Patrick Donohoe

Private Investment: Ask Better Questions, Do Better Due Diligence With Mauricio Rauld

TWS 5 | Private Investment Due Diligence


Investing is a fickle business. There is so much in line that when you fail to do your dues, you could end up in a bad position easily. While the world has become so advanced and giving (opportunity-wise), especially in the private investment world, it still helps to gain a better understanding of what you’re facing ahead. Patrick Donohoe brings in Mauricio Rauld of Premier Law Group. With more than a decade in the business, Mauricio has seen the good, the bad, and the ugly when it comes to deals. He shares his perspective with us, along with questions and insights, that will help improve the way we ask questions and do our due diligence on private investments. Mauricio guides us to understand the accountability structure, value proposition, and the principles of the business at a high level. Don’t miss out on this great conversation, and remember that good business equals good investment.

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Private Investment: Ask Better Questions, Do Better Due Diligence With Mauricio Rauld

This is going to be a fun episode. It’s a little bit shorter but packed with good information around how to ask good questions, how to do good due diligence on the private investments that you make. I’m intrigued by the private investment world. Our culture is going quickly and it’s amazing. The innovation that’s taking place is beyond our comprehension sometimes. It’s continuing to go faster and faster, which is awesome. It makes things faster, easier and cheaper especially from a business perspective. I’ve been able to reduce costs, especially in software, over the last several years because of innovation. It’s becoming a part of our culture. It’s also easier these days to raise money to do deals, to put companies together, to put projects together, to put investment together and those opportunities are going to continue to increase.

My perspective of private investment is based on the experience that I’ve had, but how do you convey that perspective to the typical investor out there that may have some knowledge but not as comprehensive of a knowledge? I brought in an individual that I’ve known for several years. His name is Mauricio Rauld with Premier Law Group. Mauricio has seen hundreds, probably over 1,000 deals, maybe even more than that in his practice over more than a decade that he has been in business. He mainly specializes in the real estate space. He’s done business in other sectors as well as far as raising capital for startups or for technology and so forth. He is agnostic essentially to the actual details of the deal itself.

He is putting together the documents and the structure so that those that are spearheading this project are doing it legally. He’s not getting into the logistics and the credibility or the legitimacy of the actual value proposition itself. It’s more of the legal documents and ensuring that money’s being raised the right way. He’s been able to see good deals, but he’s also seen a lot of bad deals, things that have gone sideways. I’m hoping that his perspective gives you some questions, some insight and things that you can do to improve your due diligence, so that when you are taking your money and you are expecting somebody else to be a good steward of it, that you do as much as possible so that you leverage them, not just delegate the responsibility to them getting you a rate of return.

It’s understanding the accountability structure, understanding the value proposition at a high level, understanding the principles of the business. Remember this season we’ve been talking about good business equals good investment. If you have bad business principles and acumen, you’re most likely going to have a failed investment at some point in the future. You want to be aware of all of that upfront as well as get the appropriate financial education in order to ask the right questions, the best questions, those quality questions. Mauricio is going to give you that perspective. It’s going to be awesome. You’re going to love this episode.

I have a good buddy on with me, Mauricio Rauld of Premier Law Group. Mauricio, thanks for taking a little bit of time. You’ve been on before. We’ve known each other for the better part of a decade. I look at your position as far as what you do professionally. It’s very unique because you get to see investments from a vantage point that nobody else gets. You get to see a lot of it. Would you talk specifically about what your specialty is when it comes to private investments and then we can get into the experiences you’ve had over the years?

The short of it is I’m a syndication attorney. I’m an SEC lawyer, which means I help primarily real estate investors raise capital to then placed into real estate investments. Those are multifamily deals. They might be single-family, self-storage, mobile home parks. It’s all kinds of variety of investments. I’ve seen the gambit over the last several years now, primarily multifamily let’s be honest. That’s been the hot asset class, but that’s not exclusive. People raise money to invest in all kinds of things. I’ve had the privilege of seeing all types of little different asset classes, how people have been structuring and how successful they have been in acquiring that capital.

If you want better answers, you've got to ask better questions. Click To Tweet

This is the novice person that doesn’t understand the legality of it all, but someone can’t go out and say, “Give me your money and I’m going to invest it for you.” That’s not legal. You can’t do that. There’s the public world, which most people are familiar with where you have high levels of accountability. You’ve very liquid capital markets. The barrier to entry is high, but you have private investment. It’s been around forever and it’s massive. You don’t hear much about those types of investments. At the same time, there’s a legal way of doing it and an illegal way of doing it.

The illegal way of doing it gets a lot of people in trouble. You’ve seen that and you write about it quite often, but there’s the right way of doing it. You ensure that the right way is taken when a person raises money to make sure that they do it the right way. You’re agnostic to the type of investment. You specialize in real estate, but you’re agnostic to where the project is. Who’s the principal? Who are the investors? You’re on the sidelines putting the paperwork, the legalities together and a lot more than that. I’m summarizing, but I know there were a lot more than that. In a nutshell, what else comes to mind as far as your position and what you do?

That’s exactly what I always tell people. There are two things you’re doing. One is you’re raising the capital and number two, you’re deploying it in whatever you’re doing. I handled the raising capital. I’m totally agnostic. We do non-real estate deals. We’ve done a couple of cryptocurrency funds. That’s been a hot thing, so some people put together cryptocurrency funds. I’ve also done startup tech companies that are software companies. They are putting a fund around to raise. By and large, 100% of my clients are real estate investors. They happen to sometimes venture off in other things.

Let’s get into the topic at hand. The outcome that I wanted to help the audience with is to ask other questions, do better due diligence, look for things inside of an investment or a business. What they’re putting money into, which will make them a better steward of their investment so that they’re not blindly handing money over to somebody and crossing their fingers that it will work out. Your vantage point is that you’re able to see all of these different types of investments and meet a lot of different syndicators those that have been doing it for decades. Not to say that those who have been doing it for decades are going to be successful.

They equally get stuck in their ways and ultimately make bad decisions based on the modern economy and not end up well. For those that you’ve seen consistently do well by their clients, those that have succeeded with raising money and deploying it in a way where they not only return the investment but a return on the investment. Ultimately most private investments fine print in a nutshell like, “You can lose all your money and we’re not legally responsible if that happened.” That’s ultimately what it says. What are the things that you see consistently that are done the right way and done the wrong way conversely?

I like the way you framed that. It’s one of my favorite things. If you want better answers, you’ve got to ask better questions. What are the right questions that investors should be asking or at least looking at? One of the things clearly that I see people are doing successfully is they’ve got a track record. The track record is huge. Anybody can put together a fancy business plan, anybody can throw numbers in a spreadsheet and make it seem like the investments are out of this world. Somebody has to execute on that plan and make it happen. That’s a lot of times easier said than done. One thing is to raise money. You can get people who are great at marketing and great communicators, but somebody has to do the work. Having a track record is very important. It doesn’t necessarily need to be a track record in syndication. This might be somebody’s first-ever syndication, but at least they’ve got a track record of doing that themselves. They’ve had a successful track record where whatever thesis they’re putting forward, they’ve tested it and they’re doing well.

They hit a wall like everybody does, which is you’ve run out of your own money, you’ve run out of your own resources or you want to scale. If you suddenly find an investment that’s working well and you’re limited by your resources, syndication is a great way to pool other people’s resources, whether it’s cash or credit or relationships or experience or whatever those resources are. It’s a great way to scale. A track record/execution because if you’ve got a terrible track record, that doesn’t work. A good consistent track record of executing is important. You and I know a lot of syndicators who’ve been doing this for a long time who are able to raise tens of millions of dollars on one email or one quick webinar or something because of the track record as opposed to if this is your first time, it’s a little bit harder to raise the money. To me, the track record is the first thing you want to look at for sure.

TWS 5 | Private Investment Due Diligence

Private Investment Due Diligence: Syndication is a great way to cool other people’s resources, whether it’s cash, credit, relationships, or experience. It’s a great way to scale.


What are maybe some other things there? Obviously, track record, you want to make sure that this isn’t the person’s first rodeo or maybe if it is, I came across an investment where it’s the first time this guy was syndicating. It took me about six months to put money into it, but I did it. It was a private investment in the energy and startup sector. I did it because he had a partner and his partner had 25 years of experience and had done these massive billion-dollar deals. Sometimes if a person doesn’t have a track record, it doesn’t mean that it’s not going to be a good investment. Essentially looking at the principles involved, which is usually the case, different partners, a board potentially like the team involved, that’s also an important element. What else do you commonly see that frustrates investors or investors end up losing because of?

The only one that’s sometimes frustrating for me is understanding the assumptions that the sponsor or the person raising the money and doing the investment is relying upon. That’s important because if they’re wrong on their assumptions or thesis or maybe more importantly if their assumption is not aligned with your assumptions. I’ll give you a great example. In the multifamily space, there’s an argument to be made. A lot of people are arguing that we’re at the end of the cycle or at the top of the cycle. If that’s your belief that we’re at the top of the cycle, you probably shouldn’t be matching up with somebody who thinks we’ve got five more years to go.

I see that specifically in the underwriting. One of the things you want to be doing is looking carefully at the business plan, all the docs and the underwriting, which is essentially the assumptions they’re making and look out for some red flags. Based on my personal beliefs, but some of the red flags, for example, if you believe that we’re a little bit frothy on the cycle, that there might be some headwinds coming in the next few years, having somebody put a short-term bridge loan or a short-term debt in place to get you to the permanent financing a few years later, that’s a little bit risky if you think that something’s going to happen.

In a scenario like that, you only have one exit strategy, which is to refinance into a permanent loan. If you cannot do that for whatever reason, then now what? You’d probably have to sell the property and now what happens? Probably you’re having an issue getting financing because we’re in a recession and that was probably the worst time to sell. That’s one example of assumptions you want to look at. The other one that I see a lot, and again my job is not to question them. As the attorney, my job is to make sure I understand what the assumptions are and that we make sure the investors understand, so we disclose all those assumptions.

When things go tough, that's when You find out a lot about the person, their character, and their work ethic when things go tough. Click To Tweet

The other big assumption is rent growth. If you’re looking especially on a real estate deal, rent growth is important because that at least on an underwriting will show you an increase in revenue year over year because rents are going up 2%, 3%, 4%, 5%. There’s an assumption being made that because rents have been going up a certain percentage over the last several years in a particular market or submarket, that rent growth is going to continue. That’s an assumption. Whether you’re right or wrong, I don’t know, but that’s an assumption. It could be an aggressive assumption where you might be assuming it’s been 5% increase for the past several years so we’re going to assume 5% every year or maybe 2% or 3%. What people forget is it’s possible there would be no rent growth or even negative rent growth. You need to make sure that your personal investment philosophy or your assumptions are matching up with what the assumptions are of that particular operator.

It would be interesting to look at if those assumptions ended up being the worst-case scenario, negative growth or zero growth or occupancy not going up or what is the minimum occupancy, especially in a multifamily deal. See if the deal makes sense. Sometimes assumptions can layer risk onto the underlying investment. That’s the importance of going through the business plan, understanding what’s been done in the past. That’s where you’re going to start to differentiate the true value proposition and where you’re going to get your return.

Here’s a great question for investors to ask, have you stress tested this model? How low can our occupancy be so that we can still sustain our debt? You’ve got a requirement that typically you have a debt coverage service ratio of probably 1.25 or something. If it drops below that, your lender is not going to be happy. How much can the occupancy drop and still maintain those levels so you’re still good? You can cover your mortgage even though maybe your investors won’t be getting money, but at least, you’re not at risk of losing the property. How much can rents drop and still cover it? You want to stress test. Most of my clients do a stress test, but it’s not just stress testing, it’s finding out what that stress test is. The first one you should look at is how low can we go for us to break even. At what point are we having problems? Stress testing all of these is important.

This has been super helpful because it comes down to the statement you made. The quality of an investment you could even say is a corollary to the quality of the questions that you ask. That leads to your understanding of what the value proposition is, what the syndicator is doing, and how your money is going to be put to work. Without that knowledge, it’s a gamble. What else do you see as far as things to look for that you see when investors go crazy in a bad way. They do a suit. What happens between the time money is raised and the time that return started to be paid out, the investment comes to fruition. What are some other things that frustrate investors that you can identify upfront?

One of the ones that are critical and it goes both ways. I’ll give you an example of how this particular topic goes both ways. It’s something that investors don’t like and will result in them not coming back a second and third time is a lack of communication with the investors or lack of transparency. One of the things that a good operator will do not only be consistently communicating with their investors in good times but especially when bad times come, that’s when they continue to communicate. Sometimes, the operators that I know that are doing it well, they over-communicate when things aren’t going well.

One of our mutual friends likes to say that builds trust. Not only respect but trust because it’s a lot harder to get on the phone call and tell people, “You’re losing money or you’re not going to get distribution,” but people understand it. In general, most people understand, especially if it’s not your fault. Things happen. Things never go according to plan. Having that communication level goes a long way for investors. The flip side is the same too. I’ve got clients who will pick up the phone and have a one-on-one phone call with all their investors when the distributions are made because nobody’s happier in the deal as the day they get a check in the mail or an ACH in their bank.

Giving them a call and say, “Patrick, it’s payday.” That creates that rapport with the investors when it’s a happy time. This particular client of mine does this. He is very successful in raising capital over and over again because he is building that level of trust and communication. Our buddy, Ken McElroy, does this a lot too. He puts together events with his investors so he can get to know them well and try to provide more and more value. The old adage is we do business with people we know, like and trust. The more you can get to know them better and had them trust you, communication goes a long way with that trust factor.

Transparency is involving and it’s enrolling because this is money that people have worked for and have earned. They’re handing it over to somebody that didn’t earn it. Looking at how they place their expectations is vital. I look at the track record. Sometimes I try to find out when things didn’t go right when things went sideways, what did they do? That shows the character. It’s not a guarantee, but it shows you what they will likely do if things don’t go according to plan in the future, which is huge.

Another good example that triggered is a lot of clients will forego some of their fees when things aren’t going well. You may have an ongoing asset management fee, for example, as the manager, as the operator to keep the lights on and maybe that’s 2% or 3% of the gross. If the investors aren’t getting their money, even though legally you’re entitled to take that, you don’t want to be in a situation where you’re getting paid and the investors are not or getting paid less. A lot of my clients will forego the asset management fee. I also have clients who, if things are going south and a cash call is required, a lot of operators will step in and not do a cash call, but come out of pocket themselves and try and avoid that at all costs. That goes back to the track record and the reputation of that operator and those who do that tend to do well the second and third time, especially when you get these referrals. When you’re asking somebody else, “Patrick, I know you’ve invested with this operator before, what can you tell me?” When you say, “The last one wasn’t great, but this is what they did during those tough times.” That goes a long way.

TWS 5 | Private Investment Due Diligence

Private Investment Due Diligence: Make sure that your personal investment philosophy or assumptions are matching up with what the assumptions are of that particular operator.


This has been super helpful. They’re simple things. Usually, it’s those simple things that make the biggest difference. It’s like a game between a gold medal and fourth place. Gold metal is known throughout history. The fourth-place could have been second behind. Nobody remembers it. It’s those marginal things, those details are what usually makes the biggest difference because, in the end, there’s always going to be an opportunity. There are always market cycles. There are black swans. There are many things that come out of the woodworks that people can’t anticipate. At the same time, when that happens, you have two ways of reacting. You have your gut and your chemicals, which pretty much leads to your bad decision or your principles and your values that you could identify upfront in people, especially experienced people and that’s what’s likely to happen when things go sideways.

When things go tough, that’s when you find out a lot about the person, their character and their work ethic. Are they people who bail on you or are they the ones that stick around until the end and beyond?

For those who are exploring SEC attorneys, those that help businesses, help an opportunity to raise money legitimately the legal way. How can people get a hold of you, learn about your firm and ultimately do business with you?

The website is a good one, I put a lot of content and I’m starting to upload those more and more into my YouTube channel. If you go to YouTube and put in, Mauricio Rauld, my YouTube channel should pop up there. I try and add as much value as I can. I do some educational videos on there. I’m on LinkedIn, Facebook, it’s hard to miss me.

That might be great for the majority of the audience because if you go to YouTube and you see how Mauricio is educating those syndicators/investors that are raising capital and doing different private investments, you can see what he’s teaching them. That can help you be more informed in the ways in which capital is being raised, especially with private investment to help you become a better investor. That might be a great thing for you to do is subscribe to his channel. You can visit us at and access all of the things we’ve talked about. I’ll give you the final word. You’ve got any words of wisdom for us?

Be a good steward of your money. Don't hand over your money to anybody without doing some due diligence. Click To Tweet

Be a good steward of your money. Don’t hand over your money to anybody without doing some due diligence. The due diligence is on the frontend. It’s not that long, but do it once and sleep better at night knowing that you’ve done everything you can as opposed to blindly handing over your money to somebody else.

It’s good to have you on. I appreciate your time, Mauricio. We’ll have you on again for sure.

Thanks for having me.

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About Mauricio Rauld

TWS 5 | Private Investment Due DiligenceMauricio Rauld is one of the premier syndication attorneys in the country helping real estate syndicators raise hundreds of millions of dollars to pursue their dreams of financial independence.

Mauricio is the founder and CEO of Premier Law Group and spends 100% of his practice on syndications for real estate investors. With over 20 years of securities experience, Mauricio specializes in Reg D exempt offerings and educates investors from around the world on how to navigate the complex world of securities laws.

