will no longer just look at opportunities in the container ship industry. Obviously, we're the largest player there. We have an envious position in the sector, and we will continue to grow there. But we're also looking for ancillary opportunities. And Swiber is a good example of that. They historically were an offshore EPC company, which obviously means maritime. But in the collapse of the oil prices in 2014, they were over leveraged and ended up in receivership in Singapore. But they have some core assets that are significant. Secondly, their management team during that restructuring got very focused on developing energy projects, utilizing L&G.
David Sokol:
And so we have entered into an agreement to acquire them through the restructuring, and then based on putting those projects together, investing in the equity side of those long term projects. In a way, totally different industry, but very similar long term contracts, 20, 25 year contracts, assets that we operate for a customer, and the customer guarantees to take all the off take. We would like to see ourselves do more of those types of transactions over time to both diversify our customer base, but also the risk profile long term of the various investments.
Josh King:
When you're surveying the shipping sector and adjacent industries, what are you looking for in potential acquisitions?
David Sokol:
Well, first of all, would also be in the container ship business. We are the largest, we're only 8 or 9% of that market. And so the next largest of our competitors is half our size. So there's a lot of potential there. Ancillary assets like port facilities and similar facilities in the food chain, if you will, of container shipping. And then also there's a lot of ancillary maritime related energy assets that we could potentially, Swiber being one example. But there'd be multiple examples in the sector. So we're looking at a very broad range of opportunities, things that we have some level of expertise in, either on the energy side or the infrastructure side, and operations.
Josh King:
After the break, David and I explore his career and what will happen with Seaspan moving forward. We'll be right back after this.
Speaker 8:
Our mission is to bring the world together through live experiences. We're focused on building a technology enablement platform for event creators, lower the fraction in cost of creating an event, and increase the rate of success for event creators all over the world. We're a global inclusive company and 11 different countries. This really marks a new chapter for EventBrite, and it feels like the starting line. EventBrite now listed on the New York Stock Exchange.
Josh King:
Welcome back inside the ICE House. Our guest today is David Sokol, chairman of Seaspan Corporation. We've been talking about his first year at the helm of the shipping giant. I want to go back to the beginning to Omaha, Nebraska, where you were born, David, the youngest of five siblings. What was your household like? And what lessons did you get from your parents that prepared you for your career?
David Sokol:
Well, it's an interesting question. The household, we were a lower income but not poor. The Midwest is a farming community in the Nebraska area. But my dad ultimately worked in a grocery store and my mom was a homemaker. I was the youngest of five. So I benefited or in some cases was punished for the acts of my older brothers and sisters.
David Sokol:
But what was interesting is my dad, his parents were immigrants to the US, and he just focused our attention on education. And on the fact that in America, you can do anything you're willing to work for. And so I never grew up thinking that there was anything that I wouldn't have the opportunity at least to try. And so we really grew up in a household of, "Get the education and be willing to work hard and you can do what you want to do." And so engineering became a natural educational process for me in the sense that I liked math and sciences in high school. And engineering seemed, from my perspective to give me a lot of options once I got out of school and-
Josh King:
Were the four kids before you engineers?
David Sokol:
I have two brothers that are, and two sisters that were teachers.
Josh King:
Your father had an interesting weekend habit that culminated in Sunday night dinner. What was that?
David Sokol:
Yeah, he clipped out of the local newspaper, the Omaha World Harold articles that he passed around the table every Sunday, and being at that meal was not optional. And so he would just talk about both entrepreneurial successes of individuals like Jack Baker or Abe Baker, who started a grocery store chain in the Midwest or Peter Kiewit who started one of the world's largest construction companies. But he would talk not only about... So from time to time, it would be, "Gosh, look how big this company's become, and he started it from nothing." But then it would be an article where Peter Kiewit donated money quietly to help a housing project in a poor part of the community. And he really focused on both of those things, that's what's neat about America as you can do whatever you want to do, but don't look government to solve problems, look to yourselves to solve problems.
