Any Tony Robbins finance summit always bring game-changing opportunities for thrill seekers and for those who want to grow and stand out in their industries. Patrick Donohoe shares his fruitful experience from the event. Understanding oneself is key to establishing what you want. A clear set of outcomes along with the excitement that sticks with achieving it is one of the highlights of the summit. Discover more learning from the summit such the idea of money magnifying the understanding of psychology, the archetypes that people have, the five financial dreams, and Erik Prince’s economic influence.
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Money And Psychology, And More From The Finance Summit, Part 1
I’m up in Sun Valley, Idaho. It’s beautiful up here and cold. As most of you know, I’m at the Tony Robbins Platinum Partnership finance trip, which is a summit of a couple of hundred people every year that learns from some of the best minds in the economy about what’s going on, what are the opportunities and what to be aware of. I’m going to recap every day for you. It’s going to be day one and it was crazy. It was over a twelve-hour day starting at noon. We didn’t get out until almost 1:00. It was packed. Tony did the entire day. I learned a lot and a lot is repetition. I’ve learned some of these principles and ideas before. As most of you know, sometimes it takes 2 to 4 plus an emotional experience to have those ideas resonate so that they’re understood, not just analytically processed. There’s a difference.
Day One: Real Wealth, Your Economic Identity, And The Four Kinds Of Archetypes
Day one is philosophical. In the next couple of days, they get into some alternative investments. The CEO of Blackwater, Erik Prince, is one of the speakers, as well as Bill Gross and Ray Dalio. There are seven billionaires that are going to be speakers. It’s going to be a stock-full of valuable information, but on day one, it was Tony. For those of you who have had the opportunity to go to one of his events, you understand where he is when it comes to the importance of mindset. It doesn’t matter how much material things you have, real wealth is in the mind. He started right out of the gate by explaining how real wealth is being able to master the mind. Mastering the mind usually is in unfavorable circumstances. If you look at the wealthy and successful from a financial perspective, they have made their wealth during the downturns, the winters, difficult times where everyone’s afraid. Nobody is willing to act because they don’t have control over those two competing forces, the analytical mind and the emotional mind. It was refreshing. The theme is to be able to live without fear, especially when it comes to finances.
Let me get into a couple of my notes. I have probably 30 pages of notes from one day. It’s crazy. I’m going to highlight a few things that he said and expand on them. Developing ownership of being the creator of your life, not a victim of circumstance. This is a powerful idea. It’s something that I thought a lot about, especially when it comes to business. I believe that we get caught up in what’s called the tyranny of how, which is the analytical mind is trying to figure out, “How is this going to happen?” The emotional mind is telling us that it’s not possible as well. That’s where it comes down to understanding yourself as the possibility of creation and being able to establish what you want. Not having a plan of how to do it, but having essentially a clear set of outcomes that you are passionate and excited about. The ‘how’ ultimately manifests. Being in that mindset is a prerequisite for that manifestation. It’s an interesting idea.
If you look at the nature of growth, typically growth is not controlled. People usually will have to have some unfavorable circumstances happen to them in order for them to wake up, to snap out of it, to have a realization or an epiphany. At the same time, you can control that. There are these thresholds that we have within ourselves when it comes to what we want and what we’re willing to do. If you look at the nature of equality, our souls are all the same and equal. The value that we bring comes down to our psychology. The value we bring to the marketplace is represented in the monetary remuneration for that. He stated that getting to the next level, there’s something in your way in which you identify with economics. There are these thresholds. It’s this idea that you hit these thresholds, whether it’s the money that you make or the investments that you make, your risk tolerance, but it comes down to your mind. He ended that thought with the idea of what real wealth is.
He defines wealth as the ability to extract enjoyment from life, no matter the circumstances and being able to do that in every moment. The idea of money magnifies that understanding of that psychology. What that means is if you’re not happy, satisfied and joyous about what you have, that lack of that state will magnify. If you’re in a scarce, fear-based, frustrated, egotistical, envious type of state, the money will magnify that. It’s a powerful idea. That’s why he focuses on mindset and state so that it’s established. Regardless of what your circumstances are, you’re able to find the beauty, the enjoyment, the satisfaction with whatever is going on before you get to the next level. It’s almost a prerequisite. That mindset puts you in this state of being able to have more. It’s fascinating. We’ve talked about that before with the whole Have-Do-Be instead of Be-Do-Have habits. It is that same idea.
Tony mentioned that with all the things that go, the reason why he bombards you with information isn’t so that you absorb and take in all of that information. It’s the one idea that’s meant for you, the epiphany, the one takeaway, the one action on it, the one realization requires one to completely change your life. That’s what these events are for. That’s why I was persistent in inviting you out to UPW, which is his foundational event in San Jose. There’s going to be another one in Chicago. If you want all the information for my contact over at the Tony Robbins organization, you can register for that too with the same discount. There’s one in Chicago and there’s going to be one in New York City toward the end of the year. The idea is for you to have this awakening of sorts. It happens based on his teaching and explaining based on some of the physical things that you do, but also based on some of the interventions that he does that requires one idea.
He went through a lot of different examples, but there is someone that pays for the Platinum partner membership and comes to the finance event. At the finance event is where all these ideas float to him. He made a deal in 2019 where he sold a business to Merrill Lynch for $1.2 billion coming from one idea that he got at finance. The thing is putting yourself in the environment in which these ideas come to you. It’s not going to happen in your general set of circumstances. I have one idea on the kickoff dinner that I could have gone home. It’s one conversation with this guy in the home renovation industry, of all industries. It rocked my world. It’s one idea to completely change one idea, one realization, one epiphany, that completely changes your life. Another purpose and theme of the week is expanding your economic identity, those thresholds, your relationships when it comes to money and finance.
Ray Dalio has this amazing video that was played. It talks about the economic machine. I think you would get a lot out of it. It’s deep with information. At the same time, he makes it easy to understand that. It will give you the idea of a system and what to look for when it comes to economic opportunities. I’m going to get into the final piece. This is my realization and it may sound strange. The guy that was sitting next to me was an extremely successful venture capitalist. He’s younger than I am. He’s in his mid-30s and has a couple of nine-figure funds. He does some incredible things. He helped me identify something that I hadn’t thought of before. Tony is a coach for a lot of high-level people. He coached Conor McGregor in his win. I didn’t watch the fight. I don’t watch MMA fights that often. He used that experience to talk about these four kinds of archetypes that people have.
You have the warrior archetype, magician archetype, the lover archetype and then the sovereign or the King or Queen archetype. This struck me. I’ve been to over a dozen events and he hasn’t spoken about this before, but he did this time and it clicked. The individual I was sitting next called me out on a few things that things started to click for me. I want to be a little open with you. One of the exercises they take you through is they have you answered the question, “What is money?” You keep saying everything that’s on your mind, “What is wealth? What is money not or wealth is not?”
It does extracts language. It extracts words, whatever is on your mind. That’s flowing there. I realized that there are some dominant archetypes that we have that I don’t believe we are fully in control over, unless you’re aware of it. As you can imagine, I won’t get into a lot of the details, but the warrior archetype, you can imagine what that is. The lover archetype, you can imagine what that is. The magician archetype, you can imagine what that is, as well as the sovereign or the King. These are part of our identity, our psychology that has been essentially formed over the course of time. It’s also natural. Based on our circumstances, based on typically child events where we came to certain realizations of who we are and what we need to do to protect ourselves, we’ve formed one or a couple of these dominant archetypes.
In the language that I was using when I was coming up with, “Where my identity thresholds were?” I realized that my identity was heavily in the warrior identity and lover identity. It oscillated back and forth. There was some magician in there every once in a while. What I wanted was the sovereign and the King identity, but the language I was using answering on all of these questions, all related to the language of the warrior and the lover. A lover being gracious, charitable, altruistic in a sense of giving. You have the warrior, which is make it happen, do whatever it takes.
Tony Robbins Finance Summit: Develop an ownership of being the creator of your life, not a victim of circumstance.
I realize that there are elements that I’ve seen myself in the past, as far as the characteristics of my personality, my psychology, that has come to certain circumstances with the magician. I know what the outcome is. The sovereign, I became more aware of myself in being able to identify what the best results that I get when my psychology is growing the most is in this specific archetype. It’s figuring out how to identify what that archetype, in a sense, act and show up as that archetype will get me the results that I want. Yet, I was showing up as a different archetype. This may sound weird to you. Conor McGregor, the example he used was his natural identity was a warrior. It’s like going to battle fighting and winning at all costs, all odds.
Tony brought out the magician in him and the magician was creative, figuring out how we win the game in a way that wasn’t anticipated or expected. The magician is looser. They’re more free-flowing. He was able to help Conor capture that and subsequently win his fight in 40 to 42 seconds. That’s the biggest breakthrough I had. It is understanding how I show up in my specific set of circumstances, how I view money, how I view economics and then establishing what I want, as far as the enjoyment levels of life. I’m going to discuss that as some of the things I put down, essentially establishing what those are. Once it’s all established, once it’s stated, then you can come up with plans and how to accomplish that. The psychology of believing that it’s possible first takes precedence. You are amazing. Thanks for tuning in. We will be back with another episode. Take care.
Day Two: The Experience Of Life, The History Of Money And Their Patterns, And The Five Financial Dreams
I’m back for day two of recapping the event. I’m still up in Sun Valley, Idaho. It’s the Tony Robbins finance conference that he puts on once a year for his platinum partners. It has been packed. It’s been crazy. I can’t find any time to do these recaps, let alone sleep. I’m having a great time. I’m learning a ton. I’m going to recap the primary things I learned from day two. Tony started out the day talking about your body. He’s writing a book called Life Force Ha, coming out in 2020. He’s been working on it for a while. He started with this quote, “A person with health has a million dreams and a person without it only has one.” It eludes to this idea that the experience of life is very much dependent on our physical wellbeing, our health. Although we have many conveniences, life is becoming easier from a physical perspective, people are becoming unhealthy. They are no longer forced to survive, which helps them retain that physical vitality.
They don’t need it. It is more of a choice to work out, eat healthy, in a sense is even more challenging than having to do it to survive. He then brings in all his companies as well as others, whether it’s Egoscue, which is a form of physical structure and different stretching and ways you can align your body. He has a number of others. He is huge on this whole idea of health and having your body in its optimal state in order to have the best experience of your day. I’m going to get into a couple of other things that I’ve thought through. It does have to do with the whole idea of health and our physical wellbeing, but it’s patterns.
I didn’t cover this in the day one review, but the speaker late on day one was Niall Ferguson and he wrote The Ascent Of Money. He is a consultant to a lot of major hedge funds as well as sovereign funds throughout multiple countries. He is a brilliant individual, funny, great storyteller. He is good at British sarcasm and humor. I researched some podcasts that he’s been on. He’s worth the listen. He talked a lot about the history, as far as the history of money and their patterns. I believe recognizing those patterns help us anticipate the future. At the same time, we don’t necessarily have to be subject to patterns. We can create our own patterns. This is where health comes into play. We have a pattern of health. We have a pattern of how we do things and understanding that it exists and be able to essentially refine, break the pattern, create new ones in order to improve our results.
He specifically talked about patterns as it related to what’s going on in the world. Even though it’s all different, there are some things that are the same because human behavior is the same. He spoke to a lot of what happened in 2008 and 2009 and referenced other times in history with the same things that have happened. I will pick up his book, The Ascent Of Money. He’s updated it in the last couple of years to reflect some of the more modern things that are going on mainly in Chimerica, which he talked about extensively. This is about what is driving China, what are their motivations, what are their intentions? He looked at history to help refine what’s going to happen in the future. That was interesting.
Ray Dalio did the same thing. He talked about patterns. I mentioned that when it came to how the economy works. I reviewed that because it shows you the different patterns that occur. It’s not necessarily going to predict with 100% accuracy the future, but you’re going to start to be able to see signs of what’s going on and understand how those fit within the patterns of how an economy works. I’m going to talk about what I believe Tony is brilliant at. He has helped me. I mentioned this idea of understanding outcomes, understanding results, understanding your goals. Those are insanely important to be crystal clear about what you want, why you want it and the motivations to get it.
We all have these psychological thresholds. We have thresholds based on the amount of money our parents earned, our socio-economic circles earn, our peers, maybe our extended family, our siblings. We’re psychologically kept. It’s a glass ceiling, at the same time, it’s a ceiling. Understanding goals going to push you to the brink of that threshold and breaking through that threshold allows you to achieve those goals. Being crystal clear about what it is, how it’s measured, believing that it’s possible, making it a must. Not a could, but a must, “I must do that. I must achieve that.” Then ensuring that it’s worth it, that the reward is worth the struggle and pushing through. Nothing’s going to come without hitting that threshold. Those psychological thresholds, especially when it comes to money, we don’t even realize they’re there, but they’re there. Being able to have something that is motivating us is huge in getting crystal clear about that.
One of the things that Tony brought up is he’s very well off, which is clear. Most billionaires are very well off and their motivations have changed to what they originally have been. He had stated that there were at least twenty different charitable causes, whether it’s the partnerships that he’s done. Feeding two billion people sustainably is what his X Prize is with Peter Diamandis and Elon Musk. He’s pushing to these more contributions to the world projects that is breaking through the thresholds that he had previously. He doesn’t have to work. He doesn’t have to do what he does, but he has these new motivations that he has designed. He has created commitments there that have made him push through new thresholds that he had in order to achieve more.
His whole life is about contributing and giving back. There is a birthday party that he’s doing in Los Angeles. His wife and his circle of influence are putting it on for him. The proceeds are going through Operation Underground Railroad. There’s a documentary that Russell Brunson did. There’s also a movie coming out with one of my favorite actors. The guy who played The Count of Monte Cristo. There’s a movie coming out about human trafficking, the sex trafficking that’s happening all around the world. A lot of the demand is coming from the United States. These are places like Haiti and Asia. It’s horrific what’s going on.
Operation Underground Railroad is out in Utah. Timothy Ballard, who’s the CEO and is a former Special Forces, he may have been maybe a Navy SEAL, but he essentially got to the point with his position in the government where it was difficult to go after these types of criminals. He took it upon himself to form an organization that goes out and does that and is making a huge difference. Tony has raised millions and tens of millions of dollars. This whole birthday party is around that idea of contribution. There are the things that are motivating him that are beyond him. This doesn’t mean that we have to have these altruistic, charitable driven things at the same time. The gift of contribution, the gift of making a difference in somebody else’s life. There are more psychological and spiritual benefits for that than anything else that you could do. At the same time, your enjoyment of complete altruism is imbalanced.
Tony Robbins Finance Summit: We have thresholds based on the amount of money our parents earned, socio-economic circles, peers, and siblings.
It’s your enjoyment of life, being able to do the things you want, go to the places that you want. What Tony does is he explains that there are these five financial dreams. The five financial dreams are facilitated by having savings, having your investments at a point, at a level, he called the critical mass level. The money is at a certain level that if it were to earn 5%, it would pay for these dreams. The first level of dream is that your investments in a 5% return on those investments would pay for your basic living expenses such as your food, shelter, clothing, transportation and basic insurance. You calculate what that is. What is the bare minimum that you can live on your rent, your food and so forth? What is the dollar amount that’s needed to hit that threshold?
One of the exercises he did in advance of this was powerful, where he asked the question, “What dollar amount would you need to be financially free?” You had people that put down $5 million, $20 million, $1 billion and $500 million. The answers were all over the place. The reason why he did this was to seep where someone’s psychology is. As he goes through these dreams, his intention was to show that we think it’s going to be much money than it is to be financially free and it’s much less. The psychological thing that’s going on in our mind is we put this huge number, this impossible number out there. It demotivates us from even getting started. Being able to establish that threshold, what is it going to take? Then going into, what is it going to take to be the first dream financial security? Having that critical mass, that amount of money that if it earned 5% would pay for your food, utilities, transportation, basic insurance. It’s a number that’s much less than what people think it is.
Then the next dream is financial vitality. Financial vitality is all of your financial security expenses plus one-half of your monthly clothing costs, one-half of dining and entertainment, one-half of small, indulgent and luck or luxury. This gets to the point where it’s not only your basic living expenses, but maybe it’s going on vacation or maybe going to the movies or going out to eat. It’s calculating what is your critical mass, what’s the amount of assets with a 5% return? It would create a cashflow sufficient to pay for financial vitality. That’s a bigger number than financial security. It is a number that is way less than what people think they need to be financially independent. This purpose isn’t necessarily to say, “I’m going to have enough money, then I’m going to have my living expenses covered.” It’s not to do that. It’s to create milestones. To create these psychological levels where we know that we have enough money, sufficient resources and sufficient cashflow to pay for these things. Knowing that allows us to push more. It operates outside of fear. That’s what I said, to live without fear. These are ways in which you can position your psychology so that you establish thresholds where you have certainty in your mind that if this happened, “I have enough resources to pay for my basic expenses or financial vitality.”