Named as one of the Top attorneys under 40 by Super Lawyers magazine, Mauricio regularly shares the stage with The Real Estate Guys and the likes of Robert Kiyosaki, Ken McElroy, Brad Sumrok, Peter Schiff, and others.

An educator at heart, Mauricio regularly travels around the country speaking to real estate investors and entrepreneurs, educating them about how the syndication legal piece fits into the overall syndication puzzle.

He is also a constant on the real estate investing podcast circuit, regularly contributing to The Real Estate Guys Radio show (consistently one of the most downloaded podcasts on real estate investing) where Mauricio is Robert Helms’ personal attorney. He has also been featured on The Lifetime Cashflow through Real Estate (Rod Khleif), The Ken McElroy Podcast, and The Best Real Estate Show Ever (Joe Fairless) among countless others.

A graduate of The University of California at Berkeley, Mauricio obtained his Juris Doctorate degree from Loyola Law School in Los Angeles and lives in Southern California with his wife Heidi, and children, Adelina and Alessandra.

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Business Mastery With Patrick Donohoe

TWS 4 | Mastering Business


All businesses are built on a core set of principles that, if you follow where they lead, you’re more or less guaranteed success. This is why mastering business is key to making sure you find the success you’re looking for. Patrick Donohoe shares his daily experiences from Tony Robbins’ Business Mastery, a conference where people come together to find their success by learning from some of the world’s most successful people. Throughout Patrick’s experience, you’re sure to also be learning something amazing that might not have even occurred to you. Find your path to business mastery today!

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Business Mastery With Patrick Donohoe

Tony Robbins’ Business Mastery

This episode consists of a daily review of my experience at the Tony Robbins’ Business Mastery, which is a multi-day seminar that took place in a warm, sunny and green palm tree-dotted Palm Beach, Florida. It was an awesome event and I know you are going to get a lot out of each of these episodes. Thank you for your support. Thank you for being here and expanding your knowledge of investment. I know it’s going to make a difference. It takes 1 or 2 decisions, 1 or 2 new thoughts to completely transform your life, making wise choices with your investments and your overall wealth strategy. That second business that you should be participating in order to balance your efforts as an entrepreneur, a small business owner and a professional. It’s important to know how to characterize investments and ask the right questions. I’m going to get into all of that in this episode. You are going to get a lot out of it.

In addition, one of my final invites to the Unleash the Power Within, the UPW Event that Tony puts on as like his introductory event in San Jose, California. That’s going to be in March 2020. You can reach out to Jeff at the Tony Robbins Institute. I’ve got a crazy discount for you, guys. I don’t get any benefit from this whatsoever but there’s an incredible discount based on my relationship with the membership that I have with Tony’s group. Take advantage of it. It will change your life. It’s one thought, one decision, one idea that separates you between where you’re at now and what you can become. These are the environments in which I can take place. Definitely look into that and if you can make it happen, I love to see you there. I’m going to come with my thirteen-year-old daughter most likely and to give her that gift, give her that experience will be life-changing for her. Let’s get to the actual content and my daily reviews.

I’m going to do an overview of my experience on day one of Tony Robbins’ Business Mastery down here in Palm Beach, Florida. It’s beautiful especially given the winter weather in other parts of the country. We’re inside the entire day and it’s colder in there than it is in most parts of the United States during the winter. Regardless, this is an event that I enjoy. I’ve been to it a couple of times in the past, but Tony always brings new information, new speakers and is keeping up with how society is evolving especially when it comes to business. I look at Business Mastery and associate it with his drive to empower people. I believe that business is an incredible idea and how people work together to bring ideas into reality.

It takes only one or two thoughts or decisions to completely transform your life. Click To Tweet

Tony talks through his experiences, the experiences of businesses he’s been a part of but also has evaluated. In order to extract some of the things that business owners as they’re in business, as they’re continuing to innovate can use to continually progress and grow. I look at what this has to do with our theme this 2020 which is an investment, specifically atypical investment. The correlation I’m making is the fact that all investment is ultimately a business. It’s a set of systems. I’m going to go through my note and review some of the main points that I took away from day one. I’m going to go day-by-day going through each of the main bullet points and the lessons that I took.

The first is I believe that successful investment is a result of a successful business. If you look at the last several years, there have been tons of disruption when it comes to businesses that could have been categorized as perennial. Those that are lasting generation after generation. Some of the examples he used were Hilton and Airbnb. Hilton has a history. They have a million or so rooms across the world and are valued at a certain amount. It’s like $25 billion or something like that. Airbnb came in and disrupted that market and provided better results, better service and/or no rooms and essentially facilitate a technology platform. They’re valued at $35 billion or $40 billion.

The idea there when it comes to businesses that have been around for a long time, if they’re not continually innovating and figuring out what their clients or customers need and giving them what they need. Making it more convenient and cheaper, then that’s when they’re ripe for disruption. The statistic that correlates to that is that 96% of businesses fail in a ten-year period of time. That’s indicative of successful investments. Even companies or investments that have been around for decades or generations, they’re still susceptible to failure and even new businesses. It makes the analysis important when it comes to knowing what you’re putting money into, knowing the business, knowing the investment that you’re making. That’s the first thing.

TWS 4 | Mastering Business

Mastering Business: You have to focus on the customer because their tastes, demands, and needs are constantly changing and evolving.


The other is, a successful business is 80% psychology and 20% mechanics. Most people in business focus on the value of their service, the value of their product and they’re always trying to improve that. However, a big piece that is ingrained in this seminar is focusing on the customer, focusing all your efforts there as opposed to the actual product and service because customer tastes, customer demands, customer needs are continually changing and evolving. For businesses to continue to provide value to those customers and be successful, they have to find new ways to provide value to meet those customers’ and client’s needs.

I look at one thing there that they introduced on day one that they’re going to go into it in a lot more detail as the days go on, which is the life cycle of the business. You also look at the different seasons that exist in the business cycle. Tony, for several years, has been talking about winter coming. With seasons, you have winter which is the death of things, the destruction of things but then you have spring which is the sprouting of new things. You have summer, then you have fall, which is harvest, reaping the rewards. Right now, we’re in a period of harvest. We’re in a fall season which is followed by winter. The timing is the challenge. We’ve been in the biggest bull market in history and looking at whether it’s the president or whether it’s the involvement of a central bank, the Federal Reserve in the economy, things have continued to prolong and grow.

The question really becomes, when is winter? Nobody’s able to time that perfectly, however, you can look at the past and see signals. There are lots of signals when it comes to winter being on the horizon. It comes down to the question of when. Some of the statistics that I pulled away to indicate some of those amendments, changes whether it’s winter, there’s definitely transition happening in the world. First and foremost, you look at the Baby Boomer generation and how they are involved heavily in politics and in business. They are in their 60s and in the mid-70s at this point. They’re going to be retiring. They’re going to be letting their business go.

A successful business is 80% psychology and 20% mechanics. Click To Tweet

The statistics that they used which are 87% of businesses that were the founder of that business are not going to continue past their death. I looked at the transition in business but I also look at the amount of money, the wealth transfer that’s going to take place between now and the next ten years. The tens of trillions of dollars are going to go in from the hands of Baby Boomers who invest in certain things, that do certain things with that money and that wealth to a new younger generation who are doing completely different things with money and they have different interests. That’s going to create a different set of demand and there’s now going to be money behind that demand. That’s an interesting thing to pay attention to.

You also have emerging markets. You have Africa coming online where they’ve created per capita more millionaires and billionaires than any other part of the world. You have the Middle East despite the stigma that’s attached to it also has a rising generation that is interested in Western things and is going to be demanding whether its product, services, etc. That’s something interesting to it to pay attention to. I’ll end with a few things, especially as you pay attention to investment. Hopefully, you see the theme here with the correlation between investments and business which is a successful investment is because of a successful business. A successful business is one that is in love with other customers, not in their product and service. They’re always figuring out better ways to meet their customer, meet their client needs and are adapting and innovating to do that.

This is an example that I shared last season regarding one of the exercises Tony does with purses and he does it with cars as well, but I’ll do the purse example. He has the female audience give him purses. He’s using it as an example. He has ladies raise their purses and he goes around and he picks expensive purses. He picks the middle of the road purses that look nice. He picks cheap purses. The principle is not to say that one is worse or better than the other. It’s that certain clients, certain customers have different needs, different tastes and different things they want out of those bags. You look at Louis Vuitton versus a bag from Target. The one that purchased it from Target is looking for efficiency. That’s their specific need. If you look at the margin in regards to that business, it’s smaller than the margin of Louis Vuitton. I would say, the difference in making the actual bag itself and manufacturing costs are going to be in a very similar range. However, the margin between the actual cost and what it’s sold for is hugely different. A Louis Vuitton bag is selling for thousands and thousands of dollars, a Target bag selling for under $100.

TWS 4 | Mastering Business

Mastering Business: Being able to understand yourself, especially your strengths, allows you to make even better decisions.


The principle there is understanding your client, understanding what they need and building a brand behind that. Louis Vuitton and some of these higher-level Prada bags, these luxury bags or clothing lines have established brand and subsequently margin. That’s also important to understand, not to say that Target isn’t profitable because Target doesn’t make bags. They do a lot of other things and they have a cool business model in a sense and now they’re partnered with Disney. Looking at how businesses are trying to continually understand their clients and meet those customers and client needs is very important when you’re weighing the decision of what to invest in. That’s all that I have for now. We’ll bring some new content and takeaways in the next episode so stick with me until then.

We are now past day two of Business Mastery, one of Tony Robbins’ events here in Southern Florida. Day two was pretty awesome. As I went back and looked at the main things I took away, I tried to extract again the information that’s relevant to investment. There are a few things. The day was very much about personal development and about the business itself, your business enterprise. As far as investing is concerned, I had to look for some of those nuggets. The first one is a quote from Tony that I liked. He says, “Wealth is the ability to master the mind.”

I looked at this and saw the relevance to not just business but also investing where understanding yourself and strengths, understanding how you respond to things especially your patterns, the emotional way you react to certain things. Understanding yourself more allows you to make better decisions. If you look at it, as I’ve talked about in the show, things or even circumstances don’t create the level of happiness and fulfillment that most people are seeking. That’s a hallucination, if you will, to think that once this happens, then I’ll be happy. Once this happens, then I’ll feel successful. Once this happens then that. I believe it’s the other way around. It’s the state of mind that we’re seeking and the state of mind can be accessed. Understanding our mind both the conscious and subconscious is paramount to becoming what we’re after, which is a wealthy mindset. That’s the first thing.

Wealth is the ability to master the mind. Click To Tweet

The second thing is the idea of the zone of maximization. I do think that this is important to understand. Tony has this description of a business as it pertains to a life cycle. In a life cycle of life in general, you have a birth and you have being a toddler, then you have been a teenager and then a young adult and then the prime of life. You can imagine the different struggles that human beings go through at those different stages. There are similar struggles when it comes to a business in those stages. The idea is to get to the zone of maximization.

That’s where I would say business starts to thrive. You also have the perennial businesses which maintain the ability to innovate and market to their customers and continually discover needs and find better ways of meeting those needs. When you’re looking at investment, when you’re looking at the actual underlying company, sometimes it’s valuable to know where they’re at in the life cycle. I’ll give you some nuggets as far as the zone of maximization is concerned. In that zone, you’re going to see a professional leadership. It’s not somebody becoming a leader. It’s not someone who’s trying to figure out their position. It’s someone that’s been there and done that.

The second is systems. There’s the quote that I love which is, “Systemize the predictable so you can humanize the exceptional.” I think that applies to most businesses. Having systems allows you to systematize the predictable, have things done the same way over and over again so there can be a focus of human effort in the most important areas. The third thing is culture. It’s the culture that’s representing the brand and bringing that message to the specific customers. When you’re in the zone, you also have growing revenue but also a growing profit. Sometimes in those younger stages, you have lots of growing revenue but you don’t necessarily have the profit. Finally, there’s the passion for the customer or meeting customer needs.

TWS 4 | Mastering Business

Mastering Business: There are specific languages in business and investing, and if you don’t understand these languages, you can’t play the game.


That’s hugely important to identify because that keeps the business thriving, innovating and constantly figuring out ways to discover better ways to meet customer needs. Finally, innovation and marketing. These are ingredients. As you can imagine, if you bake a cake and you forget the flour, the salt or the sugar, if it doesn’t matter what the other ingredients are, it’s not going to taste good. You look at the ingredients in the zone of maximization and it’s important to identify those. The ingredients are professional leadership, systems, culture, revenue up and profit up, growing, passion and then innovation and marketing.

There are a few more things. One is there was a gentleman who stood up and made the comment of, “Why weren’t you able to achieve?” It was that the person I hired, the group that I hired, the company that I hired, I trusted them and they failed me. It’s the difference between delegation and leverage. I thought this was really interesting and sometimes you have leverage as part of a financial transaction but it means something different here. Delegation is when you trust somebody else to do something. I think that’s in large part what the United States does from an investment standpoint. They delegate the responsibility to grow wealth to an institution or to an individual, whereas leverage is different.

Leverage is first and foremost, knowing what your end result is and being able to articulate that and then having enough knowledge to ask the right questions and to have high levels of accountability. Being able to leverage others, leverage financial advisors and leverage investment providers, you have to articulate what the end result is that you want and ensure that that aligns with the actual underlying purpose of the investment. When it comes to a relationship that you have with an investment provider, it’s understanding the leadership inside of you, which is the ability to influence the individual that you are in essence partnering with.

Systematize the predictable so you can humanize the exceptional. Click To Tweet

That requires them understanding what the end result that you want is as well as accountability along the way. The final thing I’ll end with and this applies to investment which is overcoming fear. It’s handling anxiety. Tony has five steps that he uses to overcome fear. The first step is to daily feed your mind with good information. Feed the animal, feed the person you want to show up in your life, not feed the one that you don’t. The second is to strengthen your body. Do something every day to challenge yourself. Do something that’s going to push you beyond the limitations of the day before. The third is the immersion in a role model. Seeing somebody that has been in the shoes that you want to be in and immersing yourself in their life, how they experience things and how they do things.

The fourth is proximity is power. Proximity is power, in essence, means to be around individuals, being in an environment that’s going to challenge you, that’s going to get you to think differently. It’s to connect with people that are going to help facilitate the results that you want. Finally, it’s to give more than you expect to receive. If you do that, then you’ll never lack abundance. Fear and faith can’t exist in the same mind at the same time. I also believe that when you do give, when you contribute to somebody else, the result of that is worth more than any dollar amount that it can give you. Tony’s famous saying is, “The secret to living is giving.” With that being said, day two is over. We’re onto day three. I’m excited to come back with you for day three recap. I’m sure we’re going to get through some awesome stuff.

A Personal Challenge

I’m going to do a recap of day three. We’re about to start day four but I wanted to get my thoughts. This day was interesting if you have been to events before, there are a lot of interventions. This is where Tony Robbins will engage directly with one of the participants and work through their business challenges. Everything comes out to be like a personal challenge. It’s fascinating how intertwined everything is. There’s a speaker that has been with Tony for several years and that’s what I wanted to focus on. I’m going to do a second session with even more details. There’s a whole other Business Mastery Convention that happens in Europe every year.

TWS 4 | Mastering Business

Mastering Business: Circumstances don’t just suddenly align to create your happiness and fulfillment. You have to do that yourself.


A second one, a follow-up to this where they go even deeper and it’s awesome. Keith Cunningham is the one that I’m going to cover and specifically some of the things he covered are that I felt were important and relevant to investment. Let me get some background in Keith. He is an older gentleman. He was partners with Robert Kiyosaki and Sharon Lechter in kicking off Rich Dad Poor Dad. He’s been around for a long time but he’s been speaking with Tony for a long time. If you haven’t picked up any of Keith’s books, they’re good. The Road Less Stupid is an amazing read. He also has a comedic personality and he’s from Texas too. He’s the old gray guy, Texas accent. He’s a good-natured guy. It’s interesting. He has some cool sayings.

Let me get into the things that I learned. First off, he goes through the three ways in which every business or investment failure boils down to which is number one, excessive optimism. Number two, bad assumptions. Number three, ignored risks. The idea is to learn how to understand the game of investing, the game of wealth and the game of business and avoid the emotional inclination to the end result which is either a loss, fear, more loss or gain which is greed. Going to the book he wrote, the key to wealth is to avoid doing stupid things. It makes more sense but it’s also funny. I want to get into how he goes about understanding the optics of a business, the optics of an investment. I think they are one and the same in a sense.

He associates it with dials on an airplane. These are what are known as more of the facts. If you look at what most individuals are doing when they’re analyzing an opportunity, they’re telling themselves a story. If you think about the lottery effect, most people dream about, “If I won the lottery then this would happen. I’d be able to buy this and this.” There’s this fictional story that starts to play in our mind as far as the end result of achieving wealth and investment, paying off, being able to retire and being able to be financially free. Then there are the facts and you have to use the facts as the basis for decisions as opposed to the emotions of it. He talks about the dials on an airplane and there are three primary dials in business. I’m not going to get into the details of these. The first one is the balance sheet. Understanding what a balance sheet is, assets and liabilities and how to read a balance sheet.

