Patrick Donohoe

Jeff Kreisler on Dollars, Sense And Behavioral Economics

TWS 14 | Behavioral Economics

 

It has been said that the predominant thing people think daily is money. Our financial well-being has fully occupied our lives that it dictates what we do and what we think. Getting down into the science of that is lawyer turned author, speaker, pundit, comedian and advocate for behavioral science, Jeff Kreisler. Jeff shows his expertise as he talks about economics, money, and behavior in general. He shares his own journey that led him to explore how economics is a measurement of human behavior. Moving forward, Jeff talks about his book co-written by Daniel Ariely, Dollars and Sense: How We Misthink Money and How to Spend Smarter, ultimately putting forward the importance not in the pursuit of money but the end result in our lifestyle.

Listen to the podcast here:

Jeff Kreisler on Dollars, Sense And Behavioral Economics

What makes humans tick? Why do we look at the world rationally and expect perfection, and then behave irrationally and settle with our own imperfection? There is a whole field of economics known as behavioral economics, which is relatively new and studies the often-missing variables and economic models which is human behavior. Thank you for joining me on the final season of 2018 where we are discussing the Principle of Property. I have an awesome guest, but it’s been a wild ride. It’s been an awesome 2018. I’ve been a huge fan of Daniel Ariely. Daniel Ariely is a behavioral economist and he has some incredibly entertaining videos on YouTube. If you want a good date night movie, his documentary which is called (Dis)Honesty, which is modeled after his book, Predictably Irrational. Both the book and the documentary are some of my favorites. Daniel Ariely coauthored a book with my guest and the book is Dollars and Sense: How We Misthink Money and How to Spend Smarter. My guest is Jeff Kreisler and he is entertaining and full of humor. It’s going to be a great interview. I look forward to hearing your feedback. Thanks again for all your support of the show and our seasons for 2018. We have some cool plans for 2019. Here is the interview with my guest, Jeff Kreisler.

TWS 14 | Behavioral Economics

Dollars and Sense: How We Misthink Money and How to Spend Smarter

It’s my honor and privilege to have Jeff Kreisler on the show. We are going to be talking about a book that he wrote and about the behavior in general economics and money. Jeff is a Princeton alumnus. He studied economics and law there. He also wrote the book, Get Rich Cheating. He also is a coauthor of Dollars and Sense with Daniel Ariely. He is the Editor-In-Chief for PeopleScience.com. If that resume was enough, he also can add to it that he is a standup comedian and contributor to some news networks CNN, Fox News and MSNBC is a few of them. Jeff, that’s a long list of accolades. Thank you for taking the time.

Thanks for having me.

In doing some research and understanding the background of your book and your background in general, I find it intriguing that you have such a unique background. Someone who gets into law and economics, but also has a sense of humor isn’t something you often find. It might be good for you to tell us a little bit about your background and what your formal education background is. How you got into writing books, speaking and standup comedy. Why don’t you give us an idea of your background, if you wouldn’t mind?

I went to Princeton and I studied Economics, Politics and also Russian Studies there. I love studying and I decided to go to law school because I wanted to be Thurgood Marshall or Thomas Jefferson. As any lawyers who are reading may know, that’s not the direct career path that one takes. I chose the “traditional path” of becoming a comedian. I will admit to my privilege that I had gone to Princeton and had a law degree from Virginia Law School. It’s a great law school and I passed the California Bar, so I had a safety net of my own that allowed me to take the risks to become a comedian.

I was in San Francisco. I did political comedy. I had some success there. I won some awards. I made a little hay with it. As I was struggling to pay the bills and everything, someone approached me and said, “Do you want to write a column for Jim Cramer’s TheStreet.com about financial news and business news? A weekly humor column?” I said, “No.” He said, “It pays.” I said, “Yes.” I learned to dive into that world. Through that, I got an opportunity. It was a relatively popular site and a popular column. A publisher approached me to see if I had some book ideas. I then proposed this Get Rich Cheating book, which came out in 2009.

It was a satire. Initially, it was focused on financial crime. 2009 was a great time to talk about Enron and WorldCom and all that. I ended up going through HarperCollins and we expanded it to include steroids, election fraud, and show business. It was a fake how to book, Stephen Colbert meets Jim Cramer meets Tony Robbins. I had some success with that. That got me my first broader media attention. As far as my own career path, Dan Ariely got a copy of it. Dan is one of the leaders in this field of behavioral economics. Our audience might have heard of Richard Thaler in 2017, he won the Nobel Prize in Economics. He’s a peer of Dan’s. Dan invited me to lecture at his class at Duke University where he’s teaching graduate business.

TWS 14 | Behavioral Economics

Predictably Irrational: The Hidden Forces That Shape Our Decisions

He didn’t introduce me as a comedian but as someone with unique wealth building ideas. It was a light bulb moment for me because I did this satirical lecture. I went and I told these graduate business students at a top business school, “You should cheat cost-benefit analysis. No one’s getting caught. There’s no cost and the benefits are millions of dollars.” There was always a healthy portion of the class, a quarter to a third of them that said, “That makes sense.” For me, it was a light bulb moment because these weren’t bad people. It was money clouds are our visions sometimes. My informal research understanding was that money makes us do irrational crazy things. Through this, I discovered Dan’s work in the field who wrote Predictably Irrational that some of them may have heard of and all of his peers.

We worked together on small projects then came out with this book that came in 2017 called Dollars and Sense. It’s about the psychology of money, the way we misthink money and the psychological biases and cues that lead even the most intelligent or the most informed about finances we make mistakes. As that publication was approaching, I wanted to build on the momentum that I had working with Dan and the fact that I became a believer in the power of these behavioral sciences. There weren’t silver bullets, but there was certainly a new tool in our toolbox to solve a lot of problems.

I got the opportunity to run PeopleScience. PeopleScience is a platform where we discuss behavioral science and the future of applying it to everything from personal finance to organizational design, employee engagement and loyalty habits. We get professors and researchers talking to practitioners and people in business, and those that do know and it’s accessible. The reason why I was brought on is to bring them, whether it’s humor or that ability to speak in a way that’s not academic jargon. That’s been my obsession and talking about what I’ve learned and what the great lessons are in behavioral science. In addition, I still do comedy. I’m a traditional comedy but that’s woven together into this piece of where I’m at.

Paul Krugman is probably the most notable economist who comes from Princeton.

Alan Blinder was my Econ 101. He used to be on the Fed. Ben Bernanke, I didn’t get his class but he was teaching there at the time. He was the Fed Chair and Alan Blinder was an advisor to Obama.

There is a cultural drive to have the value in your whole life be measured by financial worth and value. Click To Tweet

The thing that helped me understand how important human behavior is was there’s this guy that wrote for the Economic Policy Journal. He wrote an article and this was years ago. The point of the article is that you have a lot of these economic models that are principle-based, are math-based. It’s the rational measurement of irrational behavior, which is human behavior. You’re trying to essentially govern people rationally when they don’t behave rationally ever. You come from that school of thought. What was it that flipped the switch for you? Where you started to make connections that even economics is known as the dismal science but the economics is just measurements of human behavior. Where did that light bulb come on?

The short answer is it was probably around being exposed to Dan Ariely’s work and his peers. The longer answer is that I had the same instinct as you that behavioral economics was not an offering when I was in college or law school. It only emerged in the last decade or so. Even then it’s still emerging. For me when I studied traditional economics, even though I got good grades and I understood it and I could explain it, it didn’t click with me. The basis of traditional economics is if I’m in a supermarket and the milk is $0.20 cheaper at the supermarket next door, I’m going to go next door. No, I’m not. I’m a lazy human. I don’t want to be bothered. It’s not a number-based decision, it’s an emotional-based decision.

That was something I knew and felt but never necessarily articulated. I discovered behavioral economics, which is essentially not ignoring traditional economics but marrying that to human psychology. It’s about our decision-making processes and finding a balance between what we say we’ll do. We say we’ll go for that $0.20, but then what do we do? What is our decision at that moment and when emotions play into it? A great example of the difference between the traditional model and the model is anecdotal. Almost universally I’ll go to a big investment firm and they talk about their best performers, the people that advise high wealth individuals how to spend their money.

The employees who tell others how to invest their money, a large number of those employees are terrible at managing their own money. To me, it says they know what to do but at the moment they get caught off guard by emotions and needs and it makes sense. I can tell Joe X, “Here’s how you plan for your kids’ college and your retirement,” but then what I’m thinking about, “That’s my kid. That’s my future.” It feels different and we do things differently. It shows how you have to have that emotional part of it, which is unsettling to those that want things to be an easy answer. Economics can provide an easy checkbox answer, but that’s not how we live.

Writing a book, even though it was satirical in nature during the financial crisis, everything you said in that book had truth to it even though there was a humorous spin. You look at what occurred there. What were some of the things you learned during that period of time? It sounded like that occurred before meeting Daniel Ariely. Pick up on some things there were you saw like, “Why would this person do that?” What are some of the things you saw as you were preparing to write the book? What were some of the things that enlightened you at that point?

Life is not about the pursuit of how you measure with money but of the lifestyle you live that impacts others. Click To Tweet

There was a lot and it’s stuff that still reflects in our society. On the one end, there was this cultural drive to have value in your whole life be measured by financial worth and value. Money is measurable. You can look at your salary and see a number, whereas you can’t look at happiness, meaning and purpose and put a number to it. It’s understandable. The discussion of whether American culture breeds that more than others, it’s a longer conversation. The point is it was there. At the same time, people’s ability to reach these standards wasn’t always being met. It drove people to want to try to find shortcuts.

On the one hand, there is that broadly cultural thing that why would people want to cheat? The psychology of cheaters themselves, whether they’re Bernie Madoff, Alex Rodriguez, Lance Armstrong, any number of other CEOs or people in Hollywood. Look at someone like Harvey Weinstein who maybe didn’t financially cheat, but this mentality of, “I get away with something. I don’t get caught, and then I’m going to get away with more.” That mentality of abandoning an ethical or moral core and pursuing this bottom line and power dynamic was exposed to me in a way that I didn’t expect. All of us have cheated a little bit. We fudged a number here and there, but it takes a certain special someone to go above whatever that 2% or 3% jumps are to make it all their life.

I want to get into Daniel Ariely and your experience with him. I’ve probably watched that (Dis)Honesty documentary a bunch of times. We understand that we’re irrational and emotional. Yet, we look at the world sometimes through a lens of perfection like, “This is what a person should do. This is how they should be. This is what they should have done in this situation.” The question that more applied to the Dollars and Sense book is what was your perspective on money personally, going into that first book? You’ve been writing for the Jim Cramer blog, but writing the first book. How did it start to shift and then get into the story with Daniel Ariely? How has your perspective shifted with the experience with him helping you write the book?

I would certainly say my own view of money and my own behaviors around money have changed dramatically, probably the most in the process of writing the book about the psychology of money. I’m becoming aware of my own biases and mistakes and I certainly still make mistakes. I’m not even sure if this has to do with as much of what I’ve worked on or as much as maturation, is understanding where money rates on the importance and how you value things. After Princeton Law School, I was offered these big corporate law firm jobs. I was at 24, 25-year-old. People were like, “Here’s a bunch of money. Your life is set if you want to be a corporate partner.” I turned it down because whether they call it privilege or stupidity, that was not important to me. I don’t think I ever understood why. The more that I looked at the way the money impacted people and made people skewed in their priorities, the more I realized that maybe there was some instinctive core to what I decided. It’s a little maybe more psychology, lie on the couch and talk about your mother.

I certainly had my own relationship with money involved through seeing how people acted immorally and unethically with it. When I worked on Dan’s book and I saw all these studies about the mistakes we make. The way that we fall for sale prices, the way those brand names affect us, the way that the descriptions of things and the setting of things impact our value. This concept or the pain of paying, which is how when we pay for something, it stimulates the same region of our brain as physical pain. That should make us stop and think if it’s a good decision. Instead of feeling that pain, what we do is numb it with credit cards and AutoPay and E-ZPass and Apple Pay. How all this financial technology that helps make spending easier makes spending less thoughtful. The same idea can be used to make retirement savings easier and less thoughtful, which can be positive. It provided me with a new perspective on the way that I was earning, spending and saving my own income as well as seeing what was happening and what was developing around me.

Ariely talks about this a lot in his other books, which is more of the pursuit of not the monetary side of it but more of the end result or the lifestyle, the meaning behind it like your family or a sense of stability for your family or your family in this situation. Being able to do this and this as the flagship as opposed to the money itself. Is that an accurate statement as far as one of the themes of the book?

That is something that we bring up towards the end as a big picture of you. The book isn’t advising you to not worry about money. It’s advising you to understand how you think about money so that you can identify what your own failings and biases are and then try to address those. Try to create systems and everything. Both Dan and I have in our own way an appreciation for the stuff that doesn’t involve money, that involves experiences. What’s fascinating about the work I’ve done at PeopleScience is that on the book I didn’t delve into that too deeply. There are some books about happiness that we referenced. At PeopleScience, I’ve looked more in this field about nonmonetary rewards. Essentially, it’s always been in this sense of engagement and motivation in employees, but all these studies showing that cash bonuses are not as effective as giving non-monetary bonuses. As far as making people motivated, feel fulfilled, have a purpose and connect it to their work.

A $10,000 bonus is not as effective as a $7,000 all-expense paid trip to Hawaii for that employee’s family. If you think about this, there’s plenty of reason to think from both perspectives. The company saves money, that’s the bottom line but the employee gets this unique experience. They get to anticipate the trip and then reminisce about the trip and enjoy the trip. It’s all this wealth of value to them in addition to making them feel like, “My company values me more than the check does.” In the book, there is a little comment we have at the end about like, “It’s not about money. You shout other things of value,” but since then I’ve learned that there are ways that people are measuring this and trying to think about how we can use it to impact our lives. Not everybody can be rich. If you can’t be rich in money, how can you be rich in life?

If people have financial stress, it affects their work. Click To Tweet

Ultimately, if you were to get people to be open and authentic about it, they would describe those whether it’s experiences or trips or things with their family. Those are what they’re after, not necessarily the money. What are you seeing as, maybe not at an individual level but at any level, how people are taking what they’re learning from the book and applying that? Individual-level, business group level, how has it impacted people?

In a few ways. One, I get my own sense of value and reward when I hear from people both I know and don’t know. They’ll reach out and mention a particular chapter and the book is divided. The chapters each address an individual bias or principle the way that we make a money mistake. People respond and say, “That story connected with me.” Sometimes jokingly, personally we have a story about people that fall for sale prices and that is the one that most people reach out. Others do other ones are like, “That’s me. I recognize myself in that story.” That’s rewarding to me because what ends up happening is this isn’t a book that gives that Suze Orman type like, “Put 10% here. Put 3% here.” It shows you what you’re doing. What I’ve found is these individuals start seeing their own mistakes and maybe they still buy those sale items. Our hope is that gradually they start to change their behavior or if they realize it’s a big problem, they design ways of checking themselves.

It’s had the result on an individual level of people recognizing their own mistakes and maybe they didn’t see. That slowly but surely is helping them change those behaviors and recognize them as mistakes. On an organizational level, I’ve spoken to a bunch of organizations of all different sorts and it’s been likewise rewarding. Companies don’t often realize the impact of financial stress on their employees. Anybody reading this, if you have stress, whether you are arguing with your spouse or you’re worried about money or where do your kids go to school, whatever it is affects your work. You can’t think about it. If people have financial stress, it affects their work.

The book and the talks that I give and somebody’s advice that’s in there can help alleviate that stress and at least alleviate the uncertainty, which is often the biggest cause of these mistakes we make. It’s like, “We don’t know what to do. We don’t know how to value our retirement. We don’t know how to value a shirt at JCPenney’s. We don’t know how to value medicine or homes.” It seemed these decisions are hard. If we can provide some tools to not provide the answers, but at least help that difficulty it’d be a little easier, that has an immense potential to impact not just those people who are making that decision, but their family, their friends, their community, and their workplace. It’s been great to see that on an organizational level, people recognizing the value in that too.

The predominant thing people think about daily is money. There are studies out there that show that. It comes down to what is the underlying anxiety and fear? You have a much bigger perspective that sounds like what generally is happening with people, especially in the US when it comes to livelihood. It seems the more technology we have, the less it’s doing for people. Money was a primary concern many years ago. It’s still the primary concern now. Those concerns, those anxieties are irrational. Do you see a shift one way or the other in the general consensus that people have in regard to their financial well-being and what to do about it?

TWS 14 | Behavioral Economics

Behavioral Economics: Living longer past retirement is valid and important to recognize.