Next is financial independence, which is the critical mass at a 5% earnings rate that would support your lifestyle. People budgeted out their lifestyle and then calculated what it would take to get there. The next is financial freedom, which is financial independence, plus 2 to 3 major luxuries. This could be a big diamond ring for your twentieth anniversary, or it could be a trip around the world or it could be buying a dream home or second home on the beach or something like that. It’s calculating what that dollar amount is.
He had pages in there that showed the luxury cars that are out there. A home, they had mortgage interest rates and payments. You’re able to see what it would take in order to do that. It was much less than what people thought. Next is absolute financial freedom is whatever you want, whenever you want. This is where people were pushed to put things in there that you usually don’t think about. I was like, “If I had absolute financial freedom, I can do what I want when I want and what would I do.” I’ve started to calculate things. Things that came to my mind were taking my wife’s family, who are underprivileged and taking them all to Hawaii for a week of Thanksgiving. I calculated out what that dollar amount would be.
Another one was my wife and I had the opportunity to go to Tahiti a few years ago. What it would take to go back and be able to take my brother? I got married within nine months of each other. For our twentieth anniversary, I’ll take my brother and his wife to that same experience that Cynthia and I had. What that would be? I started thinking, my parents are going to be moving from Cape Cod to the West. What would it take to purchase a home there and continue the legacy that we have? We’ve gone to Cape Cod every summer for several years. What it would take to do that?
You come up with all of these different things and calculate it out. It stretches you. You start to realize, “In order to have that, I don’t have to do much more.” What it does is it helps to calibrate where you’re at and push you beyond where your thresholds are. That’s what I wanted to cover for this recap. The speaker for the second day evening was Erik Prince. He is the Former CEO of Blackwater. Blackwater is a private military contracting company that he’d founded. There are lots of conspiracy theories around Erik Prince and Blackwater. I’m not sure whether it’s true. I looked at a bunch of different things around the internet, but I found him to be genuine. I found him to be intelligent. He’s since sold Blackwater and he has different investment venture capital funds, not just in the US but around the world.
He spoke with somewhat intimate knowledge about the rest of the world. He talked a lot about the Butterfly Effect because of how intertwined things are. One little blip here and there could set things off, specifically based on what we’re dealing with is the Coronavirus. He spoke a lot about China and about what China’s intentions are. He made the statement that China is not militaristic. China is not after conquering the world with their military. They are about their economic power, their economic influence in what they’re doing.
I mentioned on the show before that they have a huge presence in Africa and other parts of the world. The way in which they’re doing it is interesting. Erik went into what the supply chain looks like with China and how that relates to the rest of the world as well as shipping. He said he wasn’t afraid of China. He also stated that there’s a time where if you’ve been indulging for too long, it’s good to go on a diet. He said that is what the United States needs. We are at a historic low-interest rates, highest tax revenues, but also the highest amount of debt we’ve ever had, as well as our entitlement benefits. We’re at this point in time where we need to figure out how to cut trim the fat. He didn’t necessarily allude to any type of trigger that would do that. He also said that China is using its influence to become more powerful. They are hoarding gold. There’s a rumor or speculation that they are creating gold back cryptocurrency to create a more balanced trade.
It was pretty fascinating. He talked about how Venezuela had a tremendous wealth there, but also alluded to Maduro’s influence being deep-rooted and it’s going to be difficult for Guaidó to get into his position even though he was elected. He talked about how things are becoming so much more international. The world is very youthful. One of the statistics I saw, this is by somebody else and not by Erik, there are 600 million people in the age of twenty in Africa, which I found fascinating. I’ll get to that one next time based on another speaker who has a 5G satellite company, as well as a new technology. His insight was fascinating. He talked about how China is dealing with lots of other countries. He also talked about how the manufacturing is dependent on them. I know I’m going off on China, but the majority of people’s questions revolved around China because of what’s going on with the coronavirus. There are also a lot of Chinese that were supposed to come to this event. They weren’t able because of the travel restrictions, travel bans. I’m going to leave it at that.
He did say that there’s a tremendous opportunity if you understand the rest of the world. I think that the United States still has a tremendous opportunity, but for those of you who are reading that are very knowledgeable about the rest of the world, knowledgeable about how to do investment overseas. He had mentioned that some of the Middle East countries, African countries as well as some of the dependent pieces of the supply chain that we have with regards to China are huge opportunities because there’s capacity in other parts of the world other than China. He was specifically alluding to minerals and how minerals are our main manufactured there and how parts, whether it’s for computers, how industrial metals are being used, how those are rare earth minerals are being used to create different technologies. It was over my head to an extent. Erik Prince is somewhat active online. You can follow him. That’s it. Thank you for tuning in for the day two recap of my experience here.
The Idealab Investor Summit is a haven for anyone looking to learn great knowledge, meet great people, and bring home great ideas. Today, Patrick Donohoe who has recently been to this conference, takes us through his experience and shares what he has learned at these few days and how he plans to apply it to something that would be valuable. With the theme this season, which is about making successful investments, Patrick shares five things that can help create a fruitful venture. He notes how the impact of quality questions and the application of need-based psychology can help achieve this.
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Learnings From The IdeaLab Investor Summit
It’s going to be an awesome episode because I just got back from an incredible conference. I didn’t come home and I went to another conference. I was in Los Angeles in Pasadena. Now, I’m in Sun Valley, Idaho. I am waiting for the kickoff conference presentation for the finance event put on by Tony Robbins every single year. The last time was in Whistler, which is an amazing time. If you didn’t check out the YouTube series, I did that and highlighted what I took away every single day of that event. Check that out on YouTube. I’m going to do something similar. I’m also going to have some special guests in the room doing some interviews on various investments and things that they specialize in.
The Pasadena and Los Angeles Conference
I’m not here to talk about that right now. I’m going to talk about the Pasadena and Los Angeles conference that I went to and it was part of an investment that I made. A lot of the reason behind why I did it was simply the network, the people that were involved with it. Also, the summit that I went to, and how I was able to learn about the specific companies that were in this fund as well as experience, some things that I wasn’t anticipating. I knew that there was going to be something there. I’m going to talk specifically about that. It was at the Idealab headquarters, which is in Pasadena.
Idealab is an incubator. An incubator is a company that takes early-stage ideas, creates some investment in those ideas and also helps to grow it into a full-fledged business. It was started by Bill Gross. He’s not necessarily the PIMCO guy, but he’s the inventor and the technologist. He has done multi-million dollar exits with various companies over the years. He has a tremendous reputation and spirit about him as far as helping to solve a lot of the world’s problems. I’m not going to talk specifically about the investments that are within this fund or what he’s up to. You can check out Idealab.com and see those. There are links to the specific companies in there.
Five Things For Making Successful Investments
A lot of it is inventions around renewable energy and energy storage that are revolutionary. It’s going to be incredible to see how those come to fruition. What I wanted to do is essentially take what I learned at these few days and apply it to something that would be valuable to you and specifically to the theme of this season, which is an investment and making successful investments. I came up with five things. The first one is interesting. It’s hard to explain, but I’m going to do my best.
It’s that successful business ventures, successful people and successful investment is the result of a quality question. Subsequently, the results of that question, which would be the value proposition of the underlying business or investment. It’s asking those insightful, meaningful questions to ourselves or in general before starting to limit how we accomplish it. That’s where everyone gets stuck. I’m going to give you some examples. A question I came up with and it needs to be simpler than this but I did it as an example, is how can you store and distribute renewable energy that didn’t hurt the environment and was less expensive than what it now costs?
The second one would be, what if there was a way to get good food faster and cheaper? Another one could be, how could I have real-time information that my aging mother is safe? That was one of Bill’s questions with some of the ideas he’s thinking about. Another one specific to you and your situation is, how can I make more money with my investments and have more control and less risk? Another one could be, how can I make more money in a profession I love and work less so that I can do the things I love with the people I love? These are those quality questions. It’s focusing on clarity around those questions before you get into how to solve it. I’m going to give you an example based on one of the exercises we did.
What Happened The Last Day
The last day of this investment summit was that we all came up with an idea and everyone voted on the ideas. We got into nine separate groups and took fifteen minutes to come up with a three-minute pitch of that ideas. I went to the group that the idea was essentially a monitor for children so that if they were in a public place and were lost or heaven forbid kidnapped, there would be a notification to the parents. The quality question that we came up with is, what if you never had to worry about the safety of your child in a public place? Here’s what was amazing is when we got into these groups, we only had fifteen minutes to come up with the pitch.
Almost everyone went to, “How do you do it?” It was, “We could do it this way.” “No, you can’t do it this way because of that,” then it was, “We’ll do it this way.” “No, you can’t do it this way because of that.” We as human beings naturally rush to why it’s not possible instead of gaining crystal clarity around the actual underlying question as well as the results that we want. I know this sounds so simple and it may seem irrelevant or insignificant, but it’s going to lead to my second point, which is the whole idea of proximity is power. It’s not how or what. It’s who. This is what’s important.
IdeaLab Investor Summit: An incubator is a company that takes early-stage ideas, creates investments in those ideas, and helps it grow into a full-fledged business.
For those of you who haven’t seen the Bill Gates documentary series on Netflix called Inside Bill’s Brain, watch it. It’s fascinating. It proves this point. Bill Gates and Bill Gross are part of a few ventures. Bill Gates is part of one of the companies that are inside of Idealab called Heliogen. These guys understand it. They understand the nature of a network and the nature of knowing people in all sorts of specialties and areas. I’ll give you an example. In this docuseries by Bill Gates, he presents these quality questions.
One of the questions revolves around energy, how can we have abundant energy for the world? They came up with this strategy. They get to this idea of how to turn nuclear waste. The waste that came from nuclear facilities in the past, how could you turn that into safe, clean nuclear energy that does not have any probability of a meltdown and is clean. He went out and he networked with those that had expertise and specialty in this area. It’s not 1 or 2 persons but multiple people. He brought them together and that’s how they came up with the solution.
If he went to one, he’s probably not going to do it. If he went to two, he’s probably not going to do it. He brought a team together to figure out that solution. This is why I think it is important when it comes to investments. Number one, it’s creating a quality question around what you want, what the results are that you are after. What if I could do this? What if I could do that? What if my life looked like this? Then you start to look for that inside of your network that could help facilitate this as opposed to you figuring it out.
If you knew how to do it, you would already be doing it. That’s where people get stuck because they feel that they have to do everything in a single dimension. Whereas the idea of creating brainpower comes from multiple people in their area of expertise in order for you to figure out how to do it. It’s not you figure it out, but it’s the team environment, the network that’s enabling you to do that. I’ll give you another example. I was talking to an individual that was part of this group. He is really successful. He’s done nine-figure venture capital funds doing some incredible things. I won’t get into it because I don’t have his permission to talk about it.
He said the exact same thing. He was able to make so many different connections with his network in Northern California and was able to exit a few businesses of his own. He started to put together deals doing some incredible things. It’s him being able to have these relationships in various areas, bringing those relationships together and solving these incredible problems. He alluded to the same thing. It wasn’t the Bill Gates docuseries. It wasn’t what Bill Gross did, bringing amazing people together because of all of the teams that were associated with the Idealab companies and ventures, these professional teams that he had preexisting relationships with.
This brings me to my third point. We’ve discussed this in a previous episode this season, which is the difference between leverage and delegation. I believe that the easy thing to do is to delegate. It’s to put the responsibility for everything on the shoulders of somebody else. Leverage is within our control. Being able to be crystal clear about any outcome, an investment outcome, the results of an investment as well as understanding the expectations that you have and the clarity around those results. What you are expecting as well as the accountability structure that exists, knowing how to along the way with certain milestones that things are successful. We hit this with this and noticing signs that things are not going well.
There may seem to be these subtle differences between leverage and delegation. The leverage is what I explained before. It’s Bill Gates and his knowledge to a certain point, of what the outcome is, of what the problem is and having enough information about how things work to be able to bring a team together and be clear about the mutual expectations. That’s the third, leverage versus delegation. The fourth one is also interesting. It does relate to what I’ve been talking about, which is the criteria for a winning company/investment.
As I said before, the quality of the underlying business structure is typically the quality of the investment. One of the things they went through is how they go about identifying an idea and the success of an idea. The first thing they look for is an experienced leader, an experienced CEO, not one that is appointed or because of tenure gets that role or the founder. It’s an experienced executive, someone that’s been there and done that. It’s an experienced professional investment team. This isn’t their first rodeo. They’ve been through multiple different ventures and companies before.
IdeaLab Investor Summit: Successful business ventures, successful people, and successful investments are the result of quality questions.
Even though they may not have expertise in the specific fields, they can orchestrate the business fundamentals, the investment fundamentals. It’s identifying the market that exists where whatever the underlying business or investment is, has value. It solves a big problem. The potential audience is identified. If it’s a small audience, it may not be worthwhile. If it’s a massive audience, if this business or investment unless you make a difference with lots of people’s lives, that’s something to take into consideration. The timing is also important. These days, especially as things are going so quickly, knowing whether the market is right for this specific idea.
The next is that there are opportunities to iterate, meaning you have a product or a service or an investment that comes to the market. There’s constant improvement, constant iteration, being able to improve this, improve that and make it even more valuable. The next one is Moore’s Law, which I found is interesting that the underlying business and investment are able to be grown or scaled based on computing power, leveraging technology. The next is persistence coming from the team itself, the founder, the question that they have, the quality question, the mission that they’re on, the results that they’re after, which is doing something great. The persistence comes from that.
Going the extra mile comes from knowing that they’re doing something amazing and great. Finally, there’s a differentiating factor. There’s something different. It’s not the next Starbucks, Pizza Hut or Papa John’s. There’s a differentiating factor. It provides that marginal difference to make it great versus average or normal. That’s number four is the quality of the company, investment, the team and identifying where it fits. The final is to know the needs of the team, specifically the executives, the founders and knowing what they are driven by.
Tony Robbins talks about needs-based psychology, which is the six human needs: certainty, uncertainty, significance, love, connection, growth and contribution. We all have these needs. What those needs are is we do things in life. We act a certain way in order to meet these specific needs. We all would assume to know a person that is driven by significance, how they’re going to make decisions, show up, behave. It’s all about them because you have some driving needs that dictate a person’s behavior, the decisions that they make.
If the significance is at the top, that’s one of those underlying needs that may destroy an investment. It may not enable the successful teamwork that is necessary for an investment or an idea, a company to be successful. It’s understanding those needs. If those needs are based around contribution making a difference, that’s something we need to identify because that could lead to that persistence, the necessity of iterating, trial and error, failure and trying again. All of these five points is to allow for more information so when you are making a decision about a business or about an investment that you ask different questions and analyze different things. You look for different things that could either make you more excited or things to do some more due diligence on to formulate better questions to ask or to determine whether it is a fit or not a fit because it could be exciting on the surface.
Nobody comes to an investor and talks about all the different things that could go wrong. They’re always talking about what could go right. It becomes your stewardship to ask better questions to determine what is right and is the truth. There are always going to be downsides, but rarely they’re talked about. It’s a good sign when you do have someone that is pitching an investment that talks about the downsides, what could go wrong? It comes to, it’s not about no cons, no downsides. It’s about the pros. The upsides are worth whatever those downsides are. They’re greater than what those downsides are.
Hopefully, this is has helped. This is a great experience for me. I’m trying to figure out how to best translate my experience into something that would be valuable to you. Looking at this season, the importance of due diligence, the importance of asking good questions is vital. This team has been around for a long time. You can look at Bill Gross’ history. He’s gone through so many different failures, so many different successes over and over again. He’s identified ways to be even more successful and it comes from those lessons. Leveraging his experience is what I did. I put those points in five different categories.
If you want to review those, go to TheWealthStandard.com website. Make sure you subscribe as well. I’m glad that you are supporting us. Hopefully, this has made a difference for you. For those of you who’ve been tuning in a long time, I’d love to hear your feedback. Go ahead and email me at Hello@TheWealthStandard.com. I hope you enjoyed this episode. We’ll be back with the next episode that revolves around my experience at the Tony Robbins Finance Event up here in Sun Valley, Idaho. Thanks again. We’ll talk to you soon.
