Mentoring And Shaping Effective Business Leaders with Tom Donohoe

TWS 13 | Mentoring Business Leaders


When asked to open a new law firm office in a different market, business leader, problem-solver, and health care attorney Tom Donohoe shares how he was able to apply basic entrepreneurial principles to establish their business. As someone who’s not averse to doing the leg work, he was able to build a client base in a new market and entice other lawyers to join the firm by running around forming relationships and connections. Together with his brother, host Patrick Donohoe, they discuss the role of mentorship in business progression. They also talk about the qualities that effective business leaders possess and how they affect positive work culture, morale, and the overall rhythm in the workplace.

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Mentoring And Shaping Effective Business Leaders with Tom Donohoe

I am with my little brother, Tom. I wanted to have Tom on because we’re going to talk a little bit about mentorship. We’re also going to talk about business rhythm and also ways in which you can identify friction in business rhythm to capitalize on opportunities. I’m going to give you an idea about why I chose this topic for the week, especially as we’re talking about entrepreneurs. First the book, we still have our free website up. It’s FreeBook.HeadsOrTailsIWin.com. You can get a free copy. All you have to do is pay for the shipping. Also if you’ve enjoyed this season, then go head over to iTunes. They’ve changed up a bunch of stuff with the podcast. Go ahead over there and give us a review. We would appreciate that. We are in Yarmouth, Massachusetts on Cape Cod. This is where my brother and I grew up during the summers. It’s been many years that we’ve been out here with our kids. It’s an amazing place. It’s going to be important for Tom to be on this episode. He is in a different industry and not necessarily the entrepreneur type of role but definitely entrepreneurial based on what he’s done with his career in law. Why don’t you introduce yourself to the audience and tell them about your background?

I’m an attorney by trade. That’s my professional path. I was in private practice for about ten years with a couple of the country’s largest health law firms. That’s where I focused. My practice has always been representing hospitals and health systems for the most part on transactional regulatory matters. A few years ago, I went in-house to a mid-size regional health system headquartered in Denver, Colorado but it has operations in Denver, Kansas and Montana. It sounds like this is an audience of entrepreneurs. I may not make sense to be speaking to that crowd given I’ve taken a little bit more of a traditional route in my career. I would say that some of the principles that I’ve applied in the entrepreneurial space, you can also apply and be equally successful in the legal space as well and some of the more traditional settings.

On that note, I did start in the traditional law firm setting. For one of the firms that I worked for the longest, I opened their Denver office. In some cases, it’s a startup, a new market, new client base, new potential for people to come in, both to join me to practice but also to receive services in that area. In that setting as part of a larger law firm, we had to act like entrepreneurs in the way that we were trying to develop a business, bringing people along and then also refine our craft. It was a great experience in doing that. I can certainly talk a little bit about that and some of the different principles we applied in doing that.

I’ve looked at the conversations we’ve had over the years and with what you see typically in the corporate world. I would say the legal world is business that is essentially in a chokehold because of clinging to old habits, ideas, ways of doing things. I remember when you started up the Denver office, it was interesting because you hit the ground running. You did things that other attorneys weren’t willing to do. You went out and do business development and establish new relationships. What was cool is even though you were in Denver, you were in Salt Lake quite a bit. You were able to establish relationships with big hospital networks out there that already had representation. You were able to go out and sponsor dinners, go to golf tournaments and network.

Ultimately, most business, especially when you’re doing business to business transactions, there tends to be frustration at times, whether it’s lack of experience, whether it’s timeliness, whether it’s focus, whether it’s organization. You’re able to capitalize on relationship opportunities because you had done a lot of that networking. When those frustrating things happened, they remembered you and remembered your firm and subsequently started to do more business with you. Talk about where did that come from. As you opened the Denver office, was it your idea to do the business development or was it something that the hierarchy up the chain was insistent on?

There’s a fundamental perception, particularly of lawyers, that there’s this body of legal work that sits out there waiting for some lawyer to do it. You go to a firm and there’s a pile of work on your desk and you are there for hour after hour doing it. That’s not the case. In some cases, it may be but in mine, it never was. It was, “Here’s an opportunity to develop a new office, a new service. We’ve got some work for you but you’re going to have to find that on your own.” It’s similar to any startup or any entrepreneur’s situation where you’ve got a new product or new service and you’re trying to find buyers and you’re trying to sell that to them, grow your business and all of that. That’s exactly what this was.

In my case, I had some foundational clients I developed relationships that I had some work, but it was going into those markets. I was in Denver for the most part but in that market, developing the relationships, pitching the service that we provided, why we do it differently, how we do it differently and why we could do it better and then expanding to new markets and doing that too. To your point, sometimes I drop into Salt Lake. I have a handful of lunches or dinners scheduled and no real prospects, but you have to grind and make those contacts time after time with people. When you’re given that opportunity, you can knock it out of the park.

It seems like a simple recipe, but I feel like that’s a recipe for success in any industry. It’s having a relationship. It’s building that relationship. It’s once you get a bite based on that relationship, being responsive and doing a good job. It’s not rocket science in a lot of cases. It’s astounding to me in any industry how unresponsiveness, lack of communication, apathy or something like that can be pervasive. For people that are willing to put in the work and to develop those relationships and to focus on those simple things, how much success you can yield by doing that.

TWS 13 | Mentoring Business Leaders

Mentoring Business Leaders: Building relationships with the people in your market and other individuals working in the same field is essential in the growth of a business.


Let’s segue into a few topics. I wanted to do this podcast with my brother because as I was thinking about what to speak, we had a couple of guests and we had some travel conflict and so we’re doing this episode on the fly. Some interesting things happened to me. I had an old business coach of mine reach out and he is an incredibly successful entrepreneur. He started several businesses. He ran over a 1,000-person publishing company. He and another individual coached me for a few years. That coaching helped me understand the importance of business rhythm and organization. This business coach reached out because he’s starting a podcast and wanted to know a couple of the ways in which his coaching impacts my business, some of the things that we’re using. It caused me to reflect on a few things.

I wanted to talk about that, but I also felt it would be appropriate to run what I had learned as some of the friction points, the inefficiencies, the blind spots of my business. I wanted to know from a corporate standpoint if there were some similarities. I didn’t brief my brother in any of this stuff. It might backfire. We will see but one of the things that’s connected with me in regard to this idea of growth as well as business progression is the whole plus-minus-equal idea. I don’t know if you know about this but plus-minus-equal is essentially where you stand. There’s always somebody that you can look to as a mentor. Someone that’s doing more than you. Someone that has more experience than you. Also, you have minus, which is someone that is coming up the ranks that you can mentor and teach.

