Russell Lau loves numbers. He loves the undisputed truths that they hold. Whether he’s striving to help people in Hawai‘i secure a loan for their first home or helping a powerful nonprofit boost its investment earnings by over $200,000 a year, Lau analyzes the trends and lets the numbers guide his decisions. It’s the foundation of his success as vice chairman and CEO of Finance Factors, a financial services provider his father founded with other partners in 1952. With his wife, one of Hawai‘i’s top executives, by his side and grown children who have inherited their parents’ business acumen, Lau also finds life lessons and personal rewards through his service in the nonprofit sector.

How did you get started in finance?

I went to college in the 1970s, a time when business was considered bad. The Vietnam War was raging, and the military industrial complex was an evil organization. Yet I had a hankering and an appreciation for business. I looked at business from the standpoint of facilitating commerce and helping people. If businesses survive, people get hired and have jobs, which helps them make ends meet and provides a meaningful life. I looked at business as completely different from the protests out in the streets.

I could see how financial analysis could help make constructive, logical, rational decisions. I like the analytical part of business, making determinations based upon how the numbers fall out. I’ve always been a numbers-oriented individual. I found that by sitting down and putting things to paper, doing the calculations, I could figure out the right thing to do.

Getting involved in business was a way to solve problems. I had a philosophy—you could either work really hard for your money or you could make your money work really hard for you. My goal has always been to find ways to make my money work hard for me. I’ve always been a hard worker, working long hours, and now I do a lot of nonprofit work. But in the early days, I was saving every nickel and dime to pay for my wedding and my first house. I put my money to work and became an early investor.

What was your strategy when you first started investing?

I was in Northern California, and I was buying real estate early on. I was 25 when I bought my first house. I bought my second house three years later, a duplex in San Francisco. I lived in one unit and rented out the other. I was able to obtain a permit to convert it to a condominium, renovated the place and ended up selling it off as condominiums. I was working in banking for Security Pacific Bank at the time, dealing with Silicon Valley companies in the early 1980s. After that I was recruited to come back to Finance Factors.

When you look back and analyze your first investments in real estate, do you feel it was a good move?

I wish I had been fired from banking because then I would have stuck to real estate. I would have made a fortune.

Instead I was relatively successful in banking. Real estate was my hobby.

Do you still see real estate as a smart investment today?

That’s a tough call. I have three kids. One has been involved in real estate since she was 22. (She just turned 30.) I got her involved in real estate in Boston right after she graduated from undergraduate school. She’s done very well with that. She probably made $300,000 off of that property. I remember when she was 24, the building caught fire, and she was sued because she was on the board of the condominium association. She ended up rebuilding the building, a $10 million rehab of the 100-year- old, 10-story building. Then, when she applied for business school and had to write her essay, she wrote about the experience. I assume it helped her get into MIT.

Now, should millennials be buying real estate right now? It depends upon on what community or town you’re in.

San Francisco has a frighteningly expensive real estate market right now. The prices are so high, but in the Midwest, real estate is so cheap that owning is cheaper than renting. So, why not?

How about the real estate market in Hawai‘i?

I would have to say for Hawai‘i residents, buy if you can get the down payment. Even when the market turned down in Hawai‘i, it still maintained most of its value. If you hold Hawai‘i real estate long enough, over the long run you’ll come out ahead.

Finance Factors does conforming mortgages—the Fannie Mae and Freddie Mac—but we also do the loans where income isn’t high enough and there aren’t enough funds for the down payment. For millennials in situations where their parents have equity in their house, we can take the acquisition property and the parents’ house with some equity and combine the two properties into the loan. The millennial will be paying the mortgage, and the parents may have to cosign. That’s our niche. For Hawai‘i, where real estate values are high, we fill that niche for the people who are non-conforming. Our value proposition is that we help the community by providing loans that others can’t or won’t do.

It’s a way to help people reach their financial goal of home ownership. My daughter is a good example. Initially, I had to put up the down payment and cosign the loan. When she refinanced, I came off the loan, and she paid me back the down payment. That’s the ideal situation.

Do you foresee a second housing bubble fueled by subprime loans?

