Hello everyone and welcome to another edition of the Well-Read Investor, the podcast that profits your mind and your money.
We’ve got a really fun and interesting guest this week in Tyler Maroney, a former investigative journalist who today runs his own highly successful private investigation firm. His recent book is The Modern Detective: How Corporate Intelligence is Reshaping the World, about the role private investigators play in global commerce, government accountability, and legal disputes. A Fullbright scholar, Tyler has produced films for Frontline, was a reporter for Fortune, and has written for The Wall Street Journal and The New York Times.
Tyler’s work is where all the juicy details hide—corporate scandals, cover-ups, dirty dealings. His book is not only an adventure into those sordid details, but also reveals a perspective not common enough today: what “due diligence” work really is. Due Diligence is a term investors throw around all the time—its premise is to uncover any relevant issues, considerations, or problems that might arise from an investment. (At one time early in my career as an investment banker it was explicitly my job, in fact.) In truth though, I find it a topic that gets a lot lip service. SEC documents don’t often cut it. Superior investors ask countless questions, they ask “why”, they look at issues differently than others and find creative ways to get at the not-readily-visible-truth. Our credulousness is often our downfall—I’m often amazed at what we believe about the world just from a tweet or a random story we see. Someone like Tyler asks, “how do you know that? Can I corroborate what you claim? And who are you, this person making all these claims anyhow?”
We need more of that than ever today, and that’s why Tyler is on the show.
And the last bit of housekeeping, if you enjoy the show follow us on social media for book reviews and so much more via twitter @wellreadpod and Instagram at @wellreadinvestorpod or just google the Well-Read Investor to see what I’m reading, reviewing, and talking about week in and out.
Without further ado, here’s Tyler Maroney. Enjoy!
Mike Hanson (02:28):
Tyler, welcome to the Well-Read Investor. Thanks again for being on the program.
Tyler Maroney (02:31):
Thank you for having me, Mike,
Mike Hanson (02:34):
And we talk a lot about different approaches to investing on this show. And one thing that I say to just about all my analysts is, private investigation and the work behind that has a lot to do with investing. It's one of the things we really want to get into with you, but your book, The Modern Detective, tell us about how you came to write it, why you wrote it, for our listeners, what it's all about.
Tyler Maroney (02:53):
So I have now been a private detective for 15 years. Before that I'd been a journalist for 10, and it's funny when I was a journalist like many other reporters, I always wanted to write a book, but I never had anything to write about. I had to leave journalism to find that. And having been a private detective for about 10 years when I came up with the idea for the book, I realized that I'd suddenly been given a front row seat, so to speak to a fascinating world that I feel like most people either do not understand or don't have access to. And in many ways I wanted to just peel back the layers a little bit into the world of private investigations because I worried a few things. One is that people, when they hear the phrase private detective or private investigator, that they are kind of overwhelmed with the stereotypes of the trade, for better or for worse. And I wanted to kind of set some of those straight. But the second is, I was lucky enough, to work on projects that quite literally are on the front page of the newspaper every day or some of the biggest legal battles around, and I wanted to try to find a way to show how this all works from the perspective of the private eye. I thought it would be an interesting vantage point to tell some of these stories.
Mike Hanson (04:03):
You mentioned you were a journalist, so how did you get into this world?
Tyler Maroney (04:07):
My first job in journalism was as a fact checker, which turns out to be a really valuable job to have, and one that I recommend people get into, although it's a dying breed, there are very few fact-checkers left, unfortunately. Anyway, fast forward 10 years, having spent time at Fortune and the New York Times and producing films for Frontline on PBS. I got really fascinated with investigative journalism, which I very much distinguish from traditional journalism because investigative journalism to me and to others is really about finding and exposing hidden information, with the goal of hopefully doing something for the world that benefits us all, for example, exposing corruption or financial fraud. And that for me very much gave me a purpose as a journalist, although I was doing it as a freelancer. And quite by accident met somebody at Kroll Associates, which is the most well-known corporate investigative firm ever, formed in the early 1970s by Jules Kroll. Who many of your listeners I'm guessing have either come across or have heard of their time. And I was very fortunate to work with Kroll for about five years and learn much more about doing investigations than I ever had as a journalist.
Mike Hanson (05:14):
Would you start into investigative journalism the way that you have, if you had to do it all over again?