 

I definitely think that the attitudes towards money are changing. There’s a cultural shift and I won’t speculate on what’s the driving force. From people not working at a company for their whole career anymore, people go for seven years as the itch, to Millennials not valuing buying homes as much as they used to and owning property. To people still feeling the waves of that financial collapse in 2008 and 2009. People are looking at the accumulation of wealth as being less of a life goal. People are starting to appreciate experiences a little bit more. When I say people, I understand I’m segmenting. There are still a lot of people who live in a scarcity mindset and who are struggling to survive. To them, their psychology of money is different. They have different needs. The idea of trading off a $10,000 bonus for a $7,000 Hawaiian vacation is not in that world.

Even they face the same psychological barriers and biases. I have spoken to some groups that serve lower-income people. In their own way, these communities have already recognized these problems and try to find ways to solve them because they have to, to survive. They can’t overspend as much as people that have more income and more wealth can. That distinction aside, and I want to make that clear. I recognize that difference. It has been shifting some. I don’t know what the source is whether it’s reality TV or Trump presidency or what. The value on wealth for its own sake has diminished. That could be wishful thinking, but there’s some truth in that.

I look at over the 100 years or so we’ve delegated lots of responsibilities to the government in regard to our well-being. I would assume comes an ominous problem or challenge of Social Security or an aging generation that has insufficient resources. You as an economist looking towards the future, do you look at the demographic shifts that are occurring? Do you see some challenges that may not be evident now, but most likely coming in the future? You can speculate at the same time. If you have a lack of resources and you’re old, you’re going to want as much help as possible. If that group is powerful, then they’re going to influence policy-making and then that sets off a course of events that could even be worse. How do you look at the social demographic shifts and how it relates to what are some of the challenges people will ultimately have? How will that impact society?

We can’t change human nature, but we can understand human nature and then create systems so that we get to a better outcome. Click To Tweet

The idea that our demographic shift and growing an older population that’s living longer, therefore living longer past retirement is valid and important to recognize. For my own self and my own work, I tend to bring that back to the individual and the fact that we individually don’t plan for retirement as a basic. We don’t plan for the future. We don’t save. I don’t have the numbers handy, but there was one number American savings rate. People would have to work until they’re 82 to afford retirement and the average life expectancy is 78. We’re in the negative. It’s a matter of we don’t individually connect to our future selves. Part of the reason why there’s no self-control is because we’re not connected to like, “30-year-old Jeff doesn’t know or care about 70-year-old Jeff,” or figures, “A 30-year-old Jeff’s not going to worry about it, but 50-year-old Jeff will take care of it, and 50-year-old Jeff doesn’t either. 50-year-old’s like 60-year-old Jeff.” We don’t connect. There are certain tools out there to try to make us connect or there are cultural ways of addressing that if we choose.

In Australia for instance, I was once offered a job in Australia and they gave me a salary. On top of that was the automatic retirement savings. Let’s say it was $100,000 salary plus $12,000 into retirement. It wasn’t like it’s set up here, which is $100,000 and then we’ll take out $12,000 if you so choose. It would have been automatic on top. That’s framing and the fact that it becomes the default. If you can’t change the individual’s perspective, which I don’t believe we can change human nature. We can understand human nature and then create systems so that we get to a better outcome. That was a cultural and societal decision to do that. Is that the best approach? Is that the only approach? I don’t think so. Americans would have a hard time accepting mandatory retirement savings. That’s not in our nature to like that. Nonetheless, somewhere in the middle there in this particular issue is a solution that recognizes that if left to our own devices, we’re not going to save for our future. If forced to save for our future, we’re going to revolt.

As I was going through your book and learning more about you and exposure to Daniel Ariely. Being aware of your own behavior is one thing, being aware of others’ behavior is another. There are some common themes that are evident through your books but also history. I look at the future and there’s a tremendous opportunity because there are these ominous challenges we get. There are huge opportunities if you understand how people are going to react and behave in certain circumstances. Have an idea at least so that you can position whether it’s a business or a technology or some service that would help in those circumstances. As I look at PeopleScience, it’s understanding people value to figure out ways to provide value to people. Provide some service that’s going to help them.

TWS 14 | Behavioral Economics

Behavioral Economics: Left to our own devices, most people develop that sense of apathy that leave them not doing anything.

 

I would agree with the caveat in the way you described it makes it sound a lot easier than it is in practice. This I bring up because it is one of the challenges facing the field is there are people that think, I’m not saying this is what you’re expressing, but people think it’s off the rack solutions. In order to apply this stuff, it’s common and text-driven. It’s a certain designed nudge that works. Let’s say even specific works for Toyota dealers that nudge probably won’t work for high-end BMW dealers. It’s these little tweaks and yes to the point that if you understand human behavior and you understand the context, you can find a solution. It’s going to provide value to all the stakeholders, but the process isn’t as easy as snapping your fingers. The process still requires that experimentation and the deep understanding of both the science, the industry and the field. There’s great promise in there. It’s hard work but yes, the potential outcome and potential impact are great.

The general awareness of people is increasing because our interconnectivity has magnified. People’s tastes are going to change. Tendencies and preferences are going to change over time. There are many variables, but ultimately if you understand more of how people operate. It gives you an opportunity to provide value in those circumstances. I’m curious, fascinated by your inner working with Daniel Ariely, having direct access, writing a book with him, picking his brain. I’m assuming there’s probably conflict in some of the stuff you wanted to write about and what he had said was incorrect or had another opinion about. Could you describe your experience with Daniel Ariely and what you’ve learned from him that was in the book, but maybe some other context as well?

The biggest problem with working with Dan Ariely was that he was not a problem at all. He’s great and giving and kind. The writing process took a long time because we had conversations. He gave me a bunch of research and a bunch of ideas. He gave it to me and said, “Go write this. Give a pass and then we’ll go through it.” In some ways, I probably would’ve worked better if he was a lot meaner and didn’t put it all. When I wrote the book about cheating, I essentially created this field of cheating and therefore became the leading thinker in it. My writing process involves me puffing myself up and being like, “I’m the greatest. What I say is personal.” I could write with confidence.

When I was writing about a field where I knew there were experts who knew ten billion times more than me and I was writing with one of them, it became hard to write that confidence. The biggest problem with writing the book was my own confidence in getting the ball rolling as a creative person. I tongue in cheek say that’s Dan’s fault because he believed in me. Once I got over that hump, we didn’t have a lot of conflicts. Moving things around, what’s emphasized, I relied on him to make sure that what I was saying about the science was accurate. That was his decision too. There was one joke that he nixed that I’m glad he nixed because I knew we shouldn’t do it anyway.

We went through four different formats of the book. At one point it was like, “Let’s write half the book as a story of a family, then go back and analyze it.” I wrote one version. I didn’t get too far but I wrote enough of it that was awesome but never held together. Basically, the book was going to be a conversation between God and the devil. On the one hand, God is the good side and the devil is the temptation and it affects our decision making. There was no way I was going to make this work, but it was a great try. Working with Dan was great both in leading up to it and in the process. Next to the word mensch in the dictionary should be his picture. He’s smart.

The more we're aware of our tendencies in how we behave, the more we're going to help each other. Click To Tweet

We’ve all had moments of extreme lucidity and clarity where anything that comes to us, we know how to respond. We can speak clearly and distinctively. We can go on a five-minute tangent and pull it back to where we were. We had those moments. Dan seems to always be like that. It is incredibly impressive. He has a fascinating life story that your audience should check out, how he came into this. In short, he was burned over a lot of his body and then he observed the way that his nurses treated his wounds. He’s a fascinating guy and it’s been great working with him. We’ve done a few things since then and it’s been a pleasure.

What I’m picking up on, he tells the story in Predictably Irrational about his burns. I love hearing him speak. There’s so much you can detect by the way you feel about what he says, his personality and what he’s talking about. It sounds like you went in with a high bar and an environment where you wanted to write accurate but also write something that he puts his stamp on. Sometimes that environment elevates our performance or what we’re able to do as far as output is concerned. We’ve had a lot of putting yourself in an environment that forces you to expand.

Left to our own devices, most people have that sense of apathy so that they won’t do anything, but if they’re put in a situation where they’re forced to do it and either perform or not. I look at how fascinating, how amazing the understanding of human behavior, how people think, what they’re thinking about and what drives them is becoming more evident. Now you have a lot of empirical science around it as far as being able to measure the stimulus and responses. He does tons of those different experiments or case studies. In the end, money is still the predominant issue that people are having whether it’s worse, whether it’s breaking up relationships, business failure. It comes down to how people are thinking, how they’re behaving. This science is powerful and kudos to you for taking on Editor-In-Chief of PeopleScience. The more we’re aware of each other and our tendencies in how we behave, the more we’re going to help each other. I’ll leave you with the final word on what you’re doing as far as PeopleScience is concerned. What are you up to next? What’s motivating now? What is the mission and so forth?

I would certainly invite everyone to check out PeopleScience, a newsletter if you want to get bothered once every couple of weeks. It’s a place where I’m trying to make this stuff accessible and help people think about how it applies to their lives, their work, and their organizations. I don’t know the answers and even the academics recognize that their highly refined research doesn’t apply to everything. It is a powerful tool. It’s not the only tool we should use to affect change in our lives, society and work, but it’s an effective one. To understand how people are and how we make decisions. Our emotion plays into many things, even when we deny it. Financial advisors, there should just be numbers but there’s emotion there. That’s okay. That’s good. That’s what makes us beautiful creatures and not machines. The more we recognize that, the better we’ll be. My standard line is, I don’t think we can change human nature but we can understand human nature so that we can make our environment, society and systems work for us instead of work against us.

Jeff, you’re doing great work. Thank you so much. Thanks for writing your books. Go to PeopleScience.com, JeffKreisler.com. If you’re doing some comedic stuff, I’m sure you post stuff on social media. Jeff, it was awesome to have you on. Thank you so much for your time and best of luck with everything.

Thank you so much.

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About Jeff Kreisler

TWS 14 | Behavioral Economics

Jeff Kreisler is just a typical Princeton educated lawyer turned author, speaker, pundit, comedian and advocate for behavioral science. He uses humor & research to understand, explain and change the world.

Winner of the Bill Hicks Spirit Award for Thought Provoking Comedy, he runs PeopleScience.com, writes for TV, politicians & CEOs, shares witty insight on CNN, FoxNews, MSNBC & SiriusXM and tours most of this planet.

Jeff specializes in politics, money and other human encounters.

Jordan Goodman: Finance, The Economy, Markets, And Growing Wealth

TWS 12 | Finance

 

“America’s Money Answers Man” and a nationally-recognized expert on personal finance, Jordan Goodman talks about all things finance—from the personal aspects to the market and economy. He gives some great insights about how inflation is affecting not only the US but the rest of the world as well. He urges everyone to invest instead of keeping their money in a bank account where it’s losing value. Teaching some sustainable manners to grow wealth, he taps into the topic of crowd space fund and housing while sharing the benefits of paying the mortgage right. Learn the economics that have changed the tax laws, the six financial personalities, and the future of lending. All of this and more as he also adds a personal touch, sharing his mentors and financial philosophy and his “The Money Answers Show”.

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Jordan Goodman: Finance, The Economy, Markets, And Growing Wealth

Ayn Rand, founder of the philosophy of objectivism and author of best-selling novels like Atlas Shrugged and The Fountainhead claims that humankind’s greatest virtue is rationality, our ability to think. It’s the primary variable that sets us apart from the other animals in the animal kingdom. As challenges and inefficiencies of the passive manifested, we rise up and figure it out. The world has always had its challenges. The list is endless in our day and age, have faith that someone is working on them. My question to you is, “What are you working on? What are you trying to solve?” As you may have concluded, that is the topic of our show today, solutions and answers to challenges. My guest is America’s Money Answers Man. Welcome to The Wealth Standard Podcast. This is episode twelve of season three and my guest is Jordan Goodman.

Jordan, thank you so much for spending some time with me. I’m excited to have you on. Welcome.

It’s great to be with you, Patrick. I appreciate it.

You have one of the most impressive resume résumés in relation to personal finance, investing and so forth. It spanned in multiple decades, multiple market corrections and rebounds. I’m assuming you’ve probably heard and seen it all. Why don’t you maybe give the audience an idea of your background, how you got this personal finance and investing bug and how you’ve kept the bug going? Because going through 1987, then dot-com and then 2008 and 2009, what was the bug initially and what keeps you going?

I went to Amherst College undergraduate and the Columbia School of Journalism, where I majored in economic reporting there. Soon after that, I went to Money Magazine, where I was for eighteen years. That was on the glorious ‘80s. It was all about mutual funds, everybody was trying to make lots of money there. I saw the boom. I saw the bust. The night of the 1987 crash, I was on Nightline with Ted Koppel saying, “We’re not going into depression tomorrow.” I said, “This is a market event, not an economic event.” Then I saw the boom again in the ‘90s and the dot-com crash and the boom again in the mid-2000s and then the 2008 crash and now in the last few years, we’ve had an incredible boom as well. My mission is to help people navigate these very difficult waters in the investment world, but everything else as well. I help people with mortgages, credit card debt, insurance and all kinds of things. I’ve been doing that for about 40 years. I’ve gone through a lot of different cycles, up and down. I love to help people and to answer their questions and do podcasts like this. I’ve got my own show called The Money Answers Show.” I’m on lots of regular radio shows all the time. It’s been my mission and passion from the beginning.

As I mentioned, you’ve probably heard of every product, strategy and idea in the books. How have you come to conclusions personally? Especially the conclusions you talk about that are viable. They have a good degree of certainty and it would help to sustain your level of credibility.

When I was at Money magazine, there are all kinds of things being pushed at us all the time. We have to get through these things and see what works and what doesn’t. There are things that do work. A lot of people are so overwhelmed by so many choices that they end up doing nothing. That’s not going to get your head. If you keep your money in a savings account, checking account or CDs, you pretty much earn zero. That’s not keeping you up with the cost of living. Your purchasing power is being lost silently by having your money earn nothing. A lot of people don’t realize that. Officially, inflation is maybe 2%. In the real world, it’s much higher than that. You see what’s happening to tuitions. They are going up 6% to 7%. Healthcare costs are going up dramatically. Healthcare premiums are going up dramatically. Property taxes are going up. Now, the after-tax cost of housing is going up because the tax deduction has been limited to $10,000 for both property taxes and state income taxes. On high tax states, the after-tax cost of housing is soaring dramatically. Gasoline oil is up. There are a lot more inflation out here than most people are officially recognized. Therefore, you have to have your money earning something to be able to at least keep your purchasing power if not gain some of that.

Isn’t it interesting the conversation around inflation can be a show by itself because you have a lot of things that are going down in price, whether it’s TVs or automobiles and then you have computers. Then you have things that are offsetting that and typically, they’re the things most controlled and influenced by government.

The things you talked about, you buy them once every five years or every ten years, a computer or a car, but your everyday things like tuition or gasoline or food or healthcare, those are the ones going up. There is a lot more inflation in the system than people talk about.

My wife showed me something. She’s from Mexico originally. They are in the process of their elections and the prices have more than doubled in the last six years. We often don’t pay attention to other markets, but inflation is rampant everywhere, not just the US.

In the emerging markets like Mexico. In Venezuela, money is completely worthless. In Turkey, South Africa and Argentina, their currencies have plummeted against the US dollar, which means that everything is more expensive for them. Inflation is way up there in all those emerging countries and it’s painful because their dollars, their debt is denominated in dollars. As the dollar has been rising, it’s getting more and more expensive for them. There is much more inflation in the world than the official numbers will tell you.

Your point was to invest instead of keeping your money in a bank account where it’s losing value. Figure out ways to grow that wealth, but do it in a sustainable manner.

I’ll give an example. Something I’m involved in is called the Secured Real Estate Fund. The website for it is SecuredRealEstateFunds.com. It’s a way of getting an 8% yield over a one-year timeframe and the net asset value stays at $10 a share. It doesn’t go up or down. As interest rates have been rising, people are losing money in bonds. In something like this, as interest rates rise, it doesn’t affect you because it stays at $10 a share in net asset value. They lend money short-term to commercial real estate projects on the country. It’s a new concept, which is called crowdfunding. This is like a crowdfunding fund. The SEC started approving these things in 2016. It’s technically called a Regulation A-Plus Fund. What it means is the average person can get into something, in this case a minimum $5,000. In the past, it would have been like $100 million for a big pension fund and they can get an 8% yield paid monthly. They can either take it or reinvest it inside an IRA, outside an IRA. They have a good track record. One of the things that’s unusual about it is they get a profit-sharing distribution as well. The projects that they fund when the projects sell, the developer shares some of the profit with the fund and gives 8% to the shareholder. In 2017, the actual return was 8.7%. So far this year, it’s been about 8.4%. There is a way without having the volatility of bonds, you can get an 8% yield as opposed to zero in the savings account or a checking account these days.