Failure boils down to excessive optimism, bad assumptions, and ignored risks. Click To Tweet

The second is an income statement which is income minus expenses. The third is a statement of cashflows. This is what business owners are about because an income statement, it’s not a reality. He calls it a theory. As you look at reality, what business owners are about is cash. It’s having operational cash as he puts it. That’s were understanding all three statements especially when it comes to a business or an investment. If there’s profitability but no cash and they can’t pay out a return. Understanding these three dials is vital.

The last thing I’ll use to describe understanding the language of business and how Keith puts it, which is you can’t play a game unless you understand the rules is he uses a funny story. He tells it every single time I’ve heard him speak. It’s a funny story about the game of cricket. In cricket for North America, it’s not a sport that we are familiar with. We all understand what it looks like, but as far as the rules and the language, we have no clue. He goes through the different terms. I’ll give a few, the wicket-keeper, the slip going out for a golden duck bowled over a maiden, a frog and rubbing the seam or rubbed a seam. He makes a crude joke as you can imagine with rubbing the seam in a very Texas old guy way, which is pretty hilarious.

The idea is that there’s a language in business or there’s a language in investing and if you don’t understand the language, you can’t play the game. That’s an important piece. The dials are one thing but then the language of business is another. The language of accounting boils down to the facts, not the opinions or the theories. Understanding the facts, being able to analyze the facts allows you to make a more prudent decision. A saying that applies to successful investment or unsuccessful investment is, “Those that don’t measure, don’t want to be held accountable.” That was a good overview of some of the financial things that I learned here at Business Mastery. There were some more theoretical, philosophical things and leadership principles that I learned. I’ll do a joint podcast with one of the people on my executive team, Dan, who’s here with me.

Wrapping Up

I’m going to do the wrap-up episode to Business Mastery. First, I want to celebrate the fact that you’re here. It says a lot about you and what you want for your life. Someone that takes time to read and to learn is the person that achieves what they are after. I know in a sense what you’re after. That’s what most people are after. The experience in understanding business principles and business acumen, it does relate to investment. I believe that it relates to what we’re all after which is this idea of living a fulfilling life, a meaningful life. It sounds somewhat superficial, cloudy and meta. At the same time, it continues to echo through these conferences, through my thoughts that there aren’t these circumstances that align in your life and somehow that creates your happiness and fulfillment. I believe that it’s the mindset and it’s trained and understood before the actual material thing happens.

What’s amazing is that the material thing happens a lot more quickly once you are able to go through and establish that sequence. First, understand the mindset, what you’re after and then experiencing it now and then things align so that you are able to experience it in the physical world. I’m going to continue to talk about this because I believe that the interviews that we’re going to be conducting around investment, around how to be a wise investor without a purpose, a very clearly defined purpose. It’s not going to matter how much money you have. It’s not going to matter how successful you are in business. If you understand that purpose, that is what people are after. It’s a true sense of meaning. I believe when you are able to discover what that is, it’s not like you arrive at the finish line. There is an ongoing process to cultivate, improve and magnify that. It’s a lifelong process.

We’ll continue to go there. I’ll give you a few nuggets from the last couple of days of Business Mastery. I would first say that I was grateful to take one of my guys with me, Dan. He’s been with me since the very beginning and we’ve gone through some ups and downs. We came closer as leaders in the company that I primarily work with and own, which is Paradigm Life. Understanding him at a deeper level and vice versa, it helped to see where we can make the biggest difference together. Going there and experiencing that with a business partner, an executive or a team member, it’s a profound experience to get outside of your typical culture and cultivate those relationships which make the biggest difference to you. I would say that that’s the first primary takeaway.

In the last couple of days, there are a few interesting things as it relates to investment. The first, Keith Cunningham did his second part of his overall presentation, which was a few hours. I look at what he’s teaching and how that applies to what you are after. I know you’re telling yourself, “I don’t need to understand accounting. I don’t need to understand what I discussed about the optics, which is a balance sheet, an income statement and a statement of cashflows. I don’t need to understand that in order to make a successful investment.” I get that and I understand where you’re coming from because I’ve been there. At the same time, I would say that the investors and people we work with that value our services and value this insight, the most are the ones that are lost. It comes down to not necessarily the investment being something risky and put your money into it and it didn’t work out.

It could have been the best value proposition, ideal environment and ideal leadership team. There are so many different factors within the economy, culture, society and legal that can throw it off-kilter. Understanding not just a snapshot in time of what the optics are of a business or an investment, then you’re placing more risk on your shoulder. Those three things that he talks about, the three pieces of paper to master those, he hit it home by describing the Enron demise. Again, the balance sheet, the income statement and the statement of cashflows, understanding those pieces of paper and how they relate to the health of a business.

He talked about Enron and for those of you who have been around a while as far as investment is concerned, Enron in one year went from the top of the world to bankrupt and there was a tremendous amount of fraud behind the scenes. There’s a documentary on Netflix which is The Smartest Guys in the Room. What it did is it showed how the Wall Street analysts that were looking at this company and its health and what their recommendation and feedback would be. It started off when they’re at their height, “Strong buy. It will definitely hold. This is a company that’s going somewhere,” then the price started to go down.

The analysts were saying the same thing. It was cut in half. The analysts were saying the same thing, strong buy, this is the best time to buy and the best time to hold. They were looking at one piece of paper and they were looking at the income statement which showed the profitability of the company from an accounting standpoint. The price kept going down because the unloading was happening by those who understood all three pieces of paper. If you looked at the statement of cashflows, they were losing hand over fist in their market value. When it was going from $80 or $90 a share at the top to even $2 and $1, analysts were still saying strong buy. Sometimes, when you rely on supposed experts and don’t understand yourself, what you’re looking at, it creates a tremendous amount of risk.

Let me touch on a couple of other things. Tony did go into the theory he has when it comes to your personal financial life. I like how he looks at it as a second business. The majority of people there are business masters. They’re there because they owned a business. As you established your business, what happens often is there’s so much opportunity in a business that people will invest their assets, earnings, and profits into the business because it’s giving the highest rate of return. At the same time, these other factors that are outside of the periphery of the business owner whether it’s the economy, society, maybe the target demographic is no longer relevant. There are all sorts of factors that could put that business in jeopardy. The competition that comes up. That’s where Tony advocates having a second business. He calls his investment strategy and his personal wealth strategy his second business.

e makes it easy. He talks about asset allocation. It’s very similar to what I talked about in Heads I Win, Tails You Lose, which is the hierarchy of wealth. One thing that he talks about is buckets. There’s a bucket that he mentions that I don’t talk about often enough. He has your foundational theory, your growth bucket and Tony advocates the use of specifically designed insurance which was cool to hear. He said that before but these are your secure safety assets. That’s why I said growth before but it was more of your safe assets, your foundational bucket.

He recommends filling that up before you get into alternative types of investments which I don’t necessarily agree wholeheartedly with but we won’t use this episode to debate that. I’ll do that when I go to the finance seminar. He goes into the growth side of things. The growth is where you have your assets that are diversified and he believes in getting as many non-correlated assets as possible. Looking at where our economies go and how assets are within a correlated standpoint. The market can fluctuate in a very similar way. It doesn’t matter how diversified you are. He goes through a lot of that.

I want to focus on the dream bucket. The dream bucket is something that I gloss over sometimes. The dream bucket is more of setting money aside to do those things that give your life that meaning, the experiences that you can have. I’ve talked about it in past episodes about how simply going on vacation, doing something with your spouse or your significant other or your family unplugging yourself from your normal routine is so healthy for that relationship, yet most people will save money as opposed invest in those types of experiences. That’s destructive because it takes away from the meaning of the investment in the first place. That’s why it’s important to identify your purpose, identify the end result that you’re looking for before you start investing. “Beginning with the end in mind,” so goes the famous saying by Stephen Covey.

That’s the idea behind what he was talking about when it comes to the dream bucket which is allocating money so that you can drive a nice car, live in a nice home, go on a nice vacation and the list goes on. It’s a much smaller percentage than the money that you allocate toward your security bucket, your growth bucket. I love how he looks at that. He makes it very simple. The bucket approach is something that I talked about in the Heads I Win, Tails You Lose. It’s very similar to what Tony talks about. That was another takeaway.

There was a cool end speaker that impacted me. He’s from the East Coast. His name is Jesse Itzler and his wife is Sara Blakely, the Founder of Spanx. It’s a $1 billion company that she owns 100% and built it from scratch. It’s an amazing story. Jesse is one of those crazy, driven guys. It was really inspiring because as he was talking about it, five minutes after, he concluded his remarks is where all the notifications came out about Kobe Bryant. He talked about looking back in his life and he wasn’t going to be satisfied with 80%. He wasn’t going to look back and say, “I’m glad I lived a mediocre average life.” We’re not about that. We get pulled into that sometimes. We’re getting to this point in society where we’re not going to have to do much at all.

The technological advances, there are a couple of companies that are in this incubator, this investing conference I’m going to. They’re going to change how much energy costs to nothing or very little, transportation and entertainment. Oftentimes, you look at the glass half empty with regards to the conflicts within countries. The other social issues that are going on, what’s going on in Washington, DC. The news is plastered with negativity, but we live in an amazing place. We live in an amazing time and we’re getting to the point technologically where we’re not going to have to do much to live a good life. That brings up a huge issue.

I’ve talked before about how life expectancies because of our understanding of health and longevity, they should be going up but they’re going down. They’re going down because people are not fulfilled. They’re drinking or taking drugs and they’re committing suicide even at high levels when they’ve achieved all sorts of success. Jesse was inspiring because he practices what he preaches and he lives it. He’s run ultra-marathons. He pushes the limits when it comes to business. He does it because of one thing and that’s what I wanted to end with. He does not negotiate with his goals. When he establishes a goal and says, “This will be done,” he figures out a way come hell or high water, given anything to do it. He wrote a book called Living With a SEAL, which is hilarious. There’s some language in there.

He was so driven to experience how a Navy SEAL lives. He experienced that at a race that he was at, seeing how that individual handled himself in a hundred-mile race. He wanted to see how that person lives. We invited this navy seal guy that lived with him for 30 days. The book is hilarious because he has him do all sorts of crazy stuff. That says a lot about him and how he finds meaning and fulfillment. I believe that it’s very similar to how most of us think and feel wired for mediocrity and average. Meaning comes from discovering who we are, what we’re about and making the biggest difference for everyone else.

The quote that was used was, “Purpose is found at the intersection of what you’re good at, what you care about, and what makes the biggest difference for others.” I believe that that is inside of all of us and we can find it. When we do, that’s true wealth. All of this other stuff, making investments certainly a part of it, but there are some foundational things that magnify the purpose behind why we make investment decisions, why we choose this, why we choose that, why we do this, why we do that and what the end result is. I’ll be back in the next episode. Thank you so much for going through this longer episode because we’ve had different segments lumped together.

The invitation is still open to the Unleash the Power Within, the UPW Event that Tony puts on. It’s going to be in San Jose. Go check out It has all the information to sign up. We’ve got some awesome discounted prices. It’s going to be an incredible experience. I can’t wait to meet some of those who have already signed up. Thank you so much for your support. Thank you for the feedback on this season. It’s been fun and there’s still a lot more to come. We got an investment conference. We have a finance conference where there are going to be five billionaires speaking. There is a lot of good stuff to come. Stick with me until then. Thank you so much. I really appreciate it.

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Assessing Investment Risk With Andy Tanner

TWS 3 | Risk Assessment For Investments


Making smart, worthy investments is all about the preparation – the research and the analysis. This is why risk assessment for investments is such a crucial part of the process of deliberation. One bad investment could set you back a whole lot. Andy Tanner is a renowned paper assets expert and successful business owner. Andy speaks to Patrick Donohoe about what you have to be looking at when you’re making a big choice about an investment. Let Andy teach you some of the techniques that will help you make smart investments.

Watch the episode here:

Listen to the podcast here:

Assessing Investment Risk With Andy Tanner

It’s an honor to interview Andy Tanner. Andy is a Rich Dad advisor. He is the author of 401(k)aos as well as Stock Market Cash Flow. He was also the host of The Cashflow Academy podcast. Andy’s been on here before. He is a good friend of mine. We get to do some things with our families together. We have these marathon meetings whenever he comes in to do a show that lasts up to 4 to 5 hours. Andy is someone that I have a tremendous amount of respect for. He has principles as his foundation, as well as his personal values that I have tremendous respect for, but yet he continues to change.

How he changes is because of the environment that he’s in. For those of you who are not familiar with Robert Kiyosaki, he’s the author of Rich Dad Poor Dad. As an organization and as a philosophy, they are constantly growing. They do not conform to the status quo. Even though Andy has an incredible foundation, he continues to be challenged and refined because of him being the paper asset guy. He’s written extensively about markets and the role that they play as well as how to capitalize from an investment standpoint on it whether it’s up, down and sideways. Andy and I have those discussions on. You are going to enjoy it. I know he has several free resources. However, his bread and butter is a paid membership course where he mentors you directly. Andy is a great guy. You are going to love it. We have a cool conversation.

This season is awesome. I want Andy on early because he and I have a similar philosophy and perspective on things. Him speaking about the stock market, which is his expertise I felt was appropriate. As I assume most readers, especially new readers, this is a primary investment that you are a part of yet. Most investors are participating in this asset class in much the same way. This is a different way to look at it. I hope you enjoy this episode. We will have another great one next time. For those of you who are new to the show and want a better context as to how I perceive and view investments and the role investments have with your overall personal wealth strategy, go back and read the previous seasons. We’ve had five so far.

The show has been on forever since 2007. However, we have been taking a season approach where we’re focusing on one central theme and it’s awesome that investment has become the capstone of the previous five seasons. Those themes have been life, liberty and property as the 2018 seasons and themes. In 2019, we focused on capitalism, which is the infrastructure in which the rights of life, liberty and property are able to bear lots of fruit as we’ve seen historically.

The entrepreneur, which is the last season of 2019, we focused extensively on how to maximize your best asset. You had to find ways in which you can improve yourself, make more money, discover a meaningful career, profession, something that you love that you would never retire from. Go back and keep supporting us the way that you have. You have been amazing. Subscribe to the show. Give us a good rating on iTunes, it always helps. Share it with your friends and family.

I’m here with my friend, Andy Tanner. He is my distinguished guest. We’re going to talk about investment. We’re going to talk about your expertise, the depth of experience that you have. You have a unique perspective and experience. It’s going to be hugely valuable, but we’re going to start with some rapid-fire stuff. Who was your role model? Someone that you looked up to, who inspired you?

It’s my dad.

What superhero or icon in history do you most resonate with?

It’s Superman.

What charitable causes do you support?

Multiple sclerosis, but the biggest one is cystic fibrosis. That’s huge for us. They have huge advancements.

If there was one attribute that you can impress upon your kids, grandkids, the world, this audience, what would it be?

It’s self-discipline.

We could go off on many topics, but we’re going to talk about investment. Rapid-fire was more to tell you how a person thinks. That’s important, especially as you talk about investment. You’ve written some books on it, 401(k)aos and Stock Market Cash Flow. Do you have any other books that we don’t know about?

I write all the time cathartically. I don’t know if I’ll leave it on my computer for my kids to find, all my little catharsis. When I have an issue in my head, I find writing about it. If something bothers me, that’s a great form of catharsis for me. I cannot type, so it’s hunt-and-peck. A lot of bad voice-to-text technology makes no sense. As a person who doesn’t know how to type, spell, or grammar, I write all the time but I don’t like to publish. I like to write about my own stuff.

So many people are in an investment they don't understand. Click To Tweet

There are many different benefits from it. Ryan Holiday wrote a book called Stillness Is the Key. He talked a lot about writing. The fact that the activity itself, it’s much out of your mind, it allows you to see things differently and see them clearer. That’s stoic.

A good insight is if something is inside of you and you write it down, it releases it from outside your body. At least it’s out there where you can see it.

The physical activity of doing it is huge.

I do a lot of that.

Let’s talk about investment. This is a broad subject. I wanted to start with a broad question. How do you characterize an investment?

An investment is when you put something in whether it be time, energy, heart, soul, money, and hope with the aim to get more back than what you put in.

Does that happen a lot?

Sometimes it does. Sometimes it doesn’t. Sometimes you put in and you don’t get it back. That’s what risk is.

Let’s talk about financial investments. What have you experienced over the years? Your profession in a sense is money, financial education and speaking. You do a lot of market-based things. What are some of the common reasons why investment will succeed? What are the most common reasons you see that investment fails?

I would say number one is financial education. If I were to write another book, I would call it The Second Bridge. In all my travels, I’ve seen two things. Why do people go to seminars? Why do people read books? Why do people listen to podcasts? Thousands of people wanting to do better, which is good and right and so should they. When I’ve asked the question, if I start seeing the same faces and they don’t get out of the rat race and they don’t get it, two things that they usually don’t have. Number one is they’re in an investment they don’t understand. In a culture of advice, people center on the investment rather than the investor.

Education is about the personal development of the investor. For example, let’s say we do some options. We sell an option. We sell a naked put. You would think a naked put is a naked put for one person, for another person, the risk is there. It’s not true. Warren Buffett does this. My mom does this. There are two different outcomes. The education and understanding of what you’re delving in are massive. Most of the time in my life when I’ve lost money and when I’ve asked other people that have lost money, it was a lack of understanding of what we were doing. We got excited about the investment but didn’t take pride as an investor. Is an investor someone who invests? That’s like saying someone with a scalpel is a surgeon.