Tyler Maroney (05:20):
I would start as an investigative journalist. Because the problem with, as a journalist, if you're a generalist, which is what I was. It's fun, but you never really know where your next story is coming from. So one week I'd write about diplomacy the next week, I'd write about the New York Knicks. The following week, I'd write about some art collection that I was fascinated with. And it just felt a bit like I didn't have any real focus and investigative work really helped. If I ever go back to journalism, which in a way I did by writing this book, I'd be a much better journalist having done private investigative work. So when I meet young, want to be journalists, I often encourage them to go into my field with a goal of going to journalism once they learned how to do the work as a private detective.
Mike Hanson (06:01):
And now you've got your own investigative firm. I want to talk first about the client themselves. I mean, when you talk about corporate private investigation, who comes to you and do you vet client? You must decide who you take on and you don't, tell us about that.
Tyler Maroney (06:15):
Well, first let me just give you an overview of the types of clients we work for. And the answer is nearly anyone. But by that, I mean everything, everyone from, sovereign wealth funds to individuals. Law firms are traditionally the way that we attract cases because lawyers, whether they be corporate lawyers who are doing a deal, or litigators, they know where the deals and where the disputes are. And so they're the ones who often understand that they need a private detective or a forensic accountant or some other kind of expert to help them gather the facts before they can either make the motion in court or make an offer for a business, say that they want to acquire. So it's largely through lawyers.
Tyler Maroney (06:55):
To quickly answer your question about our due diligence on our own clients, most of the companies in my field are opportunists and I don't mean that in a negative way, but they take what comes to them. And we have very much decided that we're going to do big corporate investigations and by corporate, I mean, often our clients are from the corporate world, like large companies. If possible, those that benefit the public interests. So for instance finding evidence of a financial fraud that is say, gumming up the markets, or showing a conflict of interest between a politician and a donor, in that sense, helping bring transparency to the political system as well.
Mike Hanson (07:34):
Probably the most fascinating chapter in your book to me was Due Diligence in which you talk about several things, but among them hedge funds and some of almost like corporate activist types of things, I mean it's fascinating.
Tyler Maroney (07:44):
In many ways it's the most interesting work that we do. And also the work that distinguishes us from the stereotype of the private eye who is investigating infidelity or something like that, that you might see in film noir. So, hedge funds, private equity firms, large companies, investors broadly, routinely use private detectives, not for what people often call corporate espionage. Like I hate phrases like that, but for real fact-finding to help them understand the landscape in anticipation of some kind of, either a hiring scenario or before a deal. One example that I do not include in the book. We were once hired by a hedge fund that wanted to take a position in a foreign mining interest. And they didn't know much about this. They had plenty of very smart analysts who could go through regulatory filings and look at databases like Westlaw and Lexis, but they needed some people who could actually get out and try to talk to people.
Tyler Maroney (08:42):
And so we found some former employees of the company and we asked them some general questions about the management of the firm, any prior controversies. And we noticed that many of the employees didn't mention one of the mines that we were interested in. And so we decided to actually send some of our people to that mine. And when we got there, we discovered that it did not exist. There was literally no mine in the geographic location where the company claimed that it had. And what's interesting, there is that, that didn't end up as part of a lawsuit or anything. It's simply informed our client as to the transparency and the honesty of the target. Look, their mining company was real, but it was not as forthcoming with its own investors that it claimed to be. So in that sense, to use a well-worn cliché, kicking the tires of the car our client wanted to buy and found out that one of the tires was missing. So they decided not to make that investment, ultimately. It's a bit of an extreme example, but it, I think shows the value of the kind of work that we can provide.
Mike Hanson (09:41):
Your work transcends borders, tell me a little bit about a team you would assemble and the types of people that you assemble for this type of work?
Tyler Maroney (09:48):
It's a great question because it’s really about the right team. Years ago I was on a client who wanted us to investigate possible wrongdoing in Kazakhstan and we all said, Oh, sure, we've got people in Kazakhstan, and we hung up the phone and we looked at each other and we said, does anybody know anyone in Kazakhstan? And what we realized is that we need to make sure that we are always working with people who know the landscape. And in that case, it might have been somebody who spoke the local language, who was from there. So language is one very important qualification for the business, because if I am hired to do due diligence on a company in in Beijing and we don't have anybody who speaks Chinese, then we simply are not qualified for the job.