The equal is essentially having somebody that is in a very similar situation as you so that you remain competitive. You have that type of edge. I consider the mentors that I’ve had, this individual in particular, as someone that has gone down the path that I was going. Someone that could help me see some of the pitfalls, some of the things that I would be approaching and how to essentially set up my business, set up my structure in a way where I don’t necessarily avoid them. When they’re presented, I can essentially identify the opportunity and be able to proactively respond as to impulsively react. Tom, talk about the importance of mentors to you and then also your ability to mentor others. I know that you’ve had mentees and mentors throughout your career.

The whole mentorship thing, unless you’re intentional and you seek out one that fits what you’re looking forward, is a product of chance. My first partner that supervised me was very old school. It was a sink or swim. I had very little interaction with him. At the time, I didn’t think that’s what I needed. In some case, I felt I wasn’t getting what I needed. I had expressed that and I can always remember where he would be in meetings all day and would have sent me a couple of things that he needed help with or questions he needed to be answered. He gets back to his office at the end of the hall. I slowly popped my head out of my door in my office and I gave him one look. I could tell he did not want to talk to me. I go right back to my office and hold my questions until the next day.

Making connections and strengthening relationships is the foundation of success that encompasses all industries. Click To Tweet

There were also times when it was late in the day, he was in a good mood and we could talk through some things. It was a very sink or swim type of relationship as you explained it to me a few years ago when I ultimately transitioned from that firm. I came back eventually but as I was departing, he said, “That was my style and my style was to give you as much as you could handle and then see if you can survive or if you thrive.” Fortunately, I did okay. I don’t know if thrive is the right word but I certainly didn’t sink. At that moment I resented it a little bit but as I look back, it did prepare me in my career to deal with harder personalities but not the people that coddled you or protected you.

It helped me navigate some more difficult personalities both internally at the other firms or companies I worked with but also externally as I negotiated with other parties with difficult personalities. It helped me manage those. I was very grateful in the end for that mentorship. That’s a little bit of non-traditional path. I think those are important. You can do two things by chance. You can have the mentors that you get or assigned to you and make do what you can and try to find the best benefit that you can in those relationships. You’ve got to understand the parameters of those mentors and how they operate and try to leverage what benefit you can get from those relationships.

The other way to approach it is to seek mentors not just in your companies or in your businesses but around you or the one that Patrick suggests as these plus ones that are in the industry. They’ve been successful and that’s a path that I want to follow. You get in touch with them and establish that more informal mentorship path. That’s a little bit of a roll the dice because they may have been successful, but they don’t want to teach anyone. They don’t have the patience. That’s not their personality but that’s certainly something worth exploring. As far as the minus one, my experiences with mentors or lack thereof however you characterize it has driven me to want to go above and beyond in terms of the people that report to me and that I work with on a daily basis. I’ve done that in my current role, part of the task that I was brought in to do, I was to build an in-house department. I did it in what I would characterize as a vertical way. I’m the number two attorney in my company and I developed layers beneath me.

That’s not necessarily to have a hierarchy for having a hierarchy sake but it’s so that the people with certain skill levels could have access to people that have the higher levels, with additional skills or experience that they can leverage or go to when they have challenges. It also creates a path for those people to progress. I have a particular attorney who she worked with me at the firm and then we worked a little bit together there and she ultimately left to take in-house role. I stole her back from that role and I came in and I’ve had the opportunity to try to push her as hard as I can but also be a mentor to her. We meet on a weekly basis and go through her projects, any questions, the concerns that she has. I try to push her as much as she can and I feel like she’s progressed. She’s given the feedback to me that she’s certainly stretched the most that she can but not to a point where she’s put in a position that’s going to compromise her success or make it difficult for her to be successful in her job.

TWS 13 | Mentoring Business Leaders

Mentoring Business Leaders: Mentorship can be very beneficial in determining the path you want to take in your career and in establishing your foothold in your chosen industry.


It’s interesting when you look at growth in general, just the principle of growth. You have an environment in which growth is taking place. The environment has to be conducive to certain variables. One of them is pressure because if you don’t have the pressure to perform, then you’re not going to be pushed. We also have this notion of a team where you can push the limits but yet the fear of failure, it’s not like you’ve burned all boats and you’re forced to do it, even though that could be a viable strategy. You still have team members. One of the things we didn’t talk about with regards to your background is you’ve been part of several hundred-million-dollar mergers, acquisitions, buy-outs.

These are big transactions, whether it’s hospitals merging, buying private practices, merging of private practices. These are very important transactions especially in the healthcare and the medical world because there’s so much regulation. The pressure is almost baked into the process. The idea of having a vertical is intriguing to me because you have an environment where you can’t make many mistakes. The mistakes have pretty big consequences and opportunity costs. You’re essentially entrusting someone to do work and be in that environment. You have parameters built-in so that they can fail but the failure is going to get caught so that there aren’t these dire consequences of not dotting the I’s and crossing the t’s and what that would do to the specific transaction details.

I have a couple of thoughts on that. First to your point, they’re trying to create failsafe within your structure so that people can be pushed and can go to a limit, yet they’re not too far out there that they’re exceeding their bounds. You’re right. In the legal industry, if you provide the wrong legal advice, it could potentially end up with pretty significant consequences. We don’t have a lot of room for error in most cases. That is certainly one. You also mentioned the concept of team and culture. Those can be buzzwords and clichés for different companies or if you’re reading inspirational books and all of that but they matter. I think about the department I came in and as we developed structure, one of the things we had to do was develop a culture where people were empowered to collaborate with each other. Where there were good communication and some people were good at it and some weren’t.

As you develop that culture, you lead in that respect and that’s how you act, people tend to fall in a lot of cases. To your point on a transaction, on a heart issue on something, if people are aligned and communicating, your ability to resolve any given issue or get through a transaction is increased significantly as opposed to if you’ve got internal dynamics or cultural barriers. The transaction itself could be hard and now you’re making it even harder because of the way that you are operating internally. That’s an incredibly important thing and sometimes very difficult based on the personalities that you have. They emphasize within an organization in order for it to be a success. It doesn’t matter how good the product is or the service or what you’re doing. If your culture isn’t good, you may have short-term success in some respects, but it certainly leads to the disadvantage to your long-term prospects.

There’s always someone you can look to as a mentor. Find one with a lot of experience and who can introduce you to different perspectives. Click To Tweet

Unconsciously, human beings make judgments about who they want to do business with. They don’t sit down and say, “Here’s how I want to do business.” The unconscious side of them is looking for what culture is, looking for what the relationship will be especially at those levels. At smaller levels, you can probably get away with it. At the same time, when you’re talking about big transactions, the big corporate world. In some cases, small business where you’re merging or doing joint ventures, understanding that there is that unconscious side that’s looking for, “What is this relationship going to be like?”