A lot of people get so overwhelmed by so many choices that they end up doing nothing. Click To Tweet

Maybe you can expand on some things that I try to talk about often when you come to an opportunity that’s worth sharing with your audience. I too have seen lots of opportunity in that crowd space fund. We had a good company on here a couple of years ago, Fundrise and they spoke at an online event that we did. They were in DC where some of the pioneers were getting that reggae done. They have a tremendous platform. I see tons of opportunity there, but looking at an idea. In this case, it’s secured real estate funds. It’s also getting a specific return and so forth. How do you about looking at an opportunity and realizing that an idea and a product is one thing, the execution is another? You have great ideas out there all the time, but the people behind it, the systems behind it, the business behind it jack it all up. How do you go about looking at an opportunity like that and determine, “This is a company that has history, has reliability. They have a mission. They’ve proven things historically.” How do you go about doing that?

You’ve got to look at the track record. In the case of the Secured Real Estate Funds, the fund managers who make the real estate decisions have been doing this for 30 years have a long track record before they ever did this specific plan fund. It’s $150 million in projects they’ve done. I’ve talked to him. He has an 1,100-point checklist before he’ll do a deal. He’s seen every mistake everybody has ever made and he makes sure they don’t make it again. They check out the underwriters of the project very carefully and make sure the project makes sense. They also hand the money out in draws. They don’t get to give them all the money upfront and say, “Come back in a year.” They say, “Put the foundation and we have to inspect it and then make the next one.” There’s a lot of safekeeping and also to diversify across the country both geographically and by different types and not putting it on one thing. They’ll some apartment buildings. They’ll do medical offices. They’ll do student housing. They’ll do assisted living. It’s diversified both geographically and by types. The Fundrise, my understanding of that it was like individual deals that you can do.

They have portfolios now too. They started out with individual deals and that’s where they got in the door with the SEC and they spent tremendous time and energy, but they were right on the corner in DC. They leveraged their parents’ big development company that’s been around forever. It started individually, but then got to the point where they were linking up with different markets and portfolios.

That makes sense. You want to do a diversified portfolio. If something goes wrong with a particular deal, it doesn’t hurt you. It’s part of a bigger portfolio, so that diversification makes sense. There are definitely options out there, but the point we’re making is you don’t have to be sitting there in the bank earning nothing while your cost of living is going up. Those are two examples that can hopefully help some of your folks.

Maybe go back to something I was curious about. As you’ve received probably tens of thousands or maybe millions of questions, what are the more common ones that you get? That is agnostic to the market or the period of time whether it was ‘80s, ‘90s, 2000s or now?

TWS 12 | Finance

Master Your Debt: Slash Your Monthly Payments and Become Debt Free

Getting out of debt, that’s a big one. We are in a debt bubble right now. The big four, mortgages, credit cards, student loans and car loan debt are all soaring dramatically. People don’t know how to get out of debt. That’s an area that I’ve specialized in. The book I did is called Master Your Debt where I go into all this in some detail. That’s an area where I could help people and I’ll start off with mortgages, which is the biggest debt that people have. They don’t realize that if they do it right, they can pay off a 30-year mortgage in about five to seven years or so on their existing level of income. This is generically called mortgage equity optimization. It’s transformative to people. What a difference in their life? You have a couple who is 35, whose mortgage is paid off by 40 instead of 65. Isn’t that going to be so much better for them? Even more so now, with the new tax law means that there are limitations on mortgages. You don’t get that deduction you get in the past. You want to pay those mortgages off as fast as you possibly can. I’ll do a brief explainer of how mortgage equity optimization works. It’s not something most people have heard about.

What you do with a traditional system, you have a 30-year mortgage. You make the same payment for 30 years and you keep your money in the checking account earning zero. The system works well for the banks. You give them your money for free and you pay them the terms of interest with all the interest being upfront loaded in the first ten to fifteen years. You make very little progress on the principal. That’s the existing system. The mortgage optimization system reverses everything. Your money is working for you instead of the bank. You use a home equity line of credit, HELOC, is what they’re called, which is a liquid line against your house. You put money in, you can take it out whenever you like. You keep your income in the HELOC pushing down your principal every day. HELOCs are based on what’s called average daily balance, how much do owe now?

Let’s say you had a $50,000 HELOC, you’ve got a paycheck for a $1,000. You put it in, you now owe $49,000 instead of $50,000. You’re paying interest on a lower and lower balance all the time. You pay your bills out of the HELOC and the point is your money every day is pushing that principal down. You combine the HELOC with the first mortgage, what I call the blended strategy and you pay the first off. Let me do a very oversimplified example of how this might work. Let’s say you have a $300,000 home and you had a first mortgage of $200,000 on it. You would go say a 4% rate or something like that. You would go get a HELOC for maybe $50,000 would be an example. You open it. It’s free and clear. You write a check on the HELOC $50,000 towards the first. Now, instead of owing $200,000 in the first, you owe $150,000 on the first and $50,000 on the HELOC. You get your money in there. You pay that HELOC off over a year or so, $50,000 down to zero. You then do it again. Instead of $150,000, you owe a $100,000. You pay it off. Do it twice more and after four years, your first is paid off. You pay off the HELOC. In the fifth year, you are now mortgage free.

That’s a dramatic oversimplification, but that’s the idea is every day your money is working for you instead of the bank. There’s a free website. You can model it for yourself to see if this would be appropriate for you, which is TruthInEquity.com. You go on there and they do what’s called a personal profile. You put in your income, your expenses, your home value and your mortgage. It’s going to say, “Based on what you’re doing now, it’s going to take you 28.5 years to pay off your mortgage. Based on the numbers you gave us, it’s going to be 5.3 years,” or whatever comes out to be. Then they show you step-by-step how to do it. There are three things you need to make that work. You’ve got to have a positive cashflow, more money coming in than going out. You’ve got to have equity in your house and you’ve got to have a decent credit score of 680 or higher to qualify for the HELOC. I bet the vast majority of your people are going to have those three things. They can save tens of thousands of dollars in needless interest and 25 years or so off their mortgage. That’s a very powerful strategy. Probably a lot of people have not heard about it because the banks are certainly not going to tell you about that one.

Banks offer product, rarely do they offer a strategy. If you look at the primary expense people have in life and it’s their housing. It’s interesting especially now because there are some ways in which you can analyze whether a home is worth buying or is it better renting. It’s all based on the circumstance. Right now in most markets based on finding a place to live, it’s arguably less expensive to rent than to buy. When you buy, you have to come up with the down payment, which means that money can’t be invested, so you have a cost there. You also have maintenance and upkeep, insurance and taxes that you’re responsible for. Sometimes those payments can end up being more than what a rent payment would be. It’s interesting where people look at their housing. Housing to me, you want to optimize the economics of it, but economics shouldn’t always determine or be the leading influence. Because I did that and I got my wife mad at me for several years. I did it twice. The idea is like there’s an emotional decision and there’s a financial decision. An emotional decision often drives that, but when it comes to the economics, that’s still vital. The way in which you acquire is important, but the way in which you manage your mortgage and how you manage your cashflow is also vital.

The economics have changed because of the tax law particularly in the higher tax states. Not always but in many cases, renting does make sense particularly if you want to move, which so many people go from one job to another. You don’t want to be tied down to a particular place and have to sell your house into a bad market. A lot of people get stuck that way. There are some people in 2008, 2009 that have been able to sell in bad market. There are good markets, Seattle, San Francisco, Austin and other places where the market is doing well. The prices are so high if you sell and you have no place to go. Housing is a big issue. A lot of people don’t deal with it correctly.

I want to go back to a few things. Your housing that’s a strategy. Money in the bank is another strategy. Debt is something to be to be conscious of. Talk about mindset when it comes to money and finance as opposed to strategy because I’ve seen a lot of the things that you’re talking about right now. I’ve heard about it before and seen certain programs. I’ve seen some succeed and some fail, but it’s rarely the results of the actual product or service. It’s typically the results of the actual person executing properly. Talk about how you address those concerns and questions that people have or maybe they don’t even know or they don’t even recognize that they’re the problem. How do you typically approach that idea or that situation?

TWS 12 | Finance

Master Your Money Type: Using Your Financial Personality to Create a Life of Wealth and Freedom

I did a whole book on this topic called Master Your Money Type, where I divide people into six financial personalities. Understanding what your personality is going to help you make the right decision or at least understand the decision you’re making. I’m not going to go into all the details, but the six types are strivers, high rollers, ostriches, squirrels, coasters and debt desperados. It came out of how your upbringing was or what your parents were. You might be the same or you might be the opposite of your parents. If our parents grew up in the depression, they’re going to be squirrels. They are going to be very fear-oriented, penny pinching, worried about everything and not wanting to take any risk. In general, the Baby Boomers have grown up in prosperity, so they tend to be coasters or high rollers even. That’s part of the mindset is to understand the way you look at money. When you’re dating somebody or going to marry them, understand what their money type is. You don’t have to be the same money type, but at least it can avoid a lot of conflict if you know where you’re coming from and the way you look at money.

Aside from your book, there are ways in which you can determine what that mindset is. If you’re happy with your finances, then there’s no real need to change your mindset. If you’re unhappy, if things are unhappy, if things are not working, what typically is the basis of shifting from maybe the ostrich to the striver or is money mindset static and you have to deal with that the rest of your life?

You’re going to have a predominant one based on your upbringing, but be the best you can, be the best squirrel you can be. If you’re going to be a squirrel, you don’t have to be an uber squirrel and get out of your risk tolerance a little bit. If you keep your money in the bank earning nothing, you may feel safe as a squirrel, but you’re losing purchasing power. Push the envelope maybe not in your normal level of comfort, so you can do better in these things. The debt desperado is too comfortable with getting into debt. You go to a casino in Las Vegas and there are ATM machines. People are taking money out of 18% to put up on the tables. It drives me crazy. That’s the desperado mentality. You’ve got to have a counterweight to your normal money type.

What are some books that you’ve read or mentors that you’ve had that have formed your original financial philosophy and then talk to us about how it’s evolved over the years and who you are influenced or pay attention to now to get an idea of where things are, what opportunities are and where things are going in the future?

TWS 12 | Finance

The Truth About Your Future: The Money Guide You Need Now, Later, and Much Later

Peter Lynch was a very informative one back in the ‘70s and ‘80s and picking stocks of companies you know very well. He did so well with that. That was certainly of influence to them. I like Ric Edelman. He has a book out called The Truth About Your Future: The Money Guide You Need where he talks about all the new trends that are happening whether you like them or not. You can have them work for you or you can have them work against you. Robotics, cloud computing, 3D printing, artificial intelligence, biotechnology and there’s a whole bunch of different things. They are happening. You can get run over by them or you can have them work on your behalf. That’s been an influential thing. He has got an exchange traded fund called The Exponential Technologies Fund with the symbol is XT, which has about 200 companies that benefit from all those exponential technologies. That’s an example of how you can have it work for you because a lot of people don’t know these things are coming. Their jobs are going to be disappeared out of robotics or artificial intelligence. They don’t know what hit them. That’s an influence that has been very helpful.

What are some of the topics you’ve been discussing consistently on your show, The Money Answers Show?

Other ways of getting out of debt. We talked about paying the mortgage off faster. Some of the other ones, car loans. A lot of people have big car loans, bigger than they can afford. They don’t realize they can refinance those car loans to a much lower interest rates or change the maturity to a level that’s going to bring their car loans down. There’s a free website MyLoanGem.com. You go in there and put in how much you owe on the car, how many more months you have to go, what your monthly payment is and the interest rate. Then it gives you a little dial that you can choose what your payments are going to be. Basically, the interest rate or the maturity. Let’s say you’re paying $500 a month. In the next three years, you’re finding that too much to handle, so you moved it up to six years, maybe it goes down to $250. It makes it more affordable. The new thing now is that these car lenders are putting a device in your car, which can disable your car while you’re driving along the highway if you don’t make your payment. That’s given them the courage to make a lot of subprime car loans that in the past they wouldn’t have made. Now they disable the car. They know where GPS. They can send the repo man and take your car right away. That means a lot of people have gotten car loans that they wouldn’t have gotten in the past, particularly a subprime car loan. There’s a resource that can help you do better with your car loans instead of typically what you’re going to get from the dealer.

I want to ask about what you see as the future of lending and finance from a from a lending standpoint. I look at some of the trends especially in insurance where you have these startups that are placing sensors in phones or in cars that determine how fast you go, determine if you break hard, determine if you go over certain speed limits based on the area and that’s how they determine your insurance rates. Going into lending, subprime was hurt because of a number of factors both housing as well as cars. Looking at some of the technology and optimization in which they’re keeping people disciplined in making their payment, what are you seeing there? Because there are still business loans that I analyzed that people don’t know how to calculate what an interest rate is. They think they’re getting a good deal on a 20% business line of credit or a 15% car loan. What do you see as the future as far as lending is concerned, but also consumer awareness when it comes to knowing that they got a good deal on a car or a good deal on a loan or a credit card or whatever?

The Credit Card Act of 2010 supposedly made for more disclosure, so people know what they’re getting into. You’re paying a credit card and you pay the minimum amount, it will stay around in your statement it’s going to take you 32 years to pay it off at this APR. Hopefully, that’s made it a little bit better. Let’s talk about small business loans because I know you have some small business owners as part of your followers there. That’s an area where there are some good things going on and some bad things going on. I’m talking about the bad things first. There are what are called merchant cash advances, MCAs, which they take over your credit card receivables and they take fees out every day. The interest rates can be like 400%. They don’t call it an interest rate, they call it a fee. The last I heard was there’s about $600 billion worth of merchant cash advances out there. It’s the payday lending of small businesses.

They get on this treadmill and they can get cash in a day unsecured. Then they take fees and they need another loan to be able to pay off the past one. The same thing is happening to small businesses that was happening before with payday lending and consumers. That’s would be the bad way of doing small business lending. There is a better way. There are these clearing houses that will help small businesses get legitimate loans from new kinds of sources, not traditional banks. Hedge funds are willing to invest in small businesses. There’s a website that can help people, which is called CorporateLendingSolutions.com. At that site, they have accounts receivable financing, payroll financing and equipment financing. There are lots of different ways of getting financing and they will vet you as a business owner, as a potential borrower. Then present you to the place whether it be a hedge fund or some alternative organization. We can get decent interest rate 6,% 7%, 8% or a revolving lines of credit if you are decent business. That’s a website that can help people and I would avoid these merchant cash advances, which are killing a lot of small businesses.

The way in which you acquire wealth is not the only important thing, but also the way in which you manage your mortgage and your cash flow. Click To Tweet

People are not aware of it because they use factoring rates of 1% or 2%, but they don’t disclose timeframe and frequency in which that percent is charged.

There is a loophole in the Dodd-Frank law, the Consumer Financial Protection Bureau, the CFPB, has jurisdiction over consumers but not small businesses. That’s how these MCAs are getting away with murder as far as I’m concerned because CFPB doesn’t have jurisdiction over these MCAs.

Some car loan programs fall into that too because you see some very similar ways in which those are structured as you do with merchant lending.

On the positive side, I know you deal out with insurance, life insurance and so on. One thing a lot of people are not aware of, is being able to sell your life insurance policy into what’s called the life settlement market and get hundreds of thousands of dollars that otherwise you’re going to get nothing if you let the policy lapse. That’s as we talked about mortgage optimization, the bank will never tell you about that. In this case, the life insurance company will never tell you, you can sell your life insurance policy for potentially hundreds of thousand dollars.They would much rather you let it lapse. You pay them premiums for many years. You take whatever cash value is left and they’re off the hook. This is what’s called life settlements. A simple example, say you have a policy worth $1 million death benefit and say you’re 70. Maybe you’ve got a heart condition or some medical condition, you could potentially sell that $1 million policy for like 300,000 or something like that. You sell it to the hedge fund or various other institutions. They pay the premiums and when you die, they get the million. They’re going to get a big payoff, they just don’t know when. The older you are and the sicker you are, the more you’re going to get that policy. That can be enough to fund people’s retirements and make a huge difference in their lives that the insurance companies are never going to tell them about. There’s a website for that too, which is FundingLife.com. What they do is they put together buyers and sellers. You would be the seller of a life insurance policy.

I want to talk about the economy and what you fall as far as economics, whether it’s life settlements. Even reverse mortgages fall into a certain category that may not be applicable to the audience, but I would argue that. I look at where the demographics are and we’re on the cusp of having a very old population incapable of working, but also very ill-prepared when it comes to their future and potentially a longer life expectancy than they anticipated. Most states have enacted what’s called a Filial Law, which essentially the children or parents on the hook legally for their expenses.

If you have assets that are exhausted before maybe they use state funds or even Medicare, the kids are on the line as far as taking care of them, even if it’s an estranged child. As kids are seeing their parents age and recognizing that there is going to have to be some help associated with them. Whether it’s in financial matters or whether it’s care facilities or the long-term care because of that incapacitation. That’s where a lot of the life settlements if it’s an expiring or a term policy or an expiring universal life policy, those are ideal for settlements. Reverse mortgages had a stigma in the past, but fees are coming down. Reverse mortgages are adopting now, which is making it a little bit more affordable.