I don’t see it so much here in Hawai‘i. We are playing it pretty straight and conservative. All the Hawai‘i banks are akamai—they are smart and know what they’re doing. We don’t see that liar-loan type of market anymore. The noincome, no-documents, no-problem loans don’t exist in Hawai‘i. But on the mainland, there’s a movement toward pushing those types of loans again. In fact, even the Federal Home Loan Banks, Freddie Mac and Fannie Mae, are encouraging bankers to look at some types of non-conforming loans, which may increase their risk profiles.  What should someone with a stock portfolio do to avoid loss if there’s another housing bubble that does burst, bringing financial markets down again?

The whole market went down by 40 percent. In that case, don’t panic. I know people who timed the market, sold their portfolio and avoided the 40 percent decline in the stock portfolio. They looked really good at the time, but may not have reentered the market. What happened is the market not only recovered, it has grown considerably from where it was before. If you had sold when the market was down 40 percent, you would have realized your loss, and you would permanently have that 40 percent loss. If there’s a strong market correction, don’t panic. Wait it out. The market almost always recovers. That’s been the case—knock on wood—over the last 20 years.  Did you have a mentor, or did you have to figure things out in the finance industry on your own?

You have to figure it out yourself, but I’ve been blessed. My wife is my biggest advisor. I have to listen to her—she makes way more money than I do. I’m blessed to have a very smart insider who I can bounce some of my wild ideas off of.

When I first got started in buying real estate, this one fellow told me that when you’re buying a house, don’t buy a single-family home, buy a duplex or quadplex. When you buy a multi-unit building, you will learn more about real estate because you will be on the management side of it. You will also be able to depreciate and take advantage of the tax benefits by having a piece of property you’re managing, getting real estate to make money for you. That’s advice I pass on to my kids.

At what point did you transition from working on your business to working for volunteer and nonprofit boards and why?

I’ve been involved in nonprofit work since the early 1990s. I got involved initially because of my kids. I joined all my kids’ school boards, which gave me insight into what was going on in their schools. Then I got into other nonprofits that aligned with my passions and values.

The true benefit of working for a nonprofit is that you learn about what’s going on in the community. It’s a great way to learn business skills and practices, things you can’t learn any other way.

I listened to General Norman Schwarzkopf give a talk once. He said that in war, if everyone was to do what is in their personal best interest, the logical thing to do is run in the opposite direction. A true leader is someone who can get the troops to attack the people shooting at them and put themselves in harm’s way. True leadership is getting someone to do something that is not in their personal best interest, but in the best interest of the community.

When you join a nonprofit, not only are you getting people to work for free, but you’re also getting them to make donations. How is that in their best interest? You have to make their contributions of time and money fulfill a higher calling. That’s true leadership. You learn a lot about leadership skills, to be wiser and more diplomatic.

It also gives you an opportunity to experiment. Sometimes one style of leadership might work, and other times another way might work. You learn different styles and use those styles in different situations in the business world.

When I see issues not being handled properly, I can make recommendations on how organizations need to improve their governance. And when I run my own organizations, I hope I can run them properly. It’s good insight on how things should be done.

When it comes to investments and finances, give me a Do and a Don’t.

Do buy real estate. Don’t sell yourself short on what you can do. You might have to work really hard and make certain sacrifices, but if you do the right thing in the right fashion, you can be very successful. I don’t think it’s hard for you to become the millionaire next door.

What’s it like being married to Connie Lau, the CEO of Hawaiian Electric Industries? Do you feel like you’re in the public eye with her? How do you balance work and family life?

The smartest move I’ve ever made was marrying my wife. People assume I know what she’s doing, and the truth is I don’t. We don’t talk business at home. I don’t know what her companies are doing, and she doesn’t know what my companies are doing. She runs a publicly traded company and can’t provide information, and I do certain things that are confidential as well, so I can’t talk with her about what I’m doing. I have to read about what she’s doing because she won’t tell me what’s going on. We are one of the lucky ones who have a great marriage. As CEOs, we understand being in the public eye, but we don’t let it interfere with our family life and our relationship with our kids.

That’s what is most important to us, and we share the same desire to have a strong family and raise great kids.