It’s not the activity. The action is the last step. You can’t skip to the last step.

I can’t call myself a doctor because I do surgery. I can only call myself a doctor because I have the skill to do surgery and I’m certified to a certain level. The second gap, which is one that is more frustrating for me. I’m not a great student. I’m willing to work enough to get it. I don’t learn quickly, but I’m willing to put in the time to learn. What is frustrating my life, which comes back to the question you asked. What would be the thing I’d want to instill in my children more than anything else? It’s discipline. Often, what happens is we have the knowledge, but there’s a second gap that requires a second bridge between what we know and how we behave. I’ll have people that I know well how to trade options and they know how to manage risks. I’ll see them blow up an account. I’d say, “Why did you blow up your account? You know better.” “Andy, I didn’t follow the rules.”

Knowledge is the first bridge. If you don’t know what you’re doing, you’re in trouble. You bridge the gap between ignorance and knowledge. Once you have the knowledge, there’s another gap between what you know and how you behave. I always make the same joke. It never gets old. I always say there are 50 pounds on me that my wife isn’t legally married to according to her. She says, “I’m not married to that. That was not part of the original agreement.” One of the majors of many I went through in college trying to figure out what I want to do is exercise physiology. There’s no gap there in how this little pocket of mine got here. No gap in knowledge. I know what happens on the atomic level, the Krebs cycle, CO2 out, O2 and carbon in the whole bit. Despite that perfect knowledge of how it got here, for some reason, I’ve implemented that in my life. It’s a lack of either discipline or implementation. Those are paramount to investing.

You have cognitive mastery, which is mastering with information. You have physical mastery.

It’s practical. There’s not a practical mastery, which is why when you said for your sons, what’s the number one thing? Self-discipline, the ability to execute what you know. Discipline is when you do what is right whether it feels good or not, whether it’s timely or not. You know what to do and you do it. That’s a huge part of investing. This important question you’ve asked because we have a culture of advice where people don’t want any of those bridges. Do it for me. Give me a financial advisor to make all the decisions. I’ll hire that stuff out. There’s danger in that because now you’re limited. There’s a bit conflict of interest, number one, and now you’re limited to their knowledge and their behavior rather than you’re handing over the ship. If you drop your kids off to daycare for twenty years and you come back and they’re not the people you wanted them to be, don’t complain.

TWS 3 | Risk Assessment For Investments

Risk Assessment For Investments: An investment is when you put something in – time, energy, heart, soul, money, hope – with the aim to get back more than you put in.


The big picture, the key to investing is the investor less than investment. The culture of advice is an investment-centered culture. The culture of true investing is the personal development of the investor. Warren Buffett is not who he is because of what he bought. It’s because of what he knows and what he does. There’s more than one way to heaven. There’s an interesting book by Zucman who writes for the Wall Street Journal on Jim Simon. It’s interesting because Simon destroys Buffett in terms of returns. He almost doubles him up. He’s almost twice the effectiveness.

Buffett usually starts in the ‘60s when you look at what he did with Berkshire. This guy started in ‘88, so it’s a good sampling. He destroys Buffett. Buffett buys and holds and gets dividends. This guy, he’s in a trade for a week. He’s a swing trader. It doesn’t matter which one you want to do if they work. Don’t get dogmatic and say, “This is the best way,” but it’s not because of what they bought. It’s because of who they are. I hate the 401(k) for that reason because it suggests returns and prosperity minus the development of knowledge and discipline that is required for anyone.

Two points back when you’re making the comparison between Buffett and Simon. When you compare returns, it’s a comparison. Here’s this factor and that factor. When you look at all the other very variables, I’ve often said the same thing, but what I thought about when you said that is what Buffett trading is? What’s the scope of it?

It’s not fair to compare them because Buffett has only got one stock in his stock portfolio that isn’t paying a dividend. The reason he bought it is he thinks it is somewhat probably will and his cost basis is low. When you look at Coke, Buffett probably looks at it in two ways. If you compare Buffett to Simon, you can say Coke’s at $60 or $70. Buffett bought it at $3. That’s his average cost basis. You can say he bought it at $3 and now, it’s $60 that’s his return. That’s unfair to compare that to what Simon does because Simon will get more because that’s capital gain.

What Buffett cares about is the $1.47 dividend they pay every year. He’s at 50% a year on the dividend based on a cost basis. In that way, Buffett is probably destroying Simon. Either way, they both got more billions than they’ve ever known what to do with either way. It’s a little bit unfair because one is more of a cashflow model and the other is more of a capital gain model. Certainly, Wall Street is all about the capital gain model. They don’t care about dividends.

I would also say it comes down to objective. What is the individual investor? What are they doing it for? Because for Buffett, it’s a business. For Simon, it’s a business. For the individual investor, they have their business, probably their profession, their job and so forth, but you have their investments. How do you read between the lines and say, “What is a knowledgeable, educated investor?” What’s their objective? What are they after? The actual training, education, seeking that, do they need to have a refine purpose in order to do it successfully? Does that even matter?

The purpose and objectives are different. Purpose, why am I investing? Objective, what do I want to achieve? For the average person, this is quagmire because the education system doesn’t point you to either one. The education system says work for money, get a job. That’s it. That creates a problem for everybody because they’re trying to be something that they’re not. People come to me with the 401(k) thing all the time and they say, “What should I do with my 401(k)?” Advice question, not a growth question, tell me what to do question. For that person, that’s a quagmire in terms of that objective and purpose. They may not even know what that is at all in the beginning. Let’s say my purpose is freedom. My objective is to get a passive income above expenses, so I don’t have to work anymore. That’s fair.

That’s where you begin to study and that’s where you start. You’re a cashflow investor. I have a dogma that I prefer. It aligns with Robert Kiyosaki’s dogma, which is cashflow. I would be blind to the truth if I didn’t find many people that have become tremendously free, rich through capital gains stuff. Simon and Buffett are great examples. Buffett is a cashflow guy. Simon is a capital gain guy. It’s billions both ways. Both of them are financially free. Both of them don’t want for money. Both of them are living lifestyle-wise, they’re close. Philanthropy, it could be the same.

Most money managers, portfolio managers are cashflow guys because they live off of fees whether it’s performance fees or management fees.

Businesses are cashflow. If you look at the BI Triangle, you’ve got your three integrities outside and your other five in. Foundation is cashflow. The outside is mission, leader, and team, but the inside is foundations, cashflow. Businesses are certainly fundamentally in fundamental analysis. As soon as your cashflows debt, if you look at that cashflow idea from a financial statement, you got four boxes, income, expenses, assets, and liabilities. Expense is always the same as money going out. Everybody has them. You’ve got three boxes left. You either do what job people do, which is new money, in cashflow or cash investors, new money in.

The best way, this is my opinion, to deal with expenses that are new is with money that is new. If you have a new phone bill, you got to have new money coming in to take care of it. If that cashflow dies, you got two boxes left to pay. You got assets to pay or liabilities. If you have no cashflow, how do you pay? You’re in a capital gain of can you buy and sell your gold fast enough to keep up with your expenses? That puts an hourglass. The third one is, “If you have no assets left and you have no income, you have to borrow, which is the cashflow pattern of the US government.”

That’s fine for them to do that because they can print money, no problem. You looked at this and asked this question as an investor. What’s your objective? How do I want to pay my bills? Do I want to do it with a job that gives new money or I get laid off and I have to work? Do I want to make investments that produce new money, that’s dividends and rent, or do I want to make a capital gain? You’re moving from the income column depending on the asset column to pay your bills. That’s tougher to do maybe. Unless you’re Jim Simon where you’re a stud and you can compound that thing way faster than your expenses, which in a sense gives you an income above expenses in a way.

The problem with the 401(k) is those two cashflow patterns, income was the old pension model. Capital gain is the new 401(k) model. Most people don’t have the financial education to see that the column they’re draining into expenses is switched. The risk has switched because of the income from a pension, that’s the company problem to deal with stock market fluctuation and problems. 401(k) now to me. As an investor, you can learn a lot about investing by looking at the 401(k) model and deciding, “What is my purpose? Is it freedom? Is it riches?” If it’s freedom, it’s passive income above expenses. If it’s riches, probably capital gain because you’re going to have to expand your assets drastically. If you want to be a philanthropist and change the world or your cause or if you want to be driving fancy cars, which is not my thing because I don’t fit.

How do you characterize markets? How have you come to understand the different markets that are out there and their purpose?

I’m not an economist, so you’re smarter than me on this stuff, but to me, a market is a category of supply and demand. We have an energy market. What is the supply and demand for energy? We have an agricultural market, whether it’s corn or soybeans. What is the supply and demand for that? We have a financial market, which is a stock price is based on supply and demand, not the earnings of the company. The earnings of the company are secondary, the supply and demand are primary. That’s why the chart tells the truth more than the fundamentals do. To me, a market is looking at the supply and demand in the emerging market. What is the supply and demand for this stuff that’s emerging in these countries?

That creates all things being equal, fair pricing. It creates a clearing price.

The culture of true investing is for the personal development of the investor. Click To Tweet

In theory, AI is an interesting thing to think about because most of the transactions on Wall Street are made by machines. That’s tough because does it create a fair market? I suppose everything is fair. Define fair, life isn’t fair. Therefore, everything is. All is fair in love and war. I sometimes wonder if we’re a little disconnected from the fundamentals sometimes because if your machines are doing high-frequency trading and the AI is looking at technical stuff, historically markets have gone up over time. Does it disconnect from the fundamentals?

I certainly look at the run we’ve had in the last several years, which is unprecedented. I don’t think our GDP has grown. I don’t think what we’ve produced so is that fair pricing? I like saying this. If you had a beauty contest with all ugly girls, that’s what it looks like. Perhaps US stocks are the least ugly person or man in the beauty contest. Do you want to save euros? Do you want to risk everything in gold that doesn’t cashflow?

It’s not good for things to go down. The overarching theory for business is they like when things go up.

If you look at Jim Simon’s portfolio, do you know what’s the two best years are? Two best years he ever had were in the downs. It’s down bad. It’s all perspective.

People want growth and consistency.

Prices are going up and down. If you go to the gas pump and you’re an employee and the gas goes up, that’s a bad thing. If you own an oil company or you own some ExxonMobil and you see the gas price go up, depending on how many shares you have. One guy can go to the gas pump excited and one guy is bummed. It’s all relative to where you are. I wouldn’t say the market is going up or down or good or bad. If it goes up huge and it’s a bubble, is it good? Is a forest fire bad? Is it bad to purge Yellowstone National Park with forest fire? I don’t see up as good, down as bad. I’m like, “Up is up and down is down.” Robert Kiyosaki says it this way, “I don’t have a right hand and a wrong hand. I’ve got a right and left, they’re different.” In terms of people getting hurt, it gives you a different perspective. People say, “401(k)s are going up, that’s good for people going down.” I don’t know. They give all their men in Wall Street anyway.

That’s where I was going to because of a lot of the asset prices, stock prices, company prices. There’s been the biggest corporate buyback in history where you have businesses that are essentially issuing bonds that have low-interest rates. Not necessarily investing in infrastructure, but creating liquidity in their company, keeping the price and the value high and going higher. You also have this wave of how businesses are capitalized and how valuations are done.

There are a lot of reasons to issue bonds though. Apple is a great example. Over in Ireland, they’ve got all that money. If they bring that money home, what’s their charge? It’s 30% or whatever it is. They issue a bond at 3% tax-free, borrow money tax-free, repatriate the money. I’d go bond every time.

There are all sorts of reasons, but you’ll look at what you see most commonly, which is corporate buybacks in order to prop up share value.

Some people look at it that way. Some people say, “We’re confident about buying our own stuff.” You look at that in a macro idea. For this market to go higher, what is required to get it higher? It’s an influx of cash. In other words, money needs to come from somewhere. That money earned is one thing. If it’s borrowed, it’s another thing. If it’s created out of nothing, which the fed starting to do again surreptitiously, that’s a whole other show for you and me.

There are many forces. Fundamentally supply and demand, there is much supply and much demand. This creates a price. If demand goes up, prices go up. If supplies the same. If supply goes down, but demand goes up the even higher price. Assuming a stable dollar, that’s fundamental, but there are all of these other forces. The way in which accounting is done, the different financial instruments. You have many different options in order to get an outcome. One of the biggest lawsuits going on is by Citadel, where they’re suing their quant. This strategy that’s all based on this micro volatility is where they’re making all of their money. It’s not necessarily on the fundamental value of Bank of America or GE.

I have a graph in my class where I draw a line of the timeframe from long-term to micro trading in milliseconds. I have a graph of the importance of fundamentals, against that goes to zero. The fundamentals don’t change in a microsecond. That brings up another thing back with AI. They’re worried about competing against AI and I would warn them not to think that way because you don’t need AI. You’re not trading against AI. You’re not competing against them. You’re playing a different game.

The way you play the game is you say, “The market goes up, down or sideways. I’m going to be prepared for all three in terms of risk management, position size number one.” You can go in all three ways. Does it matter what causes that? No. In other words, if AI causes it to go up, who cares that went up. Maybe it was better sales that made it up. Maybe it was better GDP that made it go up. Maybe it was a devaluation of dollar where it takes more dollars to buy that many shares that made it go up. Is it more valuable then? I don’t know. Regardless of what makes it go up or down, I’ve never cared and nor will I ever care. If it’s AI that makes it go up and down, high-frequency train, I don’t care. What is interesting is if we’re going that way, does that disconnect you from the fundamentals? The answer is yes. You’d have to because they’re making such quick decisions there.

Who still bases their decisions on fundamentals?

Buffett does.

Who else?

TWS 3 | Risk Assessment For Investments

Risk Assessment For Investments: Most people don’t have the financial education and literacy to understand that the column they’re draining into expenses is switched.


I care about fundamentals. I hate talking about the same stock all the time. It seems like every time I’ve been on a radio or on podcasts that talk about Kraft Heinz, and it’s a Warren Buffett company. He owns a ton of it. I bought a lot of it off the dip. I didn’t do that for technical reasons. I did it for fundamental reasons and for cost basis reasons. I did it because I think there’s going to be ketchup on the table regardless of what AI does. If I go to a restaurant a few years from now, I think there’s going to be Heinz on the table. I don’t know that that’s the risk, but that’s my bet. That’s a fundamental decision where I write options to get paid to buy it, reduced my cost basis with an eye of faith that their dividend will get higher with inflation. Their dividends will increase as the dollar loses value. My cost basis will be low and we’ll still be eating ketchup.

That would be an interesting econometric type of study is to look at the volatility and how quickly people’s tastes changed when it comes to condiments as opposed to food. Food changes differently.

They own Oscar Mayer. They own Kraft macaroni cheese, Philadelphia cream cheese. Nestle is bigger than they are, but they’re the third-largest in the country. There’s more salsa sold than ketchup. There are a couple of big knocks on it if you want to look at the other side of that trade, not to get into the minutia of it. A lot of people are more health-conscious and so they say, “Is macaroni and cheese in trouble?” I’ll keep that personally sustained out of my own family. I’m not worried about that. People like salsa. With that said, I still think that fundamental analysis, I don’t think ketchup is going away.

The other problem with them is they’ve got too much debt. Understanding it economically is a big deal. This blew me away that their stock dropped on this. I feel like I’m on an island because I’m not an economics professor. I’m a C-minus average basketball player trying to stay eligible in college. I didn’t understand this because I always feel like there are people that should be way smarter than me on this. They had a write-down of their brand equity. Meaning what’s the brand Heinz or if we sold the name Heinz that you sell a new mayo under it. They overestimate that, which happens all the time.

It’s like, “What’s your house worth?” You don’t know until you sold it. It’s the only time you know, so maybe you put down in your balance sheet, “My house is worth $10 million.” It’s only worth $5 million. They wrote down billions in that, but that doesn’t affect the cashflow. It doesn’t affect how many ketchup bottles were sold. Their stock drops hugely. I’m like, “That’s good. That’s cleaning the house.” What that means is your return on assets went up. The amount you’re declaring in assets is that’s a better ratio to income. Why is it going down? I don’t know.

The SEC’s mad they did it. There are probably people smarter than me, but the thing that gives me a lot of sauce in that, Buffett is making $300 million a year off it. If you have a machine that’s making $300 million a year in dividends and someone says, “Your machine lost some value if you want to sell your machine.” Do you care? Cashflow investing, whereas these other guys, all these algorithms were about prices of stocks for a capital gain, but from a dividend cashflow’s point, are they selling ketchup? Do you know what percent of their profits go to the investors for dividends? It’s 57%. Do you know why that’s a big deal? Heinz is 57.

Has it been that way? Is that coincidence?

It has nothing to do with Heinz 57 sauce. It’s a coincidence. Buffett is thinking about this cashflow-wise. What does the company make? What do they sell? The AIs are totally disconnected from the business. They’re like, “What’s the stock price at?” I’ve tried to be less dogmatic. You and I like sound money. You and I like gold. We’re probably not fans of Fiat currency, but in the reality of it is I have to say we’ve been calling for crashes forever. How long is the last? This doesn’t feel right. No money out of nothing. Our dogma in our mind is like, “How can you?” You look at Japan, how long has Japan been? Their GDP is the worst in the world that I’m aware of a major country.