Investing is a fickle business. There is so much in line that when you fail to do your dues, you could end up in a bad position easily. While the world has become so advanced and giving (opportunity-wise), especially in the private investment world, it still helps to gain a better understanding of what you’re facing ahead. Patrick Donohoe brings in Mauricio Rauld of Premier Law Group. With more than a decade in the business, Mauricio has seen the good, the bad, and the ugly when it comes to deals. He shares his perspective with us, along with questions and insights, that will help improve the way we ask questions and do our due diligence on private investments. Mauricio guides us to understand the accountability structure, value proposition, and the principles of the business at a high level. Don’t miss out on this great conversation, and remember that good business equals good investment.
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Private Investment: Ask Better Questions, Do Better Due Diligence With Mauricio Rauld
This is going to be a fun episode. It’s a little bit shorter but packed with good information around how to ask good questions, how to do good due diligence on the private investments that you make. I’m intrigued by the private investment world. Our culture is going quickly and it’s amazing. The innovation that’s taking place is beyond our comprehension sometimes. It’s continuing to go faster and faster, which is awesome. It makes things faster, easier and cheaper especially from a business perspective. I’ve been able to reduce costs, especially in software, over the last several years because of innovation. It’s becoming a part of our culture. It’s also easier these days to raise money to do deals, to put companies together, to put projects together, to put investment together and those opportunities are going to continue to increase.
My perspective of private investment is based on the experience that I’ve had, but how do you convey that perspective to the typical investor out there that may have some knowledge but not as comprehensive of a knowledge? I brought in an individual that I’ve known for several years. His name is Mauricio Rauld with Premier Law Group. Mauricio has seen hundreds, probably over 1,000 deals, maybe even more than that in his practice over more than a decade that he has been in business. He mainly specializes in the real estate space. He’s done business in other sectors as well as far as raising capital for startups or for technology and so forth. He is agnostic essentially to the actual details of the deal itself.
He is putting together the documents and the structure so that those that are spearheading this project are doing it legally. He’s not getting into the logistics and the credibility or the legitimacy of the actual value proposition itself. It’s more of the legal documents and ensuring that money’s being raised the right way. He’s been able to see good deals, but he’s also seen a lot of bad deals, things that have gone sideways. I’m hoping that his perspective gives you some questions, some insight and things that you can do to improve your due diligence, so that when you are taking your money and you are expecting somebody else to be a good steward of it, that you do as much as possible so that you leverage them, not just delegate the responsibility to them getting you a rate of return.
It’s understanding the accountability structure, understanding the value proposition at a high level, understanding the principles of the business. Remember this season we’ve been talking about good business equals good investment. If you have bad business principles and acumen, you’re most likely going to have a failed investment at some point in the future. You want to be aware of all of that upfront as well as get the appropriate financial education in order to ask the right questions, the best questions, those quality questions. Mauricio is going to give you that perspective. It’s going to be awesome. You’re going to love this episode.
I have a good buddy on with me, Mauricio Rauld of Premier Law Group. Mauricio, thanks for taking a little bit of time. You’ve been on before. We’ve known each other for the better part of a decade. I look at your position as far as what you do professionally. It’s very unique because you get to see investments from a vantage point that nobody else gets. You get to see a lot of it. Would you talk specifically about what your specialty is when it comes to private investments and then we can get into the experiences you’ve had over the years?
The short of it is I’m a syndication attorney. I’m an SEC lawyer, which means I help primarily real estate investors raise capital to then placed into real estate investments. Those are multifamily deals. They might be single-family, self-storage, mobile home parks. It’s all kinds of variety of investments. I’ve seen the gambit over the last several years now, primarily multifamily let’s be honest. That’s been the hot asset class, but that’s not exclusive. People raise money to invest in all kinds of things. I’ve had the privilege of seeing all types of little different asset classes, how people have been structuring and how successful they have been in acquiring that capital.
This is the novice person that doesn’t understand the legality of it all, but someone can’t go out and say, “Give me your money and I’m going to invest it for you.” That’s not legal. You can’t do that. There’s the public world, which most people are familiar with where you have high levels of accountability. You’ve very liquid capital markets. The barrier to entry is high, but you have private investment. It’s been around forever and it’s massive. You don’t hear much about those types of investments. At the same time, there’s a legal way of doing it and an illegal way of doing it.
The illegal way of doing it gets a lot of people in trouble. You’ve seen that and you write about it quite often, but there’s the right way of doing it. You ensure that the right way is taken when a person raises money to make sure that they do it the right way. You’re agnostic to the type of investment. You specialize in real estate, but you’re agnostic to where the project is. Who’s the principal? Who are the investors? You’re on the sidelines putting the paperwork, the legalities together and a lot more than that. I’m summarizing, but I know there were a lot more than that. In a nutshell, what else comes to mind as far as your position and what you do?
That’s exactly what I always tell people. There are two things you’re doing. One is you’re raising the capital and number two, you’re deploying it in whatever you’re doing. I handled the raising capital. I’m totally agnostic. We do non-real estate deals. We’ve done a couple of cryptocurrency funds. That’s been a hot thing, so some people put together cryptocurrency funds. I’ve also done startup tech companies that are software companies. They are putting a fund around to raise. By and large, 100% of my clients are real estate investors. They happen to sometimes venture off in other things.
Let’s get into the topic at hand. The outcome that I wanted to help the audience with is to ask other questions, do better due diligence, look for things inside of an investment or a business. What they’re putting money into, which will make them a better steward of their investment so that they’re not blindly handing money over to somebody and crossing their fingers that it will work out. Your vantage point is that you’re able to see all of these different types of investments and meet a lot of different syndicators those that have been doing it for decades. Not to say that those who have been doing it for decades are going to be successful.
They equally get stuck in their ways and ultimately make bad decisions based on the modern economy and not end up well. For those that you’ve seen consistently do well by their clients, those that have succeeded with raising money and deploying it in a way where they not only return the investment but a return on the investment. Ultimately most private investments fine print in a nutshell like, “You can lose all your money and we’re not legally responsible if that happened.” That’s ultimately what it says. What are the things that you see consistently that are done the right way and done the wrong way conversely?
I like the way you framed that. It’s one of my favorite things. If you want better answers, you’ve got to ask better questions. What are the right questions that investors should be asking or at least looking at? One of the things clearly that I see people are doing successfully is they’ve got a track record. The track record is huge. Anybody can put together a fancy business plan, anybody can throw numbers in a spreadsheet and make it seem like the investments are out of this world. Somebody has to execute on that plan and make it happen. That’s a lot of times easier said than done. One thing is to raise money. You can get people who are great at marketing and great communicators, but somebody has to do the work. Having a track record is very important. It doesn’t necessarily need to be a track record in syndication. This might be somebody’s first-ever syndication, but at least they’ve got a track record of doing that themselves. They’ve had a successful track record where whatever thesis they’re putting forward, they’ve tested it and they’re doing well.
They hit a wall like everybody does, which is you’ve run out of your own money, you’ve run out of your own resources or you want to scale. If you suddenly find an investment that’s working well and you’re limited by your resources, syndication is a great way to pool other people’s resources, whether it’s cash or credit or relationships or experience or whatever those resources are. It’s a great way to scale. A track record/execution because if you’ve got a terrible track record, that doesn’t work. A good consistent track record of executing is important. You and I know a lot of syndicators who’ve been doing this for a long time who are able to raise tens of millions of dollars on one email or one quick webinar or something because of the track record as opposed to if this is your first time, it’s a little bit harder to raise the money. To me, the track record is the first thing you want to look at for sure.
Private Investment Due Diligence: Syndication is a great way to cool other people’s resources, whether it’s cash, credit, relationships, or experience. It’s a great way to scale.
What are maybe some other things there? Obviously, track record, you want to make sure that this isn’t the person’s first rodeo or maybe if it is, I came across an investment where it’s the first time this guy was syndicating. It took me about six months to put money into it, but I did it. It was a private investment in the energy and startup sector. I did it because he had a partner and his partner had 25 years of experience and had done these massive billion-dollar deals. Sometimes if a person doesn’t have a track record, it doesn’t mean that it’s not going to be a good investment. Essentially looking at the principles involved, which is usually the case, different partners, a board potentially like the team involved, that’s also an important element. What else do you commonly see that frustrates investors or investors end up losing because of?
The only one that’s sometimes frustrating for me is understanding the assumptions that the sponsor or the person raising the money and doing the investment is relying upon. That’s important because if they’re wrong on their assumptions or thesis or maybe more importantly if their assumption is not aligned with your assumptions. I’ll give you a great example. In the multifamily space, there’s an argument to be made. A lot of people are arguing that we’re at the end of the cycle or at the top of the cycle. If that’s your belief that we’re at the top of the cycle, you probably shouldn’t be matching up with somebody who thinks we’ve got five more years to go.
I see that specifically in the underwriting. One of the things you want to be doing is looking carefully at the business plan, all the docs and the underwriting, which is essentially the assumptions they’re making and look out for some red flags. Based on my personal beliefs, but some of the red flags, for example, if you believe that we’re a little bit frothy on the cycle, that there might be some headwinds coming in the next few years, having somebody put a short-term bridge loan or a short-term debt in place to get you to the permanent financing a few years later, that’s a little bit risky if you think that something’s going to happen.
In a scenario like that, you only have one exit strategy, which is to refinance into a permanent loan. If you cannot do that for whatever reason, then now what? You’d probably have to sell the property and now what happens? Probably you’re having an issue getting financing because we’re in a recession and that was probably the worst time to sell. That’s one example of assumptions you want to look at. The other one that I see a lot, and again my job is not to question them. As the attorney, my job is to make sure I understand what the assumptions are and that we make sure the investors understand, so we disclose all those assumptions.
The other big assumption is rent growth. If you’re looking especially on a real estate deal, rent growth is important because that at least on an underwriting will show you an increase in revenue year over year because rents are going up 2%, 3%, 4%, 5%. There’s an assumption being made that because rents have been going up a certain percentage over the last several years in a particular market or submarket, that rent growth is going to continue. That’s an assumption. Whether you’re right or wrong, I don’t know, but that’s an assumption. It could be an aggressive assumption where you might be assuming it’s been 5% increase for the past several years so we’re going to assume 5% every year or maybe 2% or 3%. What people forget is it’s possible there would be no rent growth or even negative rent growth. You need to make sure that your personal investment philosophy or your assumptions are matching up with what the assumptions are of that particular operator.
It would be interesting to look at if those assumptions ended up being the worst-case scenario, negative growth or zero growth or occupancy not going up or what is the minimum occupancy, especially in a multifamily deal. See if the deal makes sense. Sometimes assumptions can layer risk onto the underlying investment. That’s the importance of going through the business plan, understanding what’s been done in the past. That’s where you’re going to start to differentiate the true value proposition and where you’re going to get your return.
Here’s a great question for investors to ask, have you stress tested this model? How low can our occupancy be so that we can still sustain our debt? You’ve got a requirement that typically you have a debt coverage service ratio of probably 1.25 or something. If it drops below that, your lender is not going to be happy. How much can the occupancy drop and still maintain those levels so you’re still good? You can cover your mortgage even though maybe your investors won’t be getting money, but at least, you’re not at risk of losing the property. How much can rents drop and still cover it? You want to stress test. Most of my clients do a stress test, but it’s not just stress testing, it’s finding out what that stress test is. The first one you should look at is how low can we go for us to break even. At what point are we having problems? Stress testing all of these is important.
This has been super helpful because it comes down to the statement you made. The quality of an investment you could even say is a corollary to the quality of the questions that you ask. That leads to your understanding of what the value proposition is, what the syndicator is doing, and how your money is going to be put to work. Without that knowledge, it’s a gamble. What else do you see as far as things to look for that you see when investors go crazy in a bad way. They do a suit. What happens between the time money is raised and the time that return started to be paid out, the investment comes to fruition. What are some other things that frustrate investors that you can identify upfront?
One of the ones that are critical and it goes both ways. I’ll give you an example of how this particular topic goes both ways. It’s something that investors don’t like and will result in them not coming back a second and third time is a lack of communication with the investors or lack of transparency. One of the things that a good operator will do not only be consistently communicating with their investors in good times but especially when bad times come, that’s when they continue to communicate. Sometimes, the operators that I know that are doing it well, they over-communicate when things aren’t going well.
One of our mutual friends likes to say that builds trust. Not only respect but trust because it’s a lot harder to get on the phone call and tell people, “You’re losing money or you’re not going to get distribution,” but people understand it. In general, most people understand, especially if it’s not your fault. Things happen. Things never go according to plan. Having that communication level goes a long way for investors. The flip side is the same too. I’ve got clients who will pick up the phone and have a one-on-one phone call with all their investors when the distributions are made because nobody’s happier in the deal as the day they get a check in the mail or an ACH in their bank.
Giving them a call and say, “Patrick, it’s payday.” That creates that rapport with the investors when it’s a happy time. This particular client of mine does this. He is very successful in raising capital over and over again because he is building that level of trust and communication. Our buddy, Ken McElroy, does this a lot too. He puts together events with his investors so he can get to know them well and try to provide more and more value. The old adage is we do business with people we know, like and trust. The more you can get to know them better and had them trust you, communication goes a long way with that trust factor.
Transparency is involving and it’s enrolling because this is money that people have worked for and have earned. They’re handing it over to somebody that didn’t earn it. Looking at how they place their expectations is vital. I look at the track record. Sometimes I try to find out when things didn’t go right when things went sideways, what did they do? That shows the character. It’s not a guarantee, but it shows you what they will likely do if things don’t go according to plan in the future, which is huge.
Another good example that triggered is a lot of clients will forego some of their fees when things aren’t going well. You may have an ongoing asset management fee, for example, as the manager, as the operator to keep the lights on and maybe that’s 2% or 3% of the gross. If the investors aren’t getting their money, even though legally you’re entitled to take that, you don’t want to be in a situation where you’re getting paid and the investors are not or getting paid less. A lot of my clients will forego the asset management fee. I also have clients who, if things are going south and a cash call is required, a lot of operators will step in and not do a cash call, but come out of pocket themselves and try and avoid that at all costs. That goes back to the track record and the reputation of that operator and those who do that tend to do well the second and third time, especially when you get these referrals. When you’re asking somebody else, “Patrick, I know you’ve invested with this operator before, what can you tell me?” When you say, “The last one wasn’t great, but this is what they did during those tough times.” That goes a long way.
Private Investment Due Diligence: Make sure that your personal investment philosophy or assumptions are matching up with what the assumptions are of that particular operator.
This has been super helpful. They’re simple things. Usually, it’s those simple things that make the biggest difference. It’s like a game between a gold medal and fourth place. Gold metal is known throughout history. The fourth-place could have been second behind. Nobody remembers it. It’s those marginal things, those details are what usually makes the biggest difference because, in the end, there’s always going to be an opportunity. There are always market cycles. There are black swans. There are many things that come out of the woodworks that people can’t anticipate. At the same time, when that happens, you have two ways of reacting. You have your gut and your chemicals, which pretty much leads to your bad decision or your principles and your values that you could identify upfront in people, especially experienced people and that’s what’s likely to happen when things go sideways.
When things go tough, that’s when you find out a lot about the person, their character and their work ethic. Are they people who bail on you or are they the ones that stick around until the end and beyond?
For those who are exploring SEC attorneys, those that help businesses, help an opportunity to raise money legitimately the legal way. How can people get a hold of you, learn about your firm and ultimately do business with you?
The website is a good one, PremierLawGroup.net. I put a lot of content and I’m starting to upload those more and more into my YouTube channel. If you go to YouTube and put in, Mauricio Rauld, my YouTube channel should pop up there. I try and add as much value as I can. I do some educational videos on there. I’m on LinkedIn, Facebook, it’s hard to miss me.
That might be great for the majority of the audience because if you go to YouTube and you see how Mauricio is educating those syndicators/investors that are raising capital and doing different private investments, you can see what he’s teaching them. That can help you be more informed in the ways in which capital is being raised, especially with private investment to help you become a better investor. That might be a great thing for you to do is subscribe to his channel. You can visit us at TheWealthStandard.com and access all of the things we’ve talked about. I’ll give you the final word. You’ve got any words of wisdom for us?