David Sokol:
It was interesting for someone with a high school education and the son of an immigrant to see actually the realities as clearly as he did, was very helpful. My dad was a very practical guy. I'll never forget at the age of 13, sitting on a river bank at the Elkhorn River fishing for catfish, which was something if I could do with my dad was the best time of the year. And he explained to me that the reason we were doing this, this time was he wanted to share a thought with me. So I'm 13 years old and the thought was, "Look, you're going to go to college. You need to just understand that. And the second thing is, you need to figure out how you're going to pay for it." At the time, you're a 13 year old kid, you're-
Josh King:
It's pretty heavy stuff.
David Sokol:
Well, or you're going, "Yeah, okay, whatever." But then the reality is, and I think enough parents don't have that conversation with their kids today, because within six months, it actually... As I look back, I realize it became a thought process of, "Okay, I've got to start saving money." And so the various part-time jobs and that, that I had, and then full-time jobs, a significant amount, I just kept saving because I had dreamed of playing college football on scholarship. I did end up getting to play college football, but not on scholarship. But just the fact that he had that simple one time conversation made me realize nobody else is going to pay for this. In hindsight it was a pretty nice gift actually.
Josh King:
Your home state Senator Ben Sasse tries to impart a lot of the same values. And he recently published a book to that effect. Is this a quintessential Nebraskan attitude, or is this more fully the Midwest or just the way Mr. Sokol lives or Senator Sasse treats his kids?
David Sokol:
Yeah, well, I think there is a Midwest ethos that you pick up just... It's a community oriented place. it was very rural when my dad was young, obviously and it was pretty rural when I was young where people looked out for each other. And there was never really... Government was always looked at as a defense and in truly dire need. But beyond that, the communities... And you grew up with that belief that, we have an obligation to look out for each other. And I think that's a... I don't think that's just Nebraska. I think Nebraska's a great place because of that. But I've lived in Wyoming the last 20 years and that's a very similar type of thought process.
Josh King:
So at that Sunday dinner, would he come with the article already clipped, would you know it was coming, would you pass it around for reading and then comment, how did it actually go down around the dinner table?
David Sokol:
Yeah. He clipped them out during the week and then he would pass them around and expect you to read them while you're eating. And then when we got done before you had dessert, it was a conversation. It would only be two or three. But there'd be two or three that there was some point in there he wanted to make. And he could very... Normally it had something to do with the American dream or your community responsibilities. And then occasionally it had to do with them...
David Sokol:
And I remember one very graphic one in the sixties. I don't know, it wasn't from the newspaper, but it was an article just about the absurdity of the race issues we had and that, how could anybody not view humans as humans? And it was just interesting because as a kid, you learn a lot from your parents, either from what they do say or what they say. And I just remembered as an interesting time that in a largely white community, he was sharing a thought that was pretty important. But normally, frankly up in... I was probably mid high school years then. Well, not quite, I was eighth grade or something, and no one had really imparted those thoughts prior to that moment. And so it was that a discussion, which, I don't think families have enough of today.
Josh King:
Yeah. And I've spent a bunch of time in Omaha, Nebraska and the Omaha World Herald, the way it covered the business that I was once working for was pretty astute. And yet you look at the thickness of that paper, getting thinner and thinner, less and less advertising. Thank God for Warren buffet for basically rescuing the paper and keeping it alive. But the exposure that families and young people have to these stories is more difficult to find these days.
David Sokol:
Yeah, you're absolutely right. And even the Omaha World Herald, even though Berkshire owns it, it's also going the way that print press is going, which is I think unfortunate. But I think it's... The other thing that's unfortunate is that we now have too much news that. One of the things that the time's allowed in the sixties say, was for my dad to clip out two or three things during a week and say, "We should focus on these." Now we have this instantaneous mega information every day, all the time. I think, unfortunately it causes people to become more numb to issues rather than sensitized to them. It used to be... I remember my dad would complain that, "Well, it isn't enough to read these articles. You kids should go and get some books on some of this, and learn more about it." So he was frustrated that people didn't read the article and go read a book. As I got older, I got frustrated, people didn't even read the article, they just read the headline. And I think that focus, if you will, continues to get minimized.
Josh King:
And now they just read the tweet, David.
David Sokol:
Yeah, exactly.
