I have wanted to do a column on Michael Farr, president of the Washington investment firm Farr, Miller & Washington, since I saw him on CNBC a few years ago. The guy is on television all the time, a talking head saying something that has nothing to do with politics — and he’s from our own back yard.
I pinched him at a Christmas party back in 2008 and started peppering him with questions (What are the CNBC hosts like? Got any good investment ideas? Is the world coming to an end?).
I learned enough — he is a Chevy Chase native who attended Gonzaga High School and graduated from the University of the South in Sewanee, Tenn., where he studied Shakespeare, Dante and the great poets — to know he was worth a write-up.
So how did someone who quotes from “Henry IV” and “Macbeth” end up managing $800 million worth of investments for institutions, governments and wealthy individuals?
“I got a job out of Sewanee teaching English at a private New England boarding school called Pomfret,” said Farr, 51. After three years, “I decided I was not going to be able to teach ‘Tess of the d’Urbervilles’ for the next 50 years, so I decided to try the most difficult thing I could think of, which was Wall Street.”
The biggest parts of success are initiative and persistence. Farr is a perfect example. He put himself forward.
“Just ask,” my wife, Polly, always tells me.
“I called some of my students’ parents, who were on Wall Street,” he said. “The majority of the wealthy kids I was teaching had a bunch of Type A parents on Wall Street. When the 11th- or 12th-grade English teacher calls and asks a favor, these parents jump.”
He landed a stockbroker’s job in his home town of Washington, working for Richmond-based Wheat First Securities. He started selling at an office on 25th Street and Pennsylvania Avenue NW. It was early 1989, right after the big crash.
“I remember the first call, where I called a man about mutual funds,” said Farr, who was 26 at the time. “I was so thrilled somebody hadn’t hung up. He asked me two questions, and I answered both of them. Then he asked me a third question. He wanted to know the fund’s fees. I had no idea, and I panicked and hung up.”
His leads for calls came wherever he could find them. He would call alumni directories, troll the Yellow Pages. One day, his boss dumped a stack of three-by-five cards with names left by a recently departed broker.
Eventually, Farr earned a name for himself. In 1990, he joined Alex. Brown & Sons, an investment bank in Baltimore. His salary and commissions went through the roof.
After six years, he was approached by two senior brokers in the firm — then 75 and 77 — who wanted to start their own firm instead of retiring. If Farr would put up the money, find the office space and staff it, they would supply their client lists.
Why, I asked, did you give up a high-paying job to start your own firm?
“I was paying a lot in taxes every year and helping to build the equity value for shareholders of Alex. Brown & Sons. I figured if I own my own company, the value grows, tax-deferred, because I own the asset rather than everything getting taxed as earned income.”
Farr’s partners, Miller and Washington — 94 and 92, respectively — report to work every day. The firm has 17 employees, and Farr’s fees average less than 1 percent. Farr owns 78 percent of the company; there are eight or so other owners, as well.
I am sure he makes a pile of money, but he also gives a lot away. He has raised millions for Sibley Memorial Hospital and other charities.
I followed up where we left off at the party a few years ago, throwing some questions at him over the phone instead of over a holiday bourbon. Here they are:
Tell me something about the hosts on CNBC.
The late host, Mark Haines, would sit at his desk on Squawk Box. He didn’t talk to me. He was wearing sweatpants and topsiders, and he ate from a box of Cheerios, shoveling handfuls, doing the New York Times crossword in pen and completing the thing during commercial breaks.
What does it take to be a smart investor?
You don’t have to be a genius. But you can’t be an idiot. You have to be trustworthy. If you recognize that you cannot predict the market, you have to invest the money so that it’s prepared to both endure and enjoy an upturn.
What is the single best investment book you recommend?
“How to Buy Stocks” [by Louis Engel] is excellent on the basics.
Are you a buy-and-hold guy?
I am a buy-to-hold guy. I like to hold stocks for a minimum of five years. I really don’t trade much at all.
What’s going to happen to the markets in the next year? Five years?
The next 12 months are always unpredictable. There’s never any way to know what will happen. Over the next five years, I expect markets to move higher.
What’s the biggest mistake investors make?
They invest emotionally — they invest when they feel good and sell when they feel bad. This is the opposite of what they should do.
Should I continue to have faith in the U.S. economy’s ability to grow?
Absolutely. For all of its problems, the U.S. has property rights, an educated workforce, and a hardworking, determined population. Free markets and capitalism prevail through good times and bad.
Are we going to fall off the “fiscal cliff”?
Definitely maybe. I doubt that we’ll fall off. I expect Congress to delay making decisive moves as long as they possibly can.