Be a good steward of your money. Don’t hand over your money to anybody without doing some due diligence. The due diligence is on the frontend. It’s not that long, but do it once and sleep better at night knowing that you’ve done everything you can as opposed to blindly handing over your money to somebody else.
It’s good to have you on. I appreciate your time, Mauricio. We’ll have you on again for sure.
Mauricio Rauld is one of the premier syndication attorneys in the country helping real estate syndicators raise hundreds of millions of dollars to pursue their dreams of financial independence.
Mauricio is the founder and CEO of Premier Law Group and spends 100% of his practice on syndications for real estate investors. With over 20 years of securities experience, Mauricio specializes in Reg D exempt offerings and educates investors from around the world on how to navigate the complex world of securities laws.
Named as one of the Top attorneys under 40 by Super Lawyers magazine, Mauricio regularly shares the stage with The Real Estate Guys and the likes of Robert Kiyosaki, Ken McElroy, Brad Sumrok, Peter Schiff, and others.
An educator at heart, Mauricio regularly travels around the country speaking to real estate investors and entrepreneurs, educating them about how the syndication legal piece fits into the overall syndication puzzle.
He is also a constant on the real estate investing podcast circuit, regularly contributing to The Real Estate Guys Radio show (consistently one of the most downloaded podcasts on real estate investing) where Mauricio is Robert Helms’ personal attorney. He has also been featured on The Lifetime Cashflow through Real Estate (Rod Khleif), The Ken McElroy Podcast, and The Best Real Estate Show Ever (Joe Fairless) among countless others.
A graduate of The University of California at Berkeley, Mauricio obtained his Juris Doctorate degree from Loyola Law School in Los Angeles and lives in Southern California with his wife Heidi, and children, Adelina and Alessandra.
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All businesses are built on a core set of principles that, if you follow where they lead, you’re more or less guaranteed success. This is why mastering business is key to making sure you find the success you’re looking for. Patrick Donohoe shares his daily experiences from Tony Robbins’ Business Mastery, a conference where people come together to find their success by learning from some of the world’s most successful people. Throughout Patrick’s experience, you’re sure to also be learning something amazing that might not have even occurred to you. Find your path to business mastery today!
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Business Mastery With Patrick Donohoe
Tony Robbins’ Business Mastery
This episode consists of a daily review of my experience at the Tony Robbins’ Business Mastery, which is a multi-day seminar that took place in a warm, sunny and green palm tree-dotted Palm Beach, Florida. It was an awesome event and I know you are going to get a lot out of each of these episodes. Thank you for your support. Thank you for being here and expanding your knowledge of investment. I know it’s going to make a difference. It takes 1 or 2 decisions, 1 or 2 new thoughts to completely transform your life, making wise choices with your investments and your overall wealth strategy. That second business that you should be participating in order to balance your efforts as an entrepreneur, a small business owner and a professional. It’s important to know how to characterize investments and ask the right questions. I’m going to get into all of that in this episode. You are going to get a lot out of it.
In addition, one of my final invites to the Unleash the Power Within, the UPW Event that Tony puts on as like his introductory event in San Jose, California. That’s going to be in March 2020. You can reach out to Jeff at the Tony Robbins Institute. I’ve got a crazy discount for you, guys. I don’t get any benefit from this whatsoever but there’s an incredible discount based on my relationship with the membership that I have with Tony’s group. Take advantage of it. It will change your life. It’s one thought, one decision, one idea that separates you between where you’re at now and what you can become. These are the environments in which I can take place. Definitely look into that and if you can make it happen, I love to see you there. I’m going to come with my thirteen-year-old daughter most likely and to give her that gift, give her that experience will be life-changing for her. Let’s get to the actual content and my daily reviews.
I’m going to do an overview of my experience on day one of Tony Robbins’ Business Mastery down here in Palm Beach, Florida. It’s beautiful especially given the winter weather in other parts of the country. We’re inside the entire day and it’s colder in there than it is in most parts of the United States during the winter. Regardless, this is an event that I enjoy. I’ve been to it a couple of times in the past, but Tony always brings new information, new speakers and is keeping up with how society is evolving especially when it comes to business. I look at Business Mastery and associate it with his drive to empower people. I believe that business is an incredible idea and how people work together to bring ideas into reality.
Tony talks through his experiences, the experiences of businesses he’s been a part of but also has evaluated. In order to extract some of the things that business owners as they’re in business, as they’re continuing to innovate can use to continually progress and grow. I look at what this has to do with our theme this 2020 which is an investment, specifically atypical investment. The correlation I’m making is the fact that all investment is ultimately a business. It’s a set of systems. I’m going to go through my note and review some of the main points that I took away from day one. I’m going to go day-by-day going through each of the main bullet points and the lessons that I took.
The first is I believe that successful investment is a result of a successful business. If you look at the last several years, there have been tons of disruption when it comes to businesses that could have been categorized as perennial. Those that are lasting generation after generation. Some of the examples he used were Hilton and Airbnb. Hilton has a history. They have a million or so rooms across the world and are valued at a certain amount. It’s like $25 billion or something like that. Airbnb came in and disrupted that market and provided better results, better service and/or no rooms and essentially facilitate a technology platform. They’re valued at $35 billion or $40 billion.
The idea there when it comes to businesses that have been around for a long time, if they’re not continually innovating and figuring out what their clients or customers need and giving them what they need. Making it more convenient and cheaper, then that’s when they’re ripe for disruption. The statistic that correlates to that is that 96% of businesses fail in a ten-year period of time. That’s indicative of successful investments. Even companies or investments that have been around for decades or generations, they’re still susceptible to failure and even new businesses. It makes the analysis important when it comes to knowing what you’re putting money into, knowing the business, knowing the investment that you’re making. That’s the first thing.
Mastering Business: You have to focus on the customer because their tastes, demands, and needs are constantly changing and evolving.
The other is, a successful business is 80% psychology and 20% mechanics. Most people in business focus on the value of their service, the value of their product and they’re always trying to improve that. However, a big piece that is ingrained in this seminar is focusing on the customer, focusing all your efforts there as opposed to the actual product and service because customer tastes, customer demands, customer needs are continually changing and evolving. For businesses to continue to provide value to those customers and be successful, they have to find new ways to provide value to meet those customers’ and client’s needs.
I look at one thing there that they introduced on day one that they’re going to go into it in a lot more detail as the days go on, which is the life cycle of the business. You also look at the different seasons that exist in the business cycle. Tony, for several years, has been talking about winter coming. With seasons, you have winter which is the death of things, the destruction of things but then you have spring which is the sprouting of new things. You have summer, then you have fall, which is harvest, reaping the rewards. Right now, we’re in a period of harvest. We’re in a fall season which is followed by winter. The timing is the challenge. We’ve been in the biggest bull market in history and looking at whether it’s the president or whether it’s the involvement of a central bank, the Federal Reserve in the economy, things have continued to prolong and grow.
The question really becomes, when is winter? Nobody’s able to time that perfectly, however, you can look at the past and see signals. There are lots of signals when it comes to winter being on the horizon. It comes down to the question of when. Some of the statistics that I pulled away to indicate some of those amendments, changes whether it’s winter, there’s definitely transition happening in the world. First and foremost, you look at the Baby Boomer generation and how they are involved heavily in politics and in business. They are in their 60s and in the mid-70s at this point. They’re going to be retiring. They’re going to be letting their business go.
The statistics that they used which are 87% of businesses that were the founder of that business are not going to continue past their death. I looked at the transition in business but I also look at the amount of money, the wealth transfer that’s going to take place between now and the next ten years. The tens of trillions of dollars are going to go in from the hands of Baby Boomers who invest in certain things, that do certain things with that money and that wealth to a new younger generation who are doing completely different things with money and they have different interests. That’s going to create a different set of demand and there’s now going to be money behind that demand. That’s an interesting thing to pay attention to.
You also have emerging markets. You have Africa coming online where they’ve created per capita more millionaires and billionaires than any other part of the world. You have the Middle East despite the stigma that’s attached to it also has a rising generation that is interested in Western things and is going to be demanding whether its product, services, etc. That’s something interesting to it to pay attention to. I’ll end with a few things, especially as you pay attention to investment. Hopefully, you see the theme here with the correlation between investments and business which is a successful investment is because of a successful business. A successful business is one that is in love with other customers, not in their product and service. They’re always figuring out better ways to meet their customer, meet their client needs and are adapting and innovating to do that.
This is an example that I shared last season regarding one of the exercises Tony does with purses and he does it with cars as well, but I’ll do the purse example. He has the female audience give him purses. He’s using it as an example. He has ladies raise their purses and he goes around and he picks expensive purses. He picks the middle of the road purses that look nice. He picks cheap purses. The principle is not to say that one is worse or better than the other. It’s that certain clients, certain customers have different needs, different tastes and different things they want out of those bags. You look at Louis Vuitton versus a bag from Target. The one that purchased it from Target is looking for efficiency. That’s their specific need. If you look at the margin in regards to that business, it’s smaller than the margin of Louis Vuitton. I would say, the difference in making the actual bag itself and manufacturing costs are going to be in a very similar range. However, the margin between the actual cost and what it’s sold for is hugely different. A Louis Vuitton bag is selling for thousands and thousands of dollars, a Target bag selling for under $100.
Mastering Business: Being able to understand yourself, especially your strengths, allows you to make even better decisions.
The principle there is understanding your client, understanding what they need and building a brand behind that. Louis Vuitton and some of these higher-level Prada bags, these luxury bags or clothing lines have established brand and subsequently margin. That’s also important to understand, not to say that Target isn’t profitable because Target doesn’t make bags. They do a lot of other things and they have a cool business model in a sense and now they’re partnered with Disney. Looking at how businesses are trying to continually understand their clients and meet those customers and client needs is very important when you’re weighing the decision of what to invest in. That’s all that I have for now. We’ll bring some new content and takeaways in the next episode so stick with me until then.
We are now past day two of Business Mastery, one of Tony Robbins’ events here in Southern Florida. Day two was pretty awesome. As I went back and looked at the main things I took away, I tried to extract again the information that’s relevant to investment. There are a few things. The day was very much about personal development and about the business itself, your business enterprise. As far as investing is concerned, I had to look for some of those nuggets. The first one is a quote from Tony that I liked. He says, “Wealth is the ability to master the mind.”
I looked at this and saw the relevance to not just business but also investing where understanding yourself and strengths, understanding how you respond to things especially your patterns, the emotional way you react to certain things. Understanding yourself more allows you to make better decisions. If you look at it, as I’ve talked about in the show, things or even circumstances don’t create the level of happiness and fulfillment that most people are seeking. That’s a hallucination, if you will, to think that once this happens, then I’ll be happy. Once this happens, then I’ll feel successful. Once this happens then that. I believe it’s the other way around. It’s the state of mind that we’re seeking and the state of mind can be accessed. Understanding our mind both the conscious and subconscious is paramount to becoming what we’re after, which is a wealthy mindset. That’s the first thing.
The second thing is the idea of the zone of maximization. I do think that this is important to understand. Tony has this description of a business as it pertains to a life cycle. In a life cycle of life in general, you have a birth and you have being a toddler, then you have been a teenager and then a young adult and then the prime of life. You can imagine the different struggles that human beings go through at those different stages. There are similar struggles when it comes to a business in those stages. The idea is to get to the zone of maximization.
That’s where I would say business starts to thrive. You also have the perennial businesses which maintain the ability to innovate and market to their customers and continually discover needs and find better ways of meeting those needs. When you’re looking at investment, when you’re looking at the actual underlying company, sometimes it’s valuable to know where they’re at in the life cycle. I’ll give you some nuggets as far as the zone of maximization is concerned. In that zone, you’re going to see a professional leadership. It’s not somebody becoming a leader. It’s not someone who’s trying to figure out their position. It’s someone that’s been there and done that.
The second is systems. There’s the quote that I love which is, “Systemize the predictable so you can humanize the exceptional.” I think that applies to most businesses. Having systems allows you to systematize the predictable, have things done the same way over and over again so there can be a focus of human effort in the most important areas. The third thing is culture. It’s the culture that’s representing the brand and bringing that message to the specific customers. When you’re in the zone, you also have growing revenue but also a growing profit. Sometimes in those younger stages, you have lots of growing revenue but you don’t necessarily have the profit. Finally, there’s the passion for the customer or meeting customer needs.
Mastering Business: There are specific languages in business and investing, and if you don’t understand these languages, you can’t play the game.
That’s hugely important to identify because that keeps the business thriving, innovating and constantly figuring out ways to discover better ways to meet customer needs. Finally, innovation and marketing. These are ingredients. As you can imagine, if you bake a cake and you forget the flour, the salt or the sugar, if it doesn’t matter what the other ingredients are, it’s not going to taste good. You look at the ingredients in the zone of maximization and it’s important to identify those. The ingredients are professional leadership, systems, culture, revenue up and profit up, growing, passion and then innovation and marketing.
There are a few more things. One is there was a gentleman who stood up and made the comment of, “Why weren’t you able to achieve?” It was that the person I hired, the group that I hired, the company that I hired, I trusted them and they failed me. It’s the difference between delegation and leverage. I thought this was really interesting and sometimes you have leverage as part of a financial transaction but it means something different here. Delegation is when you trust somebody else to do something. I think that’s in large part what the United States does from an investment standpoint. They delegate the responsibility to grow wealth to an institution or to an individual, whereas leverage is different.
Leverage is first and foremost, knowing what your end result is and being able to articulate that and then having enough knowledge to ask the right questions and to have high levels of accountability. Being able to leverage others, leverage financial advisors and leverage investment providers, you have to articulate what the end result is that you want and ensure that that aligns with the actual underlying purpose of the investment. When it comes to a relationship that you have with an investment provider, it’s understanding the leadership inside of you, which is the ability to influence the individual that you are in essence partnering with.
That requires them understanding what the end result that you want is as well as accountability along the way. The final thing I’ll end with and this applies to investment which is overcoming fear. It’s handling anxiety. Tony has five steps that he uses to overcome fear. The first step is to daily feed your mind with good information. Feed the animal, feed the person you want to show up in your life, not feed the one that you don’t. The second is to strengthen your body. Do something every day to challenge yourself. Do something that’s going to push you beyond the limitations of the day before. The third is the immersion in a role model. Seeing somebody that has been in the shoes that you want to be in and immersing yourself in their life, how they experience things and how they do things.
The fourth is proximity is power. Proximity is power, in essence, means to be around individuals, being in an environment that’s going to challenge you, that’s going to get you to think differently. It’s to connect with people that are going to help facilitate the results that you want. Finally, it’s to give more than you expect to receive. If you do that, then you’ll never lack abundance. Fear and faith can’t exist in the same mind at the same time. I also believe that when you do give, when you contribute to somebody else, the result of that is worth more than any dollar amount that it can give you. Tony’s famous saying is, “The secret to living is giving.” With that being said, day two is over. We’re onto day three. I’m excited to come back with you for day three recap. I’m sure we’re going to get through some awesome stuff.
A Personal Challenge
I’m going to do a recap of day three. We’re about to start day four but I wanted to get my thoughts. This day was interesting if you have been to events before, there are a lot of interventions. This is where Tony Robbins will engage directly with one of the participants and work through their business challenges. Everything comes out to be like a personal challenge. It’s fascinating how intertwined everything is. There’s a speaker that has been with Tony for several years and that’s what I wanted to focus on. I’m going to do a second session with even more details. There’s a whole other Business Mastery Convention that happens in Europe every year.
Mastering Business: Circumstances don’t just suddenly align to create your happiness and fulfillment. You have to do that yourself.
A second one, a follow-up to this where they go even deeper and it’s awesome. Keith Cunningham is the one that I’m going to cover and specifically some of the things he covered are that I felt were important and relevant to investment. Let me get some background in Keith. He is an older gentleman. He was partners with Robert Kiyosaki and Sharon Lechter in kicking off Rich Dad Poor Dad. He’s been around for a long time but he’s been speaking with Tony for a long time. If you haven’t picked up any of Keith’s books, they’re good. The Road Less Stupidis an amazing read. He also has a comedic personality and he’s from Texas too. He’s the old gray guy, Texas accent. He’s a good-natured guy. It’s interesting. He has some cool sayings.