They continue to grow 100-year mortgages, crazy stuff. I went back and read some of Bernanke’s stuff. If you’re dogmatic about it, you say, “You don’t print money out of nothing.” What’s interesting, if you took his side and reread what he said about, he says, “A currency like gold is valuable based on the value we place on it and the quantity of what we have.” The problem I see with it is that you can invent it out of nothing. The reality of it is we don’t trust men with that power. That’s probably where you and I have a big issue.

When you think about it, if the population grows, you’re going to need more currency. Keep up with population demand, you can dig up more gold to back it. If people did trust it and as long as you controlled it, what’s the difference? If we say this is a dollar, it’s valuable, they’re limited in supply. The problem is if men get there what we see is they flip that switch and they turn it on to fix everything. There was no sacrifice of anything of substance. It’s money out of nothing. Fiat currency is our issue. When the S&P hit 2000, I’m nervous about being bullish ever since, but I have to do what the chart says. I can’t say, “It’s going to crash.” I have to do what my chart says because the chart tells the truth.

If you look at money supply and how much liquidity, you can go back in hindsight and say, “That totally makes sense why things kept going up.”

What’s crazy is we’ve got $22 trillion on balance sheet, $150 trillion off promised obligations. If you don’t freak out at $1 trillion and you don’t freak out at $5 trillion, the guy who understands it is the guy that would know at what point it doesn’t work anymore. If you were back in the Ross Perot days where he had his little charts, “Back in 1971 when $1 is a $1.” If you’d have told Ross Perot back in the ‘80s that we’re going to have a $22 trillion deficit, he will say, “You will collapse far before then.” That’s an interesting thought.

We’re beyond this point where people we’ll freak out. I’m not sure at what level it is. Maybe it’s no level.

No one talks about it but us. Congress isn’t talking about it. Trump hasn’t talked about it. Pelosi hasn’t talked about it. Is it wag the dog for both of them? We’re making wars. We’re doing impeachments. We’re doing all the stuff. We’ve got to keep this fight going because if people realize that we owe $150 trillion, they’re going to freak out, so let’s fight with each other in public as long as we both agree not to talk about that.

In 2019 when they diverted away from what they were trying to do with interest rates, I think they had three or four cuts.

What was interesting about that, you and I have talked about this, but what’s weird is if you looked at the economic policy as medicine to where I say, “The economy is sick.” What do we have in the pharmacy? We can print money, we can change rates, we can change the fractional reserve rate. What are the tools in our cabinet? What medicine do we have? If you looked at the Federal Reserve as a pharmacy with different medicines, I could see after ‘08 where we lost half its value. You’re going to drop interest rates to practically nothing. We’re at all-time highs. What’s the unemployment rate? How far back do you have to go to find that low of a number? Here you got stock market all-time high. You got all-time unemployment low. Their job is price stability. Why are we medicating the economy?

Markets go up, down, and sideways. Click To Tweet

It’s the government who are monetizing them because if interest rates did go up, they wouldn’t be able to afford the interest on it.

The question is, is the economy healthy it as to be propped up? You and I would say no because if you got to give you heroin, the heroin hit makes you feel good. Get off the heroin and see how you do. In 2018 going into 2019, we started trying to pull off heroin. We tried to raise rents. Look what the market did and how it goes. We will be patient. Yellen was not cryptic. She’s going to do whatever she says she’s going to do. Powell is maybe a little more cryptic. Bernanke is a little bit more cryptic. Yellen was an academic. They’re all academics, but it’s interesting. Why is the monetary policy accommodated? We’re addicted to cheap money.

It’s almost 2008 that created the precedent for the role of the fed. There’s much more power. Their influence has changed.

They used to buy bonds, now they’re buying private stuff. That was a big change.

The whole repo thing is fascinating because the overnight market, bank-to-bank lending, but they stopped lending because it was less risky and a huge reward keeping money at the fed as opposed to giving it to each other. Banks putting up crappy collateral and that’s when the interest rates spiked on the repo stuff.

Maybe that’s why he got $1,500 gold again. Maybe some people always want to turn to gold.

There are many different things happening where I find it interesting. At the same time, it’s beyond my understandings from a rational standpoint.

That’s where technical. People say you’re a fundamental guy or technical guy. I talk about my Heinz trade as a fundamental trade. I’m in line with Warren Buffett. Why do I care about the technical as well? This is exactly why. It’s because they tell the truth. When you come right down to it, let’s say markets go up, down and sideways. Let’s decide to create a risk management strategy that does well regardless of the cause. What we’re talking about is the cause, “Is it the fed? Is it the debt? Is it the overnight stuff? Is it the repo stuff? Is it the AI stuff?” We’re talking about causation. If you say, “I don’t care what the cause is. I need something that helps me if it goes up, down or sideways, regardless of the cause.” You have a little bit of freedom there. That’s why technical analysis is an important thing. Direction matters. At the end of the day, it’s the truth. It might not correlate to what the fundamentals are doing, but it correlates to your buying power and what you have to show for yourself.

This might be a good tangent. How do you characterize risks when it comes to investment? You have more knowledge of markets.

First of all, it’s weird having an insurance guy ask me about risks because that’s your wheelhouse, not mine. The greatest lesson I ever learned from risk because I credit Robert Kiyosaki with so much of what I’ve learned. We were in Phoenix and I remember he said this, it resonated as true to me. He said, “Risk is about control. The more control you have, the less risk. Less control you have, the more risk.” I said, “If you have no control, you’re gambling.”

What are some examples of control?

Control is when you can force an outcome. Let’s do several examples across the asset classes. Let’s say you’re a guy like Than Merrill who understands markets well. He knows that regardless of what the market’s going to do, that he can take a single-family home and he can renovate it. People bash flippers. Why don’t you bash developers then? Because all flipping is redevelopment. If you can have a development business, you can have a redevelopment business. If he understands what those rents are and he understands what those home prices are, in a short amount of time because it takes a long time for the housing market to crash.

He can force appreciation like Kenny McElroy does, better management, better facilities, better features, different cashflows. They can force that appreciation. They go and borrow out money against the need to get tax-free cash. They’re managing their risks with knowledge and being able to force appreciation of some kind. Kenny McElroy is the same way. He buys development. He says, “How can we raise the NOI? Can we force that to happen?” As opposed to a stock where you buy Apple, now force the price up or down. The reason that real estate investors freak out about stock is like, “I have no control. I can’t force appreciation. I can’t force this up.” True, but if you marry the stock market with the options market, now you gained control back because an option gives you a guarantee on where you can buy or sell.

It does it in a liquid environment or real estate. If you get in trouble there, how are you going to get rid of that? Neither one is better than the other. As a salesperson, the reason people are scared of working on commission is there is an illusion that they can’t control the outcome. One person goes and he goes into sales and his mindset is, “I can’t make people buy from me,” but a skilled salesman that understands stimulus and response. If he controls the stimulus, he controls the response and he can walk into a business meeting and know he’s going to get the contract because he can force it to happen with his skills. It’s a low risk. If you find a square mile area with a certain population, a certain economic status, you plop a McDonald’s in that, try to stop people from coming through the drive-through. All you can do is put your close sign up because you’re going to make money. You can’t stop it from happening. The amount of control you have is the risk.

I look at markets and it’s interesting because risk, the likelihood of loss, I look at real estate being more consistent. There are only many things that could go wrong. If you’re able to look at the example you gave, which is here’s this city, here are the demographics, and here are the trends over the course of time. Putting McDonald’s there, there’s a high probability it’s going to be successful. Ultimately there could be an earthquake, that happens and everything is gone. My point is like, “What could cause loss?” How do you go about identifying that in markets?

There’s a lot. Real estate is riskier than that because real estate is dependent on the debt market. If you made a law that said you’ve got to pay cash for it, what would happen to the real estate market? You said, “No more debt for real estate.” The amount of debt you have enables the purchase. The more you enable people to purchase, the more they’ll purchase. The more student loans you create, the higher the tuition it will go. Why did we have a bubble in the 2000s in real estate? It’s zero down, no doc loans. In other words, anyone can get a loan.

TWS 3 | Risk Assessment For Investments

Risk Assessment For Investments: Risk is about control. The more control you have, the less risk. The less control you have, the more risk.


When you give a loan to anybody, anyone can buy the real estate. To me, that doesn’t sound like a real safe environment. It turned out it wasn’t. People say, “What about the stock market?” Mark Cuban has Ross got his baseball games over the internet all over. People listen to their baseball games than radio. Yahoo at that point was bigger than Google. Yahoo was the search engine. Some people don’t even know what Google was. He sells his company for $6 billion in stock. For Yahoo, maybe it’s $100 a share. The 2000 crash, tech bubble. In 2000, it was $5 a share. Let’s say it goes from $100 to $5, 95% is value.

Cuban is fine. Why? He bought the right guarantee. What’s more solid than that? He’s got a guarantee at which you can sell no matter what happens. The company can go bankrupt. As a person in the insurance business, why do I buy insurance on my home or my life or whatever else? It’s to give me some guarantees and people will buy guarantees. Those are derivatives. That’s the driven market. Is one market more solid than the other? I don’t think so because they’re intertwined and they’re both relying on the debt market so much. The largest market in the world is the currency market. The bond market is much bigger than the stock market. The stock market is much bigger than the options market. Debt is probably the one that links them all together and makes them all risky because they’re all dependent on debt.

You also look at the risk associated with the bond market versus risk associated with the equity markets and risk associated with the options markets. The risk keeps going higher and higher in a sense. It depends on how it’s used because a bond is a guaranteed coupon rate. Bonds are used as equity in a sense because it’s bought and sold, not kept.

It makes the paper asset class relevant because people hate paper, “I want gold. I want real estate. I want business.” Paper is everywhere. You put money in the safe or gold. It’s printed on paper. You put your car in a valet and they give you a stub. It’s on paper. You got a title for your real estate. You got an insurance policy. What you’re talking about is social to primal. If you want to take it to the extreme, does your paper hold water? In a primal world, if I’m bigger and stronger, then I get the sandwich and my kids eat. We fight and you lose. It’s primal, it’s not civil.

If you’re civil, you have a government, you have paper, you have agreements because that’s all these are. This paper has meaning. It should. If we’re honest and true, all papers are a handshake written down. As long as there are honesty and truth, “This is my house. I’ve sold it to you. Now it’s your house,” agreed on paper. If we grow primal, we throw all that out. Put up our dotes and we go back to caveman days where the biggest, strongest guy becomes the alpha male of the group. Paper is an interesting thing. In order to invest, there’s a certain amount of trust that you place in civility. You need a certain amount of trust that you put into this stuff. Hopefully, that trust is not always misplaced.

I’m not necessarily talking from your perspective, but from a retail perspective, what is typically the fear associated with markets and with market investing? Looking at them, I would say the majority of people that have ownership or stake in the market. Are they ones that do it based on your definition of risk or is there a different definition for them?

Are you asking like factors?


Employment is a big number because employment suggests people’s ability to buy. Debt is also a big one because it suggests people’s ability to buy. You have to earn money. You have to borrow money. Innovation is a huge one because if we innovate, now we’re creating value out of nothing. Unlike a Fiat currency, you create a new drug like Trikafta for CF. Trikafta has $300,000 a year for a kid to be on that thing. That’s a new value there and it’s worth it. As you innovate, that’s a factor. What’s the risk of failure to innovate?

The war between the United States and China is less of a trade war and more of who gets to AI the fastest. They’ve taken a much different path towards AI than we have. If they out-innovate us, that’s a huge risk. Failure to innovate is a major risk because that’s called obsolescence risk. Obsolescence risk is Blockbuster Video. They failed to innovate. Netflix did, they didn’t. Netflix won. They’re gone that quick. How fast did Blockbuster die? You have legislative risks.

Innovation always displaces the technology in which it was inferior.

If you go out of the individual, you say, “l have legislative risk.” For example, the new 401(k) law. It’s awesome for Wall Street. It’s horrible for the worker under the guise of being better for the worker, legislative risks. Geographic risk, does the Middle East run out of oil someday? Political risk, we’re going to start a war with Iran may be. Purchasing risk and inflation, all these risk factors are there. You look at and you freak out. That’s outside. If you want to go inside, you say, “What can I control?” That’s the real key. Risk is about control. You can’t control legislative risk. Do I run from options? No, I embrace them because of my best chance to control them. An option is a guarantee. It gives me a choice to do something. Someone else makes me a promise. Do they make good on it? You can’t control that either.

All those risks are evident and you have the retail investor world that doesn’t know how to control ignorance risks. That’s where you look at having the upper hand is being able to know what your options are and be able to make moves so that whether it’s up, down, sideways, you’re capitalizing on the opportunity.

It comes back to those two bridges. If you have the ignorance to knowledge, any gap there is risky because now you’re in an environment where you can’t control it because you can’t control what you don’t understand for sure. That second gap is if you don’t apply it, you’re also at risk.

I was going to make a comment on China, which is fascinating because China has tons of money. They’re building these massive cities because they have tons of capital. What I found interesting is I was reading a report on the billionaires and millionaires of the world and the fastest-growing population, and it’s in Africa.

The policy of China, they have controls on population. They had to. They’ve got a big population. It’s against the law to have kids over there.

Real estate is risky because real estate depends on the debt market. Click To Tweet

Do you know where the biggest investor in Africa is? It’s China. As you look out, what they’re doing there. They have a big presence in the Middle East as well. It’s interesting because you look at China years ago when we would do a show, we would say, “They’re building these massive cities. They have tons of resources and they have those limitations on kids.” They’re destined for failure, but they’re innovating by going outside. That’s where I find it’s fascinating. It’s how the world is becoming global.

It’s important to be patriotic, but not dogmatic because I’m a red-blooded American. I love my country. Is it unpatriotic to say they might be beating us? That’s reality. You have to live in reality. You can still be patriotic and that’s not anti-American to say they’re beating us. It’s weird because they have this economic capitalism and yet they still have this communistic social stuff, control, big brother and all that. Hong Kong and China, it’s a weird place because you go over there and you feel the energy of capitalism, yet it’s still under North Korea-type crazy dictatorships. You give them that stuff, they’ll revolt. They’ll want their freedom.

They get enough freedom to make a buck. It’s interesting how they’re playing the game and what we don’t want to be. If we’re not all part of the human race and we decide, “It’s us versus them.” We don’t want to be arrogant because they got a lot of minds. If you believe two heads are better than one, how many engineers do they have as opposed to how many AI guys they have working on this? We’re smarter because we’re Americans. They have resources. They’re spreading their influence. They have a culture of, I wouldn’t say of an underdog. We feel like in America. Pride comes before the fall. You got to respect those guys. Probably the best thing to do is start learning how to get along in the world. That’s probably the best thing, like do unto others type stuff, build bridges and not panic. See them as enemies. That’s the way the world has always been.

The world is the world. We’ve known there are people all over the place, but it’s becoming so much more linked because of technology and a lot of the innovation that’s happening is allowing third world countries, emerging markets to start to live a better life.

Where’s Google Translate going to be in 30 years? Pretty soon, we’ll be listening to Chinese podcast and they’ll be listening to yours and ideas will be exchanged so much more freely with language barrier dropped and innovation.

There’s this velocity of people where you have innovation, ideas and things are compounding. They’re going to continue until the language barrier is going to become less and less significant.

People hate change. Change causes upset. People resist change. Dogmas will take the truth. Chain it with their chains and sink it at the bottom of the ocean if it doesn’t fit the rhetorical goals. As we innovate and the truth is discovered from the epistemological standpoint, do you think we’d be able to change? We’ll have a culture of change is okay? Do you think that will ever happen or do you think the DNA that we’ve evolved into don’t change?

There’s equity in change. What I mean by that is there’s a room or the capacity to change. In the US, I don’t think there are tons of capacity other than the Millennial generation who are going to be inheriting trillions of dollars over the next few years. I look at the rest of the world because we’re 300 million people in the US, but there are billions everywhere else. As the world becomes more connected, they’re going to see what’s possible in life and they’re going to want that. Equity for change is huge. The capacity to change outside the United States is big.

Millennials are interesting to think about. I hate that stereotypical thing is you label all these people. You’re Millennials, you judge them because they’re a diverse group and any other thing is. With that confessed and with that caveat, they’re an interesting group because on the one side, we see them as more open to change and brighter. My kids even below Millennials got iPads. You learn differently. You think about the world differently. The other part of it is a lot of them have been tested like the greatest generations like World War II guys if they had resistance. Because on the one hand, they’re like, “School should be free. Everything should be free. We shouldn’t have to suffer.”

They’ve been coddled a bit. Assault can be done with words like that book, The Coddling of American Mind. All of a sudden, you go on a college campus, “I need a safe room because someone said something.” I look at them as maybe they are strong to handle these problems? They’re smart and they’re open to change. That’s going to be an interesting generation to see how they deal with all the crap that the Baby Boomers dumped on them.

There are challenges, problems and there have been forever. People go through different challenges. Going through world wars and being at the brink of death, that’s a big challenge. The challenge is going to be different. You can measure extreme, but extreme in a sense is based on perspective. They’re smart. They want simple. They want easy. They’re looking more for lifestyle than they are for security. That is a different motivation that drives behavior that is unprecedented. When you put resources in their hands, it’s going to be in better use than with Baby Boomers. Have you seen the Bill Gates docu-series that’s on Netflix?