I know that it’s not necessarily with one person. It’s not with Tom but it’s with his offices and with his team. I remember the conversations we’ve had over the years is you’ve been at a couple of two different firms before you went to the in-house at this healthcare network or hospital network. Talk about where you saw in these big organizations some of the unintended consequences of not necessarily bad culture but let’s say maybe mediocre or stagnant culture. If you’re not growing, you’re dying. There’s not this neutral place that you can stay in. The Law of Nature compels you to grow. Talk about that briefly.

It does have consequences. The most apparent consequence is always in good people leaving. You lose good people. The firms that I’ve been, in some cases it’s to another firm. In other cases, it’s to a client. They go in-house. That’s what I did. Some of the attorneys in the firm choke that up too, that’s good. He or she went to a client and now we will get business from them. In a lot of cases, those employees are disgruntled. They don’t look at the fact that “If that person was a good person and a good asset to the firm and they left, did we do something wrong?” There’s definitely a consequence in that. That means something. If a smaller or large company has put resources and time into developing an individual and they’d become a good asset, you lose that. That’s tangible capital to the company. Maybe not in terms of dollars but that’s capital.

That’s time that’s been invested and put into that person. You now lost it and now you’re going to have to invest in someone new. The more you see movement in any industry, the more people realize that that’s certainly not a good thing all around when a person leaves. I’d say the other effect that I’ve seen or consequences of some poor cultures or some idiosyncrasies that weren’t necessarily productive in a firm or a corporation is the morale. You want people showing up. You want them making an effort. You want them engaged. You want them invested in the business. When they’re not getting the mentorship or when the culture of the department, the company or the corporation is not good, their ability to be positive and to work hard is significantly diminished. You need those people, particularly at the leadership level, to show up and influence others and to set a good tone that they can’t do that. You’re going to see some of the foundations of a company crumble because the people aren’t the foundation in a lot of cases.

TWS 13 | Mentoring Business Leaders

Mentoring Business Leaders: Individuals in the leadership level should want their people to show up, make an effort, and be engaged and invested. This can only happen if you set the tone for them as their leader.


From the business coaches that I brought on, I have two business coaches. Both happened to be women and I did that intentionally because it has provided a different perspective for me. All my business coaches of the past had been male. I’m not going to get into that right now, but I wanted to get into some of the things I thought about when it came to this particular business coach. He’s reaching out to me and me going through our notes, going through our sessions over the last several years. I stopped coaching with him a few years ago. It caused me to reflect on some of the main things that impacted my business.

This is where we will go back to this narrative that we’ve been on with culture and team. One of the biggest things that I learned from them, it was one of the first things they told me, which is the objective of the leader is to do nothing. What that means is when he was coaching me, what he was trying to say, at least that’s how I interpreted it and thought about it over the years, is that having a good team in place allowed me to do what the leader does, which is maintain the psychology of the team. I learned that the chokehold of all business comes down to the psychology of the leader or leadership. That’s where you look at if you want growth in your business. The leadership first has to grow, expand their psychology, expand their understanding of how to take a team from one level to the next level.

It’s caused me to reflect and allowed me to restructure my role in a way where I’m performing actual leadership things. It is not something that I studied or understood because I read a few books but it’s something I had to work on, which is connecting with people, building a culture, setting principles, setting values and setting business rhythm and then continually improving it. Tom, talk about that. You’ve had some leadership role being second in command at this network. You also ran the Denver office. You were a partner at the firm, which is based out of the Midwest. Talk about the good leadership that you’ve seen, the bad leadership that you’ve seen and then how you have essentially taken that information and honed in on your leadership style and how you’re leading.

First of all, fundamental to all of this is a leader’s understanding of what leadership is. It might seem that’s intuitive, but I don’t think it is in all cases. People aspire to leadership or become leaders for various reasons. Some because they want a title and they want to tell people what to do, others because of pay. Others because they understand leadership and want to be in that role and influence people.

When the work culture within a company isn’t encouraging, the employees’ ability to work hard and be positive is significantly diminished. Click To Tweet

Are you saying there’s a difference between a leadership role and a leader?

Absolutely. There’s no doubt. If there’s something I’ve seen is many people put into leadership positions that don’t know how to lead. Fundamental to any leader being successful is understanding what their role is. You talked about and I’ve reflected on it over the years as well because as a lawyer, no one pays me to be a leader. Clients, particularly in private practice, pay you for your work so you have to work twelve hours and produce good work and be competent with that. At the same time, I had leadership roles as the managing partner of an office and all of that stuff. At some point, I had to understand that in order for the office to be successful, I was going to have to take additional time to the legal work I was doing to step back and influence people in the office and see where their gaps were, where the gaps of the office were, so that we could ultimately be successful as a team as opposed to just individuals.

That’s the plight of any law firm. You incentivize an individual, for the most part, to be successful but not necessarily for the firm to be successful in all cases. What I’ve seen and that compelled me to go into an in-house leadership role because I feel like there’s a greater appreciation in some cases in the corporate world. Generally, they pay people to be leaders. You’re putting in a leadership maybe sometimes because there are the skills that you bring but also because they’ve recognized that you have leadership skills and you should be leading a team. I struggle with that at first. I said, “Why are you paying these people money to lead? They should be doing something.” I want them drafting an agreement or I want them at the table negotiating. I’ve come to appreciate that if the company be it big or small, recognizes that someone has a skill in influencing people and bringing them together as a team and helping them function at their highest level, that is something worth paying for. That’s why you may have seen the news, the CEO of GE goes to be the CEO of Johnson & Johnson where their product lines are entirely different.

I don’t know what they do but what I’ve come to appreciate is some of these CEOs transfer industries where they have no experience. They’re not getting paid because of their knowledge of that industry and in certain cases but their ability to lead and bring a company back from a certain situation that transcends industry. I give those examples because going back to some of the points that you’re making, I do think the most effective leader recognizes what their role is and what they’re there to do. They get into the work of how they do that, how they influence people, how they create rhythm within a department, within an organization so that people are functioning at their highest level. They’re happy, they’re getting the mentorship and the tools that they need to be successful. That stuff in my career I thought was intuitive but now I’ve come to appreciate it’s not, particularly as you grow the number of people in a company and the department. That tone needs to be set by an individual and then passed down to others so that those constituencies can be successful.

TWS 13 | Mentoring Business Leaders

Mentoring Business Leaders: If someone has a skill in influencing people, bringing them together as a team, and helping them function at their highest level, it is something worth paying for.