They are and those are the two main assets a lot of people have, their homes and their life insurance policies. They don’t realize they can get cash out of both of them on the reverse mortgages. They’ve made it stricter now, which is a good thing. Meaning you have to prove that you can pay property taxes and insurance. Whereas in the past, it was like people’s last desperate effort and then would default anyway. Once you can show you can pay the proper tax and insurance, you can get a reverse mortgage and then you take that assets and you’re going to pay off your forward mortgage. Hopefully, whatever you’ve got left, you can either pay off credit card debt or other debts or invest it to produce income for you.

If you're happy with your finances, then there's no real need to change your mindset. Click To Tweet

That’s how I look at kids. There may be a paid off house and there might be a policy that they could pay out in the future to them or the house can be transferred to them through a will or passing away, but that means they have to come up with all the money right now to care for their parents. Whether it’s a care facility, whether it’s in-home care or whether it’s transportation. Kids are on the hook for that. That expense is growing.

There is a website called ReverseLoanChoices.com, which is an objective site to look at all the different possibilities with reverse mortgage. In the right circumstance, you have to be at least 62 years or older, the older you are, the more money you’re going to get. You’ll be able to get roughly 50% of the value of the home or something like that. You don’t have to make payments. If you do make payments, it’s good, but if you don’t have to, the interest is accruing. Down the road when you need to sell the house or the person dies, they would collect what they paid out in the first place plus the accrued interest. The two things we talked about, reverse mortgages and life settlements can help a lot of people. A lot of people have gotten to retirement without having saved almost anything is what it comes down to. The latest numbers I saw is 40% of the people receiving Social Security retirement benefits, it’s their only source of income. Those are two aspects.

Even those that have saved some, over 60 years old, the average retirement account is like almost $200,000, which seems a lot, but then if you look at Monte Carlo simulations, it’s nothing as you stretch distributions out over a long period of time. There’s a dilemma and it’s concerning to me. I don’t know how it’s all going to play out. In the end, kids that who are preparing for themselves and trying to gain financial education and be more responsible with their finances, it could be totally disrupted by the lack of preparation on the part of their parents.

The middle generation are being hurt by that, the parents needing their money and so on. The kids because of the student loan debt is huge that something over 50% of the kids graduating each year are going back and living at home again. You thought you had an empty nest. That was a four-year empty nest and now what I call the boomerang generation keeps coming back at you loaded down with student loan debt. The average person is graduating with about $39,000 in student loan debt. The people in the middle, they’ve given money to their kids. They don’t have time to save for themselves. Now, the parents are coming back. You’ve got the boomerangers and what I call the parents, the reverse boomerangers, the parents moving back with the kids. Let’s talk about student loan debt because it’s a big issue for a lot of people.

I want to segue into the economy too. I want to use the context as student loans are not sustainable. Credit card balance is not sustainable. Car loan balances is not sustainable and you have this big glut in the sense of debt and what’s the way out? Maybe you can talk about that when it comes to student loans because that is a very touchy subject.

TWS 12 | Finance

Finance: There is much more inflation in the world than the official numbers will tell you.

 

There are about $1.5 trillion in student loan debt outstanding. The average person is about $39,000 in debt. Every graduation season, we add about $100 billion in new student loan debt. It’s staggering. What can they do? If they’ve got a whole bunch of different federal loans at different interest rates, they can consolidate into one. There’s a website for that, ConsolidateCollege.com. The other thing they can do, a lot of people don’t realize, you can refinance your student loans to typically in the 2% to 3% area instead of 5% or 10% or much higher rates if you have private loans. You would combine private loans and federal loans into one in the typically 2% to 3% area. A place I recommend there is Credible, their website Credible.com/moneyanswers, they know it’s me that way. You get $200 off your first payment. There are about ten different lenders who will offer you different kinds of deals, some of them fixed, some of the variable with different interest rates. The point is you have one loan instead of money that can help you get that student loan at least under control a little bit. You can’t make it disappear. Because of the bankruptcy laws, you cannot discharge student loan debt in bankruptcy, that’s an IRS debt.

Do you see that changing?

No, I don’t. If that changed, nobody would ever make a student loan again because people would skip out of their student loans a lot. It’s unfortunate, but it hangs over you. The delinquency and default rates have soared on student loans. It’s up to about 20% these days because people can’t handle the amount of student debt. They can’t pay it, but it doesn’t go away the way credit card debt would if you go bankrupt.

Let’s talk about the economy because you have a lingering generation that is coming to the realization that they haven’t necessarily prepared for retirement adequately. They are staying in the workforce longer than they have anticipated. As you grow older especially in our economy, there’s less efficiency associated with working and providing value and so forth. You’re also having the opportunity cost because younger people are not getting into the workforce that could potentially make the business more efficient. There are variables that you can argue against that, but ideally that would be the case. You have people working two, three, four jobs and you still have the levels of debt going up.

Going back to 2007, 2008 or for you going back to 2000, what are you seeing right now that you saw then? What are some things that didn’t occur then that you’re seeing? The economy banks, lenders, Wall Street, they learned lessons about derivatives. They learned lessons about lending. They learned lessons through all the different booms and busts of the last couple of decades. You always have that funny thing about human beings, it’s like the gambling mentality. You make a bet and you win and now you’re like, “I’m going to take even more risks. I’m going to make another bet,” and you win and you keep making another bet. In the process, you get sloppy and sooner or later the house collapses. What are you seeing right now within the context of that statement?

I don’t think people learned, maybe they learned, but they’ve forgotten the message from 2008. That was people getting way over their heads in mortgage debt. The mortgage that they should never have taken on or should have qualified. That’s better now because the Dodd-Frank rules have made it harder for people to get mortgages and get themselves into trouble. Still you see a lot of fix and flips and people doing speculative real estate now. That’s a game that could come to an end if interest rates keep rising. Credit card debt is over $1 trillion at very high interest rates. People are way in over their heads on credit card debt. We talked about student loans and car loans. All four of them are going up dramatically. When times are good as they are relatively now, people forget the times they were bad. The banks are willing to extend them the rope to hang themselves when that comes down to. If we talk about credit card debt, if you’re in that circumstance and you’ve got a lot of credit card debt at high interest rates, there two things you’re going to do.

Get lower interest rate credit cards, a free website is GuideToCreditCard.com. All the best deals you can get there and nonprofit credit counseling. They will combine all your debt into one payment at a lower interest rate typically 6% to 7% or something like that. My favorite place that’s called Cambridge Credit Counseling, CambridgeCredit.org is their website. They’ve already got deals with Bank of America, Citibank and Chase to get your rates you couldn’t get around and it’s a discipline. It’s what’s called a debt management plan, a DMP. You make one payment a month. They pay the creditors and you can get out of debt. You need the discipline to do that, but that’s what happened to a lot of people, they spend too much. Particularly what drives me crazy, is on consumable items. A cruise or a nice dinner or something that’s gone and you’re paying interest on it a month later. You don’t even remember what you ate. That’s not a good use of your money.

If you keep your money in the bank earning nothing, you may feel safe as a squirrel, but you're losing purchasing power. Click To Tweet

The first job I had gotten when I was a senior in college is at a center like that where there’s a nonprofit arm up and there was a sales arm. This was back in 2003, 2004 and I realized that people have big issues when it comes to money and it hasn’t changed me. We’re years later and it’s still the same. That’s where it’s a combination of using strategy, but it’s also the human behavior side of things. Where if you’re in the situation, it’s not necessarily a debt consolidation or a refinance that’s going to do the trick. It’s one of the variables. The other variable is to obtain some level of financial education, so you don’t make the same mistake twice. The reason why we’re in this issue is because banks got away with murder in 2008, 2009.

They propagated a lot of the derivative markets and propagated a lot of the different loan programs. They took advantage of people in a sense and they got a bail out. I was part of that. I personally guaranteed some stuff with a partnership that I formed this company with and I got hammered. I realized how much power they have to get a judgment on you and tarnish your bank accounts. These guys have it dialed in where they can make your life miserable and force people into bankruptcy. Right now, it’s evidence of that. Wells Fargo is one of staring us in the face examples. It’s one to recognize and understand what your options are, but it’s another to essentially have a mindset and a level of education that helps you to make the right decisions going forward after you make the most of the situation as it exists presently.

Education is a big part of it and people go through school and they learn all about Greek philosophy and German music and Etruscan pottery and all kinds of wonderful things. How to do a budget and how to pay your mortgage off and invest, all the things that we’ve talked about is like a foreign idea to them. In my money types, those are the ostriches. “I don’t deal with money, it will take care of itself somehow.”

That’s the unfortunate part. There’s no perfect system. There are always these ideal systems. In politics, there’s nothing that it’s ideal regardless of what the political parties says. In the end, we have enough experience based on what’s occurred in the past to recognize where the pitfalls are with our financial behavior, our investing habits, our savings habits, our purchasing and consumer habits. There are ways to live a pretty amazing life these days. One of the things I always love to talk about and do is question everything. Even if it’s something that’s so mainstream, it seems like it makes so much sense The actual questioning of it and the understanding of it opens a person’s mind to engage their senses. People know intuitively what to ask when it comes to what they do here or what they do there. That’s where a starting place is but I look at where we’re at as an economy, as a society and there are a lot of red flags for me. At the same time, it could keep going in another ten years.

It’s making good habits is where it comes to and that’s what you do and that’s what I do. We help people get into good habits. Getting out of debt and not getting into it in the first place, having investments and savings that are working for them and making the most of their assets. We’ve talked about real estate. We’ve talked about life insurance. You make relatively small moves that can have a big positive impact. In general, I like to live a positive compounding life instead of a negative compounding. The positive, it’s producing more money and you’re getting a compounding impact. Negative compounding is you pay the minimum on your credit card and the amount of interest you owe is rising all the time. What a difference in your life if you can get the right habits to do positive compounding instead of negative compounding.

TWS 12 | Finance

Finance: You always have the gambling mentality that is funny about human beings where once they make a bet and win, they are going to take even more risks.

 

Jordan, thanks so much for your time. This has been an awesome conversation.

There’s a landing page I’ve created specifically for your people, which is   Go.MoneyAnswers.com/WealthStandard. You can follow up on some of things we talked about. I’ve got a free monthly newsletter they can get and see all the different resources I have at MoneyAnswers.com and videos. I’ve got a YouTube channel. I’ve got a blog. I’ve got a newsletter. All kinds of things, we’ve touched the surface and some of the ways I try to help people do better with their money.

Jordan, thanks again. This has been a very valuable conversation. Thanks for all the resources that you provided. We’ll have to do this another time.

Thanks so much, Patrick. I appreciate it.

Take care.

Important Links:

About Jordan Goodman

TWS 12 | FinanceJordan Goodman is “America’s Money Answers Man” and a nationally-recognized expert on personal finance. He is a regular guest on numerous radio and television call-in shows across the country, answering questions on personal financial topics. He appears frequently on The View, Fox News Network, Fox Business Network, CNN, CNBC and CBS evening news.

For 18 years, Jordan was on the editorial staff of Money magazine, where he served as Wall Street correspondent. While at Money, he reported and wrote on virtually every aspect of personal finance. In addition, he served as weekly financial analyst on NBC News at Sunrise for 9 years and the daily business news commentator on Mutual Broadcasting System’s America in the Morning show for 8 years.

He is the author / co-author of 13 best-selling books on personal finance including Master Your Debt, Fast Profits in Hard Times, Everyone’s Money Book, Master Your Money Type, Barron’s Dictionary of Finance and Investment Terms and Barron’s Finance and Investment Handbook.

He has also written 6 special focus editions of Everyone’s Money Book on College, Credit, Financial Planning, Real Estate, Retirement Planning and Stocks, Bonds and Mutual Funds, and hosts the Money Answers Show podcast.

Jordan is also a speaker and seminar leader on personal finance topics for business executives, students, associations, investment clubs, employees and others.

Thriving In Leadership By Being Conscious with Bob Rosen

TWS 11 | Being Conscious

 

Being a leader today, no matter what organization or agency you are in, is much more difficult than it was before. The speed that technological advancements afford us has only created more and more options together with confusion and competition. What is to be done? Bob Rosen, trusted CEO adviser, organizational psychologist, and bestselling author, tells us his findings about leadership in today’s world and how we can navigate it more successfully. Bob begins by giving us a background from when he started Healthy Companies International, sharing the correlations they have found between relationships and its impact to leadership positions in the company. At the heart of it is his book, Conscious, where he shows the need to go deep into our roots – the physical, emotional, intellectual, social, vocational, and spiritual – in order to survive the change.

Listen to the podcast here:

Thriving In Leadership By Being Conscious with Bob Rosen

Bob, welcome to the show. It’s great to have you on. I’m excited for the interview.

It’s my pleasure.

You’ve been in the game of business and have probably looked at tons of different leadership structures and personality types. Why don’t you give us an idea of your background from the time you started Healthy Companies International until now?

I was trained as a clinical psychologist. My first job was in the Department of Psychiatry at George Washington School of Medicine. I was treating successful families and the fathers never showed up for treatment. I got very interested in how these men were having an impact on their family is by extension in their companies. I started writing about what was possible if you had healthy leaders and healthy companies working together. I got a call from the MacArthur Foundation in Chicago and they threw a bunch of money at me to start for a not-for-profit. We studied top executives and interviewed over the years 600 CEOs in about 55 countries of large companies. Toyota, Boeing, Coca-Cola and Procter & Gamble to try to get a sense of how these leaders were building great companies. Now, Healthy Companies is a leadership and transformation company. We do consulting mainly around the human side of organizations. We also do a lot of leadership development. We’re bringing the messages of being grounded and conscious into organizations at all levels so that people and companies can prepare for all the disruptions and change that is happening and will happen in the future.

Speed is a critical driver. Uncertainty is reality. Click To Tweet

Some of the backgrounds had to do with men and families and that they would not show up to these therapy sessions with their families. Did you find a correlation between maybe how a father has an impact on his family? If a man has an impact if he’s in a leadership position in the company?

Over the last years, the pace of change has increased dramatically. Speed is a critical driver. Uncertainty is reality. The world is more complex with more choices. Technology is the uber disruptor in our personal lives and our business lives. Competition comes from everywhere. Everybody in business is like a global businessperson because of technology and the fact that money markets and people can come from everywhere. This has caused a lot of stress, a lot of opportunities and a lot of challenge for leaders. Leading now, whether you’re leading a not-for-profit organization, a government agency or a large global corporation is much more challenging and much more difficult. When I say leading, I’m talking about leaders at any level of the organization. It’s interesting, as the world has changed outside in a counter-intuitive way, it’s forced us to look inside for answers. Leaders have had to look inside themselves to become more agile, more resilient, more adaptive, more collaborative and higher performing. That’s been a real shift for all leaders, men and women. It’s been a hard one, especially for men because we grew up at a time when men fought their way into new solutions. They didn’t feel their way into new solutions oftentimes. They made the decisions in more authoritative workplaces. We hid from vulnerability and weakness. We didn’t make mistakes in public. We didn’t fall down and get up and tell anybody. The world has changed for us and we’ve had to develop some new mindsets for the new world order.

I’m curious about what you said and looking at leadership in the past, I agree with your comments. Men particularly fighting for what they have and wearing some façade, not necessarily going within and being self-aware. Did that work in the past and if so, the employee, the people that were being led, was it their mindset changed first or was there some other cause?

A lot of factors changed. One is that the workforce demanded and is demanding more from their leaders. They want their leaders to be more real, more honest, more authentic. Acknowledging with them in a partnership that the world is tough and we can create and we can navigate through this together. The workforce has been a factor. Secondly is the evolution of men and women. We’ve seen changes within both genders, preparing us and changing our relationship with each other. Lastly is the environment has changed so dramatically. The level of complexity and uncertainty is so high. The tenure for top executives is going down and down. There’s so much pressure on leaders to perform. The world is changing so quickly on them and they don’t have all the answers. Another factor is that who has power in the organization has fundamentally changed. With technology, everybody has access to knowledge and information and so authority, responsibility, accountability and power has been pushed down in the organization. Mainly because people can make decisions and are closer to the customer down through the organization. The world’s gotten complex and the top executives don’t have all the information. All of those factors have contributed to the evolution of the concept of leadership.

TWS 11 | Being Conscious

Being Conscious: The dilemma is that many of our workplaces are not designed for humanity.

 

The world has become very complex in a sense. The transient nature of employees as well is interesting to note. This brings up a question I wanted to ask which is about the name of your company, which is Healthy Companies International. Remind us again when the company was founded.