It shows how he’s helped to brainstorm finance trade awareness to some of the global challenges mainly in Africa, third world countries, whether it’s about pollution or HIV or the water cleanliness. One of his big projects in that docu-series that they talked about was how kids in parts of Africa continue to die because of diarrhea. There’s so much bad water, bad sewage. He essentially brought good minds together to create a sanitary system that was affordable. It took several years to do it, but what he’s been able to accomplish there, that’s the mentality of Millennials. That’s Bill Gates. They see how things should be and they’re empathetic.

That’s where equality comes from that group. They care about equality out of empathy. Quite frankly, the Baby Boomers did not feel that way.

No, because they were in a war. It was about survival. Survival is you first before anybody else. Millennials haven’t had to go through that. They are sympathetic, empathetic and that’s where their minds work differently. How they get information, how they organize. It’s different. They may be able to get a better outcome than the methods that were used previously.

They got more intelligence, more knowledge than we had in our generation. Back to investing, when you look at all the stuff we’ve talked about, generational stuff, economic stuff, risks and all that, investing is about wanting first to sacrifice, first put out before you get in. That can hurt people right from the beginning. Notice when you asked me that question, what’s investing? I didn’t do it in a monetary sense because I don’t think about it that way. There are investments of time, energy, love, and many kinds other than money. It’s when you give and hoping that it’ll come back bigger. Whether you’re investing in your children, you’re hoping the fruit of that will be bigger than what you put in. Playing the piano, you’re hoping the fruit of it will be bigger than what you put in.

It’s an exchange where there’s an output that’s greater than the input.

The thing that’s tough is whenever you put something out because there’s not a guarantee that will happen and there’s your risk. You manage that with control saying, “If I put this out, what can I control to ensure that this comes back?” It’s so much not about advice. In 2020, I’m going to take my gloves off and I’m going to start punching advice in the culture of advice because it’s dangerous. Why fight personal development? Why fight that work? Why fight becoming before having or doing? Give me advice and tell me what to buy.

TWS 3 | Risk Assessment For Investments

Risk Assessment For Investments: Employment is an important number because employment suggests people’s ability to buy.


If you were to read this blog, what people are going to do is they’re reading about all this talk we do about Millennials or AI or any stuff we’ve talked about. They’re still going to be caught in it. What am I supposed to buy? At the end of the day, what they’re craving, what their addiction is like heroin. I want to know what to buy. I want to know what to do. There are plenty of people who will sell that heroin on the street. They’ll sell it to them and give them advice. They’ll suck it up. If you sell this in a different way of saying, “No, it’s not about what I’m going to buy, it’s about what I’m going to be.” I do personal development, that should be sexy, that should be exciting, it should be healthy. You look at and say, “My schooling told me to get a job and it’s not looking good. Maybe my next schooling is I’m going to learn to invest. I’m going to be an investor before I have investments.” That’s “be have” behavior. When you take the ‘be’ and you put the ‘have’ and put them together, that’s behavior. You’ve got to be before you can have. The doing is in-between behavior.

As a final point and then I’ll have you tell everyone how they can buy your books, access your courses, follow you. What I would say is on that vein, which is as I’ve looked at giving people advice and doing the show and we have a business that revolves around it. People rarely connect to why they’re doing what they’re doing. They connect to the objective. They do it because they’re supposed to do it. That’s never qualified. I look at what an individual realizes that they think all of these things have to happen in order for them to experience something. That experience gives them a feeling or an emotion. That’s ultimately what it is.

I look at those emotions, those feelings can be experienced. You don’t need all of these things to have that outcome. That’s where you look at those that have achieved enormous amounts of wealth, success, and prestige, but they’re still way more miserable. In some instances, they take their own life. It’s one of those things where you need to connect the role of money, the role of investment because we live in a time that we’re all wealthy. If you compare to other parts of the world and look at it in history, you look at what we’re able to do, experience and how incredible it is. It doesn’t mean that investing and achieving more isn’t going to bring more of those experiences, but you got to connect that first. If you go about thinking that your life’s going to suck until you have this much money, this job, this title or this bank account balance. It doesn’t work that way.

My parents raised me in church and I don’t get out as much. There’s a wonderful passage that I remember and I don’t remember where specifically it came from, but it was about a group of people. It’s a wonderful idea where they figured it out. A group of people that had a society where it was almost communist because of all things common among them. They lived after the order of happiness. That’s a huge thing. When you look at the role that money plays in that Maslow’s hierarchy’s instructive is food, clothing, and shelter. You got to have some to do that. People say, “Money can’t buy happiness.” Hunger doesn’t buy happiness. Sick kids without medicine don’t buy happiness, and being naked and afraid on day 25 isn’t happiness, especially if it could be day 300.

As you go up there and you look at familial relationships that are different. Having money means you have time. I think having a little extra cash helped me spend more time with my kids. It’s been better not to have a 9:00 to 5:00 job that most people look at normal and having more time to put into my kids. The problem is that some people get caught up with the money. They never put in that time for those relationships. The money eclipses through relationships, so they’re killing. In that case, too much money kills that hierarchy. Self-actualization, try to buy that. How many Ferraris can you buy? You’re not going to get it.

Happiness, huge part as you get into your investing thing. I love Robert Kiyosaki’s CASHFLOW game, the rat race. Cashflow, if you get out of the rat race, that’s when you win it. It’s not when you get to the fast track. It gets ridiculous after that. I’m doing this charity thing. I’m making millions of dollars and I’m buying this. They’re big deals. When you look at where that game is played on the first page of financial. When you get passive income above expenses, now you have freedom. That’s a huge happiness thing.

If you go into your investing and you say, “If I don’t do anything more than that, does it get passive income above expenses?” There is some happiness to be found in that. That is not in the money, it’s in the life that you have at that point. Where if you have time, you can study what you want to study and if that’s your thing to go out and get another $100 million, you have to pursue it. Passive income above expenses out of the rat race, that’s a good place to start with a goal of investing that many people would find attractive.

What you’re saying is profound and still goes to the idea that it’s the life people are looking for and they think that having to get to certain points from a financial standpoint is when they’re going to be able to experience it. I’ll use an example with a client who got divorced as he was about to sell his business. He owned tons of property. He had been going to different personal development conferences and had studied, read books and watched videos. While he’s doing it, it was all for his family. That’s what he told himself, but yet he neglected his family the entire time. He neglected their needs. It’s that whole mentality where “I’m doing this all for them. They should love me because of that.”

They won’t give you love for that specific purpose. Plus, after you achieve that level where you have the money, freedom and time, suddenly life is going to start. I keep going back and forth on it because I look at the necessity that’s in me, which is I have to keep growing. I have to keep contributing, but I find fulfillment in that. If I do more, I’m going to have more of that fulfillment, yet I’ve connected that fulfillment piece to it. I’m satisfied fulfilled. If I get more, it’s going to be more. I’m good with where I’m at.

Investing is not about money. In other words, money is a subset of investing but not vice versa. We opened the program with it. Investing in people, hobbies, and growth is a huge thing. How we spend our time, that is the investment that is required. You have a limited amount of time. You can’t make it. How you invest the time is huge. Part of that time will be invested to learn and make money. Part of it will be to foster relationships. Part of what we’ll do philanthropic things. What did you achieve? What’d you build? What’s your legacy? Steve Jobs has an incredible legacy. Look at the stuff we use and what he left and what he gave us. I don’t think he went to work for more money. He knew what he wanted, who, why, and all that stuff.

How can readers get a hold of you and learn what you put online?

I’m changing my pitch on this stuff. When I google stuff, they google me as everyone else does. Google is looking at what I search and because I’m in investing, the ads I get on my YouTube stuff are all about stocks. I’m so sick of them. I hate them. I hate how they’re presented. It’s usually some guy in a Learjet, “I’m the greatest option,” or there’s this one, “I used to work on Wall Street and I found their dirty little secret. I’m going to share it with you.” I’m like, “Are people this stupid?” Before we talk about how people get a hold of me, I am going to take my gloves off in 2020. I have no interest in having any students or anyone read my books that want advice and that don’t want to develop themselves and put a little work.

I was over in Vietnam and I saw some people saying, “Sign up for one program. Click the button, follow, to do is $10,000 a day.” I was like, “People believe this. They sign up for these programs.” My website is The Cashflow Academy. The way we approach this is we say, “If people that want to learn, be investors and get excited about learning, this is the best place in the world you could go.” For the people that want quick tips, the people that want something for nothing, that’s not an investment. Remember something for nothing is not investing. Investing is putting out something and getting something back. If you put out nothing, that’s not investing. We’ve tried to purge any messages when we do promos. We didn’t want to work with those people frankly. First, I’m saying, “There’s only a certain type of people we want to drop by.” Is that bad to do? I don’t know if it’s bad to do or not, but I’ve grown weary of the environment of advice, programs, books and stuff. I like to be frank and clear. Would you like to do some work and put in some effort to gain knowledge and discipline, then we’re going to be a great resource for you.

That’s the natural order of things. If you want to get something more than what you have, there has to be more in the process.

Our website is The Cashflow Academy. We’ve got a lot of free stuff. It’s good stuff. We teach the 4 Pillars of Investing. We teach fundamental, technical analysis, cashflow, risk management in a way that’s fun and simple.

It’s good to have you here.

It’s fun to hang out. I always look forward to this stuff.

Andy, thank you. I appreciate it.

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About Andy Tanner

TWS 3 | Risk Assessment For InvestmentsAndy Tanner is a renowned paper assets expert and successful business owner and investor known for his ability to teach key techniques for stock options investing. In 2008, Andy was key in helping develop and launch Rich Dad’s Stock Success System, which teaches investors advanced technical trading techniques to profit from bull and bear markets.

He serves as a coach to Rich Dad’s Stock Success System trainers and as the Rich Dad Advisor for Paper Assets. He is currently authoring an upcoming Rich Dad Advisor book on paper asset investing.

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Conquering The Venture World With Thomas W. Jones

TWS 2 | The Venture World


There are so many more opportunities to be found in the venture world these days, and it’s a good time to jump in. You’ll find that you’re able to make more now if you have some capital to put in. Patrick Donohoe talks to Thomas W. Jones, the former Chairman and Chief Executive Officer at Citigroup. Together, they speak of these opportunities for investment. Your path to wealth might just be down this road – if you know where to look. Let Thomas and Patrick show you the way!

Listen to the podcast here:

Conquering The Venture World With Thomas W. Jones

It’s truly is an honor to speak with this gentleman. His name is Thomas Jones. Thomas is a former Vice Chairman, President and COO at TIAA-CREF, the largest pension system in the country, one of the biggest financial firms in the country. He’s also the former Vice Chairman of Travelers of the Federal Reserve Bank of New York and Freddie Mac. He’s also the former Chairman and CEO of Smith Barney Asset Management and the former CEO of Global Investment Management at Citigroup, the former Treasurer at John Hancock Insurance Company, the Founder and Senior Partner of the venture capital investment firm, TWJ Capital. He’s also the author of a book called From Willard Straight to Wall Street. Thomas, correct me if I’m wrong, but were you also a part of ICI, the Investment Company Institute?

I was on the board at the Investment Company Institute for a number of years.

Of anyone to understand how investment has changed over the years as well as different types of investments, different types of companies within the financial services. Tom, I can’t wait to have this interview. I thought it would be great to start with some context for the audience to understand your perspective on things. I’d love to know as you were growing up and as you got into financial services in your career, who was one of your role models? A person that inspired you either someone you knew, somebody you didn’t know. Who were some of those instrumental people that helped form what you decided to do with your life?

I would say one of the most significant role models was John Bogle, who created a modern index fund. As an experienced investor, he understood the various characteristics of risk in both the equity and fixed income markets in the US. Through a long period of experience and reached their conclusion, it was a low probability that the average investor was going to outperform the average performance and efficient capital markets have evolved in the US. He came up with this idea that the most likely way to deliver efficient returns relative to risk for the average investor was to minimize the cost of making those investments, so that the net return over time would be maximized in a way that it compounds itself. I thought it was magnificent that somebody as brilliant as that would focus on trying to create a product that was designed to serve the common man, so to speak. Designed for the average investor and accessible to investors who weren’t necessarily wealthy with large sums to invest in able to pay high fees. That was contrary to the standard Wall Street model. I admire what he was doing.

That was one of those earthquakes in financial services. It continued to compound where technology is on the scene now and the awareness of information has pushed fees, expenses and transparency. It pushed all those down in transparency up and you were one of the founders of it.

It was interesting and totally going index funds didn’t attract much of a following. Frankly, index funds came up onto the scene in the late ’50s and early ’60s and weren’t considered to be much of a factor in the market or maybe 25 or 30 years. It’s been only in the last 25 or 30 years that it’s become powerfully evident that most active investors are not consistently outperforming an efficient index fund. There will be some outperformers every year, but the problem is that most investors can’t identify them in advance.

It’s too late by the time they know. Their track record, is it that way going forward once they have outperformed it? 

That’s true also.

I thought another question that would be helpful for me to understand the career you’ve had, this success that you’ve had and the difference that you’ve made is to understand a superhero or a figure in history that has done amazing things, hero-driven things. Who have you most resonated with and maybe fit those criteria?

Most active investors are not consistently outperforming an efficient index fund. Click To Tweet

I was a bit of a student revolutionary in the 1960s. The cover of my book, From Willard Straight to Wall Street, shows me with a gun exiting Willard Straight Hall of Cornell University in 1969. That was a Pulitzer Prize-winning photograph. I’m on the cover of Newsweek Magazine in April 1969. I thought my generation of African-Americans was tasked by history to stand up and fight over the historical oppression that we had suffered in this country and to say that it had to end in our time. In that context of my hero, one of the people that I most admire was Martin Luther King, Jr. He made a way that he did change the conversation in this country that has hundreds of thousands of people doing things like participating in the march on Washington in 1963. Shaming America by personifying this high wall standard and saying that he was going to lead a movement that epitomized that high wall standard by doing a nonviolent movement and responding to hatred with love. I thought that was admirable and courageous and I admire him for doing that. Coming out of Willard Straight Hall with a gun was not a statement of love, it was a statement of resistance. I admire the way that Martin Luther King, Jr. elevated the civil rights movement and given it so much movement.

I always referred to some of the most inspirational, energetic, motivational speeches of all-time came from Martin Luther King, Jr. The reason why I asked the question that I did is you have figures in history or even in the fiction world that play this role, have this presence and state that is contagious to certain people that they resonate and essentially take onto their character. It’s fascinating because a person did stand for what’s right. The person did face the odds that were not in their favor, conquered, and made a massive difference in another earthquake in the world that set a new precedent. That’s awesome to hear about some of your heroes. Another question is what are some of the charitable causes that you have represented or continued to represent for support?

The one that’s closest to my heart was a school in Central Harlem, St. Aloysius School, which was focused on serving low income, predominantly black and Hispanic children, elementary and middle school. I became familiar with them in 1993 when I became the President of TIAA-CREF. There were a lot of newspaper articles about me and so on. One of those stories that were in the Wall Street Journal, I said that one of the ways I would like to make a difference was to support educational opportunities for inner-city children. Helping them to get better opportunities than were typically afforded to them. The lady who was the head of St. Aloysius contacted me and said, “If you’re serious about what you’re saying, you ought to visit us instead of starting something new, you want to work with somebody like me who was already in process.”

I followed up on that. I went to visit her and it was remarkable. She had these kids, the average kid. She had no special selection procedures other than you had to have a positive attitude. They had to be a person that wanted to engage positively for those. She oriented these kids through things like oratory, not the reading and the mathematics but oratory in a way they would give some of the great speeches that you would find in history. Learning how to understand those concepts and how to speak powerfully, resonantly, and emotionally. Through that process, imagining themselves being the machines and the footsteps of the great people whose speeches they were giving.

She also had side excursions going to museums around New York City, going to Broadway shows and it opened the eyes of these children to see what might be some of the possibilities beyond the daily horizons that normally were never experienced. I was impressed that we partnered with them. We started a program that was called the Courage to Succeed. I called it the Courage to Succeed because in a lot of inner-city communities, there’s a culture that reaches you back from success. There’s a culture sometimes where the kid who studies hard, the kid who tries to succeed in school, their teams. That’s not black. That’s not cool. I had faced that same thing coming up in my own life. I skipped two grades and that’s not cool. I had a mental shell, hard made of that but I knew these kids, it takes courage to stage that lack of cultural support.

I named the program the Courage to Succeed. What we did was donate computer equipment to the school with technicians from TIAA-CREF volunteering a couple of hours a week to go work in shifts to teach the kids various programs in schools. How to use the computers and the software we were giving them. The second thing was I recruited prominent, successful business people, African-American and Hispanic business people, to come and talk at school, tell their stories so the kids could identify with that’s somebody that looks like them and look how successful they are. If they can do it, I can do it too. The third thing I did was we were a sponsor of their annual fundraising efforts. We had an annual gala and win awards, which would raise $500,000 or $600,000 a year to support scholarships for the families that could not pay the modest tuition, $2,000 or $3,000. That’s something that not every family can pay. We raised the money to support scholarships for the kids. That’s been my favorite philanthropic endeavor.

I look at making a difference. I would say some of the stereotypes with charities are that you exchange money and support them because of their cause. Instead of that, it seems like you helped to perpetuate their cause by making a difference where it’s not giving a fish, but it’s teaching how to fish.

You’re trying to teach people how to fish, how to support themselves, how to be confident in themselves, how to lift themselves, how to see a way, how to see a road, how to see what an opportunity might look like.