What would you say are maybe the top two to three characteristics of a leader that you have tried to embody?

First of all, the biggest character is that they have the ability to be influential and I use that word, influence. I know there are plenty of literature about this because I’ve seen some leaders who say, “I’ve got a title. I’m going to tell people what to do and they’re going to do it.” If we are all robots, that would be a wonderful thing but we’re not. You need people to join your cause to be on your side, to want to achieve the same objective you are. In order to do that, that’s influencing them. It’s scoping out the personality and say, “What is it going to take for that person to get on board and to do what we need them to do?” Sometimes that’s setting an example. You do have to get your hands dirty a little bit and do that. Once they see that, they will follow you or deploy other skills. In some cases, they’re not going to get there. It comes down to that leader making the hard decision of letting that person go for the benefit of the department, the corporation or the company, whatever it is.

The ability to influence is probably a big characteristic. Humility is another big one that is huge for me. A leader who wants to put others before themselves, wants to see others succeed, wants to see the company succeed. That leader will be successful and that’s hard. I can’t say that I’m always the best at that. That is certainly something I work towards. The humble leader that we hear, the servant leader in some cases, those are the people that want to see other people succeed. They’re the ones who will put in the work and will do the things necessary to try to accomplish something bigger than themselves. There are certain charismatic leaders throughout different industries that we hear about in the news and otherwise that they get big headlines or whatnot. They might have successful companies. I go back to that. I think eventually those companies will stagnate if the ego gets too big, if that stuff gets too big because they will lose sight of who is important to make sure that enterprises are successful.

I think it’s Confucius but it’s one of those counterintuitive paradoxical ideas. If a person looks at a leader and leaders are the ones that tell everybody what to do but that’s not the case. It was Confucius that said, “Leaders who are soft are strong.” It’s the idea where they’re able to essentially take the situation at hand, take all the emotions involved and objectively or as objective as possible analyze those and determine what to do. At the end, who is the person’s best asset and the number one thing in their life, it’s them. If the leader doesn’t understand that, then it’s very difficult for them to get them to do things past a certain point. From a long-term standpoint, being able to have a lasting impact, lasting influence. You have to understand human psychology, what makes a person tick and then evaluate if they’re in the right role.

If you want growth in your business, the leadership first has to grow to expand their psychology and understanding. Click To Tweet

We can probably talk about that, which is people that are in roles that they have no business being in. Not necessarily based on them being incompetent. They well could be but it’s not because of them as a person. It might be because of their experience. It might be because of their conation, their natural tendencies, their strengths. One of the biggest things a leader can do is to get a team together, identify certain strengths, identify the roles where they’re going to be able to operate efficiently and make an even greater impact than if it was one or two people. This is something where this business coach made me understand. It sounds so fundamental but yet I look at human nature and without this, people get super frustrated, anxious and concerned which if you combine all of those things together, you have emotions that don’t allow people to do very good work. That’s the ability to create business rhythm.

I’ve understood there’s a brainwave pattern of your flow state. It’s right in between your Alpha and your Theta. There’s this flow state where you’re able to have complete focus. You have no distractions. It’s like you’re in that zone. I look at business rhythm. An ideal business rhythm is creating the structure in which a team operates, which has that very flow-like state. Talk about where you’ve seen clunky rhythm, maybe some of the previous firms where stuff didn’t get done. It wasn’t because people were incompetent but because this person didn’t know what that person was doing or what this step was or there wasn’t necessarily guidance by leadership. Talk about some of the clunky situations, the friction you’ve seen in the past. Also talk about some of the good business rhythms and then maybe how you’ve taken your new role in the last few years and established your team and established its rhythm.

In terms of where I’ve seen some clunkiness or some disruption in rhythm or barriers to establishing any rhythm, to begin with. It goes back to these organizations that I’ve either been involved with or they’ve been clients, whatever, where I’ve seen a fractured state of operations and leadership. There are certain functions within an organization that are dissatisfied. Maybe its marketing is always unresponsive and they don’t send the right stuff or they’re not up to par as similar competing organizations or your HR function is not helpful. There are these constituencies or services that reside within a company that seems to exist and no one seems to pay attention to them. That gets people frustrated and other things so that they can’t do their jobs or it ruins their day. You get out of the rhythm of sorts. As I’ve seen organizations overcome that, it’s been around first identifying that. You’ve got to have the appropriate feedback loops, whether it’s leadership or operators that understand how those different constituencies and the disruption that they’re causing are being disruptive.

The things we’re talking about are not intuitive for people. I keep on using that word as if everyone speaks the same language. I don’t think it is. People complain about HR and most people, leaders and otherwise saying whatever, that’s HR, marketing, “We’ll fix that, but we like our guy and that’s our guy and that’s how it is so deal with it and grow up.” That’s an antiquated philosophy. The more sophisticated leaders, the more sophisticated managers will step back and say, “As I look into different pieces within my organization, where are the barriers? What are the sources of frustration?” It’s not just identifying and say, “Go fix that.” We all have jobs. We all spend a lot of time. It’s not like you can tackle it all in the first place or one single meeting or get together and everyone’s good and you’ve re-established where you need to be.

TWS 13 | Mentoring Business Leaders

Mentoring Business Leaders: Feedback helps you identify the gaps that disrupt workflow.


They’re like, “We’ve got one issue. We’ve got five or six issues and five or six got pieces that maybe disruptive. Let’s take this one. Let’s look at it, let’s fix it, then we will get to the others as well.” It’s having a plan to do that. We do an example, I set this up as we have some standing meetings within our department which we call legal operations meeting and we’ve done exactly that. We’ve said, “What are the things in our day that are challenging? Is it our contracting processes? Are our IT flat boards conducive in helping us do the work that we do?” This group of us are going to be meeting to identify those particular pieces that are creating barriers within our department. We’re going to fix them, move on to the next one and then the next one so that we can create those efficiencies and create that rhythm that I think gives us the job satisfaction and gives us the tools that we need to be successful.

Most people become overstaffed because of bad rhythm.

Throw more people at it. To me, identifying what the fix is. Most people have the dumbest solution that I’ve seen as well but it’s understanding the process, thinking through it and then taking the steps to fix it.

A very well-created and then managed the business process, your start to finish whatever that flow looks like. When there are hand-offs in between these impact points of each department or business unit as you have handoff, it’s the clear understanding of both the party that’s giving and the party that’s receiving. That is typically where you find the most friction. If you don’t have a clear understanding, then it bottlenecks everything else going forward, especially if you have ten processes through your business process or your business flow. As you look at entrepreneurship, entrepreneurship interestingly enough is finding friction. All wealth and opportunity exist where there’s friction. Whether that’s making travel more convenient, whether that’s making communication more convenient, entrepreneurs are always looking for friction. What I find fascinating and it’s very ironic where most entrepreneurial-driven businesses fail because of their own friction.