Let me get into the things that I learned. First off, he goes through the three ways in which every business or investment failure boils down to which is number one, excessive optimism. Number two, bad assumptions. Number three, ignored risks. The idea is to learn how to understand the game of investing, the game of wealth and the game of business and avoid the emotional inclination to the end result which is either a loss, fear, more loss or gain which is greed. Going to the book he wrote, the key to wealth is to avoid doing stupid things. It makes more sense but it’s also funny. I want to get into how he goes about understanding the optics of a business, the optics of an investment. I think they are one and the same in a sense.
He associates it with dials on an airplane. These are what are known as more of the facts. If you look at what most individuals are doing when they’re analyzing an opportunity, they’re telling themselves a story. If you think about the lottery effect, most people dream about, “If I won the lottery then this would happen. I’d be able to buy this and this.” There’s this fictional story that starts to play in our mind as far as the end result of achieving wealth and investment, paying off, being able to retire and being able to be financially free. Then there are the facts and you have to use the facts as the basis for decisions as opposed to the emotions of it. He talks about the dials on an airplane and there are three primary dials in business. I’m not going to get into the details of these. The first one is the balance sheet. Understanding what a balance sheet is, assets and liabilities and how to read a balance sheet.
The second is an income statement which is income minus expenses. The third is a statement of cashflows. This is what business owners are about because an income statement, it’s not a reality. He calls it a theory. As you look at reality, what business owners are about is cash. It’s having operational cash as he puts it. That’s were understanding all three statements especially when it comes to a business or an investment. If there’s profitability but no cash and they can’t pay out a return. Understanding these three dials is vital.
The last thing I’ll use to describe understanding the language of business and how Keith puts it, which is you can’t play a game unless you understand the rules is he uses a funny story. He tells it every single time I’ve heard him speak. It’s a funny story about the game of cricket. In cricket for North America, it’s not a sport that we are familiar with. We all understand what it looks like, but as far as the rules and the language, we have no clue. He goes through the different terms. I’ll give a few, the wicket-keeper, the slip going out for a golden duck bowled over a maiden, a frog and rubbing the seam or rubbed a seam. He makes a crude joke as you can imagine with rubbing the seam in a very Texas old guy way, which is pretty hilarious.
The idea is that there’s a language in business or there’s a language in investing and if you don’t understand the language, you can’t play the game. That’s an important piece. The dials are one thing but then the language of business is another. The language of accounting boils down to the facts, not the opinions or the theories. Understanding the facts, being able to analyze the facts allows you to make a more prudent decision. A saying that applies to successful investment or unsuccessful investment is, “Those that don’t measure, don’t want to be held accountable.” That was a good overview of some of the financial things that I learned here at Business Mastery. There were some more theoretical, philosophical things and leadership principles that I learned. I’ll do a joint podcast with one of the people on my executive team, Dan, who’s here with me.
I’m going to do the wrap-up episode to Business Mastery. First, I want to celebrate the fact that you’re here. It says a lot about you and what you want for your life. Someone that takes time to read and to learn is the person that achieves what they are after. I know in a sense what you’re after. That’s what most people are after. The experience in understanding business principles and business acumen, it does relate to investment. I believe that it relates to what we’re all after which is this idea of living a fulfilling life, a meaningful life. It sounds somewhat superficial, cloudy and meta. At the same time, it continues to echo through these conferences, through my thoughts that there aren’t these circumstances that align in your life and somehow that creates your happiness and fulfillment. I believe that it’s the mindset and it’s trained and understood before the actual material thing happens.
What’s amazing is that the material thing happens a lot more quickly once you are able to go through and establish that sequence. First, understand the mindset, what you’re after and then experiencing it now and then things align so that you are able to experience it in the physical world. I’m going to continue to talk about this because I believe that the interviews that we’re going to be conducting around investment, around how to be a wise investor without a purpose, a very clearly defined purpose. It’s not going to matter how much money you have. It’s not going to matter how successful you are in business. If you understand that purpose, that is what people are after. It’s a true sense of meaning. I believe when you are able to discover what that is, it’s not like you arrive at the finish line. There is an ongoing process to cultivate, improve and magnify that. It’s a lifelong process.
We’ll continue to go there. I’ll give you a few nuggets from the last couple of days of Business Mastery. I would first say that I was grateful to take one of my guys with me, Dan. He’s been with me since the very beginning and we’ve gone through some ups and downs. We came closer as leaders in the company that I primarily work with and own, which is Paradigm Life. Understanding him at a deeper level and vice versa, it helped to see where we can make the biggest difference together. Going there and experiencing that with a business partner, an executive or a team member, it’s a profound experience to get outside of your typical culture and cultivate those relationships which make the biggest difference to you. I would say that that’s the first primary takeaway.
In the last couple of days, there are a few interesting things as it relates to investment. The first, Keith Cunningham did his second part of his overall presentation, which was a few hours. I look at what he’s teaching and how that applies to what you are after. I know you’re telling yourself, “I don’t need to understand accounting. I don’t need to understand what I discussed about the optics, which is a balance sheet, an income statement and a statement of cashflows. I don’t need to understand that in order to make a successful investment.” I get that and I understand where you’re coming from because I’ve been there. At the same time, I would say that the investors and people we work with that value our services and value this insight, the most are the ones that are lost. It comes down to not necessarily the investment being something risky and put your money into it and it didn’t work out.
It could have been the best value proposition, ideal environment and ideal leadership team. There are so many different factors within the economy, culture, society and legal that can throw it off-kilter. Understanding not just a snapshot in time of what the optics are of a business or an investment, then you’re placing more risk on your shoulder. Those three things that he talks about, the three pieces of paper to master those, he hit it home by describing the Enron demise. Again, the balance sheet, the income statement and the statement of cashflows, understanding those pieces of paper and how they relate to the health of a business.
He talked about Enron and for those of you who have been around a while as far as investment is concerned, Enron in one year went from the top of the world to bankrupt and there was a tremendous amount of fraud behind the scenes. There’s a documentary on Netflix which is The Smartest Guys in the Room. What it did is it showed how the Wall Street analysts that were looking at this company and its health and what their recommendation and feedback would be. It started off when they’re at their height, “Strong buy. It will definitely hold. This is a company that’s going somewhere,” then the price started to go down.
The analysts were saying the same thing. It was cut in half. The analysts were saying the same thing, strong buy, this is the best time to buy and the best time to hold. They were looking at one piece of paper and they were looking at the income statement which showed the profitability of the company from an accounting standpoint. The price kept going down because the unloading was happening by those who understood all three pieces of paper. If you looked at the statement of cashflows, they were losing hand over fist in their market value. When it was going from $80 or $90 a share at the top to even $2 and $1, analysts were still saying strong buy. Sometimes, when you rely on supposed experts and don’t understand yourself, what you’re looking at, it creates a tremendous amount of risk.
Let me touch on a couple of other things. Tony did go into the theory he has when it comes to your personal financial life. I like how he looks at it as a second business. The majority of people there are business masters. They’re there because they owned a business. As you established your business, what happens often is there’s so much opportunity in a business that people will invest their assets, earnings, and profits into the business because it’s giving the highest rate of return. At the same time, these other factors that are outside of the periphery of the business owner whether it’s the economy, society, maybe the target demographic is no longer relevant. There are all sorts of factors that could put that business in jeopardy. The competition that comes up. That’s where Tony advocates having a second business. He calls his investment strategy and his personal wealth strategy his second business.
e makes it easy. He talks about asset allocation. It’s very similar to what I talked about in Heads I Win, Tails You Lose, which is the hierarchy of wealth. One thing that he talks about is buckets. There’s a bucket that he mentions that I don’t talk about often enough. He has your foundational theory, your growth bucket and Tony advocates the use of specifically designed insurance which was cool to hear. He said that before but these are your secure safety assets. That’s why I said growth before but it was more of your safe assets, your foundational bucket.
He recommends filling that up before you get into alternative types of investments which I don’t necessarily agree wholeheartedly with but we won’t use this episode to debate that. I’ll do that when I go to the finance seminar. He goes into the growth side of things. The growth is where you have your assets that are diversified and he believes in getting as many non-correlated assets as possible. Looking at where our economies go and how assets are within a correlated standpoint. The market can fluctuate in a very similar way. It doesn’t matter how diversified you are. He goes through a lot of that.
I want to focus on the dream bucket. The dream bucket is something that I gloss over sometimes. The dream bucket is more of setting money aside to do those things that give your life that meaning, the experiences that you can have. I’ve talked about it in past episodes about how simply going on vacation, doing something with your spouse or your significant other or your family unplugging yourself from your normal routine is so healthy for that relationship, yet most people will save money as opposed invest in those types of experiences. That’s destructive because it takes away from the meaning of the investment in the first place. That’s why it’s important to identify your purpose, identify the end result that you’re looking for before you start investing. “Beginning with the end in mind,” so goes the famous saying by Stephen Covey.
That’s the idea behind what he was talking about when it comes to the dream bucket which is allocating money so that you can drive a nice car, live in a nice home, go on a nice vacation and the list goes on. It’s a much smaller percentage than the money that you allocate toward your security bucket, your growth bucket. I love how he looks at that. He makes it very simple. The bucket approach is something that I talked about in the Heads I Win, Tails You Lose. It’s very similar to what Tony talks about. That was another takeaway.
There was a cool end speaker that impacted me. He’s from the East Coast. His name is Jesse Itzler and his wife is Sara Blakely, the Founder of Spanx. It’s a $1 billion company that she owns 100% and built it from scratch. It’s an amazing story. Jesse is one of those crazy, driven guys. It was really inspiring because as he was talking about it, five minutes after, he concluded his remarks is where all the notifications came out about Kobe Bryant. He talked about looking back in his life and he wasn’t going to be satisfied with 80%. He wasn’t going to look back and say, “I’m glad I lived a mediocre average life.” We’re not about that. We get pulled into that sometimes. We’re getting to this point in society where we’re not going to have to do much at all.
The technological advances, there are a couple of companies that are in this incubator, this investing conference I’m going to. They’re going to change how much energy costs to nothing or very little, transportation and entertainment. Oftentimes, you look at the glass half empty with regards to the conflicts within countries. The other social issues that are going on, what’s going on in Washington, DC. The news is plastered with negativity, but we live in an amazing place. We live in an amazing time and we’re getting to the point technologically where we’re not going to have to do much to live a good life. That brings up a huge issue.
I’ve talked before about how life expectancies because of our understanding of health and longevity, they should be going up but they’re going down. They’re going down because people are not fulfilled. They’re drinking or taking drugs and they’re committing suicide even at high levels when they’ve achieved all sorts of success. Jesse was inspiring because he practices what he preaches and he lives it. He’s run ultra-marathons. He pushes the limits when it comes to business. He does it because of one thing and that’s what I wanted to end with. He does not negotiate with his goals. When he establishes a goal and says, “This will be done,” he figures out a way come hell or high water, given anything to do it. He wrote a book called Living With a SEAL, which is hilarious. There’s some language in there.
He was so driven to experience how a Navy SEAL lives. He experienced that at a race that he was at, seeing how that individual handled himself in a hundred-mile race. He wanted to see how that person lives. We invited this navy seal guy that lived with him for 30 days. The book is hilarious because he has him do all sorts of crazy stuff. That says a lot about him and how he finds meaning and fulfillment. I believe that it’s very similar to how most of us think and feel wired for mediocrity and average. Meaning comes from discovering who we are, what we’re about and making the biggest difference for everyone else.
The quote that was used was, “Purpose is found at the intersection of what you’re good at, what you care about, and what makes the biggest difference for others.” I believe that that is inside of all of us and we can find it. When we do, that’s true wealth. All of this other stuff, making investments certainly a part of it, but there are some foundational things that magnify the purpose behind why we make investment decisions, why we choose this, why we choose that, why we do this, why we do that and what the end result is. I’ll be back in the next episode. Thank you so much for going through this longer episode because we’ve had different segments lumped together.
The invitation is still open to the Unleash the Power Within, the UPW Event that Tony puts on. It’s going to be in San Jose. Go check out TheWealthStandard.com. It has all the information to sign up. We’ve got some awesome discounted prices. It’s going to be an incredible experience. I can’t wait to meet some of those who have already signed up. Thank you so much for your support. Thank you for the feedback on this season. It’s been fun and there’s still a lot more to come. We got an investment conference. We have a finance conference where there are going to be five billionaires speaking. There is a lot of good stuff to come. Stick with me until then. Thank you so much. I really appreciate it.
Making smart, worthy investments is all about the preparation – the research and the analysis. This is why risk assessment for investments is such a crucial part of the process of deliberation. One bad investment could set you back a whole lot. Andy Tanner is a renowned paper assets expert and successful business owner. Andy speaks to Patrick Donohoe about what you have to be looking at when you’re making a big choice about an investment. Let Andy teach you some of the techniques that will help you make smart investments.
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Assessing Investment Risk With Andy Tanner
It’s an honor to interview Andy Tanner. Andy is a Rich Dad advisor. He is the author of 401(k)aos as well as Stock Market Cash Flow. He was also the host of The Cashflow Academy podcast. Andy’s been on here before. He is a good friend of mine. We get to do some things with our families together. We have these marathon meetings whenever he comes in to do a show that lasts up to 4 to 5 hours. Andy is someone that I have a tremendous amount of respect for. He has principles as his foundation, as well as his personal values that I have tremendous respect for, but yet he continues to change.
How he changes is because of the environment that he’s in. For those of you who are not familiar with Robert Kiyosaki, he’s the author of Rich Dad Poor Dad. As an organization and as a philosophy, they are constantly growing. They do not conform to the status quo. Even though Andy has an incredible foundation, he continues to be challenged and refined because of him being the paper asset guy. He’s written extensively about markets and the role that they play as well as how to capitalize from an investment standpoint on it whether it’s up, down and sideways. Andy and I have those discussions on. You are going to enjoy it. I know he has several free resources. However, his bread and butter is a paid membership course where he mentors you directly. Andy is a great guy. You are going to love it. We have a cool conversation.
This season is awesome. I want Andy on early because he and I have a similar philosophy and perspective on things. Him speaking about the stock market, which is his expertise I felt was appropriate. As I assume most readers, especially new readers, this is a primary investment that you are a part of yet. Most investors are participating in this asset class in much the same way. This is a different way to look at it. I hope you enjoy this episode. We will have another great one next time. For those of you who are new to the show and want a better context as to how I perceive and view investments and the role investments have with your overall personal wealth strategy, go back and read the previous seasons. We’ve had five so far.
The show has been on forever since 2007. However, we have been taking a season approach where we’re focusing on one central theme and it’s awesome that investment has become the capstone of the previous five seasons. Those themes have been life, liberty and property as the 2018 seasons and themes. In 2019, we focused on capitalism, which is the infrastructure in which the rights of life, liberty and property are able to bear lots of fruit as we’ve seen historically.
The entrepreneur, which is the last season of 2019, we focused extensively on how to maximize your best asset. You had to find ways in which you can improve yourself, make more money, discover a meaningful career, profession, something that you love that you would never retire from. Go back and keep supporting us the way that you have. You have been amazing. Subscribe to the show. Give us a good rating on iTunes, it always helps. Share it with your friends and family.
I’m here with my friend, Andy Tanner. He is my distinguished guest. We’re going to talk about investment. We’re going to talk about your expertise, the depth of experience that you have. You have a unique perspective and experience. It’s going to be hugely valuable, but we’re going to start with some rapid-fire stuff. Who was your role model? Someone that you looked up to, who inspired you?
It’s my dad.
What superhero or icon in history do you most resonate with?
What charitable causes do you support?
Multiple sclerosis, but the biggest one is cystic fibrosis. That’s huge for us. They have huge advancements.
If there was one attribute that you can impress upon your kids, grandkids, the world, this audience, what would it be?
We could go off on many topics, but we’re going to talk about investment. Rapid-fire was more to tell you how a person thinks. That’s important, especially as you talk about investment. You’ve written some books on it, 401(k)aosand Stock Market Cash Flow. Do you have any other books that we don’t know about?
I write all the time cathartically. I don’t know if I’ll leave it on my computer for my kids to find, all my little catharsis. When I have an issue in my head, I find writing about it. If something bothers me, that’s a great form of catharsis for me. I cannot type, so it’s hunt-and-peck. A lot of bad voice-to-text technology makes no sense. As a person who doesn’t know how to type, spell, or grammar, I write all the time but I don’t like to publish. I like to write about my own stuff.
There are many different benefits from it. Ryan Holiday wrote a book called Stillness Is the Key. He talked a lot about writing. The fact that the activity itself, it’s much out of your mind, it allows you to see things differently and see them clearer. That’s stoic.