We can go off on that topic for the entire show because the amount of influence that the children have especially around the teenage years when their bodies are changing, the chemicals in their brains are changing. There’s a huge part of their perspective that lingers throughout their entire adulthood is formed in those years. I look at how profoundly in good ways or bad ways, depending on the environment, how school influences that. We could go off on that, but I want to get to one other question for context then we can get into some of the meat of the interview. I’m grateful to you for answering the questions the way that you are because it shows who you are. It shows what you care about and even the purpose behind what you do. The last question I have for you is from a legacy perspective. If you could choose one attribute that you could impress on your children, your grandchildren, the world, and perhaps this audience. What would that attribute be?

If I had to pick one, it would be something I’ve talked about in my memoir. It’s the lesson I learned of the significance of giving 100% effort every day and try to excel at what you do. It’s a lesson I learned because when I started out in my career in the early ’70s, I thought I had no chance at all. I was going into the business world because I thought that’s where the toughest battle would be as America seemed to be opening up to more integration, inclusion, and racial equality. I thought the business world would be the toughest battle because that’s where the wealth is. I thought I would have next to no chance whatsoever because I was branded as the black radical supporter but I wanted to give it my best shot anyway.

TWS 2 | The Venture World

From Willard Straight To The Wall Street

As I thought about how to approach it and to think which is unlikely that you’re going to succeed, I concluded that you have to have a framework of reference for success that you can control for yourself. You can’t be psychologically dependent on those around you to define whether or not you’re successful. My conclusion was the only thing I could control was my attitude, my demeanor, my work effort, my product output. If I had a positive attitude, if I always carried myself in a way that was respectful and friendly towards others, if I gave 100% commitment in my best every day, that could be my personal scorecard. Every day, I could grade myself on to do that to them. Things might not work out at all in the context of the companies and my assignments. I might get fired any day.

If I could give myself that scorecard every day, then that was the best I could do. I should be proud of that. As I made that commitment, I discovered that operating at 100% to try to excel every day is different than 90% or 95%. I had been socialized, like most of us, you’re socialized at school at 90% or 95% is an A and A is the best you can do. You should be satisfied with that. In fact, I discovered that there’s a big difference between 95% and 100%. It may not seem like a lot. Who cares? You got 100, I got a 95%, big deal. What are the five points? It may not mean that much on any given work assignment. It’s hard to push it into shades of gray about the quality.

That five points of differential effort and commitment, if it’s compounding every day, day after day, week after week, month after month, it becomes an enormous reservoir of differential effort and likely achievement that sets you apart. That was the basis of my career because I did not know it at that time, but the most successful people in Corporate America, the guys that reached the top, the guys that build teams, one of the reasons they’re at the top is because they have the teams. They can’t do all the work themselves. One of the ways they build teams, they’re like sports coaches. They’re always on the outlook for talent. People that they want to try to bring onto their team.

I did not realize it at that time, but some senior guys we had to pay attention to them unless they heard about me. They began to pay attention and people would show up if I was doing a presentation. A report that I admit and might have been read by a number of different people who then ask me questions about it and people would begin to approach me. It always started with discussions about work, conversations about my work efforts, my projects, clients. It would slowly engine to asking me about my family in the background and what my goals were. It would go a little bit broader into social, they would invite my wife and me maybe to dinner.

Ultimately, I was adopted by the whole series of people who became my mentors and they gave me the promotions, the compensation increases, and protection. I did need protection because not everybody wanted me to be in the company. People who would have fired me because I was the black radical from Cornell and people were like, “You don’t belong here.” I got protection, promotions, and compensation. That mentorship was a reciprocal relationship. I made them look good by the work I did and they took care of me. To come full circle, the point I would make is I learned through that 100% effort to achieve what I call self-actualization.

Self-actualization is your highest potential and you don’t know what your highest potential is. You put a 100% effort and to try to get there. I learned through doing that, It was a spiritual gift to myself because it was not only was it successful in a career sense or job sense, but I felt spiritually uplifted just the joy of knowing that you’re achieving your highest potential and being everything that you can possibly be. I recommend that to your audience because I guarantee you, it’s a spiritual gift to yourself to give 100% effort to be everything that you can be.

This is inspiring because if you look at the athletes in history, and I’ll refer more to the Olympic athletes. The gold medal winners are the ones that go down in history. They’re the ones that are celebrated. They’re the ones that people remember. The bronze could have been a fraction of a second off from the gold. The fourth place, no one even remembers. They look at the tiny margin that exists between those 1st, 2nd, and 3rd place. It’s incredible that the ones that go down in history, it’s a fraction, it’s a hair, it’s that tiny bit of effort. I’ve heard before that in our day and age, a good effort is going to give you poor results. An excellent effort is going to give you mediocre results. It’s an outstanding effort that gives you those moves. It’s a rung on the ladder toward Maslow’s self-actualization. It’s powerful that you say that because it’s not that those that succeed, excel and achieve that excellence do so much more than everybody else. It’s a little bit more than that threshold that most people stop at.

It’s a little bit more but they’re doing it for themselves. Nobody’s forcing them to do it. LeBron James is out on the basketball court as a kid at night shooting hoops. Nobody’s forcing him to do that.

That compounds, it creates the way in which you view your role in everything. That behavior side of things, it’s that compounding because the detection of making that little bit extra effort is noticeable. The other stuff is the cliché of people doing enough to get by.

You have to have a frame of reference for success that you can control yourself. Click To Tweet

It becomes a way of life. It’s different that doing whatever you can get away with, which is the way some people approach work. You do as much as you need to do. What can I get away with doing? What can I skip doing now? It’s a different orientation to how you approach.

You look at the philosophy, you have everything you listed and then you look at your bio. I know there are other roles that you’ve played throughout your career but you’re not surprised. If you were to look at some of the philosophy that you have, the perspective you had, and then look at your experience, it won’t be a surprise. That’s what’s amazing. I appreciate you sharing that.

That’s one of the messages I try to communicate in my memoir. I want to tell you a second message, the second point, briefly. I wrote my memoir in part because I’m concerned about this negative tone that’s developed in the country with regards to the political divisions and cultural divisions, racial divisions, and we seem to form the negatives well incessantly. What’s wrong? What divides us? From my perspective, I look at this country now compared to America in the 1960s. I say that if you described America now to people in the 1960s, most people would have said this country could not possibly change that.

It’s impossible, but we have. It’s such a better country. We ought to give ourselves credit for how much the country has accomplished with regard to race relations and cultural issues. Even as we recognize, it’s not perfect. We still have ways to go. There’s much to do but give ourselves credit for how far we’ve come. That’s important to our collective psyche, especially if we raise a child, we can’t always be negative and saying, “You didn’t get this done and you didn’t get that done and you’re not good at this. You’re not good at that.”

If you’re raising a healthy child, you’ve got to praise them for their achievements and accomplishments and then say, “Also, there are some areas where you could get better, some things you want to focus on because that’s not quite up to par with other things that you’ve accomplished.” You’ve got to have that balance for the psyche because psychologically, you’re trying to help your kid understand that you are capable of these achievements. Look at how much you’ve done already and now there’s a little bit more that you also need to get done. That same thing is true of our society. I wrote my book in part to try to communicate that message that our country wants to be proud of how far we’ve come with regards to race relations, women’s equality, the LGBTQ acceptance in society. We’re a country. Nobody came in from the outside to impose these changes on us. The country has decided to try to live up to its higher standards, it’s higher ideals. We should be proud of how far that down road we are.

There’s a saying that I’ve connected with that is, “Pessimism gives you the crumbs of life.” There’s always going to be something wrong if you look for it, we’re humans. What’s right is also always there.

It is there. When I look at America now, I see that in every profession, law, medicine, business, every academic field, entertainment, sports, law, government, African-Americans have achieved at the highest levels, recognized and accepted. In the middle of fears of our society, millions and millions of African-American families have been lifted out of poverty through access to better education and better economic opportunities that have occurred in the last 50 years. An African-American has been elected president of the United States.

He’s one of the most influential presidents.

We should be proud of that. That doesn’t mean that Black Lives Matter doesn’t have a good point when they march and demonstrate against this violence against unarmed black men that occurs. The truth is, those kinds of incidents of violence against unarmed black men occur proportionately. The frequency was 50 times greater 50 years ago, and 100 years ago 100 times greater. I’m not sure we’ll ever eliminate it because it’s humans and there are going to be some bad apples who dislike other people for some nasty reasons. I’m not sure we’ll ever get rid of it entirely and Black Lives Matter is right to demonstrate and publicize the incidents which still occur, but at the same time, we should recognize the frequency is greatly diminished. We should recognize that it does not take away from how much our society has accomplished in the last 50 years. We could be proud of what we’ve done even as we recognize that we still have ways to go. We’re never going to be a perfect society. You still have ways to go.

TWS 2 | The Venture World

The Venture World: You’re trying to teach people how to support themselves and be confident enough to lift themselves up.


We’re humans, we’re fallible. Since the beginning of time, anything that’s different or as perceived as different, people are afraid or are naturally afraid of. It goes to the caveman inside of us being afraid that the saber-toothed tiger is going to eat us in the morning. I look at that but I also see so much good that’s happening in the world. The news headlines, it’s easy to get the chemicals in our brain firing because of the negative things that are happening. There’s so much good that’s happening if you know where to look for it. We can go off on that. I believe that the focus that you have on how you show up with the different roles you have in life, there is going to be an overwhelming amount of things that are wrong, but there’s going to be as much more that you could be grateful for and what’s right. You have to look for it.

You have to look for it, you have to see it and you have to appreciate it. One of my tenets would be to associate yourself with those who are positive people, the positive events, the positive dynamics. You individually need to be a positive person and associate with positive people.

In the past, I’ve thought about disassociating with negative people. I don’t know if that’s always the thing. In the end, what influences a person that may be naturally pessimistic is you changing first, you adopt a different perspective, a different state in which you show up and that person over time will be influenced. It is having an awareness of that instead of assuming that a person is going to be influenced by you or by you. It shows that the people in the world that I would say are the most pessimistic are the ones that are suffering the most. You could be a positive influence on them if you understand these principles and then show up differently. That’s ultimately what’s going to be the greatest influence.

Tom, I wanted to get into investment and we’ve talked about our philosophy. I love what you’ve said and it magnifies the respect and admiration I have for you. A few questions on finances and investment. This life experience that you’ve had and the perspective you have in regard to yourself, life, our society especially the Western and the American society. How have you taken that to the financial world, whether it’s the way in which you’ve run these massive companies and the theory behind how they invest? You’re in the private sector as far as investment is concerned. It applies to the companies you invest in and aligning your philosophy with theirs. How have you taken what you’ve learned about life and brought that to the financial service’s roles that you’ve played?

I’d like to give you two examples. One is that more of a microscopic, personal level because your audience may have some questions with regards to how they can become wealthier. How can they be financially more successful? I want to tell you about the anecdote. When my wife and I got married, on our honeymoon in 1975, I said to her that one of the things I was thinking about was that we were both working professionals. We both have a nice income. I said I have thought that if we could, we should try to live on one income. If we could live on one income, save the other and have some money that we can invest and try to build economically, building an economic venture, this is the time to try to do that while we’re young.

I’m not sure what we would invest in but I know that in a capitalist society, you’re a lot better off having some capital to invest. Looking for opportunities to then build wealth by using wealth. She agreed, which seems self-evident 40 years later, but in fact, at that time it meant we couldn’t live the same lifestyle as many of our young dual-income friends. We couldn’t have the same clothes. We couldn’t go out to dinner as often. We couldn’t take the same vacations and so on and so forth. My wife agreed and within two years, we had a $25,000 nest egg. We lived in Boston at that time. One Sunday, I’m reading the Boston Globe and the Boston Redevelopment Authority and some ads for abandoned properties that they had taken over, which were available for redevelopment.

We lived in the south end of Boston, which at that time was in the early stages of urban renewal. One of the properties that the Boston Redevelopment Authority advertised was too boarded up, abandoned, burned out, brownstones about a little over two blocks from Copley Square in Boston, which is hard to believe now as much as that area that gets developed. We put in an application to redevelop those two brownstones. We were the only people in the whole city of Boston to even bid on it. It’s a long story, a lot of hurdles, a lot of tough stuff to deal with. Three years later, we had completed a ten-unit, totally refurbished apartment building.

We lived in one of the units, the top floor. We had a two-bedroom apartment with a roof deck that was overlooking Copley Square. The other nine units were cashflow positive. The building was cashflow positive within a year, which meant that income was paying down the mortgage which accrued to our benefit, and then in that era there were all kinds of tax advantages to owning investment real estate. We were living essentially rent-free while the asset was growing in value. It then ended up making hundreds of thousands of dollars out of that initial investment. That’s a microcosm of how you get from nowhere to somewhere in America financially. It’s not what you earn on your job, it’s what you do with what you earn.

You need to try to accumulate some capital somehow so that in a capitalist society, you need to have the advantages of having capital work for you so that you can get the capital gains and the income that is thrown off by capital. That example I gave you, Wall Street is a million-scale magnification of what I described to you. More complexity in some of the kinds of deals, but as essentially various versions of there’s an equity piece of capital, there’s some debt layer around it. There are some assets, be it a building or be it a business. You’re trying to build that asset with the combination of the equity and the debt. If you’re successful in building that asset, it pays down the debt for you. You end up owning the whole thing even though your equity portion was only a fraction of what it costs. That’s what happens in capitalist economies. You need to understand that and make it work for you personally.

Associate yourself with positive people, events, and dynamics. Click To Tweet

There’s a saying I love, which is when you have the capital or liquidity, opportunity seeks you. It’s not that it wasn’t there before, it was always there. If you don’t have the means to do, your brain doesn’t see it. It’s an interesting phenomenon. I love that example. Let’s fast forward to now because you’ve taken the wealth of knowledge that you’ve accumulated over the course of time and experience, most importantly. Now, you run a VC type of fund and you’re investing in different companies and other assets. What are you paying attention to? What do you see as the opportunity that exists right now? There are a lot of things that you could focus on that are negative. At the same time, there are also a lot of positive things that you can focus on. What are you and your investment strategies focused on right now?

When I started several years ago with the venture business, this has changed a little bit, but my theory at that time was at venture capital that becomes something of a concentrated industry. Most of the capital, so to speak, under the control of a relatively small number of medium and larger size venture capital firms, typically on the East and West Coast. These firms had accumulated such large pools of capital that smaller deals, meaning $5 million and $10 million type deals, didn’t move the needle for them. Meaning    if you’ve got a $500 million fund, a $10 million deal is 2% and it takes a lot of work. If you’re going to try to make your fund successful with doing deals that are only 2% of the fund and it takes as much work, due diligence, document structuring and so on to do a $10 million deal as opposed to doing $50 million. My theory was there’s an inefficiency that’s developed in this marketplace, what I would call a smaller commercial size, smaller industrial size opportunities don’t have as much money, don’t have as much sophisticated investment money looking at them as doing larger transactions. That was true at that time.

Shortly after we got started, we had a $60 million fund and I would network. Over the course of my career, I’ve come to know a lot of people. One day, I’m having lunch with somebody I had known for a number of years. She’s also an investor and she says, “Tom, we’re in this deal with a company called Floor & Decor Outlets of America. We do hard surface stone tile. We helped them to grow to five stores. Entrepreneurs started out, we helped them grow five stores but they have violated one of the deck covenants that support their inventory. The bank was going to pull the plug in the next 60 or 90 days.” It says, “We’re at the limits of how much money we can put into the deal. Would you be willing to consider investing?” I said, “I’ll tell you that I will do my diligence. I could do that. I will do an intensive look at it and I could give you a decision within that timeframe, but I’m not going to promise you that we’ll do it.”

I went and I spent a lot of time with the entrepreneur and it turned out the entrepreneur, the leader of the company, was a brilliant entrepreneur by the name of Vincent West who had family company down in Georgia that had been wiped out by the early stages of Home Depot. This guy, Vincent as a kid, had learned this business, the stone, the tile, ceramics, different types of wood. He developed relationships with all the sources of this product around the world, the different quarries, the different manufacturers. His idea was this, he says, “If you are remodeling your house, you had your interior designer come. He gives you some ideas, you like the ideas. You go down to the tile shop, you see something that you like, you order it there. It goes to six different pairs of hands because the tile shop doesn’t have it in stock. You’re going to order it from the distributor and the distributor doesn’t have it in stock. He’s going to order it from the importer. The importer’s got to get it, place it to the shipper and everybody’s adding 20% markup.”

His idea was to let me import a unique product. I’m going to put it in 50,000 to 60,000 square foot warehouses. I’m going to put up these beautiful examples, almost artistic types of examples using that product. Here’s what you can do design-wise with the product so that when you come in with your interior designer, if you see something that you like, it’s right there in my warehouse. This eliminates one of the problems. He says, “When you go to the local design store and you see something you like, when it finally gets imported through all these different pieces of hands, it may not even be the same as what it looked like in the store because it’s coming from the quarry. It’s coming from the rock. Some of the little colors in it, the grains may be a little bit different.” This was his idea. The problem with this type of business model is that you have to be precise with the modeling of your revenue versus cost because although your cost is upfront, you’ve got to get the store, you’ve got to get all the inventory into the store, you’ve got higher roles of people to be in your store, you’ve got to train them. All the expense meters running. Unless you understand how the revenue currently builds, it’s easy to run out of cash. This was the problem.