We were founded in 1987. That was some time ago. I’ve written eight leadership books. The first one was called The Healthy CompanyI was on a plane and when you produce your first book, you want to take it out, open it up on a plane and hope that somebody next to you says, “What an interesting book.” and it happened. The guy next to me on the plane says, “It’s an interesting title. Is that a novel?” It was a smack in the face because I thought this idealistic understanding of the potential of companies was so critical. This guy didn’t think that it was even possible. In the last years since I wrote that book, there’s a growing recognition by the more progressive companies that if they don’t create cultures and environments that enable people, inspire people, challenge people and engage people their hearts and minds, they’re not going to have a very successful company for too long. That was my first book, Conscious. Another book is Grounded, which is based on the idea that we grew up in a paradigm that says that what you do defines who you are. The environment is forcing us to flip that to say that who you are as a human being drives what you do and how you perform.

The book’s organized around six roots of being grounded. Your physical, your emotional roots, your intellectual roots, your social roots, your vocational roots and your spiritual roots. Those leaders who exhibit those roots have a stronger foundation when the winds of change come and blow at them. Conscious was written as the companion book. It basically talks about how do you accelerate yourself? How do you move faster and adapt faster in this changing world? It’s based on the notion that the more conscious you are, the more aware you are of yourself, your relationships, the environment and surroundings around you. The faster you adapt and the higher performing you are. Conscious is organized into four practices. The first one is to go deep and to discover your personal self inside. The second is to think big into a world of possibilities. The third is to get real, be honest, intentional, step up and be a change agent. The last one is to step up. To be a transformational leader in whatever you do. We have data to support that those leaders who are self-aware outperform their competitors.

The world is more complex with more choices. Click To Tweet

Would you mind giving us maybe some examples? I’m assuming there’s some in the book but giving some examples of how to apply this methodology or apply this philosophy to leadership of a big business.

In Conscious, we link pitfalls to practices. One of the problems in business now is that many of us are too unaware or superficial. We don’t go deep enough, we don’t understand our insights, what’s going on inside of us. The world keeps changing so fast and we don’t stop and reflect. The practice of go deep is to help people become more aware and introspective. One of the things we do in our workshop is we have people look at their life story and to make sense of who they are or how did the past influence how they show up now. We also help them to become more comfortable being uncomfortable in this world. Many of us grew up believing that the goal of life was to be happy. You’re supposed to feel good all the time, but in the new world order, it’s bumpier. We have ups and downs. We have to learn not only to get comfortable being uncomfortable, but we have to learn how to be resilient to fall down and get up.

That means spending more time in our positive emotions, which comes from positive psychology. It means managing our threats more effectively, knowing the connection between our mind and our body. Also, using what we call our thought liberators rather than thought underminers or hijackers. There are very specific tools in the book and in our workshops to do that. Think big is about being curious and adaptive. One of the great examples of go deep is Oprah Winfrey. I watched her in real time. She has dealt with her personal demons and her internal self on the public stage. She’s been authentic. She showed up with an open mind and an open heart. She has a wonderful quote that says, “If I only knew that being authentic would make me this much money, I would have done it a lot earlier.” It’s a sign to people that people are hungry for people who are authentic. Who tells the truth about the internal experience that we’re facing, but many of us are afraid of that.

What is it about that it’s so compelling? With the training in psychology, what is it about being empathetic, transparent and open and being willing to talk about your faults? What is it about that that resonates so deeply with somebody else, especially someone that you’re in a leadership position with?

As the world has changed outside in a counter-intuitive way, it's forced us to look inside for answers. Click To Tweet

Many of us grow up in the paradigm that says the goal is to be the smartest kid in the room. We’re reinforced by report cards and performance appraisals in the workplace. We’ve outgrown the smart paradigm because everybody’s smart. The new paradigm is to be conscious and to be aware. Smart gets you in the room, but conscious keeps you there. That’s one shift. Another reason is if you think about it every moment of every day, we make a choice consciously or unconsciously to live that moment in fear or love. We have a set of fear-based emotions. The three primary ones are anger, sadness and anxiety. We have love-based emotions, confidence, optimism, compassion, generosity, faith and love. The more people can experience the full range of that emotional continuum but spend most of their time in their positive emotions, which are hardwired just like their negative emotions, the easier it is for them to navigate through all this complexity and change. The dilemma is that a lot of people live their life in these fear-based emotions. They get hijacked by demons from the past. They worry constantly about what’s going to happen in the future. They magnify or generalize situations that are not rational.

Each of us is hijacked by one of those three primary emotions whether it’s sadness, anger or anxiety. We generally know that in the privacy of our hearts and minds. Being aware of that is very important. The dilemma is that many of our workplaces were not designed for humanity. Increasingly younger people and the external environment is forcing leaders to be more confident and humbler, more humane, a real person in the workplace. People love that. It frees you up, so you don’t have to hold onto all the fear-based emotions. You can be more positive, more joyful and navigate through it. One of the specific tools is to be able to determine the difference between what you can and cannot control. We, in psychology, call this ceaseless striving. People who are constantly trying to control things that they can’t control and it creates tremendous distress. Everybody knows that. How do you allow yourself to be personally powerful and at the same time accept and be comfortable with uncertainty? That’s a real important tool for people to develop in this new workplace.

As you do your consulting and you with work companies, is there as much emphasis put on the employees. At least the training of the employees or the education of the employees as there is with the leadership? I imagine if it was one-sided, leaders would probably resonate with a lot of what you’re saying, but then it could be somewhat disruptive if there hasn’t been context created for the employees.

We bring our Grounded and Conscious workshops into organizations and we say that it’s important to facilitate them at the top with executives. We certify and train middle managers, human resource or learning managers or even operating unit managers to facilitate those workshops. We allow our tools and all of our materials to go in those packages so that a lot of middle managers are starting to learn this. We use technology for the masses for educating people in electronic learning and digital environment. It’s important. If you don’t do this, you don’t have a contrary of mature healthy adults in your organization. If you don’t, it’s very hard to execute your business strategy. It simply is because people are not showing up as healthy, mature adults. What happens is we create blame cultures where the top blames the bottom for not getting the work right. The bottom blames the top because the leaders are too greedy, selfish or don’t know where they’re going rather than a culture of commitment. The shift from being unhealthy to healthy is to move toward that culture of commitment, but it happens one leader at a time. You can’t change the culture if you’re not willing to recognize that everybody’s got to change. Every CEO I talked to is talking about organizational transformation and business transformation. Oftentimes, what we forget or we minimize is if you want the organization to transform, every person in the organization has to transform. That requires an investment, it requires priorities.

TWS 11 | Being Conscious

Being Conscious: There’s this power that is so contagious that if you can own it, you can get a group of people to do some pretty marvelous things.

 

A company is an abstract. A company is not like a living thing. It’s a group of individuals. It’s creating some humanity out of the culture of a business. With the lens that you have to business, what are some things you see, what are maybe some companies that exemplify this notion of being conscious? What are some companies that you’ve seen struggle because of not recognizing the notion of being conscious?

One company in particular for the latter would be Wells Fargo. Completely was not conscious of what they were doing. Maybe there were a couple executives who were, but the company as a whole didn’t realize that their incentives were all out of whack. They were forcing customers to buy products that they didn’t want. It’s cost them multiple billions of dollars and it’s still happening where the leaders were not conscious of what was going on. Contrast that to a company like Google or Apple who are constantly on the edge and creating learning cultures. The People Leader Laszlo Bock had Google for years talked about the importance of learning agility and learning on the fly. Seeing connections and helping people develop in their jobs. That’s what healthy companies do. Another one would be Reed Hastings at Netflix out front on trying to create a values-based healthy culture.

We have to learn not only to get comfortable being uncomfortable, but also how to be resilient to fall down and get up. Click To Tweet

What’s interesting about Reed is that if you look at his history, Netflix has changed its business model multiple times. It always had a vision to create video streaming on the internet. The world was not ready for that when he started the company in 1997. He was willing to reinvent the company over time. He had to bring people with him. That required thinking big and engaging people in conversation about now and tomorrow. That’s a very important skill some people call it ambidexterity. It’s helping people live for now and lead for now and prepare for tomorrows simultaneously. That requires a different mindset. There are lots of examples. Michael Phelps is a great example. In Get Real we talk in the book about the accelerators. Those things inside of us that drive us forward, like our confidence, our faith and inspiring leaders.

Also, our hijackers, those things inside of ourselves that are thinking errors, our emotional derailers that I talked about. Our desire to control or perfectionism, these are hijackers. Michael Phelps is a great example. I used his example in the book of somebody who had mastered these accelerators. His intense drive for success and his perfectionism in the swimming and the like. He won all these gold medals and then after Beijing, he fell apart because he hadn’t addressed the hijackers in his life. Being a normal real human being like all of us, he ended up going into a treatment facility. As you recall when he came out in Rio and emerged as this mature adult with a family, he seemed like a different person when you interviewed him. He had gone deep and gotten real with himself. He was able to emerge a stronger person. That’s what Conscious is all about is giving people the tools they need to thrive in this disruptive and accelerating world.

This has been a fascinating conversation. I’m looking forward to reading the book. Would you tell us about those who have either mentored you or inspired you directly or indirectly over the years to understand and be passionate? You’re clearly passionate about what you believe in. Which of these principles help transform businesses? Would you mind going through maybe some of the mentors you’ve had and the things or events that have been inspired you over the years?

The more we can move from negative energy to positive energy, the better off we'll be. Click To Tweet

I got a PhD in clinical psychology, but I had to learn business from the streets. I didn’t get an MBA. What I did was I went out and I sat face-to-face with all these CEOs over about a twenty-year period. I learned a ton about how they think, how they feel and how they manage their boards. How they build executive teams, how they deal with their fears and frustrations. How they built cultures. Although every business is different, there are some common maladies that cut across any business, any industry, any country around the world. Many of them were mentors, they probably never knew that they were my mentors. For me to have to step back from those interviews and write stories about them in my books helped me a great deal in understanding the challenges of leading complex companies and complex organizations. I’ve tried to invest in my own development. There were multiple times I could get off the train and do stress management or do organizational development, which is very important. I kept stretching myself to get to the CEO until the entire enterprise. I’ve had therapy over the years and I tend to be a pretty authentic person. When I was younger, the most important thing that I wanted to be perceived as when I gave a speech is somebody who is smart. I was a smart kid. Now, I go in and talk and I want people to leave the room a little bigger and a little better than I found them. I evolved as a human being to a more conscious state, to a more other oriented perspective which has been healthy for me.

We have a whole other conversation about the school system, education system that is ingrained in people. What the definition of smart is and stupid. I have almost two teenagers. I have a fourteen-year-old and a twelve-year-old. I have a four-year-old. They’re in this time of their life where that is starting to affect them. The conversations we’ve had have been pretty remarkable because even though society is progressing so quickly, you still have these ancient things that are involved in the school system in teaching the youth, which is flawed as you put it and I totally agree. That’s one of those things where a lot of people are driven by looking smart. Doing everything possible to avoid looking stupid when they make a mistake. That’s very unhealthy. I’ve seen it with the business I run and I’ve seen other businesses as well. It’s one of those complexes that creates some big disruption.

There’s a difference between negative energy and positive energy. That energy sits inside you, team or classroom. It sits inside an organization or a society. The more we can move from negative energy to positive energy, the better off we’ll be. We’ll be healthier, more fulfilled and higher performing.

Smart gets you in the room, but conscious keeps you there. Click To Tweet

That’s amazing about someone that is aware of how to have that positive energy and then how to express it. It’s viral. It can impact huge numbers of people. We’ve seen leaders over the years, Nelson Mandela comes to mind. There’s this power there that is so contagious that if you can own it, you can get a group of people to do some pretty marvelous things.

I see it all over the place and not just at the top in the middle and the bottom of organizations. People who are willing to step up and be grounded and conscious, not only are they happier, but they do better in life.

Do you think that the same leadership principles, tactics and being self-aware apply in politics?

That’s probably more so. These folks live on the public stage 24/7. They’re role models one way or the other. How they show up as human beings influence us. It’s important to have low crime. It’s important to have a good economy. It’s important to have a safe and secure country. It’s also important to communicate to people what it means to be healthy, grounded and conscious as a human being because people look to our leaders. I was at a speech that Jeff Bezos gave, the CEO and Founder of Amazon. He said in the speech, “One of the things that concerns me is that leaders think that they shouldn’t be scrutinized. The definition of leadership is that you will be scrutinized because leadership is a public relationship, wherever it is in government or business.”

Your feedback is like your scorecard. The feedback is the score in how effective of a leader you are.

TWS 11 | Being Conscious

Conscious: The Power of Awareness in Business and Life

No question about it. We need to help leaders develop a thicker skin. One of the dilemmas is that we idealize our leaders or we demonize them. We don’t allow them to be human beings on the public stage. Where they don’t have to have all the answers. We’re partially responsible for this. It goes in both directions.

Would you tell the audience the best way that they can pick up the book, Conscious: The Power of Awareness in Business and Life?

I’m happy to say it became a national bestseller. I’m excited about this and it’s not too long. It’s only about 200 pages. You could find it at Amazon, you can find it in all of the websites. You can also come to HealthyCompanies.com and find out about us. I wish everybody in your audience good luck on their journey.

Bob, it’s great to meet you again. Thank you so much for being on here and best of luck. Congratulations on the success of your book.

Thank you so much.

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About Bob Rosen

TWS 11 | Being ConsciousBob Rosen is a trusted CEO adviser, organizational psychologist, and bestselling author. He has long been on a mission to transform the world of business, one leader at a time. Bob founded Healthy Companies International over twenty years ago with the singular goal of helping executives achieve their leadership potential. With support from a multiyear grant from the John D. and Catherine T. MacArthur Foundation, Bob and his colleagues began an in-depth study of leadership. Since then, he has personally interviewed more than 500 CEOs in 45 countries in organizations as diverse as Ford, Motorola, Johnson & Johnson, Singapore Airlines, Brinks, Northrop Grumman, Toyota, Citigroup, PepsiCo, ING, and PriceWaterhouseCoopers. He has become an adviser to many of these companies, and coordinates the Healthy CEO Roundtable.

Bob is a frequent keynote speaker at a variety of global events. Bob has spoken on issues ranging from Leading Transformation and Leading Innovation to Leading Growth and Leading in a Global World. The underlying foundation of all his work is the power of being a healthy and grounded leader and building high-performance executive teams as the catalyst for personal and organizational success.

Bob is a frequent media commentator who has been quoted in The New York Times, Wall Street Journal, Fortune, Bloomberg Businessweek, Financial Times, Time, Chief Executive Magazine, and more. Bob’s books include The Healthy Company, Leading People, Just Enough Anxiety, Global Literacies, The Catalyst, the New York Times Bestseller Grounded®, and his latest Conscious.

Bob graduated from the University of Virginia. He subsequently earned a PhD in clinical psychology at the University of Pittsburgh. Bob teaches in executive education programs, and has been a longtime faculty member in the Department of Psychiatry and Behavioral Sciences at George Washington University’s School of Medicine.

Breaking Down The Biggest Myth About Entrepreneurs with Jim Beach

TWS 10 | Myth About Entrepreneurs

 

There are a lot of misconceptions about being an entrepreneur. Most of the time, we tend to think that to succeed in it, one has to have that passion from which they turn into a career. Speaker and entrepreneur Jim Beach gives some practical advice and counters the biggest myth about entrepreneurs. He talks about the myth of being a risk-taker to that of the many stereotypical entrepreneur archetypes. Sharing how one can still become an entrepreneur even if the passion is still not there, he shows some unconventional ways that will even comfort us in our own journeys. Jim is a sought-after speaker on business, low-risk entrepreneurship, and personal development. He takes us to the story of how he redefines or refocuses passion, asking each one of us to just get off the sofa and start moving.

Listen to the podcast here:

Breaking Down The Biggest Myth About Entrepreneurs with Jim Beach

Jim, it’s awesome to have you on. Thanks for spending some time with me.

Thank you very much for having me. It’s my honor.

Jim, why don’t you give the audience a brief background in your career in the entrepreneur space?

TWS 10 | Myth About Entrepreneurs

School for Startups: The Breakthrough Course for Guaranteeing Small Business Success in 90 Days or Less

I was summarily dismissed from Coca-Cola at the age of 24. I thought I was going to be there forever and they decided otherwise. I was completely devastated. I was as corporate a man as you could be at that young age. I wanted a corporate career. One of the last things they told me at Coca-Cola was that I would be a great entrepreneur. I’d never heard the word and didn’t know what it was. I did that. I went out and started my first business when I was 25. I grew it to 700 employees. It was in the children’s education space. At 31, I started teaching at a university. I was a university professor with a small P, not a PhD guy, but the one who taught all the classes for ten years. During that time, I came up with some interesting philosophies on entrepreneurship that I hope we can talk about. I wrote a book about that called School for Startups, which was published by McGraw-Hill. It sold well. That turned into a radio show and here we are.