Josh King:
A decade ago, you published something called Pleased, But Not Satisfied to share your advice farther than just a Sunday night dinner table. The title refers to the state of mind that's required to run a business. I was struck as I read your close to the quarterly call just this quarter, you said, "I can summarize the board's view in the first nine months of the year. We are very proud of what Bing and his team have accomplished. We're very pleased with where they are today, but both we, and they continue to be unsatisfied in the sense that we have a lot of activities yet to complete, and we can get a lot better." So theme has really run throughout your life until a couple weeks ago.
David Sokol:
Yeah. And it will continue to. My daughter would tell you that she wished that I had never come up with that phrase. But to me, that's life. If you ever just truly satisfied with what you've done, I think you stop growing and you stop getting any better.
Josh King:
The book outlined your six business commandments to creating long term value in any enterprise. But coming from Mid-American and Berkshire Hathaway. What experience did you have in investing in the shipping sector prior to joining Seaspan?
David Sokol:
None.
Josh King:
And how did you get up to speed fast?
David Sokol:
Well, I was on the board of the Washington Family Companies, which is a family owned private set of companies, but a very significant asset base. And one of the investments that Dennis Washington had made years ago was the founding dollars for Seaspan. And in 2016, he had asked me to take a look at a concern he had regarding the situation at Seaspan. And that was really my first introduction. And so to be able to give him a thoughtful answer, did the research I could do on the company and the particular question he had. And that was really my first introduction to Seaspan.
Josh King:
The research paid off earlier this year, Prem Watsa Watson's Fairfax, financial improved its investment in Seaspan over a billion dollars. Let's listen to why prem doubled down on your company.
Speaker 9:
We came up with the idea that this was a terrific platform for David. If he converted the warrants into equity, that's $500 million and keep that the bench of $500 million. So it's a billion dollars. One of the biggest investments, that David and the management team for Seaspan would be in a tremendous position to consolidate the industry. And that's the reason we did it.
Josh King:
He gave you this big investment, but not without some strings attached, what's it like working with him and his team?
David Sokol:
Well, Prem is like, I think a lot of great investors. And there aren't a lot of them. But he knows how to apply pressure. He gives you a very free hand to do what you talk about doing, and then he holds you to what you said you do. So he is a very smart man and very decent man. But once he makes a decision to back a group or a business, it's a lot more than me. I've known Prem for some time, but he understands the quality of Bing and our entire team, and he understands the opportunity that we have. Like I said, he's very similar in a lot of ways to some other great investors. I've known Mr. Washington, Walter Scott, Mr. Buffet, once they place a bet, they know how to gently apply pressure to you.
Josh King:
How often is your contact with him? How do you give him updates about what's going on?
David Sokol:
Well, he has board representation on the company. We have a small board, I reduce the size of the board to a very functional operational board of seven. Great, great individuals on it. They all do an excellent job. They stay very engaged in what we're doing and provide for a great policy board. So he gets obviously information that way. But he won't hesitate to pick up the phone and nor will I hesitate to pick up the phone to him about an opportunity or an idea or a thought. Working with great investors is something you learn, is that dialogue is incredibly important because every opportunity we look at may not happen. But it's an opportunity to learn from each other. And one of the things I learned at Berkshire is that every... I insisted when we sold 80% of our company to Berkshire that we had a board of directors still.
David Sokol:
And Warren's actually not too fond of that notion, but he agreed to it. And my reason was, "Look, I think I'm pretty good at what I do. But every idea I've had has been made better by a discussion with my board." Prem very much works on that same basis. So we communicate quite often. He doesn't expect a lot of reports in that, but he'll call when he sees an opportunity that might be out there or, I'll call him just to discuss a structure or something. And frankly, you couldn't pay for that kind of expertise.
Josh King:
David Sokol, chairman of Seaspan Corporation here at the New York Stock Exchange for his investor day. Thanks very much for spending a few minutes with us in the ICE House to talk more about your strategy.
David Sokol:
It's been a pleasure. Thanks for having us.
Josh King:
That's our conversation for this week. Our guest was David Sokol, chairman of Seaspan Corporation. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question, you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @NYSE. Our show is produced by Pete Ash and Ian Wolf with production assistance from Ken Abel and Steven Porter. I'm Josh King signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
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