A good insight is if something is inside of you and you write it down, it releases it from outside your body. At least it’s out there where you can see it.
The physical activity of doing it is huge.
I do a lot of that.
Let’s talk about investment. This is a broad subject. I wanted to start with a broad question. How do you characterize an investment?
An investment is when you put something in whether it be time, energy, heart, soul, money, and hope with the aim to get more back than what you put in.
Does that happen a lot?
Sometimes it does. Sometimes it doesn’t. Sometimes you put in and you don’t get it back. That’s what risk is.
Let’s talk about financial investments. What have you experienced over the years? Your profession in a sense is money, financial education and speaking. You do a lot of market-based things. What are some of the common reasons why investment will succeed? What are the most common reasons you see that investment fails?
I would say number one is financial education. If I were to write another book, I would call it The Second Bridge. In all my travels, I’ve seen two things. Why do people go to seminars? Why do people read books? Why do people listen to podcasts? Thousands of people wanting to do better, which is good and right and so should they. When I’ve asked the question, if I start seeing the same faces and they don’t get out of the rat race and they don’t get it, two things that they usually don’t have. Number one is they’re in an investment they don’t understand. In a culture of advice, people center on the investment rather than the investor.
Education is about the personal development of the investor. For example, let’s say we do some options. We sell an option. We sell a naked put. You would think a naked put is a naked put for one person, for another person, the risk is there. It’s not true. Warren Buffett does this. My mom does this. There are two different outcomes. The education and understanding of what you’re delving in are massive. Most of the time in my life when I’ve lost money and when I’ve asked other people that have lost money, it was a lack of understanding of what we were doing. We got excited about the investment but didn’t take pride as an investor. Is an investor someone who invests? That’s like saying someone with a scalpel is a surgeon.
It’s not the activity. The action is the last step. You can’t skip to the last step.
I can’t call myself a doctor because I do surgery. I can only call myself a doctor because I have the skill to do surgery and I’m certified to a certain level. The second gap, which is one that is more frustrating for me. I’m not a great student. I’m willing to work enough to get it. I don’t learn quickly, but I’m willing to put in the time to learn. What is frustrating my life, which comes back to the question you asked. What would be the thing I’d want to instill in my children more than anything else? It’s discipline. Often, what happens is we have the knowledge, but there’s a second gap that requires a second bridge between what we know and how we behave. I’ll have people that I know well how to trade options and they know how to manage risks. I’ll see them blow up an account. I’d say, “Why did you blow up your account? You know better.” “Andy, I didn’t follow the rules.”
Knowledge is the first bridge. If you don’t know what you’re doing, you’re in trouble. You bridge the gap between ignorance and knowledge. Once you have the knowledge, there’s another gap between what you know and how you behave. I always make the same joke. It never gets old. I always say there are 50 pounds on me that my wife isn’t legally married to according to her. She says, “I’m not married to that. That was not part of the original agreement.” One of the majors of many I went through in college trying to figure out what I want to do is exercise physiology. There’s no gap there in how this little pocket of mine got here. No gap in knowledge. I know what happens on the atomic level, the Krebs cycle, CO2 out, O2 and carbon in the whole bit. Despite that perfect knowledge of how it got here, for some reason, I’ve implemented that in my life. It’s a lack of either discipline or implementation. Those are paramount to investing.
You have cognitive mastery, which is mastering with information. You have physical mastery.
It’s practical. There’s not a practical mastery, which is why when you said for your sons, what’s the number one thing? Self-discipline, the ability to execute what you know. Discipline is when you do what is right whether it feels good or not, whether it’s timely or not. You know what to do and you do it. That’s a huge part of investing. This important question you’ve asked because we have a culture of advice where people don’t want any of those bridges. Do it for me. Give me a financial advisor to make all the decisions. I’ll hire that stuff out. There’s danger in that because now you’re limited. There’s a bit conflict of interest, number one, and now you’re limited to their knowledge and their behavior rather than you’re handing over the ship. If you drop your kids off to daycare for twenty years and you come back and they’re not the people you wanted them to be, don’t complain.
Risk Assessment For Investments: An investment is when you put something in – time, energy, heart, soul, money, hope – with the aim to get back more than you put in.
The big picture, the key to investing is the investor less than investment. The culture of advice is an investment-centered culture. The culture of true investing is the personal development of the investor. Warren Buffett is not who he is because of what he bought. It’s because of what he knows and what he does. There’s more than one way to heaven. There’s an interesting book by Zucman who writes for the Wall Street Journal on Jim Simon. It’s interesting because Simon destroys Buffett in terms of returns. He almost doubles him up. He’s almost twice the effectiveness.
Buffett usually starts in the ‘60s when you look at what he did with Berkshire. This guy started in ‘88, so it’s a good sampling. He destroys Buffett. Buffett buys and holds and gets dividends. This guy, he’s in a trade for a week. He’s a swing trader. It doesn’t matter which one you want to do if they work. Don’t get dogmatic and say, “This is the best way,” but it’s not because of what they bought. It’s because of who they are. I hate the 401(k) for that reason because it suggests returns and prosperity minus the development of knowledge and discipline that is required for anyone.
Two points back when you’re making the comparison between Buffett and Simon. When you compare returns, it’s a comparison. Here’s this factor and that factor. When you look at all the other very variables, I’ve often said the same thing, but what I thought about when you said that is what Buffett trading is? What’s the scope of it?
It’s not fair to compare them because Buffett has only got one stock in his stock portfolio that isn’t paying a dividend. The reason he bought it is he thinks it is somewhat probably will and his cost basis is low. When you look at Coke, Buffett probably looks at it in two ways. If you compare Buffett to Simon, you can say Coke’s at $60 or $70. Buffett bought it at $3. That’s his average cost basis. You can say he bought it at $3 and now, it’s $60 that’s his return. That’s unfair to compare that to what Simon does because Simon will get more because that’s capital gain.
What Buffett cares about is the $1.47 dividend they pay every year. He’s at 50% a year on the dividend based on a cost basis. In that way, Buffett is probably destroying Simon. Either way, they both got more billions than they’ve ever known what to do with either way. It’s a little bit unfair because one is more of a cashflow model and the other is more of a capital gain model. Certainly, Wall Street is all about the capital gain model. They don’t care about dividends.
I would also say it comes down to objective. What is the individual investor? What are they doing it for? Because for Buffett, it’s a business. For Simon, it’s a business. For the individual investor, they have their business, probably their profession, their job and so forth, but you have their investments. How do you read between the lines and say, “What is a knowledgeable, educated investor?” What’s their objective? What are they after? The actual training, education, seeking that, do they need to have a refine purpose in order to do it successfully? Does that even matter?
The purpose and objectives are different. Purpose, why am I investing? Objective, what do I want to achieve? For the average person, this is quagmire because the education system doesn’t point you to either one. The education system says work for money, get a job. That’s it. That creates a problem for everybody because they’re trying to be something that they’re not. People come to me with the 401(k) thing all the time and they say, “What should I do with my 401(k)?” Advice question, not a growth question, tell me what to do question. For that person, that’s a quagmire in terms of that objective and purpose. They may not even know what that is at all in the beginning. Let’s say my purpose is freedom. My objective is to get a passive income above expenses, so I don’t have to work anymore. That’s fair.
That’s where you begin to study and that’s where you start. You’re a cashflow investor. I have a dogma that I prefer. It aligns with Robert Kiyosaki’s dogma, which is cashflow. I would be blind to the truth if I didn’t find many people that have become tremendously free, rich through capital gains stuff. Simon and Buffett are great examples. Buffett is a cashflow guy. Simon is a capital gain guy. It’s billions both ways. Both of them are financially free. Both of them don’t want for money. Both of them are living lifestyle-wise, they’re close. Philanthropy, it could be the same.
Most money managers, portfolio managers are cashflow guys because they live off of fees whether it’s performance fees or management fees.
Businesses are cashflow. If you look at the BI Triangle, you’ve got your three integrities outside and your other five in. Foundation is cashflow. The outside is mission, leader, and team, but the inside is foundations, cashflow. Businesses are certainly fundamentally in fundamental analysis. As soon as your cashflows debt, if you look at that cashflow idea from a financial statement, you got four boxes, income, expenses, assets, and liabilities. Expense is always the same as money going out. Everybody has them. You’ve got three boxes left. You either do what job people do, which is new money, in cashflow or cash investors, new money in.
The best way, this is my opinion, to deal with expenses that are new is with money that is new. If you have a new phone bill, you got to have new money coming in to take care of it. If that cashflow dies, you got two boxes left to pay. You got assets to pay or liabilities. If you have no cashflow, how do you pay? You’re in a capital gain of can you buy and sell your gold fast enough to keep up with your expenses? That puts an hourglass. The third one is, “If you have no assets left and you have no income, you have to borrow, which is the cashflow pattern of the US government.”
That’s fine for them to do that because they can print money, no problem. You looked at this and asked this question as an investor. What’s your objective? How do I want to pay my bills? Do I want to do it with a job that gives new money or I get laid off and I have to work? Do I want to make investments that produce new money, that’s dividends and rent, or do I want to make a capital gain? You’re moving from the income column depending on the asset column to pay your bills. That’s tougher to do maybe. Unless you’re Jim Simon where you’re a stud and you can compound that thing way faster than your expenses, which in a sense gives you an income above expenses in a way.
The problem with the 401(k) is those two cashflow patterns, income was the old pension model. Capital gain is the new 401(k) model. Most people don’t have the financial education to see that the column they’re draining into expenses is switched. The risk has switched because of the income from a pension, that’s the company problem to deal with stock market fluctuation and problems. 401(k) now to me. As an investor, you can learn a lot about investing by looking at the 401(k) model and deciding, “What is my purpose? Is it freedom? Is it riches?” If it’s freedom, it’s passive income above expenses. If it’s riches, probably capital gain because you’re going to have to expand your assets drastically. If you want to be a philanthropist and change the world or your cause or if you want to be driving fancy cars, which is not my thing because I don’t fit.
How do you characterize markets? How have you come to understand the different markets that are out there and their purpose?
I’m not an economist, so you’re smarter than me on this stuff, but to me, a market is a category of supply and demand. We have an energy market. What is the supply and demand for energy? We have an agricultural market, whether it’s corn or soybeans. What is the supply and demand for that? We have a financial market, which is a stock price is based on supply and demand, not the earnings of the company. The earnings of the company are secondary, the supply and demand are primary. That’s why the chart tells the truth more than the fundamentals do. To me, a market is looking at the supply and demand in the emerging market. What is the supply and demand for this stuff that’s emerging in these countries?
That creates all things being equal, fair pricing. It creates a clearing price.
In theory, AI is an interesting thing to think about because most of the transactions on Wall Street are made by machines. That’s tough because does it create a fair market? I suppose everything is fair. Define fair, life isn’t fair. Therefore, everything is. All is fair in love and war. I sometimes wonder if we’re a little disconnected from the fundamentals sometimes because if your machines are doing high-frequency trading and the AI is looking at technical stuff, historically markets have gone up over time. Does it disconnect from the fundamentals?
I certainly look at the run we’ve had in the last several years, which is unprecedented. I don’t think our GDP has grown. I don’t think what we’ve produced so is that fair pricing? I like saying this. If you had a beauty contest with all ugly girls, that’s what it looks like. Perhaps US stocks are the least ugly person or man in the beauty contest. Do you want to save euros? Do you want to risk everything in gold that doesn’t cashflow?
It’s not good for things to go down. The overarching theory for business is they like when things go up.
If you look at Jim Simon’s portfolio, do you know what’s the two best years are? Two best years he ever had were in the downs. It’s down bad. It’s all perspective.
People want growth and consistency.
Prices are going up and down. If you go to the gas pump and you’re an employee and the gas goes up, that’s a bad thing. If you own an oil company or you own some ExxonMobil and you see the gas price go up, depending on how many shares you have. One guy can go to the gas pump excited and one guy is bummed. It’s all relative to where you are. I wouldn’t say the market is going up or down or good or bad. If it goes up huge and it’s a bubble, is it good? Is a forest fire bad? Is it bad to purge Yellowstone National Park with forest fire? I don’t see up as good, down as bad. I’m like, “Up is up and down is down.” Robert Kiyosaki says it this way, “I don’t have a right hand and a wrong hand. I’ve got a right and left, they’re different.” In terms of people getting hurt, it gives you a different perspective. People say, “401(k)s are going up, that’s good for people going down.” I don’t know. They give all their men in Wall Street anyway.
That’s where I was going to because of a lot of the asset prices, stock prices, company prices. There’s been the biggest corporate buyback in history where you have businesses that are essentially issuing bonds that have low-interest rates. Not necessarily investing in infrastructure, but creating liquidity in their company, keeping the price and the value high and going higher. You also have this wave of how businesses are capitalized and how valuations are done.
There are a lot of reasons to issue bonds though. Apple is a great example. Over in Ireland, they’ve got all that money. If they bring that money home, what’s their charge? It’s 30% or whatever it is. They issue a bond at 3% tax-free, borrow money tax-free, repatriate the money. I’d go bond every time.
There are all sorts of reasons, but you’ll look at what you see most commonly, which is corporate buybacks in order to prop up share value.
Some people look at it that way. Some people say, “We’re confident about buying our own stuff.” You look at that in a macro idea. For this market to go higher, what is required to get it higher? It’s an influx of cash. In other words, money needs to come from somewhere. That money earned is one thing. If it’s borrowed, it’s another thing. If it’s created out of nothing, which the fed starting to do again surreptitiously, that’s a whole other show for you and me.
There are many forces. Fundamentally supply and demand, there is much supply and much demand. This creates a price. If demand goes up, prices go up. If supplies the same. If supply goes down, but demand goes up the even higher price. Assuming a stable dollar, that’s fundamental, but there are all of these other forces. The way in which accounting is done, the different financial instruments. You have many different options in order to get an outcome. One of the biggest lawsuits going on is by Citadel, where they’re suing their quant. This strategy that’s all based on this micro volatility is where they’re making all of their money. It’s not necessarily on the fundamental value of Bank of America or GE.
I have a graph in my class where I draw a line of the timeframe from long-term to micro trading in milliseconds. I have a graph of the importance of fundamentals, against that goes to zero. The fundamentals don’t change in a microsecond. That brings up another thing back with AI. They’re worried about competing against AI and I would warn them not to think that way because you don’t need AI. You’re not trading against AI. You’re not competing against them. You’re playing a different game.
The way you play the game is you say, “The market goes up, down or sideways. I’m going to be prepared for all three in terms of risk management, position size number one.” You can go in all three ways. Does it matter what causes that? No. In other words, if AI causes it to go up, who cares that went up. Maybe it was better sales that made it up. Maybe it was better GDP that made it go up. Maybe it was a devaluation of dollar where it takes more dollars to buy that many shares that made it go up. Is it more valuable then? I don’t know. Regardless of what makes it go up or down, I’ve never cared and nor will I ever care. If it’s AI that makes it go up and down, high-frequency train, I don’t care. What is interesting is if we’re going that way, does that disconnect you from the fundamentals? The answer is yes. You’d have to because they’re making such quick decisions there.
Who still bases their decisions on fundamentals?
Risk Assessment For Investments: Most people don’t have the financial education and literacy to understand that the column they’re draining into expenses is switched.
I care about fundamentals. I hate talking about the same stock all the time. It seems like every time I’ve been on a radio or on podcasts that talk about Kraft Heinz, and it’s a Warren Buffett company. He owns a ton of it. I bought a lot of it off the dip. I didn’t do that for technical reasons. I did it for fundamental reasons and for cost basis reasons. I did it because I think there’s going to be ketchup on the table regardless of what AI does. If I go to a restaurant a few years from now, I think there’s going to be Heinz on the table. I don’t know that that’s the risk, but that’s my bet. That’s a fundamental decision where I write options to get paid to buy it, reduced my cost basis with an eye of faith that their dividend will get higher with inflation. Their dividends will increase as the dollar loses value. My cost basis will be low and we’ll still be eating ketchup.
That would be an interesting econometric type of study is to look at the volatility and how quickly people’s tastes changed when it comes to condiments as opposed to food. Food changes differently.