When I did my due diligence, I figured this guy has a business model through these five stores that they’ve got going. He’s got a good idea and it looks to me like they pretty much learned to operate the model but they made a few errors with regards to some of these unpredictable, tiny variances. I offered them a deal. I’ll put in $2 million and cure the bank covenant default. People think you’re going to screw up in a circumstance like that. I said, “What I’m going to do is I will come in pari passu with the economic terms of your most recent rounds. That’s generous. Here’s what I want. I’m going to be pari passu economical but I want a separate class of securities. If your last round was series B, I want a separate round, which is series C or series B1.”

Series B1 covenant, you’re going to say that under circumstances where everything’s fine, budget and all of that, everything’s pari passu. There’s going to be a whole list of conditions if we miss budgets, if we have any defaults on bank debt, if we want to raise new debt, if we want to raise new equity, anything like that you’re going to have to have a majority of the series B1. In effect, I have negative control. If everything goes well, we will all share the economics. If there are problems, I’ve got the seat at the table. To make a long story short, I put in $2 million then a couple of years later, I put in another $2.8 million. We grew that out to 25 schools to $250 million in revenue runway. We sold it to Aries Capital Management out in LA.

They scaled it up to over 50 stores and they took it public. FMD is the symbol on the New York Stock Exchange. That’s the thing that we do. A $2 million initial investment is scaling-up $4.5 million and that was a ten-bagger for us. A larger fund wouldn’t even look at a deal like that. Let me make one last comment. What is changing though and this has got me concerned, there’s a lot more money in the venture world these days, a lot more angel groups, there’s a lot more money chasing every opportunity. If we do one deal a year during a period like this, that’s a lot because there’s a lot of money chasing them. What happened was we work in terms of the market saying this is crazy. They’ve gotten out of control. They’re throwing money at a guy and they’re losing hundreds of millions of dollars a year. I hope that’ll bring some sanity back into the marketplace.

There’s a big article in the Wall Street Journal that talked about $100 billion or so disappearing. A lot of it was initiated by WeWork debacle but not just that, it’s also what happened with Uber and some other companies that were betting on a certain valuation. What I wanted to get into because I totally love this train. Going to where your expertise had been established over the years and with this deal, what were the ingredients of your engagement in the deal? Number one, it was the actual individual, the entrepreneur behind the company. The second ingredient sounded like understanding their finances, understanding where their finances, where their costs and then what costs would be and as well as revenues if they start scaling. Another ingredient that I picked up on is the terms of the deal. Was there anything else in there as far as your recipe for a good deal that you use consistently with some of the other deals that you do?

TWS 2 | The Venture World

The Venture World: There’s a lot more money, many more angel groups, to be found chasing every opportunity in the venture world these days.


You’re accurate. First and foremost, what is the product? What does this company do? What problem does it solve? In the case of FND, it was solving that problem of going through multiple layers of mark-ups in order to home improvement supplies that were attractively done and artistically set up. What’s the value creation that accrues from your product because the value creation tells you here’s what people are likely to pay for it. This design or setup enabled them to get 40% gross margins even while they were selling at 40% less then you would have paid in the local tile store. That was the value creation. The third one was the people. I’m not saying it’s always in that order but those are the three elements. What is the product? What’s the value equation for you? Who are the people? What’s the quality up to you? At the end of the day, you’re betting on people but good people can fail if you’ve got a poor product concept or a poor value equation. The other thing also happens, you can have a good product concept and a good value equation but if you don’t have good people, that doesn’t work either. You need all three of those elements.

This has been fascinating. The best way I would say to learn about you is going to be from your book. Anything else that you’re doing whether it’s anything online or anything that’s public other than your book where people can learn more about you, learn from you, learn from your expertise. What’s the best way for people to connect with you?

My Facebook page, From Willard Straight to Wall Street. We focused around the book but on a regular basis, I get comments on that Facebook page. My website is You’re going to see a little bit of information about the investments we do.

The best way to get your book is through Amazon or any publisher? What’s the best way to do that?

Amazon has it. They also have an audio version which is done by Audible. If you’re one of those people that while you’re driving and like to listen to the book, you can get the audio version at either Since Audible is owned by Amazon, that’s also available through Amazon, From Willard Straight to Wall Street.

In a capitalist society, you're better off having capital to invest in things. Click To Tweet

Tom, this has been such a pleasure. Thank you for sharing all that you’ve shared. There are some fundamental principles in there that I’m excited about. Hearing it from you makes me even more excited. I’m grateful for you taking the time to be with us. It’s been an incredible interview. Would you like to depart with any final words?

I would say thank you for taking the time to do this. To me, it’s an example of what the opportunity of social media is. We see so much that people say social media is negative. This is an example of you’re being able to take the time to develop this topic. There’s a wonderful example of how you can add value through social media. Thank you.

Thank you, Tom. We’ll have to have you on again.

I look forward to it.

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About Thomas W. Jones

Thomas W. Jones is former Chairman and Chief Executive Officer of Global Investment Management at Citigroup, and former Chairman and Chief Executive Officer of Citigroup Asset Management with approximately $500 billion assets under management. Mr. Jones was appointed asset management CEO in August 1997, and sector CEO in August 1999, and continued in that capacity until October 2004. This business sector included Citigroup Asset Management, Citigroup Alternative Investments, Citigroup Private Bank, and Traveler’s Life & Annuity.

Prior to joining Citigroup, Mr. Jones was Vice Chairman and Director of TIAA-CREF since 1995, President and Chief Operating Officer from 1993-1997, and Executive Vice President and Chief Financial Officer from 1989-1993. Mr. Jones was Senior Vice President and Treasurer and other positions with John Hancock Mutual Life Insurance Company from 1982-1989, and spent the previous eleven years in public accounting and management consulting primarily with “Big 8” public accounting firm Arthur Young & Company (predecessor firm to Ernst & Young).

Mr. Jones is a Director of Assured Guaranty Ltd, and Trustee Emeritus of Cornell University. Past board positions include Vice Chairman of Federal Reserve Bank of New York, Altria Group, Freddie Mac, Fox Entertainment Group, Travelers Group, Pepsi Bottling Group, TIAA-CREF, Eastern Enterprises, Thomas & Betts Corporation, Howard University, Investment Company Institute and Economic Club of New York.

Mr. Jones holds Bachelor of Arts and Masters of Science degrees from Cornell University, and a Masters of Business Administration degree from Boston University. He has been awarded honorary doctoral degrees by Howard University, Pepperdine University, and College of New Rochelle. In addition to these accomplishments, Mr. Jones is a Certified Public Accountant and author of the new book From Willard Straight to Wall Street: A Memoir.

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Investing: The 2020 Kickoff

TWS 1 | 2020 Kickoff


It’s a new year, and just like the numbers 2020, it’s time for another topic to see things clearer in The Wealth Standard podcast. In this first episode of a new season, Patrick Donohoe invites us to look forward to deep diving in investing. He outlines the season for us, giving a background on why he chose the topic and the structures of the episodes to come. As with Patrick’s mission throughout the past seasons, we’re all just after more freedom that will allow us to improve our satisfaction and meaning about experiencing life. He brings that into a whole new angle with investing. Tune in and get excited about the great and awesome learning ahead this 2020!

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Investing: The 2020 Kickoff

This is the first episode of our new season where we’re going to be talking about investing. I’m excited to outline the season, why I chose the topic, the structure of the episodes, what I have going on, which is going to be perfect for this specific topic. Also, the topic aligns well as a capstone in a sense of our previous five seasons. This kickoff episode will be relatively short and I’m excited to have the guests I have on. I’ve already done a few episodes. The conversations and the topics that I’m thinking through are going to be awesome. I can’t wait to learn right alongside you.

First off, let me take care of a few things. Thank you for your support for the 2019 season, specifically the support in the second season on entrepreneurship. That was a long season. There were many different episodes in there, a lot of different topics and tons of information. I want to make sure that you knew that the invitation to the Tony Robbins Unleash the Power Within event is still open. You can still register. If you go to, Jeffery’s information is in there. He is the representative that I work with at the Tony Robbins organization. There’s a steep discount for all of the tickets. It’s going to be amazing. It’s in Northern California in March. For dates, information, get ahold of Jeffrey. It’s going to be an amazing event. I’m excited to meet you there. Those of you who have signed up. It’s an event that is powerful and it works well to what I’ve been talking about over the last couple of seasons. You are going to see some more language and topics. I can’t wait for that and we’ll definitely have a report from the event from my office as well as the audience.

Let me make sure you are tuned into how to download new episodes. If you’re new, you can subscribe to your app and it will auto-update the episodes, so make sure you do that. We also have a YouTube channel. Almost all, if not all of the episodes are videos. Go to our YouTube channel. Subscribe to the YouTube channel as well. It’s a great way to be notified of new episodes. Also our email list, we’re going to be a lot more proactive with our email and engage a lot more with you because I’d like this to be not just me speaking to you and conveying information as well as guests doing that, but vice versa. It’s you talking about your experiences with this theme, questions you have, comments you have and deals you’re working through. I’d love to have those questions and also your feedback so that we can talk about the things that are the most important to you.

You are your best asset. Click To Tweet

Another reason why I chose to talk about investment is because of some of the events that I’m attending. I’m going to a business mastery event. I’m also going to an investment summit with a group that I had joined and invested with. They are mostly doing a startup type of investment in the energy sector, but they have an investment summit every year in Southern California. I’m excited to talk through that. These are not investments that I usually make. In fact, I’ve never made these types of investments and I consider it very speculative. The investment in part made sense to me because of the group that I got to hang around with. Not only am I invested financially, but also from a time standpoint and from a network standpoint, it’s a great opportunity. I can’t wait to learn from that event and then report back to you. I’m going to the finance event that Tony Robbins puts on for his Platinum Partners. It’s my second year going. The previous one was in a Whistler. This one’s going to be in Sun Valley, Idaho.

If you are new and haven’t watched the video series that I did, I think there are 3 or 4 episodes, please check them out on our YouTube channel. I went through and gave an overview of what I was learning and what was being said. I’m going to do the same thing with the one this coming February in Sun Valley. There are going to be a lot of people there, a lot of networking. I’m hoping to not just do solo episodes, but have some surprise co-hosts with regards to these events. It’s going to be busy months for me, but I’m excited to keep giving you information, teaching you and sharing with you ways in which you can get closer to your financial independence.

TWS 1 | 2020 Kickoff

2020 Kickoff: What might be good and wise and prudent investment for one person may not be that for another.


Why investment? I chose investment or investing and all the subcategories: investment strategy, investment theory, philosophy, as well as wealth strategy. Why investment plays a role or should play a role? What is an investment? How to make a wise investment? What’s wise and not wise? Why is it wise for one person and not for the other? There are a lot of topics in there, but the objective was to have this as a capstone to our previous seasons. For those of you that are new, in 2018, I went on this path of life, liberty and the pursuit of property, which is a very famous saying from the 1700 from a man named John Locke who inspired the Declaration of Independence, Thomas Jefferson, “Life, liberty and the pursuit of happiness,” which is what most people are familiar with. I chose this topic because of how intrigued I was based on what John Locke meant by the rights of life, liberty and property.

We spent a season on life and looked at life as you are as your best asset. Liberty, the second season I perceived that as what everyone is after when it comes to wealth strategy, financial strategy, which is financial independence and freedom. The property, which I consider resources, is the physical world around us. As the human being interacts with the physical world, amazing things happen. In 2019, we spent an entire season talking about capitalism, which is the infrastructure from a societal standpoint that best houses those rights and allows human beings to capitalize on those and pursue interests in the smoothest way possible.

As the human being interacts with the physical world, amazing things happen. Click To Tweet

A guest that I wanted on but wasn’t able to make it happen due to some illness and health issues on his part was Hernando De Soto, who wrote a book called The Mystery of Capital. It’s an amazing read into the nature of the system in which people interact and how the system itself, the foundation, and the infrastructure facilitates or inhibits progress and prosperity. I’ll probably speak a little bit more about that whole idea and I’m hoping to still get him on the show. Those were the seasons. The last season was entrepreneurship, which is essentially the individual and what they can do to improve themselves and subsequently improve their financial situation by understanding the structure in which they operate capitalism as well as the rights of life, liberty and property.

There have been some incredible stories about what readers have been able to understand with regard to ways in which they can improve themselves to make more money in their profession or maybe you switch professions or maybe switched companies. Also, from a wealth strategy standpoint, how could they start to make investments, make wise choices when it comes to where they put their money? We’re going to expand on a lot of that because investment, in theory, is the end result of all of this. When you invest, you hope to get more than what you put in. From a financial standpoint, that’s getting more money back then you put in. From an investment standpoint, not everybody qualifies to use that definition because a lot of people lose money, then the majority of time, you have individuals who don’t know what they’re doing.

When you invest, you hope to get more than what you put in. Click To Tweet

Whenever there is a gain, it’s not because of anything that they did or understand. It just happened. I put that right in line and parallel to gambling. It’s one of those things where investment and the evolution of our society is interesting because there could be tons of opportunities and options. At the same time, what might be good and wise and prudent investment for one person may not be that for another. We’re going to talk through that and use examples because we’re not just going to talk philosophically about investment. I’m going to have investment providers on here. People that have a business in which they take money from other people and give them a return and how their business operates in ways in which you can do due diligence.

I’m going to have a Securities attorney here, who has been around a lot of private investments. He’s seen the good, the bad and the ugly. As you can probably imagine, there’s a lot more ugly than there is good. I look at the different topics and hopefully, that is going to allow you to understand business and investment at a higher level. Most importantly, it’s the purpose of investment. I look at the deep-seated perspective that the United States has, especially Americans when it comes to what their end results of investing, wealth management, wealth strategy, which is our retirement. I talked extensively in my book about the nature of retirement and how flawed it is. It’s a very difficult thing to do.

TWS 1 | 2020 Kickoff

Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream

Planning and subsequently retiring is very difficult and risky as well. I look at the pursuit of financial independence, which we’re going to keep defining over and over again. It’s much easier and it can happen much sooner, and I believe it’s what people are after. I’m going to discuss that whole philosophy throughout the season. You look at most investment products and they support the theory that I’m talking about when it comes to retirement. If that’s what you subscribe to right then, there are tons of financial products out there that are designed for that end. If your pursuit is financial independence, financial freedom, then you have to look at how investments play into that different end result. We’re going to be talking about what financial independence is and expand on how to achieve that.

What are some of the criteria? It’s not the same for everybody because I believe financial independence is a mindset. Having certain things in place, whether it’s cashflow, working in a profession that’s meaningful and aligns with who you are and you’re continually growing and making a difference in other people’s lives. All those are components of it, but it’s going to be different for everyone based on where they’re at. We’ll get into that in much detail. I think 2020 is a pretty significant year. It’s the year of clarity and I’m hoping that you are starting out on a good footing.

My goal is to build upon the philosophical foundation that was established in 2018 and 2019. I believe that you, as an individual, are after ways in which you can improve your degree of independence. Money is a huge part of that. We’ve approached it philosophically. Now we’re going to get into the practical with regards to investment strategy. At the same time, I want you to step back a little bit and think through what I mentioned and hopefully take this into the next several episodes, which is what is the purpose of you making investment? What is the purpose of you working? What is the purpose of you continuing to want more? Where is that drive coming from? What’s the end result of it?

In the book that I wrote, Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream, I argue extensively that what we’re all after is more freedom and more independence. That is going to allow us to make decisions that are going to improve our degree of satisfaction and meaning with regards to life and our experience of it. I believe that you’re after that, I’m after that and I’m hoping that the dialogue, the discussions, the information that I go through with all of the guests as well as solo and with some surprise co-host, that reinforces what you want for yourself. I believe it’s possible. I’ve seen it many times. I realized that there are a lot of challenges that stand in the way of that.

Financial independence is a mindset. Click To Tweet

First and foremost, being the whole financial world is structured to help you retire. If you want to retire and you want to be financially independent, you have to rethink the investment choices and the financial products you’re using because it makes a huge difference. We’re going to get into a lot of that. I believe there’s no better time in history to gain clarity about your wealth strategy, your investments, your financial future. I believe the next years are going to be exciting because of everything that’s going on. There are many different innovations that are going to allow less work and more meaning. I also believe that with the Baby Boomer generation, the older generation, the amount of money that’s going to be transferring from one generation to another in the tens of trillions of dollars is going to shift how businesses operates.

It’s going to shift the demand for different goods and services. It’s going to shift where people are living and how they’re living. It’s going to shift employment. I believe that the disruption that’s going to happen is much needed. It’s an opportunity where you, as a good steward of your wealth, can take advantage of incredible opportunities to make money, start a business, join a force with another business, and to acquire another business. The sky’s the limit and I believe that what you want for yourself is possible. I’m going to focus on the information, the opportunities as well as answering the questions that you have working through some of the challenges you face in order for you to achieve those ends.

Thank you for reading this episode. It’s the introduction. It’s the kickoff. I’m excited to bring on the next couple of guests. In the first episode, our guest has been in the financial industry for a long time in a traditional sense. As you’ll see in the discussion, it shows you how inline people are. They are successful with some of the principles and things we’ve talked about in previous seasons. I had my good friend, Andy Tanner, on the second episode who brings an incredible perspective when it comes to money, financial freedom and financial education. From there, you’ll have to wait and see. Thanks for reading. I appreciate it. Thank you for your support. Make sure you bookmark the website, See you next time.

Important Links:

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