That is the failure to understand what the business process is and assume that everybody else knows what it is. Properly documenting it, properly managing it, improving it, that requires a series of meetings and a series of reporting and objective measurements of what is expected, what is being handed off. The feedback loop that you mentioned, Tom, is as important in a very small two to five-person office or 5,000-firm if there’s more of it. Typically, those rhythms are very much the same. There are a few other things I wanted to get into, but I want to say that for another time. Thank you for reading. Tom, thank you. We will see you next time.

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About Tom Donohoe

TWS 13 | Mentoring Business LeadersTom Donohoe is a proven leader, problem solver and teamwork-oriented health care attorney who focuses on assisting business partners and clients in achieving their goals in a compliant manner consistent with their mission, vision and values.

Tom advises health care providers on a wide range of transactional and regulatory matters, including hospital/physician joint ventures, physician practice acquisitions, physician alignment and clinical integration. Tom also assists health care providers in complying with the Stark Law, Anti-Kickback Statute and other fraud and abuse laws and regulations.

Presently, Tom is located in Denver, Colorado where he is serving as associate general counsel for a regional health system. Tom graduated cum laude from Indiana University Robert H. McKinney School of Law in 2008 with a concentration and honors in health care law. He is admitted to the bar in Indiana and Colorado.


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Mid-Season Recap: Lessons On Entrepreneurship

TWS 12 | Lessons On Entrepreneurship


We are only halfway through the season, and we have been learning a number of great things from numerous guests on our theme of entrepreneurship. In this special episode, host, Patrick Donohoe gives a recap of the main core principles from the season so far. Calling back the past seasons’ themes, he weaves these lessons into capitalism and 2018’s life, liberty, and the pursuit of property. Don’t miss out on this great wisdom compiled and delivered to you, and learn more about defining what you want and valuing the power of relationships and the power of your state.

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Mid-Season Recap: Lessons On Entrepreneurship

This is going to be a mid-season recap of our theme. We still have a few more interviews to do regarding our theme of entrepreneurship. 2019 has been crazy for me. I usually have to travel maybe once a month or so for different conferences and speaking engagements. At the end of 2018, I had an incredible experience with one of Tony Robbins’ events, the Date With Destiny event. I was compelled to immerse myself in that culture. It’s been a wild ride. I’ve been to a handful of events so far. I’m recording this in July of 2019 and I have one event every month until the end of the year. It’s going to be an even crazier and busier travel schedule. I’m learning so much. I had felt compelled to review a lot of the main core principles that we’ve been learning this season from the guests on entrepreneurship and weave them into our previous themes on capitalism and in 2018, life, liberty and the pursuit of property. They all weave into one another. In the end, they provide something that I would like to focus a lot of my thoughts on now.

Main Takeaways From Events

Let me first step back and talk about some of my main takeaways from all of the events that I’ve gone to and the coaching that I’ve had. I have two business coaches now. There are two female business coaches, which is a much different dynamic than the coaches I’ve had in the past. The guests that I’ve been so fortunate to interview this year. I’ve broken down and summarized my takeaways into three things. First is to define and discover what you want. The second is the power of relationships. The third is the power of your state. I’m going to get into the details of all three of those. These came to me almost immediately. It was incredible. I’ve learned things about business finance, the mechanics of the different focus points and impact points of your business and how to have maximum growth with the least amount of improvement. I’ve learned things about tax strategy, other aspects of wealth strategy and all of these different things.

It’s not just me observing my business and myself. It’s also observing others’ businesses. That’s one of the main benefits I’ve gotten from this Platinum Partnership group with Tony Robbins. I’ve been exposed to thousands of other successful business owners. I’ve experienced what they’re going through, their struggles and their chokeholds. It has allowed me to summarize. I thought of these three things almost instantly. I believe that if you don’t understand these three things, you’re going to discover them eventually. I’ll put it that way. This is not based on my fourteen years of experience as an entrepreneur. It’s now my experience with thousands of people, both with the clients who I get to work with and my team gets to work with, as well as going to different conferences. It’s hearing stories, hot seats and much more successful than I am business owners and what they struggle with. Let me start with the first one.

Takeaways From Platinum Partnership: Discovering What You Want

I’ll start with a story. One of the conferences I went to, which is an advanced business mastery course and this was one of Tony’s smaller events. It was in Amsterdam. It was for five days. There’s an extra day exclusively for the Platinum Partnership. Most of the crowd was from outside the United States. It was amazing to see all of the different translators in the back and the languages that the event was being translated into. This was a smaller amount of people. There were probably 3,000 or so people there. It’s still a big number, but relative to some of his other conferences, it was much smaller. The last day was where this story comes from. This was a business owner who was in South America. He owned a big piece of real estate and business that had to do with the shipping port of Uruguay. He was part of a hot seat.

Oftentimes it’s easy for us to look at somebody else’s business and make recommendations than our own. Click To Tweet

One of the things that Tony and Jay Abraham did on the last day of this Platinum Day was known as a hot seat. They gave the opportunity for anyone to go to the mic and talk about some of their struggles in business. We’ve already done several days with twelve to fourteen hours of all business that spoke to every single thing that everyone who got to the mic and did a hot seat talked about or had a struggle with. Despite being able to have the education in the previous sessions, you still had these same struggles. It was interesting.

This guy, in particular, he had to raise $7 million to finish a building that had to do with his contract renewal for this shipping company that he had. He was not able to answer some of the basic questions. What came out of his mouth was all why he couldn’t do something, not how he could do something. It’s a very simple shift in language. The thing that hit me is when either Tony or Jay Abraham asked him the question of, “What do you want out of your business?” He couldn’t answer that. It hit me hard. To conclude this story, he got to the mic and wasn’t able to articulate what he wanted. Also, he was making excuses for why he couldn’t raise this amount of money.

Based on the revenues and success of his company and the money he was trying to raise, $7 million, it was like a drop in the bucket. Tony said something interesting to him. He went face-to-face with this guy and said, “I will write you a check right now. Pitch me on your business,” and the guy couldn’t do it. As he is talking through his issues, another thing occurred to me. Oftentimes, it’s easy for us to look at somebody else’s business and make recommendations, be a consultant and know what they could do to improve this, that or the other. When it comes to your own business, because you are in it and that’s where I think the whole, “Working in your business versus working on your business,” is used so often because of how challenging that is.