They own Oscar Mayer. They own Kraft macaroni cheese, Philadelphia cream cheese. Nestle is bigger than they are, but they’re the third-largest in the country. There’s more salsa sold than ketchup. There are a couple of big knocks on it if you want to look at the other side of that trade, not to get into the minutia of it. A lot of people are more health-conscious and so they say, “Is macaroni and cheese in trouble?” I’ll keep that personally sustained out of my own family. I’m not worried about that. People like salsa. With that said, I still think that fundamental analysis, I don’t think ketchup is going away.
The other problem with them is they’ve got too much debt. Understanding it economically is a big deal. This blew me away that their stock dropped on this. I feel like I’m on an island because I’m not an economics professor. I’m a C-minus average basketball player trying to stay eligible in college. I didn’t understand this because I always feel like there are people that should be way smarter than me on this. They had a write-down of their brand equity. Meaning what’s the brand Heinz or if we sold the name Heinz that you sell a new mayo under it. They overestimate that, which happens all the time.
It’s like, “What’s your house worth?” You don’t know until you sold it. It’s the only time you know, so maybe you put down in your balance sheet, “My house is worth $10 million.” It’s only worth $5 million. They wrote down billions in that, but that doesn’t affect the cashflow. It doesn’t affect how many ketchup bottles were sold. Their stock drops hugely. I’m like, “That’s good. That’s cleaning the house.” What that means is your return on assets went up. The amount you’re declaring in assets is that’s a better ratio to income. Why is it going down? I don’t know.
The SEC’s mad they did it. There are probably people smarter than me, but the thing that gives me a lot of sauce in that, Buffett is making $300 million a year off it. If you have a machine that’s making $300 million a year in dividends and someone says, “Your machine lost some value if you want to sell your machine.” Do you care? Cashflow investing, whereas these other guys, all these algorithms were about prices of stocks for a capital gain, but from a dividend cashflow’s point, are they selling ketchup? Do you know what percent of their profits go to the investors for dividends? It’s 57%. Do you know why that’s a big deal? Heinz is 57.
Has it been that way? Is that coincidence?
It has nothing to do with Heinz 57 sauce. It’s a coincidence. Buffett is thinking about this cashflow-wise. What does the company make? What do they sell? The AIs are totally disconnected from the business. They’re like, “What’s the stock price at?” I’ve tried to be less dogmatic. You and I like sound money. You and I like gold. We’re probably not fans of Fiat currency, but in the reality of it is I have to say we’ve been calling for crashes forever. How long is the last? This doesn’t feel right. No money out of nothing. Our dogma in our mind is like, “How can you?” You look at Japan, how long has Japan been? Their GDP is the worst in the world that I’m aware of a major country.
They continue to grow 100-year mortgages, crazy stuff. I went back and read some of Bernanke’s stuff. If you’re dogmatic about it, you say, “You don’t print money out of nothing.” What’s interesting, if you took his side and reread what he said about, he says, “A currency like gold is valuable based on the value we place on it and the quantity of what we have.” The problem I see with it is that you can invent it out of nothing. The reality of it is we don’t trust men with that power. That’s probably where you and I have a big issue.
When you think about it, if the population grows, you’re going to need more currency. Keep up with population demand, you can dig up more gold to back it. If people did trust it and as long as you controlled it, what’s the difference? If we say this is a dollar, it’s valuable, they’re limited in supply. The problem is if men get there what we see is they flip that switch and they turn it on to fix everything. There was no sacrifice of anything of substance. It’s money out of nothing. Fiat currency is our issue. When the S&P hit 2000, I’m nervous about being bullish ever since, but I have to do what the chart says. I can’t say, “It’s going to crash.” I have to do what my chart says because the chart tells the truth.
If you look at money supply and how much liquidity, you can go back in hindsight and say, “That totally makes sense why things kept going up.”
What’s crazy is we’ve got $22 trillion on balance sheet, $150 trillion off promised obligations. If you don’t freak out at $1 trillion and you don’t freak out at $5 trillion, the guy who understands it is the guy that would know at what point it doesn’t work anymore. If you were back in the Ross Perot days where he had his little charts, “Back in 1971 when $1 is a $1.” If you’d have told Ross Perot back in the ‘80s that we’re going to have a $22 trillion deficit, he will say, “You will collapse far before then.” That’s an interesting thought.
We’re beyond this point where people we’ll freak out. I’m not sure at what level it is. Maybe it’s no level.
No one talks about it but us. Congress isn’t talking about it. Trump hasn’t talked about it. Pelosi hasn’t talked about it. Is it wag the dog for both of them? We’re making wars. We’re doing impeachments. We’re doing all the stuff. We’ve got to keep this fight going because if people realize that we owe $150 trillion, they’re going to freak out, so let’s fight with each other in public as long as we both agree not to talk about that.
In 2019 when they diverted away from what they were trying to do with interest rates, I think they had three or four cuts.
What was interesting about that, you and I have talked about this, but what’s weird is if you looked at the economic policy as medicine to where I say, “The economy is sick.” What do we have in the pharmacy? We can print money, we can change rates, we can change the fractional reserve rate. What are the tools in our cabinet? What medicine do we have? If you looked at the Federal Reserve as a pharmacy with different medicines, I could see after ‘08 where we lost half its value. You’re going to drop interest rates to practically nothing. We’re at all-time highs. What’s the unemployment rate? How far back do you have to go to find that low of a number? Here you got stock market all-time high. You got all-time unemployment low. Their job is price stability. Why are we medicating the economy?
It’s the government who are monetizing them because if interest rates did go up, they wouldn’t be able to afford the interest on it.
The question is, is the economy healthy it as to be propped up? You and I would say no because if you got to give you heroin, the heroin hit makes you feel good. Get off the heroin and see how you do. In 2018 going into 2019, we started trying to pull off heroin. We tried to raise rents. Look what the market did and how it goes. We will be patient. Yellen was not cryptic. She’s going to do whatever she says she’s going to do. Powell is maybe a little more cryptic. Bernanke is a little bit more cryptic. Yellen was an academic. They’re all academics, but it’s interesting. Why is the monetary policy accommodated? We’re addicted to cheap money.
It’s almost 2008 that created the precedent for the role of the fed. There’s much more power. Their influence has changed.
They used to buy bonds, now they’re buying private stuff. That was a big change.
The whole repo thing is fascinating because the overnight market, bank-to-bank lending, but they stopped lending because it was less risky and a huge reward keeping money at the fed as opposed to giving it to each other. Banks putting up crappy collateral and that’s when the interest rates spiked on the repo stuff.
Maybe that’s why he got $1,500 gold again. Maybe some people always want to turn to gold.
There are many different things happening where I find it interesting. At the same time, it’s beyond my understandings from a rational standpoint.
That’s where technical. People say you’re a fundamental guy or technical guy. I talk about my Heinz trade as a fundamental trade. I’m in line with Warren Buffett. Why do I care about the technical as well? This is exactly why. It’s because they tell the truth. When you come right down to it, let’s say markets go up, down and sideways. Let’s decide to create a risk management strategy that does well regardless of the cause. What we’re talking about is the cause, “Is it the fed? Is it the debt? Is it the overnight stuff? Is it the repo stuff? Is it the AI stuff?” We’re talking about causation. If you say, “I don’t care what the cause is. I need something that helps me if it goes up, down or sideways, regardless of the cause.” You have a little bit of freedom there. That’s why technical analysis is an important thing. Direction matters. At the end of the day, it’s the truth. It might not correlate to what the fundamentals are doing, but it correlates to your buying power and what you have to show for yourself.
This might be a good tangent. How do you characterize risks when it comes to investment? You have more knowledge of markets.
First of all, it’s weird having an insurance guy ask me about risks because that’s your wheelhouse, not mine. The greatest lesson I ever learned from risk because I credit Robert Kiyosaki with so much of what I’ve learned. We were in Phoenix and I remember he said this, it resonated as true to me. He said, “Risk is about control. The more control you have, the less risk. Less control you have, the more risk.” I said, “If you have no control, you’re gambling.”
What are some examples of control?
Control is when you can force an outcome. Let’s do several examples across the asset classes. Let’s say you’re a guy like Than Merrill who understands markets well. He knows that regardless of what the market’s going to do, that he can take a single-family home and he can renovate it. People bash flippers. Why don’t you bash developers then? Because all flipping is redevelopment. If you can have a development business, you can have a redevelopment business. If he understands what those rents are and he understands what those home prices are, in a short amount of time because it takes a long time for the housing market to crash.
He can force appreciation like Kenny McElroy does, better management, better facilities, better features, different cashflows. They can force that appreciation. They go and borrow out money against the need to get tax-free cash. They’re managing their risks with knowledge and being able to force appreciation of some kind. Kenny McElroy is the same way. He buys development. He says, “How can we raise the NOI? Can we force that to happen?” As opposed to a stock where you buy Apple, now force the price up or down. The reason that real estate investors freak out about stock is like, “I have no control. I can’t force appreciation. I can’t force this up.” True, but if you marry the stock market with the options market, now you gained control back because an option gives you a guarantee on where you can buy or sell.
It does it in a liquid environment or real estate. If you get in trouble there, how are you going to get rid of that? Neither one is better than the other. As a salesperson, the reason people are scared of working on commission is there is an illusion that they can’t control the outcome. One person goes and he goes into sales and his mindset is, “I can’t make people buy from me,” but a skilled salesman that understands stimulus and response. If he controls the stimulus, he controls the response and he can walk into a business meeting and know he’s going to get the contract because he can force it to happen with his skills. It’s a low risk. If you find a square mile area with a certain population, a certain economic status, you plop a McDonald’s in that, try to stop people from coming through the drive-through. All you can do is put your close sign up because you’re going to make money. You can’t stop it from happening. The amount of control you have is the risk.
I look at markets and it’s interesting because risk, the likelihood of loss, I look at real estate being more consistent. There are only many things that could go wrong. If you’re able to look at the example you gave, which is here’s this city, here are the demographics, and here are the trends over the course of time. Putting McDonald’s there, there’s a high probability it’s going to be successful. Ultimately there could be an earthquake, that happens and everything is gone. My point is like, “What could cause loss?” How do you go about identifying that in markets?
There’s a lot. Real estate is riskier than that because real estate is dependent on the debt market. If you made a law that said you’ve got to pay cash for it, what would happen to the real estate market? You said, “No more debt for real estate.” The amount of debt you have enables the purchase. The more you enable people to purchase, the more they’ll purchase. The more student loans you create, the higher the tuition it will go. Why did we have a bubble in the 2000s in real estate? It’s zero down, no doc loans. In other words, anyone can get a loan.
Risk Assessment For Investments: Risk is about control. The more control you have, the less risk. The less control you have, the more risk.
When you give a loan to anybody, anyone can buy the real estate. To me, that doesn’t sound like a real safe environment. It turned out it wasn’t. People say, “What about the stock market?” Mark Cuban has Broadcast.com. Ross got his baseball games over the internet all over. People listen to their baseball games than radio. Yahoo at that point was bigger than Google. Yahoo was the search engine. Some people don’t even know what Google was. He sells his company for $6 billion in stock. For Yahoo, maybe it’s $100 a share. The 2000 crash, tech bubble. In 2000, it was $5 a share. Let’s say it goes from $100 to $5, 95% is value.
Cuban is fine. Why? He bought the right guarantee. What’s more solid than that? He’s got a guarantee at which you can sell no matter what happens. The company can go bankrupt. As a person in the insurance business, why do I buy insurance on my home or my life or whatever else? It’s to give me some guarantees and people will buy guarantees. Those are derivatives. That’s the driven market. Is one market more solid than the other? I don’t think so because they’re intertwined and they’re both relying on the debt market so much. The largest market in the world is the currency market. The bond market is much bigger than the stock market. The stock market is much bigger than the options market. Debt is probably the one that links them all together and makes them all risky because they’re all dependent on debt.
You also look at the risk associated with the bond market versus risk associated with the equity markets and risk associated with the options markets. The risk keeps going higher and higher in a sense. It depends on how it’s used because a bond is a guaranteed coupon rate. Bonds are used as equity in a sense because it’s bought and sold, not kept.
It makes the paper asset class relevant because people hate paper, “I want gold. I want real estate. I want business.” Paper is everywhere. You put money in the safe or gold. It’s printed on paper. You put your car in a valet and they give you a stub. It’s on paper. You got a title for your real estate. You got an insurance policy. What you’re talking about is social to primal. If you want to take it to the extreme, does your paper hold water? In a primal world, if I’m bigger and stronger, then I get the sandwich and my kids eat. We fight and you lose. It’s primal, it’s not civil.
If you’re civil, you have a government, you have paper, you have agreements because that’s all these are. This paper has meaning. It should. If we’re honest and true, all papers are a handshake written down. As long as there are honesty and truth, “This is my house. I’ve sold it to you. Now it’s your house,” agreed on paper. If we grow primal, we throw all that out. Put up our dotes and we go back to caveman days where the biggest, strongest guy becomes the alpha male of the group. Paper is an interesting thing. In order to invest, there’s a certain amount of trust that you place in civility. You need a certain amount of trust that you put into this stuff. Hopefully, that trust is not always misplaced.
I’m not necessarily talking from your perspective, but from a retail perspective, what is typically the fear associated with markets and with market investing? Looking at them, I would say the majority of people that have ownership or stake in the market. Are they ones that do it based on your definition of risk or is there a different definition for them?
Are you asking like factors?
Employment is a big number because employment suggests people’s ability to buy. Debt is also a big one because it suggests people’s ability to buy. You have to earn money. You have to borrow money. Innovation is a huge one because if we innovate, now we’re creating value out of nothing. Unlike a Fiat currency, you create a new drug like Trikafta for CF. Trikafta has $300,000 a year for a kid to be on that thing. That’s a new value there and it’s worth it. As you innovate, that’s a factor. What’s the risk of failure to innovate?
The war between the United States and China is less of a trade war and more of who gets to AI the fastest. They’ve taken a much different path towards AI than we have. If they out-innovate us, that’s a huge risk. Failure to innovate is a major risk because that’s called obsolescence risk. Obsolescence risk is Blockbuster Video. They failed to innovate. Netflix did, they didn’t. Netflix won. They’re gone that quick. How fast did Blockbuster die? You have legislative risks.
Innovation always displaces the technology in which it was inferior.
If you go out of the individual, you say, “l have legislative risk.” For example, the new 401(k) law. It’s awesome for Wall Street. It’s horrible for the worker under the guise of being better for the worker, legislative risks. Geographic risk, does the Middle East run out of oil someday? Political risk, we’re going to start a war with Iran may be. Purchasing risk and inflation, all these risk factors are there. You look at and you freak out. That’s outside. If you want to go inside, you say, “What can I control?” That’s the real key. Risk is about control. You can’t control legislative risk. Do I run from options? No, I embrace them because of my best chance to control them. An option is a guarantee. It gives me a choice to do something. Someone else makes me a promise. Do they make good on it? You can’t control that either.
All those risks are evident and you have the retail investor world that doesn’t know how to control ignorance risks. That’s where you look at having the upper hand is being able to know what your options are and be able to make moves so that whether it’s up, down, sideways, you’re capitalizing on the opportunity.
It comes back to those two bridges. If you have the ignorance to knowledge, any gap there is risky because now you’re in an environment where you can’t control it because you can’t control what you don’t understand for sure. That second gap is if you don’t apply it, you’re also at risk.
I was going to make a comment on China, which is fascinating because China has tons of money. They’re building these massive cities because they have tons of capital. What I found interesting is I was reading a report on the billionaires and millionaires of the world and the fastest-growing population, and it’s in Africa.
The policy of China, they have controls on population. They had to. They’ve got a big population. It’s against the law to have kids over there.
Do you know where the biggest investor in Africa is? It’s China. As you look out, what they’re doing there. They have a big presence in the Middle East as well. It’s interesting because you look at China years ago when we would do a show, we would say, “They’re building these massive cities. They have tons of resources and they have those limitations on kids.” They’re destined for failure, but they’re innovating by going outside. That’s where I find it’s fascinating. It’s how the world is becoming global.
It’s important to be patriotic, but not dogmatic because I’m a red-blooded American. I love my country. Is it unpatriotic to say they might be beating us? That’s reality. You have to live in reality. You can still be patriotic and that’s not anti-American to say they’re beating us. It’s weird because they have this economic capitalism and yet they still have this communistic social stuff, control, big brother and all that. Hong Kong and China, it’s a weird place because you go over there and you feel the energy of capitalism, yet it’s still under North Korea-type crazy dictatorships. You give them that stuff, they’ll revolt. They’ll want their freedom.