You’ve done it all sounds like. Are ready to hang up the boots? Call it a career?

I’m one of the people that would get bored in ten seconds. I don’t like golf.

That’s part of my argument is even if you do like golf, humanity, especially a human being, especially one that is experienced entrepreneurship and creation, your space understands that life doesn’t end at 60, 70, 80 or 90. It ends when it ends. Production, whether it’s business or mentorship or consulting creates that livelihood in people. Let’s get into some of the nature of your books and the business that you’re a part of. What you’ve experienced over the years in regards to what is the times of Coca-Cola until now. Everybody knows what the word entrepreneur is. Maybe from that and then until now what your experience has been seeing what is possible for those that have an entrepreneurial vision?

The thing I would like to focus in on are some of the myths that I have seen and the perception of some of those. The biggest myth about entrepreneurs is that they are risk-takers. You have to be this risky guy or maybe there are three things to entrepreneurship. You are creative somehow, you are somehow risk excited and you’re going to do something risky. Number three is that you have a passion for what you do. That’s become the definition of the entrepreneur. I’m a risk-taker who found a creative idea to start a new business that I’m passionate about. I believe I can make a lot of money with that business or something silly like that. I find that because of that we have lots of people sitting on the sofa who are not trying entrepreneurship because they’re afraid of one of those three things.

One of those three things is preventing them from becoming an entrepreneur. I find that all three of them are completely false. That entrepreneurs are not risk-taking people. As a matter of fact, I do every single thing I can think of to reduce risk before I start a business. If there is a risk, I don’t start the business. I start the less risky ones. The more entrepreneurs that I meet, the more people I interviewed, it’s the same with them. Risk is a bad thing. We’re not creative. 93% of new businesses are copies of existing businesses. That data comes from the London School of Economics. There are not that many new ideas. If you want to be an entrepreneur, you find what someone’s doing in Salt Lake City and copy and do it in Atlanta. There’s nothing wrong with that. Pepsi, Coca-Cola, Mountain Dew, Hilton, Hyatt, Marriott, Mercedes, Honda and Toyota. There are lots of me-too companies. You don’t have to be original to go be an entrepreneur. Just find an idea and execute the daylights out of it.

Life doesn't end at 60, 70, 80, or 90. It ends when it ends. Click To Tweet

Before we get to the third point, maybe in your mind, define what an entrepreneur is. At the fundamental level, I have a four-year-old. If you were talking to my four-year-old and explaining what an entrepreneur is, how would you describe it?

Someone who goes out and sells things to people. A four-year-old would understand that. I have stuff that people want to buy. That could be different stuff.

It comes down to how do you define selling? Selling is the exchange of money for something that’s more valuable than money. In the context of your other businesses, it’s improving. It’s creating more value than was currently there. If you seek ways to do that, that is the beginnings of that entrepreneurial ideas to improve whatever exists or to create something that doesn’t exist.

I don’t want you to wait for something that doesn’t exist because that creativity lightning bolt may wait until you’re 90 or maybe never come. Go start something now. There’s this idea of the Corridor Principle. As you go down the path of entrepreneurship, the life of entrepreneurship, there are doors along the hallway, this path that you’re on. You could never see into those doorways until you had gone down the path a little bit. Because of where you are, you don’t have a view that allows you to see the opportunities in those rooms. By becoming an entrepreneur now, doing something very me-too, not creative but running a good business will then give you the opportunity. It’s a beautiful analogy. What it says is that we should get off the sofa and start something now no matter what it is.

There are opportunities all around to be an entrepreneur in that definition. You’re right. There are some fundamental things that scare people about being an entrepreneur or it separates that persona from who a normal person is. If you define it in the context of whatever environment that you’re in, figuring out a way to be valuable to somebody else. Once you have that mindset, the opportunities are infinite.

I say that with my coaching and what I’m working on. I’m not trying to create 100 millionaires. I’m trying to create someone worth $3 million or someone who makes $300,000 a year. That’s my goal and that’s my definition of success. You don’t have to be lifestyles of the rich and famous, yachting, private jetting to be very successful and have enough for you and your family to survive on. That’s very realistic for everybody.

Let’s go through that. First thing is you dispel the idea that being an entrepreneur is risky. Then you got into this instead of doing the whole Peter Thiel, Zero to One, creating something out of nothing. An entrepreneur can be somebody that improves an existing business or an existing process in a role that they have. I know you were going to get into a third point or subsequent points. Would you mind picking up where you left off?

That would be passion. There’s this overwhelming belief that you have to be passionate about what you sell. I would counter that. I’ve sold purses. I’ve sold leather jackets. I’ve sold a lot of stuff that I don’t buy, that I would never buy. I must tell you, that doesn’t bother me at all. I would like to redefine or refocus passion. That passion for a product is called materialism. I am passionate about the lifestyle that I lead. I am passionate for the fact that I drove four carpools. I had zero commutes. I wore what I wanted to. I wasn’t responsible to anyone. I made as much money as I was willing to work to do to get that money. I am passionate about the entrepreneurship itself. That can be enough for a lot of people. The joy of having an Amazon re-seller business that you buy stuff in bulk and sell it on Amazon. I’ve seen how that simple, non-creative, non-risky business that no one should be passionate about can change people’s lives and change their perception of themselves.

I’m passionate about the opportunity that it presents. I believe God gave us a certain basket of skills when we were born, when our DNA was created. We’re good at this and not good at some other things and I’ll never be able to throw a baseball. Entrepreneurship uses those skills better than anything else could. I could still work as CEO and my creativity would not be utilized. I could still work at Coca-Cola and not use the skills necessary that are used by my entrepreneurship. That’s exciting to me. Overall, just being an entrepreneur is cool enough that I don’t have to love what I’m doing. I have enough fun selling purses that I’m willing to sell purses if I could make some money doing it.

We should get off the sofa and start something now no matter what it is. Click To Tweet

Let’s breakdown then the stereotypical entrepreneur archetype. The entrepreneurial archetype is that person is beaming what you’re quoting as passion. Can you break down that one more time and talk about who would you consider an example of that passionate person and stereotypical definition? From what you’ve seen, a person does not necessarily have to be this overly A-type of personality to go out and find something that they’re either gifted at or interested in to pursue.

There are several different people that jump to mind. I would think of an entrepreneur who is obsessively passionate as someone like Bill Gates. Not necessarily in his first generation, but in his second generation as a philanthropist. He is obsessive with that. He’s following his passion there. His desire to solve malaria in Africa, he’s going about it at 100% wrong, but he has a tremendous passion for it. He’s also very interested in helping education. As a former professor, I’m not sure that he’s doing the right things there either. Nevertheless, his passion there is laser-focused. On the other hand, we have someone like Richard Branson who I think that of the 700 businesses that he owns, he’s probably passionate for three or four of them. The Virgin Galactic Airline, the outer space vehicle. Maybe still the airline, but I bet he’s pretty tired of the airline that hasn’t done any work there in ten years. He’s not interested in the thing that got them started the stores anymore. His passion is the love of the game. He’s enjoying the game. Whatever the business is, he’s going to have fun doing it and give it an interesting, sexy, unique twist. I don’t think he loves all of those businesses that he runs. He enjoys the, “Let’s come up with a new brand that exudes confidence. That’s cool and sexual. I get to jump out of a parachute or a hot air balloon wearing a parachute to promote it.” He’s enjoying promoting it more than me as the brand. He never goes back to those businesses on day three. He’s not there on day three.

He gets it all up and running and passes the baton.

Those are two very different views of entrepreneurial passion. All I’m suggesting is that if you wait to do what you’re passionate about, it may skip you altogether and you may lose the opportunity to go off and start a great consulting practice very similar to your last job. There’s nothing creative. They’re very similar to your last job. You steal some of the clients and you do the same work very well. That may not be your passion, but that may allow for you to do your passion in three or four years from now. What I’m passionate about is woodworking, but I suck at it. I’m bad at it. What I’ve learned is that I can enjoy my passion for what’s called the weekend and make more money so that I can go to a woodworking school more often.

You talked about natural gifts and natural abilities, that we’re all different. We all have different personalities, different strengths and different tendencies. From what you do as a consultant or a coach, is there a method to discover some of those interests? Maybe not passions but interest and figuring out a way to monetize that through business? Is that where you were saying with that comment?

I don’t think so. I have a hard time understanding those people; the people who at the age of 30 don’t know what they’re interested in or what they’re good at. That makes me wonder what is going on there. If an eight-year-old doesn’t know that, I understand. By the age of 30 or 40 or whatever you enter into the world of entrepreneurship, you should know, “I need a business partner, I need a cofounder because I’m not very good at speaking in front of people. This business is going to require a lot of speaking in front of people and so I should go get a cofounder.” I did that personally in my first business. I had a cofounder, Doug, whose sole responsibility was to talk and he was amazing at it.

TWS 10 | Myth About Entrepreneurs

Myth About Entrepreneurs: If you wait to do what you’re passionate about, it may skip you altogether and you may lose the opportunity.

 

He’s amazing at it and he probably liked it to an extent, you didn’t like it even though you may have been amazing at it. Isn’t that a feeling or a flag or a hint of what you should and shouldn’t do? I know you love working and there’s obviously hobbies that are out there but have you in your entrepreneurial experience seeing tons of businesses speaking, talking to a lot of people, is there a common connection fundamentally between what a person does as an entrepreneur and their level of interest?

Their level of interest in what?

Whatever they’re doing.

I don’t think so. I am working so that I can go to Disneyworld, so that I can take my family on nice vacations, so that I can go to woodworking school, so that we can live the standard that we all want to live. To me, that is the ultimate goal and I’m willing to focus in on that and say, “I’m willing to sell purses if I can get toward that ultimate goal.” For me, the passion is almost irrelevant. I am passionate about the lifestyle. My friends go to work, they commute and they get told what to do. Their destiny is in someone else’s hands. None of that is true for me and that’s what I’m passionate about.

I’m having a hard time distinguishing because I agree with you in that respect. For me, it’s one of those things where if you sell purses to be able to go to Disneyland, is something that will get you what you want? Long-term if you’re selling purses your entire life, is it possible to have a level of fulfillment that some entrepreneurs get? That’s where you go back to Richard Branson. He was probably passionate at one point in his life about his Virgin Records and the airline and the passion’s changed. As far as the future vision, I look at those that get on a highway and commute every morning and hate what they do. Then go home and try to disregard all that crap and be a good parent and a good husband or wife. I look at where we’re at as a society and because of how much commerce is going on in opportunities that exist, is it possible to find something that you like doing that you make money at? You were also able to provide some fulfilling lifestyle for your family? That’s where I’m disconnected.

That’s largely where the corridor principle comes in. There’s an important thing here. One idea that we haven’t talked about yet is that entrepreneurial things are created to be sold. Businesses are created to be sold. The first business that I was involved in childhood education was an amazing business, but we had thousands of kids every day that we were taking care of. The stress level was not enjoyable. I like my kids but that’s it. That’s where I draw the line. I got out of that business as quickly as within seven years, pretty much as quickly as I could when I was 32 years old, which allowed me to go off and do something that maybe I did enjoy more.

Open your mind to the opportunities that are all around you and figure out ways to create more value for people. Click To Tweet

The experience gives me the credibility, the opportunity, the fundraising skills, hopefully, some cash in pocket to go off and say, “I had your business with 700 employees. I want to be a college professor and I can go do that because I have the credibility of having a 700-person business.” That allows me to do what I am passionate about, which is teaching and sharing and helping other people down the path. I’m willing to do to get off the sofa because that long-term will lead to my goal of eventually running a business that I love obsessively and fulfills my creativity and my risk and all of that. I want people to get off the sofa and say, “I’m going to go start something that I can put up with.” God knows where that’s going to lead.

That helps me a ton. I would add to that the getting off the sofa idea, some people were naturally lackadaisical, but we’re also naturally-driven. It’s an interesting dichotomy there. If you look at the discovery process, isn’t there normally some level of anxiety or friction or stress that tells us whether we’re doing something we want to do or not that eventually leads us to what you explained? Isn’t pain, friction and anxiety an environment part of the process?

You mean the pain and the anxiety of the horrible job that I had beforehand? The horrible life beforehand? I hope that motivates you to get off the sofa and start doing the research. One of my favorite stories is about my step-brother-in-law. His name is Joey and he had a job working on a shrimping boat, peeling shrimp, taking care of freshly caught shrimp. I can’t imagine anything worse. His goal was to have a restaurant bar of his own. Eventually, he was able to say to save $5,000. 99% of our risk universe would say you cannot open a bar or restaurant for $5,000. He did it. He didn’t even have enough money for kegs. He bought cases the first weekend. He sold those cases and made what’s called a profit. Eventually was able to buy half of Athens, Georgia, which is where the University of Georgia is. He owns half of the town and something 20 or 30 different bars and restaurants off of a $5,000 investment to get started.

Off of working on a shrimp boat doing something he didn’t like to do?

For him, the interest is he was willing to say, “My dream is to have a restaurant bar with all the brewing equipment and all of the brass and the beautiful fixtures. It’s going to have dark mahogany and the walls are going to have leather embed in them and stuff.” That’s his dream. What he ended up opening was in an abandoned barbershop. It still had the linoleum floor. It had the big rings on the floor where the chairs used to be, cinder block walls, exposed metal rafters and a bathroom that didn’t pass code. He spent $4,000 of the $5,000 getting the bathroom up to code. He then went to a flea market and got $200 worth of abandoned chairs that we would throw away on the side of the road and opened a bar. His standards were so low because the alternative of working on the shrimp boat was so bad that he said, “I’m willing to take the long view on this. To put my dream aside and to start something that’s feasible now.”

You can argue that it’s right on the side. It’s in the future and the path to get there requires that you have to put a lot of money in the bathroom before you get to the Mahogany and the brass and what his future vision was.

TWS 10 | Myth About Entrepreneurs

Myth About Entrepreneurs: Sometimes, bootstrapping is healthy – taking on a big responsibility and try to circumvent steps along the way.

 

Eventually, someone bought the piece of property across the street, put in $3 million into a restaurant. It failed. The lesson is, how many beers do you have to sell to repay a $5,000 investment? How many beers do you have to sell it to repay a $3 million investment? It’s a good lesson.

Sometimes bootstrapping is healthy and taking on a big responsibility and try to circumvent steps along the way, which that restaurant across the street did. That’s how you learn those painful lessons. They probably had to go backward and then learn the lessons that Joey was learning.

Joey also did something smart. He reduced the risk. His risk was $5,000. If he lost, he’d have to go back to the shrimp boat.

Being able to rebound from that versus bankruptcy on $3 million. That’s a longer lesson to learn than having to go back on the shrimp boat and get another $5,000 and invest it wisely the next time. 

Joey got off the sofa.

When you’re in your book, School for Startups, is it targeted to the normal individual or who’s that person you are writing to when you wrote that book?

Life, in general, is never this calculated path where if you do X, Y and Z, you're going to get A. Click To Tweet

The guy sitting on the sofa who is trying to say it can be done. There are some stories in the book of some businesses that I started when I was teaching at the university. I bet my students on a semester by semester basis that I could start a business that semester, get a cashflow positive that semester, repay the startup capital that semester. They got to choose the country and the industry that I would start the business in. The first one was Pakistan and furniture. I had to start a Pakistani furniture company. After that, it was a Brazilian leather purse company. The year after that it was Argentinian painted leather for leather jackets. The book talks about some of those stories and talks about the rules that came out of those experiences. The major primary rule is don’t spend any money, bootstrap. I can go back and show you how all of the ideas that I had were not creative. The Pakistani chair idea, the furniture company, most people look at and go, that’s a very creative idea. I go, “I can tell you the flea market that I saw the idea that I copied from.” I saw the idea in Santa Barbara ten years before I started the business. When I had to start a Pakistani furniture company, I was like, “Santa Barbara ten years ago, I’m going to copy that idea. I’m going to do it for under $5,000.” Very little risk, zero creativity. I was not passionate about it, but it was a homerun success.

In the book, you addressed that principle of getting off the couch obviously, but also how individuals could be more entrepreneurial in their current environment whether it’s a full-time job or in school. Do you give direction there?

There are some examples. There a lot of characters in the book, real-life stories. One of my students, he was a junior and a senior who was making $100,000 a year on Best Buy arbitrage, going to Best Buy as they liquidated stuff. Buying $10,000 of stuff that Best Buy considered at the bottom of its life cycle. He would then sell on eBay and Amazon make $100,000 a year doing that. Those things are in there. The book is designed to be very motivational and say, “If this twenty-year-old can make $100,000, what’s your excuse?”

Have you seen it in maybe other circumstances where you have companies that motivate or incentivize for that entrepreneurial mindset? I know some tech or manufacturing where if you come up with some improvement to the intellectual property they already have, that you’ll be able to profit share off of that. Have you come across a lot of companies that have maybe not to that extent, but similar incentives to be able to provide improvements to efficiency or of that nature?