I’m not placing any type of judgment on this guy. I just found it fascinating. There are so many blind spots that I have met with the business that I have been discovering. With this individual, he had a guy that would give him money right there but he did not have the wherewithal, the state, the understanding, the knowledge and the basics of any business to be able to tell Tony why he should put his money there. The conversation went on and he got the nuggets he needed to go back. They even made him make a commitment regarding it that they were going to follow-up with him on. There are chokeholds in a business.

TWS 12 | Lessons On Entrepreneurship

Lessons On Entrepreneurship: The chokehold of any business is the psychology of leadership.


What I discovered about most businesses and myself is that the chokehold of any business is the psychology of leadership. A few years ago when I was having some cultural issues with my business, we had to let a bunch of people go and other people quit. All this happened within a few months. It was crazy. It made me doubt my abilities and myself. I had those feelings of insecurity. I didn’t step up as a leader. I looked at the psychology of my culture. It wasn’t until now where I connected the dots to the growth of my culture, my business and what I want to do in life first has to start with my psychology. It has to be there. My influence and leadership abilities have to be there before I expect my team or anyone within my stewardship to step up and represent that psychology or culture.

I realized and recognized a lot of limitations in myself. Now, I’m focused on my personal growth as a leader. That’s why these business coaches have been extraordinary in helping point out my weaknesses, my blind spots, to help me up my game as a leader. As I do that, the game and psychology of my team will subsequently rise. That’s the theory. It sounds awesome in theory. I do believe in that principle though and that’s why I put so much emphasis and resources behind that, especially for myself. Whether you’re an entrepreneur and working for a company, it doesn’t matter. Sit down and define what you want. Write it out. Let’s say you’re in your car and you’re going to start thinking about what you want. I’m not saying that at all. This is maybe a good tactic.

Tony Robbins has this exercise. If you go to his website, which is TonyRobbins.com/priming, he takes you through his exercise. It takes about ten minutes of breathing exercise and a visualization exercise. This puts you into this state of mind where you are thinking clearly. There’s nothing going on around you. Maybe put some noise-canceling headphones on while you’re doing this. In that state, ask yourself some questions, “What do I want professionally? What do I really want?” It’s not what you don’t want like, “I don’t want to stay at this company. I don’t want to be in this position.” It’s, what do you want? “I want this position. I want this type of company. I want this type of lifestyle.”

Once you connect with that, think through why. There’s this exercise known as the Seven Levels of Why. I don’t know if you always have to use seven levels, but ask yourself based on the answer you give. “I want to make a $500,000 a year.” Why? “It will allow me to provide this type of lifestyle for my family.” Why do you want that? “I care about my family. I want to provide them good experiences. I don’t want to have financial anxieties.” Why don’t you want financial anxieties? Why do you want to provide this type of lifestyle for them? Keep going and write all that stuff down. You’re going to get to this core why of what you want. Typically, it’s going to be, “I want to be happy. I want to have an adventure.”

Relationships are hardwired into who we are. Click To Tweet

It’s going to narrow down into something very simple. I’ll end with that first takeaway which is discovering what you want. It doesn’t have to be, “I want to make this amount of money. I want to have this type of position or this lifestyle.” You’re going to achieve that. You have to believe and want it. Write it down first, but you’re going to want stuff beyond that. This is one of those infinite game types of principles where just because you come up with it and achieve it, it doesn’t mean that that’s it. It’s going to be this never-ending pursuit. Start with something and once you connect to that, make a decision that it’s what you want.

The Idea Of Proximity

The second thing I want to talk about is something that I have experienced for quite a long time with business, family, extended family and friendships. It’s the idea of proximity. There’s a saying, “Proximity is power.” That is the nature of relationships. Relationships are hardwired into who we are. If you go back to a part of our heritage, our ancestry which is in our DNA, people weren’t alone. They were always together. They ate together around the campfire. If you go back thousands of years, archeologist will always go to where people ate. That’s where they found all this stuff. People gathered. How that happened over and over again built itself into what we desire. I believe that if you work hard enough and you repeat and have these behaviors, people can be happy by themselves.

Do you want to go against thousands of years of our ancestry? People want to be with people. I look at all the opportunities that I’ve had. It has come as a result of relationships. However, relationships also have some characteristics, healthy relationships. It’s not about how to do something, how to invest here, how to set up your tax strategy this way or how to become this. It’s who and this whole idea of proximity. I believe in the six degrees of separation these days is probably two or three. It has probably been cut in half. It’s looking at how important reputation is, how important it is to have integrity. Do the right thing. Put other people first, which is not a natural principle. As much as we’re meant to be around other people, being in groups and want relationships, we also have these fears and anxieties of being taken advantage of.

We’ve had these fear and anxieties of what people will think and say about us. That means a lot. Social media is a perfect example. We’re all connected in theory, but people lack connection more these days than any time in history. It’s this idea about understanding the value of relationships and putting yourself around good people. That’s one of the main reasons why I wanted to immerse myself this year in this group. Probably 80% of the stuff that Tony Robbins talks about, does and believes, I’m all in. The 80% is what I focus on. I don’t care about the other stuff. The other stuff maybe because I don’t understand.

TWS 12 | Lessons On Entrepreneurship

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

Looking at the group of people that are all there paying a large amount of money, spending a lot of time away from their families and businesses to commit themselves to grow personally, I wanted to be a part of that group. I realized that this immersion would help me become a better husband, father and leader. It’ll allow me to focus on my psychology, my state of being, my happiness and my physical wellbeing. If that wasn’t taken care of first, the experience I have with showing up for my family, business, friends or any other role that I play in life will be less than what my potential and what I could do. That’s where I connected the dots. This is a time where I am able to immerse myself in new relationships. I’m able to be around people that are driven like me and learn certain things. I’m able to make connections and contribute in a way that I may not be able to contribute to others. It made so much sense to me. Now I’m paying a huge amount of money to do it.

I’m taking up pretty much my entire year with the goal of achieving this state of personal development, as well as an improvement or enhancement of my leadership abilities. It’s been incredible. I’ve had so many breakthroughs. I’ll use an example. I was talking to someone about Donovan Mitchell. He is a professional basketball player for the Utah Jazz. I’ve talked about it before on the show. He was either a runner up or the Rookie of the Year. 2018, he had an incredible season. He had a shoe named after him now. His nickname is The Spida. He did this commercial with Tom Holland about his shoes. Don Mitchell has his own shoes with Adidas now. He’s not just an amazing player, he’s an amazing person. How do you know that? I don’t know him personally.