Tyler Maroney (10:28):
The second is technological savvy. I cannot stress how important this is these days, to understand where information lives online. And in this case, it might mean finding evidence of an anonymous posting online. For instance, we often do work for companies that feel that they're being wrong by a short and by the way, I actually think that the short sellers can be brilliant. But, in this case, we have a situation where a company feels that there is a Tweet, for instance, that is badmouthing their company. And they want to know who is behind this Tweet and being able to have employees who understand how Twitter works, how information spreads online, whether it's real information, whether it's bots, whether or not there's a true narrative online or whether or not that narrative has been manufactured by some adversary of yours or by someone who is trying to make a quick buck. In terms of hiring, obsessiveness and neuroses in all seriousness are excellent qualities in our work, because you never want someone who is a check the box thinker in this kind of work. And we have academics on staff. We have a former prosecutor, people who come out of the labor movement, people who work for some of the exchanges. So they have financial sophistication, as well as former investigative journalists. It's a real mix.
Mike Hanson (11:41):
The common thread are people who are very curious, and are willing to not just take something at face value, and I find that to be true, of course about investing as well. How much of it truly is though data oriented, is it very data intensive? A lot of this work?
Tyler Maroney (11:57):
Increasingly it is. And that's largely because we put so much of our lives online. And I think when people hear data, they often think, billions of bytes of data that you have to comb through with special software. And that is true, every time someone posts something online, that is another data point that can be collected and that probably is never going to disappear. We have to know how to find that information and what it means. But beyond social media, I mean, data is a huge part of it. And we've done projects for investors who were interested in the housing market and were able to write scripts and scrape housing data, information about prices and about deeds and mortgages and analyze that data in a very smart way that many investors do as well.
Tyler Maroney (12:41):
Never trust the official record. And the obvious example of that is, if you're doing an investigation into say police misconduct, and you're able to prove that a police officer lied on the stand, or lied in a statement in an affidavit in anticipation of an arrest. But this applies to the investing community as well. We spend a lot of our time in SEC filings, and I just want to encourage people to remember that just because it's stated in an SEC filing doesn't mean that it's true. And not only could it not be true, but it may not have been checked. And it may have been intentionally placed there inaccurately, and there also may be omissions and misstatements. And I think having that contrarian view towards official documents really does help you learn to be a better investigator and a better investor.
Mike Hanson (13:27):
That’s really what our world is, and the SEC is usually chronically understaffed, which I think is another reason why your business is taken off. One of the things that I hear you say a lot, and it's in the book is that, private investigators are not what you think. And we're doing this by video and I can corroborate, you're not dressed like Magnum PI, all those stereotypes are what they are, but, you do talk a lot about sort of the psychology of getting people to cooperate, getting people to give information and just sort of become your ally.
Tyler Maroney (13:55):
I'll give you one quick example from a personal experience. Years ago, I was door stepping, which is a silly term we use in my industry, which means showing up unannounced at somebody's house or work to talk to them. So I showed up at this woman's house. It was in the evening on a Sunday night. And I knocked on her door and she came to the door and she said, who are you? And I said, my name is Tyler Maroney, I'm a private detective. And before I even finished the sentence, she started laughing at me. She said, you are not, she couldn't believe it. I was wearing a suit. So I might've looked like a federal agent or something. But she thought I was selling something as opposed to being exactly what I told her that I was. And I told her, it's true. I really am. You can look me up on the web. And I gave her my business card and we had this back and forth in between her screen door, we were talking through, and after five or 10 minutes of kind of joking about it she let me in, and we talked for a couple of hours. I gave her the opportunity to ask me questions, because I didn't want her to feel like I was intimidating her or asking her anything inappropriate at all. And if she had simply said, I don't want to speak to you, I would have thanked her and left.
Tyler Maroney (14:57):
There is often this assumption that to get someone to talk to you, whether it's a source or a witness, that you have to use either deception or aggression and my experience, is the opposite. Is that if you kind of go through the front door with transparency and honesty then you have a much better chance of success. Now, I don't come out of law enforcement. But, my experience is that if you're honest with people, there'll be honest with you, even if that means they don't want to speak to you.