I don’t think you’re going to like my answer on this. The honest answer is I see that with every company until they have 50 employees. Then eventually that becomes something that’s written in the handbook that no one ever looks at. Back on my own business, when I was running a business and we were doing $12 million, $15 million a year in revenue and I hired my brother right out of MBA school. He came in and he was like, “You should try this. You should try this. You should do this.” I was like, “I had done it. I had seen it. The competitor did it. I don’t want to try it. I don’t like that.” I had an off the cuff response for every one of his bright ideas. Some of them we ended up trying, but a lot of them didn’t work. That part of the entrepreneurial story is getting comfortable with what you do and then not wanting to mess with it. That happens somewhere after $25 million in revenue or something like that. That eventually these incredibly creative entrepreneurial places that are designed with their baked DNA and we’re going to have a Friday creativity meeting every Friday with pizza and foosball. Eventually, that gets shut down by the venture capitalist. I don’t see it in the ten-year-old companies. I see companies that claim that they’re still doing it. When you dive deep, you very rarely see that. Maybe I’m a young curmudgeon.

Failure is vital in the process because it's part of the learning process. Click To Tweet

I would say life, in general, is never this calculated path where if you do X, Y and Z, you’re going to get A. It’s one of those things where sometimes there are great ideas, sometimes there are crappy ideas. I was curious because I’ve seen at a smaller level as you were explaining I’ve also seen it at a very high level at Honeywell in particular. They have a program and it’s all calculated into the engineers. The guy that I was talking with was a graduate of MIT. He made $500,000 a year, three times what his salary was because of the processes that he created that allowed Honeywell to save a bunch of money. He did some level of profit sharing with them and had ownership in the IP. It’s the environment and it’s the principle. Even though that doesn’t exist, I still think there are opportunities for anyone to figure out ways in which they can improve, whether it’s a process, whether it’s a product, whether inside the company, outside the company. Your point is to open your mind to those opportunities that are all around you and figure out ways to create more value for people so that you’ll have more money.

It will be interesting to see where Honeywell is ten or fifteen years from now because in essence, Honeywell is a startup. They were a huge high flyer of the ’70s and ’80s and so many other companies that crashed and burned. They are now finding a new niche for themselves like Xerox. There’s no comparison between the business that Honeywell does today and what they did in the ’80s or the ’90s. It will be interesting to see if Honeywell still got those creativity DNA packets ten, fifteen years from now.

It’s hard enough at a high level when you have hundreds of employees, probably thousands of employees to orchestrate something like that is definitely difficult. I would assume that something good has come from those programs. You also have brothers-in-law that have sophisticated degrees that tell you, “You should do this with your toilet paper. Have recycled toilet paper instead of the thick stuff to save some money.” My point is I’m totally in-sync with you in regard to getting off the couch and doing something that provides a level of fulfillment and I would say failure sometimes and taking risk. People don’t like that because they have a probability of failing. If you think about it, re-contextualizing failure, it’s vital in the process because it’s part of the learning process. It’s part of growing. You don’t know something and suddenly accelerate your path to perfection. There are these friction points, these failures and these dips along the way. That’s a good thing because the more of those you have and the more resilient you are, the more you’re going to be able to create it. The more money that is going to have and so goes the process.

Somehow, I always forget to leave off my resume that during that time I had 700 employees, I also got $10 million in personal debt. The bank called and said, “We’re seizing all of your assets and you have 30 days to repay everything.” I forgot to tell that part of the story for some reason.

That probably didn’t keep you up at night at all. That’s the thing. If you have a freaking $10 million mistake, talk about the lessons that you learned along the way. In the moment you’re like, “Get me out of this.” In hindsight, I’m assuming that that was one of your most valuable times.

I learned a lot.

This has been an awesome conversation and you’ve been around the block a number of times you speak. Do you do personal consulting and coaching as well?

Of course.

The book, which is the School for Startups: The Breakthrough Course for Guaranteeing Small Business Success in 90 Days or Less, that’s your only book at this point, correct?

TWS 10 | Myth About Entrepreneurs

Free Radio & Podcast Marketing In 30 Minutes: Fire your publicist and leverage free radio and podcasting to market your business, brand, or idea

No, I have another book that came out. It’s called Free Radio & Podcast Marketing In 30 Minutes. This is a series called in 30 minutes. It’s a series for people that the dummies books are too complicated. In 30 minutes, I teach you what you need to do to get on hundreds of radio and podcast interviews to sell hundreds of thousands of dollars of your product for free. I have that book out as well. You can read it on one airplane flight.

I would argue that that’s not below the level of a dummy. All the complicated stuff is at the level below the dummy because it takes a genius to take a lot of sophisticated information and simplify it so the average person can understand it and use it. Talk to us briefly about your role as the Executive Director of the International Entrepreneurship. What’s that role? What’s the purpose of that organization?

I’ll let you in on one of my little secrets here. That’s a great a loss leader as Walmart would say. That is a thing that I do from time to time. Sometimes it’s newsletter format, sometimes it’s videos where specific people get information about levels of entrepreneurship around the world. What countries are growing? What countries are retracting entrepreneurship? The main reason I do it is as a marketing tool for my speaking. In the last few years, I’ve done India probably ten times in Egypt, Dubai, Korea, Japan, Brazil, Argentina and Chile. I’m sure I’m leaving out some places. All of that happens because of the Business International Entrepreneurship, which is a marketing vessel for me. It’s a faux business designed to get me business in other areas.

That’s not a bad thing. The principles of entrepreneurship don’t have country boundaries.

They don’t so the rules apply. I’ve made a lot of money off of that though.

Awesome to have you on.

Thank you so much. It’s been fun.

It was great to meet you. Thanks again for the information.

Important Links:

About Jim Beach

TWS 10 | Myth About EntrepreneursJim Beach’s against-the-grain approach to entrepreneurship is not your typical business advice. He argues that entrepreneurship isn’t about creativity, risk, and passion, and that any individual can become a successful business owner without any of those traits.

At the age of 25, Jim started the American Computer Experience and grew the company with no capital infusion to $12 million in annual revenue with over 700 employees. The company was the world’s largest technology training company for children, and enjoyed tie-ins with Microsoft, Intel, Lego, NASA, and many others.

After this business was sold, Jim taught at Georgia State University and was the top-ranked Business School professor 12 semesters in a row. His book, School for Startups: The Breakthrough Course for Guaranteeing Small Business Success in 90 Days or Less, is frequently atop Amazon’s best sellers lists, and is the basis for his radio show, School for Startups Radio.

Jim has become a sought-after speaker on business, low-risk entrepreneurship, and personal development.

Using The Culture Course And The Code Of Ethics to Build Certification with Mitch Russo

TWS 9 | Culture Course

 

Using certification, consultants can generate millions and millions of dollars in symposium, event, and training fees. A lot of things play into how they use certification to double and quadruple their business. TimeSlips CEO and author of the book, The Invisible Organization, Mitch Russo says there are at least four recurring revenue streams in every company that nobody is tapping into. Certification taps into that and creates those recurring revenue streams. Mitch says he’s been able to see as many as eight under certain circumstances. He shares his journey to business success – from PR to promotion and sales – and how he’s now helping CEOs build independent tribes of certified consultants and develop loyalty and engagement with their most valuable customers.

Listen to the podcast here:

Using The Culture Course And The Code Of Ethics to Build Certification with Mitch Russo

Mitch, it’s awesome to have you on. Thank you for taking the time.

Patrick, thanks for inviting.

You have quite a remarkable background. For our audience that has not heard of you before or read your book, would you mind going through your business experience, how you got to where you’re at now? Maybe touch on the experience you had with the Tony Robbins and Chet Holmes Company?

I’ll go back to tell you a little bit about how I grew up because that influenced the rest of my life. I was a lead guitar player of a rock band in high school. It turned out we were eventually the highest grossing rock band in our little neck of the woods in Brooklyn, New York. What that did is it taught me a lot about business and a lot about promotion. A lot about PR, a lot about how to get testimonials and use them to sell. In a way, I thought that was terrific and a great way to start my life. I also dealt drugs in high school before becoming addicted to heroin. That too was a great way to learn about distribution, dealer networks. I was blessed to have all these wonderful things happen to me. All of that led me to where I am now. What ended up happening is as I graduated high school and I was interested in electronics, I went to school to become an electrical engineer. I discovered that engineering is not as much fun as selling and that’s when I took off in business.

I began my sales career at the age of about 26. I sold for two years and I got some amazing experience. At the age of 27, I was generating about $35,000 a month in commissions. That was a lot of money and I was unsophisticated financially. I was putting $100,000 in a bank. I took the passbook and I put it in my sock drawer and then I’d go to another bank and open up another account. I had a collection of passbooks in my sock drawer. I had no idea, other than that, what to do with money. That was my education. When I finally got around to starting my software company, I had saved enough money to back myself. My partner and I came together. We built a software company. I would say that it’s a combination of luck, timing, a little bit of skill and a little bit of experience. All came together to allow us to build the largest time-billing software company at that time in history. It led us to sell the company for over eight figures to Sage PLC in the UK. It was in that process of growing and building Timeslips that I met a guy named Chet Holmes.

Chet has a book called The Ultimate Sales Machine, one of the bestselling books I’ve ever read. The point of my experience with Chet was he wanted to sell me something and I didn’t want to buy it and he didn’t give up. That’s what impressed me most about him. When I did finally buy, it was eighteen months later, and I bought space in the magazines he was selling ads in. Those ads changed the company. Those ads turned out to be the best investment we ever made. As a result, we became amazing friends. That friendship led me to later be invited into his company to help him, which then led to a relationship with Tony Robbins.

TWS 9 | Culture Course

The Invisible Organization: How Ingenious CEOs are Creating Thriving, Virtual Companies

The three of us, as equity partners, put together a company called Business Breakthroughs International of which my title was President and CEO. I ran that company. We grew it to 350 people, over $25 million in sales per year and then disaster struck and Chet died. When Chet died, it was a new chapter in my life. I had felt like maybe Chet was telling me it’s time for me to go out on my own again, and that’s what I did. I wrote a book called The Invisible Organization, which in effect is a blueprint of how I built Business Breakthroughs, as a virtual company. That book went on to be a number one Amazon bestseller. It’s been quoted in different articles. It’s helped a lot of people save a lot of money by going virtual instead of buying buildings and stuff like they were before.

Going back to your experience with Business Breakthroughs, how many companies did you work with over that span of time? Do you recall that?

I’m going to estimate that it was about 3,500 companies.

It says quite a bit where you had that experience of being successful in business. You started to experience where businesses could modify this, that or the other to break through, then the tragedy with Chet. You took that wisdom, that knowledge and you created this book, The Invisible Organization. That tells me a lot about that book. Would you summarize a little bit more in detail what that book is about? What it teaches the reader? Start with how you decided on writing that book because you could have written on probably a ton of different topics given your background. What made you decide to write on that topic?

First of all, I didn’t know that I was going to write that book. I called my friend, a guy named Jay Abraham. I asked Jay, “What do I do now? BBI is over. I resigned and I don’t know what to do with my life.” It was at one of those moments. We all have them. Jay said to me something I’ll never forget. He goes, “Mitch, you cannot prevent the world from knowing what you know. You have to share what you’ve learned in building BBI with the rest of the world. I don’t know how you’re going to do that, but you’ve got to find a way to do it. You cannot keep that a secret because what you did was amazing.” I said, “Thanks, Jay. How about a job?” He says, “I don’t want to build a company as Chet did. I don’t want that infrastructure. You might be able to find someone who would hire you, but you still have to find a way to share it.” I thought about it and I said, “Let me start writing things down,” and every night I would set aside a quiet hour and sit and write.

TWS 9 | Culture Course

Culture Course: Once you transform into being a virtual company, you have superpowers you didn’t know you had before.

 

After about a year, I had about 50,000 words. I thought it was mostly rubbish so I deleted it off my hard drive because I knew that nobody would read whatever I had written. I said, “Let’s start over,” but I needed a theme. What we did was build a company that was invisible. It was an invisible organization. I went to GoDaddy and I checked to see. The name was available, Invisible Organization. I said, “That’s the spine of the book. Now, I know the theme of the book and I can go back and repurpose a little bit of what I’ve written, which wasn’t much and hammer into this whole theme.” I did some research and found that other people had written books about working virtually. There are several great books about working virtually, but none of them were for the CEO. They were all for the virtual worker.

I did some research and I discovered the Stanford University had done a study called Does Working From Home Work? conducted in 2014. The conclusion was startling. I figured that between this and what I know, I can produce a pretty compelling story behind how to build a virtual company. The first thing I do in the book is I talk about CEO mindset because everything starts with mindset. The second chapter is all about the myths and truths about building a virtual company. One of the myths is that if I try to build a virtual company, I’ll lose control of my people. It’s exactly the opposite that’s true. I kept going through these myths and truths going back and forth. We get to the point where I understand the core values of a virtual CEO. I had to manage a virtual team, the myths and realities of going virtual. Finally, we get into the building blocks, the blueprints of the software you need, the systems that you need, the philosophies that you need until we literally construct in the book a fully virtual company.

From there we get into the superpowers because once you transform into being a virtual company, you have superpowers you didn’t know you had before. I’ll give you an example. Let’s go back to the 1990s when American Airlines and other airlines had call centers. These folks housed thousands of people in buildings, picking up the phone when customers called to make airline reservations. Someone had a bright idea, “Why don’t we set up VPNs in everybody’s house, Virtual Private Network boxes, which would allow them to transmit securely back and forth from a person’s home and send our entire workers home?” No one talks about this, but this was the advent of the airline merger story. Two airlines to merge would have merged their call centers of which it was unwieldy. There were thousands and thousands of people. People didn’t realize that they’d be speaking to somebody sitting in their kitchen when they’re making a reservation on JetBlue, Southwest or American Airlines. Ask the next time you’re on the phone and they’ll tell you because they’re happy about it. That’s the story behind it. That the efficiencies and productivity, attrition drops to nearly zero. Sick days completely go away. Employee satisfaction skyrockets. It’s pretty compelling.

Everything starts with mindset. Click To Tweet

The idea behind the technology is to create efficiency. I look at all the tools that exist to be able to do that. I put myself in that boat where you’re held back because you have a belief associated with what will happen to employees because you envisioned them at home. It’s Squirrel Syndrome where their focus shifts here and they’re shifting here. They’re not going to be focused on what they should be doing. At the same time, I would say the mindset that has those thoughts is essentially programmed into how most businesses run, which is a managerial hierarchical structure. I don’t think that works regardless, whether it’s physically or virtually. It’s a fascinating idea. What results from your book have you seen? What have companies done when they realize the opportunity? Where did they go? Where did they start and where did they end up?

The first example I always talk about is Tony Robbins. Tony saw how we were operating at BBI and sent his entire sales force home. We saved Tony $1 million in lease expenses over the course of one lease. As the book came out, I started getting thank you notes and articles come out about the book and its application. I’ll tell you one story. I believe I wrote about this in the book. I got a call from a guy who has a meatpacking company in New York City. Real estate is expensive. Those companies have been in place, some of them 100 years. They had to expand but they can’t because they’re locked into this tiny little space. He said to me, “We can’t make meatpacking virtual.” I said, “I understand that but you can make your accounting department, your marketing department, your sales department and your traffic department all virtual.” What he did is he took my advice and turned that. He ended up expanding his manufacturing operation by 20% without incurring another penny in rent and sent all those people home to work. He ended up blowing his revenue out the door because he had much more production space.

I’m on the phone with another guy named Josh Turner, who has a great company called LinkedSelling. We were building certification program for Josh. As a side note, Josh says to me, “We’re leasing another building for our expansion.” I said, “Did you read my book?” He goes, “No.” I said, “Let me send it to you.” I sent him the book. I said, “Do me a favor. Would you mind holding off on that lease for a week? I want you to read my book or at least read the first few chapters of it.” He goes, “Okay.” I call him back. It was a couple weeks later. He said, “You just saved me $335,000.” I said, “How did I do that?” He goes, “We were going to lease this building for five years. I realized that I could send my entire sales team home. That’s what we did.” I said, “That’s The Invisible Organization way.”

The book came out in 2015. I believe that this is a big part of the future as far as how people work and how they choose to work, but also how companies choose to lead. I believe that when you put more trust and more responsibility in people, and you have a set of core values and a clear mission that they’ll do the right thing. More so when they’re in their home, their environment and plus all the co-working spaces that exist too. Maybe transition to your book called Power Tribes: How Certification Can Explode Your Business.