They get enough freedom to make a buck. It’s interesting how they’re playing the game and what we don’t want to be. If we’re not all part of the human race and we decide, “It’s us versus them.” We don’t want to be arrogant because they got a lot of minds. If you believe two heads are better than one, how many engineers do they have as opposed to how many AI guys they have working on this? We’re smarter because we’re Americans. They have resources. They’re spreading their influence. They have a culture of, I wouldn’t say of an underdog. We feel like in America. Pride comes before the fall. You got to respect those guys. Probably the best thing to do is start learning how to get along in the world. That’s probably the best thing, like do unto others type stuff, build bridges and not panic. See them as enemies. That’s the way the world has always been.
The world is the world. We’ve known there are people all over the place, but it’s becoming so much more linked because of technology and a lot of the innovation that’s happening is allowing third world countries, emerging markets to start to live a better life.
Where’s Google Translate going to be in 30 years? Pretty soon, we’ll be listening to Chinese podcast and they’ll be listening to yours and ideas will be exchanged so much more freely with language barrier dropped and innovation.
There’s this velocity of people where you have innovation, ideas and things are compounding. They’re going to continue until the language barrier is going to become less and less significant.
People hate change. Change causes upset. People resist change. Dogmas will take the truth. Chain it with their chains and sink it at the bottom of the ocean if it doesn’t fit the rhetorical goals. As we innovate and the truth is discovered from the epistemological standpoint, do you think we’d be able to change? We’ll have a culture of change is okay? Do you think that will ever happen or do you think the DNA that we’ve evolved into don’t change?
There’s equity in change. What I mean by that is there’s a room or the capacity to change. In the US, I don’t think there are tons of capacity other than the Millennial generation who are going to be inheriting trillions of dollars over the next few years. I look at the rest of the world because we’re 300 million people in the US, but there are billions everywhere else. As the world becomes more connected, they’re going to see what’s possible in life and they’re going to want that. Equity for change is huge. The capacity to change outside the United States is big.
Millennials are interesting to think about. I hate that stereotypical thing is you label all these people. You’re Millennials, you judge them because they’re a diverse group and any other thing is. With that confessed and with that caveat, they’re an interesting group because on the one side, we see them as more open to change and brighter. My kids even below Millennials got iPads. You learn differently. You think about the world differently. The other part of it is a lot of them have been tested like the greatest generations like World War II guys if they had resistance. Because on the one hand, they’re like, “School should be free. Everything should be free. We shouldn’t have to suffer.”
They’ve been coddled a bit. Assault can be done with words like that book, The Coddling of American Mind. All of a sudden, you go on a college campus, “I need a safe room because someone said something.” I look at them as maybe they are strong to handle these problems? They’re smart and they’re open to change. That’s going to be an interesting generation to see how they deal with all the crap that the Baby Boomers dumped on them.
There are challenges, problems and there have been forever. People go through different challenges. Going through world wars and being at the brink of death, that’s a big challenge. The challenge is going to be different. You can measure extreme, but extreme in a sense is based on perspective. They’re smart. They want simple. They want easy. They’re looking more for lifestyle than they are for security. That is a different motivation that drives behavior that is unprecedented. When you put resources in their hands, it’s going to be in better use than with Baby Boomers. Have you seen the Bill Gates docu-series that’s on Netflix?
It shows how he’s helped to brainstorm finance trade awareness to some of the global challenges mainly in Africa, third world countries, whether it’s about pollution or HIV or the water cleanliness. One of his big projects in that docu-series that they talked about was how kids in parts of Africa continue to die because of diarrhea. There’s so much bad water, bad sewage. He essentially brought good minds together to create a sanitary system that was affordable. It took several years to do it, but what he’s been able to accomplish there, that’s the mentality of Millennials. That’s Bill Gates. They see how things should be and they’re empathetic.
That’s where equality comes from that group. They care about equality out of empathy. Quite frankly, the Baby Boomers did not feel that way.
No, because they were in a war. It was about survival. Survival is you first before anybody else. Millennials haven’t had to go through that. They are sympathetic, empathetic and that’s where their minds work differently. How they get information, how they organize. It’s different. They may be able to get a better outcome than the methods that were used previously.
They got more intelligence, more knowledge than we had in our generation. Back to investing, when you look at all the stuff we’ve talked about, generational stuff, economic stuff, risks and all that, investing is about wanting first to sacrifice, first put out before you get in. That can hurt people right from the beginning. Notice when you asked me that question, what’s investing? I didn’t do it in a monetary sense because I don’t think about it that way. There are investments of time, energy, love, and many kinds other than money. It’s when you give and hoping that it’ll come back bigger. Whether you’re investing in your children, you’re hoping the fruit of that will be bigger than what you put in. Playing the piano, you’re hoping the fruit of it will be bigger than what you put in.
It’s an exchange where there’s an output that’s greater than the input.
The thing that’s tough is whenever you put something out because there’s not a guarantee that will happen and there’s your risk. You manage that with control saying, “If I put this out, what can I control to ensure that this comes back?” It’s so much not about advice. In 2020, I’m going to take my gloves off and I’m going to start punching advice in the culture of advice because it’s dangerous. Why fight personal development? Why fight that work? Why fight becoming before having or doing? Give me advice and tell me what to buy.
Risk Assessment For Investments: Employment is an important number because employment suggests people’s ability to buy.
If you were to read this blog, what people are going to do is they’re reading about all this talk we do about Millennials or AI or any stuff we’ve talked about. They’re still going to be caught in it. What am I supposed to buy? At the end of the day, what they’re craving, what their addiction is like heroin. I want to know what to buy. I want to know what to do. There are plenty of people who will sell that heroin on the street. They’ll sell it to them and give them advice. They’ll suck it up. If you sell this in a different way of saying, “No, it’s not about what I’m going to buy, it’s about what I’m going to be.” I do personal development, that should be sexy, that should be exciting, it should be healthy. You look at and say, “My schooling told me to get a job and it’s not looking good. Maybe my next schooling is I’m going to learn to invest. I’m going to be an investor before I have investments.” That’s “be have” behavior. When you take the ‘be’ and you put the ‘have’ and put them together, that’s behavior. You’ve got to be before you can have. The doing is in-between behavior.
As a final point and then I’ll have you tell everyone how they can buy your books, access your courses, follow you. What I would say is on that vein, which is as I’ve looked at giving people advice and doing the show and we have a business that revolves around it. People rarely connect to why they’re doing what they’re doing. They connect to the objective. They do it because they’re supposed to do it. That’s never qualified. I look at what an individual realizes that they think all of these things have to happen in order for them to experience something. That experience gives them a feeling or an emotion. That’s ultimately what it is.
I look at those emotions, those feelings can be experienced. You don’t need all of these things to have that outcome. That’s where you look at those that have achieved enormous amounts of wealth, success, and prestige, but they’re still way more miserable. In some instances, they take their own life. It’s one of those things where you need to connect the role of money, the role of investment because we live in a time that we’re all wealthy. If you compare to other parts of the world and look at it in history, you look at what we’re able to do, experience and how incredible it is. It doesn’t mean that investing and achieving more isn’t going to bring more of those experiences, but you got to connect that first. If you go about thinking that your life’s going to suck until you have this much money, this job, this title or this bank account balance. It doesn’t work that way.
My parents raised me in church and I don’t get out as much. There’s a wonderful passage that I remember and I don’t remember where specifically it came from, but it was about a group of people. It’s a wonderful idea where they figured it out. A group of people that had a society where it was almost communist because of all things common among them. They lived after the order of happiness. That’s a huge thing. When you look at the role that money plays in that Maslow’s hierarchy’s instructive is food, clothing, and shelter. You got to have some to do that. People say, “Money can’t buy happiness.” Hunger doesn’t buy happiness. Sick kids without medicine don’t buy happiness, and being naked and afraid on day 25 isn’t happiness, especially if it could be day 300.
As you go up there and you look at familial relationships that are different. Having money means you have time. I think having a little extra cash helped me spend more time with my kids. It’s been better not to have a 9:00 to 5:00 job that most people look at normal and having more time to put into my kids. The problem is that some people get caught up with the money. They never put in that time for those relationships. The money eclipses through relationships, so they’re killing. In that case, too much money kills that hierarchy. Self-actualization, try to buy that. How many Ferraris can you buy? You’re not going to get it.
Happiness, huge part as you get into your investing thing. I love Robert Kiyosaki’s CASHFLOW game, the rat race. Cashflow, if you get out of the rat race, that’s when you win it. It’s not when you get to the fast track. It gets ridiculous after that. I’m doing this charity thing. I’m making millions of dollars and I’m buying this. They’re big deals. When you look at where that game is played on the first page of financial. When you get passive income above expenses, now you have freedom. That’s a huge happiness thing.
If you go into your investing and you say, “If I don’t do anything more than that, does it get passive income above expenses?” There is some happiness to be found in that. That is not in the money, it’s in the life that you have at that point. Where if you have time, you can study what you want to study and if that’s your thing to go out and get another $100 million, you have to pursue it. Passive income above expenses out of the rat race, that’s a good place to start with a goal of investing that many people would find attractive.
What you’re saying is profound and still goes to the idea that it’s the life people are looking for and they think that having to get to certain points from a financial standpoint is when they’re going to be able to experience it. I’ll use an example with a client who got divorced as he was about to sell his business. He owned tons of property. He had been going to different personal development conferences and had studied, read books and watched videos. While he’s doing it, it was all for his family. That’s what he told himself, but yet he neglected his family the entire time. He neglected their needs. It’s that whole mentality where “I’m doing this all for them. They should love me because of that.”
They won’t give you love for that specific purpose. Plus, after you achieve that level where you have the money, freedom and time, suddenly life is going to start. I keep going back and forth on it because I look at the necessity that’s in me, which is I have to keep growing. I have to keep contributing, but I find fulfillment in that. If I do more, I’m going to have more of that fulfillment, yet I’ve connected that fulfillment piece to it. I’m satisfied fulfilled. If I get more, it’s going to be more. I’m good with where I’m at.
Investing is not about money. In other words, money is a subset of investing but not vice versa. We opened the program with it. Investing in people, hobbies, and growth is a huge thing. How we spend our time, that is the investment that is required. You have a limited amount of time. You can’t make it. How you invest the time is huge. Part of that time will be invested to learn and make money. Part of it will be to foster relationships. Part of what we’ll do philanthropic things. What did you achieve? What’d you build? What’s your legacy? Steve Jobs has an incredible legacy. Look at the stuff we use and what he left and what he gave us. I don’t think he went to work for more money. He knew what he wanted, who, why, and all that stuff.
How can readers get a hold of you and learn what you put online?
I’m changing my pitch on this stuff. When I google stuff, they google me as everyone else does. Google is looking at what I search and because I’m in investing, the ads I get on my YouTube stuff are all about stocks. I’m so sick of them. I hate them. I hate how they’re presented. It’s usually some guy in a Learjet, “I’m the greatest option,” or there’s this one, “I used to work on Wall Street and I found their dirty little secret. I’m going to share it with you.” I’m like, “Are people this stupid?” Before we talk about how people get a hold of me, I am going to take my gloves off in 2020. I have no interest in having any students or anyone read my books that want advice and that don’t want to develop themselves and put a little work.
I was over in Vietnam and I saw some people saying, “Sign up for one program. Click the button, follow, to do is $10,000 a day.” I was like, “People believe this. They sign up for these programs.” My website is The Cashflow Academy. The way we approach this is we say, “If people that want to learn, be investors and get excited about learning, this is the best place in the world you could go.” For the people that want quick tips, the people that want something for nothing, that’s not an investment. Remember something for nothing is not investing. Investing is putting out something and getting something back. If you put out nothing, that’s not investing. We’ve tried to purge any messages when we do promos. We didn’t want to work with those people frankly. First, I’m saying, “There’s only a certain type of people we want to drop by.” Is that bad to do? I don’t know if it’s bad to do or not, but I’ve grown weary of the environment of advice, programs, books and stuff. I like to be frank and clear. Would you like to do some work and put in some effort to gain knowledge and discipline, then we’re going to be a great resource for you.
That’s the natural order of things. If you want to get something more than what you have, there has to be more in the process.
Our website is The Cashflow Academy. We’ve got a lot of free stuff. It’s good stuff. We teach the 4 Pillars of Investing. We teach fundamental, technical analysis, cashflow, risk management in a way that’s fun and simple.
It’s good to have you here.
It’s fun to hang out. I always look forward to this stuff.
Andy Tanner is a renowned paper assets expert and successful business owner and investor known for his ability to teach key techniques for stock options investing. In 2008, Andy was key in helping develop and launch Rich Dad’s Stock Success System, which teaches investors advanced technical trading techniques to profit from bull and bear markets.
He serves as a coach to Rich Dad’s Stock Success System trainers and as the Rich Dad Advisor for Paper Assets. He is currently authoring an upcoming Rich Dad Advisor book on paper asset investing.
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Patrick is the President and CEO and started Paradigm Life in 2007 after learning from his mentor Kim Butler about financial strategies outside of Wall Street.
With a background in economics and marketing, Patrick immediately realized the opportunity to teach investors, business owners, professionals and families on a large scale using modern digital media and communication technology. Since 2007 Paradigm Life has worked with thousands of individuals in all 50 states.
Run-of-the-mill advice is everywhere. But in order to achieve different results, your strategy has to be different.
In this book, you're going to learn about a hundred year old strategy that's tried and proven to give results. Are you ready to
shift the way you think about investing?
WHAT THE PROS ARE SAYING...
Once in a great while, a person comes along who can explain financial concepts so clearlu that all of a sudden,
what had been a mystery becomes obvious. For many people, Robert Kiyosaki was that person when he wrote Rich Dad Poor Dad. For me,
that person was Patrick Donohoe when he first explained what you're about to learn in this book.
Tom Wheelright, CPA
Author of Tax-Free Wealth, of the Rich Dad Advisor Series
"Patrick's book explains why every American is experiencing worry, fear, and uncertainty with thier finances.
'Heads I Win, Tails You Lose' outlines a better way to take back control and live a life you love."
"Storyteller, man of honor, humble seeker of truth - these are the words I think about when Patrick comes to mind.
I've been looking forward to this book for quite a while and am pleased to tell you, the reader, it is worth the wait."
CEO, Partners for Prosperity
"Patrick is someone that I call upon to learn the strategies of the world's richest people. 'Heads I Win, Tails You Lose' provides
a creative approach for managing wealth outside of the old and tired methods used by everyone else."
Founder of Capitalism.com
Book Nailed it
A should-read for anyone looking to be smart with thier money, and smart enough not to just follow the herd.
Robert K. Cunningham
Very enlightening and actionable!!
If you want a real path to Economic Independance and not a theory this book is for you.
Wise if I read this years ago.
Great book, made me change my thinking on my investment situation.
Take back control of your money
The truth about money. You will be surprised with the information. WOW!
A must read
Outstanding book. Details information most people are not aware of in creating a sound financial programs.
...a critical financial strategy
I simply couldn't put this book down, I read it cover to cover in 1.5 days! #VeryEngagingRead
ABOUT THE AUTHOR
Patrick Donohoe is the Founder and CEO of Paradigm Life and PL Wealth Advisors. Patrick and his team teach thousands how
to build wealth, create lifetime cash flow, and leave a meaningful legacy.
Patrick was recently honored by Investopedia as one of the Nation's Top 100 Most Financial Advisors. He is a highly sought
after presenter and speaker at financial-based events around the country and is the host of The Wealth Standard podcast.
Patrick grew up in West Hartford, Connecticut, and attended the University of Utah, where he received his bachelor's degree in economics.
He lives in Salt Lake city with his wife and three children.
WHAT'S INSIDE THE BOOK?
THE CHAPTER LIST:
1. ORIGINS OF THE AMERICAN DREAM
2. THE PERPETUAL WEALTH STRATEGY™
3. QUESTION EVERYTHING
4. BREAK AWAY FROM WALL STREET
5. AVOIDING THE INVESTING AND LENDING TRAP
6. THINK FOR YOURSELF
7. A SOLID FOUNDATION
8. B ELIKE THE WEALTHY
9. MYTHS AND TRUTHS OF INSURANCE
10. SAVE, BORROW, INVEST, AND BUILD WEALTH
11. START, BUILD, AND PROSPER YOUR BUSINESS
12. YOUR FINANCIAL FUTURE
13. MAKE THE SHIFT
14. TAKE BACK CONTROL