Mike Hanson (15:24):
If I've learned anything from psychology, it's to be skeptical of all these methods of facial recognition of emotions, or if they said this or act this way, because there's just a million reasons, of course, somebody may be behaving some way, and really a rapport and transparency is often the best way to go. In fact, in a funny sort of way, it's similar with investments because trust with a client is all about transparency and all the rest of that. So over the course of the last year or so with the pandemic, how has that affected your work?
Tyler Maroney (15:50):
There was a terrible fear that the industry was going to collapse, like almost any industry I think, but what we learned quickly was that we are a crucial part of the investing community and of the legal community as well. The obvious answer to the question is that we cannot go out into the field as often as we used to and do interviews in person, which is always the best way to do them, because you can really show people who you are and get to know people and develop relationships with them. It's interesting, Mike, that people are home all day, these days, and we find that people actually are willing to talk. And we've been doing many more of our conversations, for investors or for litigators over FaceTime or over Zoom or some other platform. And in a way it reminded me that people want to connect and I want to tell stories. And so, although we have not been able to be in the field as much as we would've liked to have, we've been able to connect with as many people as we would have previously.
Mike Hanson (16:44):
Fascinating answer. My wife is a clinical psychologist, she's had to move to mostly Zoom meetings for a client consultations. And one of the things she'll say is that the client relationship does change a little bit, different types of people share a lot more or less. One thing I wonder about today is just the degree to which we are sort of becoming paranoid about all sorts of things, facts, and what's real, and what's not, do you have any general observations in years of working with clients about, are people paranoid, not paranoid enough? Should they ask more questions?
Tyler Maroney (17:14):
It depends on how dramatic a definition of paranoid do you want to use. I mean, I actually think a little bit in paranoid is a good thing because it allows us to kind of think a little deeper, dig a little deeper. But, the truth is that the rise of social media in the last decade or so, we are bombarded with so much in terms of false narratives, disinformation, misinformation. And I distinguish between the two, disinformation of course has information that is intentionally put out there. And misinformation is information that is then perhaps unknowingly shared that is false, that continues to spread and amplify. I think that there is a sense that we are more paranoid than we used to be.
Tyler Maroney (17:55):
And I don't have any data on this yet, but anecdotally clients come to us often out of paranoia, and I don't mean that they are insane. I just mean that they are worried that there is something out there that's affecting them in a way that it may not be as seriously. And actually one of the things that I like about my job is even though I pitch myself as a fact finder, I often find myself having to hold the hands of my clients and to sometimes say, we've done this investigation, and we have found that there is no evidence that that the group of people in the world that you think are coming after you are actually coming after you, for instance and to be able to say that, not just as a matter of opinion, but to present to them a report that's got well-sourced details about our investigation and to say, don't worry, everything's going to be all right, is a remarkable place to be in.
Mike Hanson (18:47):
How often do you have difficulty with clients accepting your findings? I've heard investigators say, well we don't give you our opinions, we give you what we found.
Tyler Maroney (18:55):
It’s not uncommon that the client will say that they're disappointed in what we found, that the facts are disappointing them because they just want to get the deal done. And that we are the bearer of bad news sometimes. And it's disappointing to be in that situation, but also it feels good to be able to stand by, this is not our opinion in this case, like we will provide the primary sources, showing the evidence of what we found. And ultimately the client will reflect upon this and realize that they were glad that they ended up doing this due diligence, because if they had gone forward with the deal and discovered later that they were in bed with a felon, then they're in trouble.
Mike Hanson (19:31):
This is a podcast about books and reading, and I did hear you in a different conversation saying that you liked some of the classic sort of pulpy old time, private investigator stories, and I'm a huge fan of all those too. Tell us about some of your favorites and what you like to read.
Tyler Maroney (19:46):
The two best, I think are, clearly Raymond Chandler and Dashiell Hammett. The big difference is that Dashiell Hammett was himself, a private detective. He was a Pinkerton for five years. And so his fiction very much comes out of his own experience. While Raymond Chandler was an accountant for an oil company, no experience as a private detective, but he was a beautiful writer, he wrote the most beautiful literature of the brand. But James Cain is another one. I mean, there's so many good classic, hard-boiled detective writers from the twenties, thirties, and forties that are worth reading because in many ways they encapsulate what America was and wanted to be at the time. I mean, think about it, in the twenties and thirties, the United States was going through a serious economic downturn and people were struggling and the private eye represented that kind of lone wolf, the cowboy that was going to help bring the truth back. And in that sense, I really admired reading that. You not only learn about fascinating private detective stories, but you learn about American history and about the American character through many of those books.