The book is straightforward. It’s all about how certification can and does explode a company’s business. The story behind it, I write about this in a book, it started with my Timeslip software company. We were a nice little niche software company, probably generating about$ 2 million, $2.5 million a year. Profitable and happy in doing what we’re doing but we were up against some big competitors, number one. Number two, we were growing faster than our revenue could support our infrastructure. We had problems. Tech support calls we’re running ten, twelve minutes hold time and I didn’t like that. The other thing was that there’s always a challenge to find more opportunities to sell. We didn’t have the internet back then, so we use direct mail extensively, tradeshows and retail.

When you're able to align your tribe with the values of the company, you create something bigger and more important than the company itself. Click To Tweet

What ended up happening was I got a call from an important person in Los Angeles. She was the head of the Los Angeles Bar Technology Committee and she said, “I bought your software. I installed it on my computer and it crashed my computer. You guys are criminals and thieves. I’m going to sue you to infinity and back.” I said, “Slow down. Tell me what happened.” She says that our software’s responsible for destroying her entire office. Remember, she paid $99 for the software. What I did is I thought to myself, “How am I going to get out there and help her?” While I had this idea that I would call another customer who lived in the area, who I happened to know was good with our software. She was an administrator at a law firm nearby. I called her up and I said, “Ann, would you do me a favor? Would you run over to this person’s office and see if you could straighten her out? I’ll pay you whatever you want, just tell me.” She goes, “No. Thank you, Mitch, for the opportunity. I’m thrilled and honored that you called me.” I said, “Do me a favor. Call me at home as soon as you know because they’re in California and I’m in Massachusetts.”

It must have been about 9:00 at night. The phone rings and it’s Ann. I said, “How did it go?” She goes, “She’s all set. She just didn’t get it right. Turned out all you had to do was reinstall the software index her database and she’s fine now. You want to know the best part, Mitch?” I said, “Yes.” She goes, “She gave me a $100 bill.” That was my light bulb moment. I said, “What would happen if I were to mobilize my best Timeslips customers as consultants and deploy them all over the country as a mobile sales force support system? Would that be a good idea?” What I did is I created a test, which was step one I created a test and I offered to test for sale. I sold it for $500. If people passed it, they could become certified. If they didn’t pass it, we return half their money.

TWS 9 | Culture Course

Culture Course: We have certified consultants spread out all over the country. They became our third largest sales channel.

 

How many clients?

At the time we probably had maybe 80,000 clients at the time, which was a third of our total clients when I sold the company. We didn’t mail it to everybody. We mailed it to people who had active tech support plans. It was even a smaller subset. The short and long of it is that what we did is we certified a small group, maybe twenty or 25 people. It was working, but we had a problem. It turns out that although we certified them, we never taught them how to be consultants. Some of these folks showed up looking like Elmer Fudd and smelling worse. It became a bit of a nightmare. It almost crashed the company because they had caused problems. There was one guy who was mentally unstable and threatened to kill everybody in the office because nobody was listening to the training while he was teaching. What we had to do is we had to shut down the program and restart it with a much higher level of care and training. It took six months. I called every person who had a problem. I interviewed them and found out what the problem was. My team and I rebuilt the program, reopened it and ended up in less than a year selling 350 certifications.

We had 350 certified consultants spread out all over the country. They became our third largest sales channel. Over the course of a couple two years, doubled our revenue and reduced our support costs by 20%. Everyone in the world is saying to me, “How did you do this? What did you do? Share it with me.” I got a call from a buddy of mine. His name is Scott Cook, Co-Founder of Intuit. Scott says, “I hear about what you’re doing there with your certified consultants. You think you could share that system with me?” I said, “Absolutely, Scott. I’d love to.”

Maybe expand on Intuit because Intuit owns QuickBooks and Mint.com and Quicken.

Scott knew what I wanted. Scott had a policy where no third-party products were able to link back then to QuickBooks or Quicken. I said, “I would be thrilled to share with you, but you know what I need?” He goes, “Yes, I know. I’m prepared now.” I said, “Great,” so I got what I wanted, which was an exclusive link between my time billing software, which was a receivables module for accounting for services directly into QuickBooks. That elevated us yet one more notch. Can you imagine competitors going up against me now? I have offices in every state. I had 28 offices in California alone. Certification changed the world and allowed me to sell the company for eight figures. Needless to say, I’m a fan.

We all have common values. It's just that without stating those common values, we don't know what they are. Click To Tweet

Did you incorporate that to the company that you ran with Tony Robinson and Chet Holmes, Business Breakthroughs International?

The answer is no. We never did that because we were moving fast on many different fronts. There were eleven divisions, including operations. That meant nine different products and all different sales forces all that stuff. We were running at full speed all the time. We never got around to it. We still ended up with over 50 coaches who worked with us directly and another fifteen consultants, high-level, high-end consultants. Certification never played a role in what we did. In fact, I forgot about it in the sense that I never brought it up again until a client asked me if I would do it for them. They had read most of the blog posts I put on my MitchRusso.com and said, “Do you think you could do that for us?” I didn’t know what to charge. I said, “What do you charge for something that could have such dramatic circumstances?” so I picked a number out of thin air and they said, “That sounds fine,” and I built their certification for them. Now, I’m doing it in the modern era in 2016, 2017, in 2016 mostly. I incorporated all the tools that we have. We have a wealth of amazing tools that we could use to build certification. We have Learning Management Systems, for example. We have all kinds of marketing systems and Infusionsoft, etc. We built a fantastic system for him and then I started getting more clients. That’s when I decided that I’d like to write a book about it. That’s what Power Tribes is all about.

You mentioned Intuit. Let’s talk about other massive companies and how they’ve used certifications to not just grow their team, but to market by certifying actual clients and customers.

There are dozens of them. My favorite example is Infusionsoft. For many years, people would call Infusionsoft, “Confusionsoft.” The reason is that it’s hard to use. I don’t care what they say now, to me it’s still hard to use. Here’s the interesting thing. Infusionsoft was a nice little company out in somewhere near Phoenix, Arizona. They are maybe running it about $5 million to $6 million a year in sales, which is still pretty good for a little software company. Someone had the bright idea as, “Why don’t we teach some of our best customers how to install and maintain Infusionsoft so that we don’t have to?” That became the beginning of their certification program.

If anyone knows what Infusionsoft is now, it is a billion-dollar company in terms of market cap. They have dominated the CRM space when it comes to sequential marketing. They’ve done it all through by building certified consultants. Not only did they end up turning all those folks into salespeople. Certified consultants sell and get a commission for every time somebody buys Infusionsoft and pays for it every month. Not only that, but they also ended up with the tech force that is unmatched in terms of size and power. Using certification, they generate millions and millions of dollars in certification fees, in the symposium, event fees and training. All these things play into how they use certification to double and quadruple their business just about all the time. My claim is that there are at least four recurring revenue streams in every company that nobody is tapping into and certification does that. Certification taps into that, creates those for recurring revenue streams. I’ve been able to see as many as eight under certain circumstances.

TWS 9 | Culture Course

Culture Course: The culture course brings everybody into alignment and makes sure that all certified consultants understand the boundaries in which they’re allowed to play.

 

Salesforce is software that I’ve used for a number of years and I’ve gone to Dreamforce, which is the tech takeover of San Francisco. If you go to Dreamforce, you’ll experience that. Now they’re in the biggest building, I believe, on the West Coast. A lot of how their business works are through certification because it’s essentially a platform in which people, companies can build integrations or apps or customizations. They certified their customers to do more business with them. What was your comment on your experience at Dreamforce?

I was at Dreamforce to meet with Tony. Tony and I had set up a time when he was going to be speaking on stage with Benioff. I was going to meet him the night before. I flew in from Boston that day. I ended up meeting Tony at 1:00 AM and we had three hours of meetings. It was 4:00 AM by the time we recorded a video together that we used to send back to the company to talk about the new direction that we were going to be taking the company. That next day I came out on the floor. I walked around and I sat through some of the keynotes. There were thousands of not people there, but vendors. Every one of those vendors was paying to be there. Every one of those vendors supported Salesforce in one way or another. Look at what certification did for Salesforce. Look at what other CRM companies are missing. This is the story I tell all the time. When I talked to somebody who has CRM software they said, “Eventually we’re going to get around to that.” I said, “Take your time,” but look at what it’s done for these types of companies. Does that mean that because Salesforce exists or because Infusionsoft exists that no one else can do it? Absolutely not.

This is the reason why I named the book this way. The goal is not to just sell certification. The goal is to build a loyal tribe led in the direction that is in complete synchronization with the company and the company’s founder. When these things happen, when you are able to align your tribe with the values of the company, you create something much bigger and more important than a company itself. You create this huge supportive community that has more importance than your own employees. That’s what certification does. In my world, when I build certification for clients, we start with the code of ethics. I have a standard code of ethics, a 38-point code of ethics, which I provide my clients and we customize those to meet exactly their values and then we record the culture course. The culture course I have created but is recorded in the CEOs voice. What the culture course does is it brings everybody into alignment. It makes sure that all certified consultants understand the boundaries in which they’re allowed to play and do anything they want. That is amazing freedom.

You essentially have created your code of ethics and then you go into a company and essentially align whether it’s ten, whether it’s five, whether it’s twenty. You align those but then because you already have them done, then the CEO or the leader is able to record what you’ve already created but it aligns perfectly with the company.

We all have common values. It’s just that without stating those common values, we don’t know what they are. Here’s a simple example. Patrick, you had never encouraged someone to copy the content of your website and pawn it off as their own, would you?

Most people don't realize they already have more leads than they need. Click To Tweet

No.

That happens. A coaching organization brings on a new coach, without a code of ethics, without establishing a culture, at that point, we’ve seen coaches do exactly what I just said and worse. The idea is if you set guidelines and boundaries and then you encourage people to work within them, you only get exactly what you want. Otherwise, you don’t know what you’re going to get.

Everyone brings years, decades, thousands, millions of experiences that have formed their perspective of how things should be and they’re all different. I would say the binding nature of a code or a set of values allows everyone to talk from not the exact same perspective, but from the closest to exact possible.

That again is why I believe it was important to codify this. This is the same code. I’ve evolved this code over the course of many years. This is the same code we started with the Timeslips Corporation, later brought to BBI and evolved there further. We ended up using it when we work with clients as well. It’s the way that you build a company’s values together with the people in the company and then creates this foundation as an extension to everyone who you bring in as a consultant.

It’s necessary. You gave examples of when you were experimenting this with your first company. How you had the guy that was mentally unstable go in and almost ruin not just your brand, but the other company too. I would say looking at those values, the first step in any venture as far as what I’ve been taught starts there to make sure that everybody is aligned.

When we were at BBI, one of our best salesmen happened to have an interest in neo-Nazism. It turned out his Facebook was covered with it. He was a perfectly nice guy. We never knew that except he was thrilled to share it with customers. You can imagine we weren’t too happy about that.

As I step out of my perspective and look at this conversation from our audience’s standpoint, I would say you don’t have many Marc Benioffss in the audience. For some of the smaller organizations that you address in the book, how do you have that conversation with them that this isn’t just a billion-dollar company idea? This can be done on a small scale.

Some of my clients are in fact relatively small companies comparatively speaking. I’ll explain the math to you and you’ll see exactly what size company works. If you were to offer certification to your customers, let’s think of your client base and that number is X. What you know about your customer base or your client base is that there is a percentage of them that are passionate about you and your work and the products that you’ve created. Those people, number one, set themselves apart because they’re passionate. If we take a subsection of them and we call them early adapters, those are the folks that are going to buy just about anything you offer, anytime you offer it. If you look at a whole population and we were to do an estimate of the early adopters, it would be somewhere between 2% and possibly on the high end 5% of your audience.

If you have an audience, and let’s say you have 500 people who are your customers, which isn’t a big company. You said 5% of that, that’s 25 people. Let’s say 3% of that, that’s fifteen people. If you were to sell to fifteen people certifications for $20,000 a copy or $25,000 a copy, that’s a nice little windfall that you get to repeat every quarter. Think about the mountaintop. There are the early adapters at the top, then there are the people who would be open to it if they understood it but want to wait for somebody else to have gone first. You have a larger element of that pinnacle and that mountaintop who would be available to buy certification and on and on. You could literally build certification for a company running a few million dollars in revenue as long as you have enough customers to cover the expenses of building your first launch. Once you launch certification and once you generate that first tranche of money, you would set aside 20% of that to market. Here’s the key. If you go on the internet and you say, “I want to be a coach.” You can buy coach for anywhere from $75 to $18,000 if you buy it from the John Maxwell Organization. What you get is a certificate and a thank you. At that point, you’re on your own.

With that, the words, “Good luck,” comes to mind. My belief is that the people that we would certify in the organizations I work with would never ever be sold a bill of goods like that. Instead, what we’re offering them is a lifetime opportunity to create a profession. In order to create a profession, there have to be leads. In order to sell certification, my mandate is that we have to also create a lead generation system for our certified consultants. That’s everything I lay out in the book on exactly how to do that. Most people don’t realize they already have more leads than they need. If you think about any company, 90% of their mailing list is prospects who never bought. If you went back to those same prospects, even if they’re two years old and said, “Last time we tried to sell you this, but now we’d like to sell it to you with a series of free one-on-one coaching sessions that will help you get started and make sure that you’re successful.”

You’re going to revive some percentage of those folks. The coaches or consultants, in this case, are going to be thrilled to work for free. Why? They get to build a relationship with these people and eventually upsell them to coaching or consulting. We already know that anybody we talk to already has a built-in prospect base that we can convert some percentage to new clients. We’re generating revenue from certification. We’re generating revenue from the old client base. We’re generating revenue from the training that we provide on a yearly basis. We have another thing that we talk about in the book called ascension. Every company that you’d ever go to work for has a path. If you come in at the entry level, if you do a good job you get to be promoted to the next level. Why shouldn’t certification programs have an ascension path as well? My belief is that you create ascension in any program that costs money to ascend, but at the same time returns 3X to 10X what you paid. That’s the theory on which my programs work. That is a client pays for certification, by twelve months later they should have 3X to 10X what they paid back and willing to pay again next year.

TWS 9 | Culture Course

Culture Course: Within business, there’s multiple ways in which you can create value for other people. You just have to open up your mind to those possibilities.

 

There are lots of thoughts that have gone through my head in the past. Especially with all the certifications that I paid for people that are here that work for me, but it’s not my certifications. They’re certifications for other programs. I’ve thought over the years how powerful that idea is, but it’s profound being able to certify existing relationships that you have. It’s a profound idea. What are the best ways to learn about the book or to buy the book? Do you have some learning that you have online where people can go and learn more about this idea and how to incorporate it into a business?

First of all, you can go to MyPowerTribe.com, which is where you would get information about the services that I deliver. You can go on Amazon and you could search for Mitch Russo, you’ll see both my books. You could place an order for Power Tribes. We’re creating a short course that we’re going to sell for $495. Anyone who preorders the book is going to get the course for free. At that point, all you have to do is go to MyPowerTribe.com and on that page, you’ll be able to enter the invoice number from your Amazon receipt and get access to the course. Whatever the book might cost, maybe $20, you’re going to get a pretty informative course on how to set yourself up for certification in terms of understanding what it takes, making sure you’re a fit and understanding the benefits of doing it.

Why don’t you give out the other ways in which people can follow you, learn more about you because I know you have a few other websites?

The central website for me is MitchRusso.com and that’s the place where I have over 50 business building blog posts there. I house my podcast there. You could probably contact me easily from that place as well. For the most part, you just have to Google Mitch Russo. I’m all over the place.

You have a podcast too, Your First Thousand Clients Podcast. You’re doing quite a bit and I wanted to thank you for the value you’re providing based on the experiences that you’ve had. I can’t wait to learn more about the certification idea.

You’re going to learn a lot more about it because there’s going to be a fairly big release on that. I’m excited to talk to people in the press and podcasters like you about it because I believe it’s the way that we work now. I believe the world is evolving to individuals being empowered and going out there and crafting their future by themselves with the help of others. This is a blueprint for how to do it.

Society is filled with opportunities and I would say a mindset is definitely a big barrier to that. I know you talked about that quite a bit, but this is a testament to the fact that within the business there are multiple ways in which you can create value for other people. You have to open up your mind to those possibilities. Mitch, it’s been wonderful having you on. Thank you.

Thank you so much, Patrick.

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About Mitch Russo

TWS 9 | Culture CourseMitch Russo says his path to business success stemmed from his time as a high school rock band guitarist in Brooklyn, New York. From learning about business, to PR, to promotion, and sales, Mitch’s propensity for execution was nurtured early and led him to start Timeslips Corp, later selling it for eight figures.

Mitch then ran Sage, PLC as COO, and later became the CEO of Tony Robbins and Chet Holmes Business Breakthroughs International, which he grew to $25 million-plus per year. He’s also the author of the Amazon #1 Bestseller, The Invisible Organization.

Mitch now hosts a podcast and helps CEOs build independent tribes of Certified Consultants, helping develop loyalty and engagement with their most valuable customers.