I’ve met him a couple of times. How do you know he’s a good person? He does a lot on social media. If you are on social media, follow this guy. It’s amazing. He has gone to some of the Utah football games like the University of Utah, Utah State Games and local basketball games. He walks around town. He never denies a signature or a photograph. He makes it fun. He’s so approachable. When they lost to the Rockets in the last game one evening, we were bummed. The next morning, my wife was at Target, which is down the road from us. It’s halfway between where I live and where downtown is where Donovan Mitchell lives and a lot of the Utah Jazz. Cynthia saw him at Target. She and her friend got a picture with him and were talking with him.

Donovan Mitchell has this personality. I don’t know if he designed it or he was raised that way. I had a conversation with somebody that contrasted that with John Stockton. He was probably one of the more famous Utah Jazz in the past. John Stockton was a prick. He did not talk to people and give autographs. This person was telling me that he used to go to this bread store. He would wait in his car for everybody to leave and then would get out and buy bread. You have Donovan Mitchell who’s been incredible. The culture of the Utah Jazz, the season tickets are almost sold out. My point is that the person you show up as is what makes a massive difference to others.

The person you show up as is what makes a massive difference to others. Click To Tweet

In my book, Heads I Win Tails You Lose, one of the stories I put in was about LeBron James and how he treats his status as a brand, as a business. Is that the angle that Donovan Mitchell has taken? Maybe or maybe not. The idea is if you can connect with people. People are what provide the highest degree of happiness, fulfillment and achievement. Without people, it would be a pretty miserable world. I look at what we can do as human beings, as individuals. We’ve all had crap happened to us. We’ve all had these reasons to not play full out. We’ve had failures. We have our insecurities, inadequacies and weaknesses. This is where I come to the last point I’m going to make, which is controlling your state. This has to do with how you show up in those relationships and what has those relationships thrive.

The Idea Of The State

I’ll give you a couple of examples of some relationships. I can talk about this principle with some stories. The idea of the state is a big thing that I learned at one of these other conferences that Tony Robbins puts on, which is called Unleash the Power. This is something that hit me. I grew up as an introvert. I was shy. I never had a serious relationship with a woman until my wife and I’ve been married for several years now. I grew up where there were some events of my life that made me shyer and more introverted. I wasn’t expressive. I was afraid of what people thought or say. There was some fear built up based on experiences. I had repeated those stories over and over and it affected me. There were some events that caused me to break out of my shell. It’s one of those things where I’ve connected to the control that I have over how I show up, my state right now and if you think about everything that you will ever want. I’m talking more materially, whether it’s the salary amount, a job or a lifestyle that you want.

The only reason why you want those things is that you think it’s going to produce a certain state. I look at the control that we have over defining a beautiful state that we can live in without those things. I’m not saying that we shouldn’t want those things. Having an adventure and experiencing life, there’s being able to travel and go to events like the ones I’ve been talking about. Being able to take vacations, even something as simple as that requires financial resources. I get that. At the same time, what makes that so much easier is understanding what your state of mind and being consists of and figuring a way to put yourself in that state as often as humanly possible. Let me talk briefly about that.

The first is a triad. The first principle of that triad is your focus. You can always look at the glass as half full or half empty. Every experience that happens in life can be construed as good or bad. In the life that we live, people would kill. They would die. They would walk across the desert. They would do that to be in the United States. That is something that we could wake up and be way more grateful for than we usually are. Be grateful for the time in which we live. We don’t have to worry about the things that people had to worry about 100 years ago. One hundred years ago, people were working their ass off during this time of year so that four months from now, they wouldn’t be freezing on the brink of dying.

TWS 12 | Lessons On Entrepreneurship

Lessons On Entrepreneurship: Paying attention to our physicality or physiology is huge when we want to live a beautiful life and a beautiful state.


We don’t have to worry about that these days. We have so many things that are part of life that we take for granted. That sounds super cliché, but if you think about it, we could focus on something as simple as that. The feeling of gratitude, being able to understand and acknowledge that, helps us to see our experiences, whether it’s today or tomorrow, from a different perspective. That allows us to experience a different state and different degree of happiness, fulfillment and so forth. That’s the first, is focus. The second is physiology. It is your physical wellbeing. When I look at physiology, something’s connected with me. I want to do more research here. I look at all the different experiences we’ve had in our life. They’re all in us somewhere.

We can’t remember them all, but part of our unconscious mind is that most of that stuff is there. Most of our life is on autopilot like our heart beating, reactions to things and language. We use the same words. We say the same phrases. We have these very similar thoughts over and over. A lot of our life is on autopilot. Much of that is with our physical body. Our body is taking care of itself without us giving direction to it. I look at how repeated the behaviors are, whether it’s the language we use, the things we say, the things we tell ourselves. How we show up has been programmed into our habits. Those habits continued to be reinforced over and over again.

Looking at focus is one of the first ways in which you can start to reprogram your habits. The second thing is looking at your physical wellbeing. A lot of those things are built into our nervous system. We react to things that way. When somebody says this or does this, we react this way. It’s there. As far as controlling our state as we start to focus on different things, paying attention to our body, especially our stature, smiling, chest up or shoulders back. There are several things that, if you understand body language, tell the person what you’re feeling without you saying anything. That’s why nonverbal communication is 93%. It’s your feet position, shoulders, eyes, chest, smile, and frown or where you look. There are all these tells that FBI agents and interviewers know to a T but we don’t know those but they’re built into us. Paying attention to our physicality or physiology is huge when we want to live a beautiful life and a beautiful state.

The final thing is language, which are the words that we use. I can’t remember what the statistic is, but we have a set of vocabulary that we consistently use. We all know what the positive words are and what the positive tonality is. We know what the negative words are and the negative tonality. As much as we control our focus, we control how we define that focus, which is typically in words and language. When you define an experience or your physical state, when you put an adjective on something and start to describe something, you can easily say that it’s negative as you can positive. Most people, because of these survival instincts that are within us, our fear of being and what people will say, protection to our self-esteem, we typically will use negative patterns. Those affect our positive state. In the end, this may sound woo-woo to you and it probably is. This is what I’ve been going through. I’ve taken all of these experiences that I’ve had, thousands of conversations over the last six months and boiled them into these three things, which I have connected as the most important to me.

Every experience that happens in life can be construed as good or bad. Click To Tweet

I look at the pursuit of an entrepreneur, all the different people that I’ve interviewed, both in the season on capitalism and this season on entrepreneurship. You’re going to see the same theme throughout, which is people overcoming certain things, digging down deep. They may have not articulated what I have here, but I look at the power of relationships, the power of controlling your state, making certain decisions and difficult moments and in the end, understanding what you want. I’ll go back to that relationship story I was going to tell you. I was in Dallas for UPW, the Unleash the Power Within, which is a Tony Robbins event. Instead of coming home the last day, I drove down to Austin and did a video interview with someone that I’m doing some joint venture type of marketing with.