Mike Hanson (20:46):
I totally agreed. Noir fiction in particular is a very American category and those are some of the best stories for it. One thing I was struck by though that back in those days, so many of those stories were about insurance fraud and investigators would just go through insurance fraud and just tells you that things don't change. So what is next for you? Are you going to be working? Do you have another book you think you might want to do, or are you going to do any more journalism?
Tyler Maroney (21:07):
Yeah. So I continue to run with my partner, Luke Brindle-Khym at QRI, our investigative firm. I'm actually look considering writing a book about the concept of risk, which is interesting. And many people have used the phrase risk mitigation to describe the work that I do. But I'm interested in extreme risk, people who say gamble billions of dollars or climb free solo a mountain without ropes, right? Like people who take extreme risks, whether it's with money or with their lives, or with their health, to see if there are patterns among and between people who take those kinds of risks. And the investing community, you could argue that people are taking risks every day, I mean, thousands of risks, because you just cannot predict the future. And I'm fascinated with this idea of well calculated risks and how do we calibrate them better?
Mike Hanson (21:54):
We of course have many, many views about that over on the investing side. And one of the things we say is that even for the long-term investor, there is a huge amount of anxiety and payment you have to make for the risk, because if you're an investor for 10 plus years, you have a pretty good chance of coming out better than you started. In fact, a really, really good chance, near a hundred percent. But that doesn't mean the risk is zero because even with all of that the emotional toll of the entire episode of sitting through markets for 10 years, for example, gets people who took on certain amounts of risk. And then all of a sudden don't want it anymore. And my observation is that risk preference changes based on the environment for a lot of people. And it's one of the things we faced the most over on this side. Any closing thoughts, Tyler for investors, or just anything that you know, as a closing thought you might want to say about your profession? We’ve so much enjoyed having you here today.
Tyler Maroney (22:39):
Well, I just want to thank you. I think that it's often the easy way to say that our field, meaning the private investigator field, is used by investors as in due diligence. For those outside of the fields, that means understanding your partners before you get into some kind of relationship with them. I can't stress enough how much I appreciate being brought into those conversations with investors, because the ones who do that often are the ones who really think hard about the long-term viability of their investments, and to bring in partners like me feels like a real honor. And I've learned so much from people in the investing community about not just how the business world works, but about economics and about the political system. And I find, as you described often, like being someone of a liberal arts background in many ways that these kind of cross disciplinary conversations are really inspiring. And so thank you for that.
Mike Hanson (23:30):
I find the same that birds of a feather, if people who are very diligent probably require a lot of due diligence and there's a lot of things to learn there. Well, our guest has been Tyler Maroney. Tyler, thank you so much again for being on, and we look forward to talking to you again into the future.
Tyler Maroney (23:45):
Well, that was our conversation with Tyler Maroney. While the work of corporate private investigation has gotten somewhat obscure these days with rabbit holes of accounting, technology, and other esoterica, Tyler really brings it back to that human side—communicating with people effectively, often being open an d transparent versus obfuscating. Great to speak with him and we look forward to his next work.
Join us in two weeks on March 17th as we have comedy writing legend Gene Perret on the program. Gene wrote countless jokes for Bob Hope, Phyllis Diller, and so many of those comedy icons. He wrote for the Caroll Burnett Show, Laugh in, and so very many more. If you watched a sitcom in the 60s and 70s, then you know Gene. As is often the case with the Well Read Investor, investing wisdom comes in strange forms. And there is so much to learn from Gene, who’s philosophy of comedy (much like investing) means seeing reality more clearly than others and expressing surprising observations about it—because that’s where the humor is, and the useful investing knowledge, too. Look forward to that one on March 17th.
Until then, may all your reading profit your mind and your money. Take care.
Investing in securities involves the risk of loss, past performance is no guarantee of future returns. The content of this podcast represents the opinions and viewpoints of Fisher Investments, and should not be regarded and personal investment advice. No assurances are made we will continue to hold these views, which may change at any time, based on new information, analysis or reconsideration. Copyright Fisher Investments, 2021.