Pursuit Of Entrepreneurship And Relationships

I’ve known this individual for several years. I met him because another business associate friend of mine, we were having dinner with a very famous entrepreneur author in Austin several years ago. We decided to invite this individual. He expressed a lot of gratitude since then to us for inviting him. It was an amazing dinner. It was a lot of cool and amazing conversation. Over the course of time, we’ve talked back and forth. We have some mutual contacts and connections and I decided to maintain that. It led to a business opportunity. That’s what we’re pursuing now. This time when I was in Austin after we were done with the video shoot, we were going to go to dinner because I was leaving the next day. We ate at this amazing restaurant. The food was incredible. This individual asked if I wanted to invite anyone that I knew in Austin. Almost immediately, a person came to mind.

This individual, I’ve known for several years as well. I had an immediate bond and connection with him when I first met him. He happened to be the guy who bought the very first copy ever of Rich Dad Poor Dad. He’s writing a book with Robert Kiyosaki. I’m going to interview him. I knew he was in Austin. I didn’t know where. I reached out to him. I’m like, “I’m doing this dinner. I’m here just for the night. We’re doing it at this place.” The place happened to be within the same complex as his office and about five minutes from where he lived. He had barely, within the hour just got home from a writing retreat that he did at his place in Colorado in the mountains. We had about an hour of conversation. I was able to bring these two people together. Even though they didn’t know each other, I’ve created two additional networks.

It was such a powerful conversation. The nature of the conversation had to do with, “How can I help you out? I can do this for you.” It was an incredible experience. Never underestimate the power of relationships. You don’t know who people know. You don’t know who people will become. The greatest mistake I’ve made as a business owner and as an individual over the past is failing to recognize the importance of relationships. Over the last few years, this has been something that I’ve been so driven by, which is, “How can I create value for more people? How can I help here? How can I connect this? How can I influence this?” It’s not, “What do I get out of it?” It’s, “How do I bind people, help people and provide value?” I never called it proximity is power or the power of relationships, but I’ve always believed that people are assets.

TWS 12 | Lessons On Entrepreneurship

Rich Dad Poor Dad

There’s always something to gain by having healthy relationships. A lot of the business failures that I’ve seen over the course of time are those that don’t care about their reputation and don’t care about others, “It’s all about me.” I get it. We all have this need to be significant and see ourselves as important in the world. If you look at the John Stockton principle, when you express that, whether it’s overtly or covertly, covertly in his case, it never ends well. You build a reputation where people don’t want to have a relationship. Those are the three things. This show revolves around business, ideas, taking those ideas and bringing it to fruition, but I thought it would be good for me to say what’s up and tell you about what I’ve been doing over the last several months. Weave in some of the things I’ve been learning and what they have to do with entrepreneurship.

I have been happier over the last couple of months than I have in a long time. I associate that with what I’ve discovered about myself and these three principles, defining what you want, understanding and believing in the power of relationship and wanting to be around the who and not how. It’s, “Who can help you do this?” and not, “How do I do this?” It’s who’s already done it and building relationships where you may not have a value from that individual for years. You never know. It’s also the state. I have 60-plus employees. I have a lot going on. We have thousands of clients. There’s always something. I was gone. When I come back, there was a toilet that leaked on the fourth floor and trashed all of my marketing books. I probably have a hundred books that now toast. This stuff is going to happen, but I choose how I react to that. It didn’t affect me the slightest.

Sometimes I look at what impacts us and how we can control it and control and understand our state of being and put ourselves in the most beautiful state possible as often as possible. You’re going to see that. That’s going to impact the relationships you have with people, the goals that you set and your success. I hope you got something out of this episode. I’ve made some offers with the book in the previous episodes. If you want to go pick up the book, it’s FreeBook.HeadsOrTailsIWin.com. We’re giving the audiobook for free if you buy the physical copy. You are amazing. Thank you so much for your support. I’ve been getting tons of good feedback for some of the episodes, videos and interviews. Keep them coming. The podcast is at ParadigmLife.net. I hope you’re enjoying this season on entrepreneurship. We get some cool interviews coming up. Make sure you stay tuned to future episodes.

If you are new, we did three seasons. We did all of 2018 based around John Locke who was an influential philosopher several hundred years ago and coined the term, “Life, liberty and the pursuit of property,” which became the pursuit of happiness in the declaration of independence. We did a season on life, a season on liberty and a season on the pursuit of property. You can go check those interviews out. That was such a fun year. The first four months of 2019, we did our theme on capitalism. Now, we’re doing on entrepreneurship. I’m not sure what we’re going to do for the third season of the year. I have some ideas. Thank you so much for your support. That’s it. Thanks. See you soon.

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Overcoming Adversities And Keeping The Entrepreneurial Spirit Alive Through Tenacity with Ron Coury

TWS 11 | Overcoming Adversities In Business


Most of life’s greatest moments happen behind its curveballs. The only way we come out of it is by having the tenacity and persistence to go through the challenges without giving up. Someone whose life has been embodying this is Ron Coury. Ron has been a casino dealer and a realtor, as well as a partner in restaurants and gaming bars, major graphics and glass companies, and several automobile dealerships throughout the western United States. He gives us a peek into his book, Tenacity: A Vegas Businessman Survives Brooklyn, the Marines, Corruption and Cancer to Achieve the American Dream: A True Life Story. Load up some inspiration as Ron shares how he conquered the odds with his entrepreneurial spirit, willingness to work, and refusal to accept failure as an option. Get inside the world of Las Vegas during its early years of gaming and learn how it affected Ron’s business and how he overcame that adversity.

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Overcoming Adversities And Keeping The Entrepreneurial Spirit Alive Through Tenacity with Ron Coury

My guest is Ron Coury. He has released a book called Tenacity: A Vegas Businessman Survives Brooklyn, the Marines, Corruption and Cancer to Achieve the American Dream: A True Life Story. Ron is a former casino dealer, realtor, as well as a partner in several restaurants, gaming bars and other ventures in the Las Vegas area. It was a fascinating story, a testament to this idea of tenacity and how important that is in weathering the storm that entrepreneurism typically brings. I hope you’ll enjoy the interview.

Ron, thank you so much for taking the time to talk with me. I’m excited about this interview.

Thank you, Patrick. It’s great to be with you.

You’ve had quite the history. Why don’t you give the audience a Reader’s Digest version of it and then I can interject with some questions?

Back in 1972, I was a teenager back in Brooklyn, New York. I found that college wasn’t suited to what interested me after three semesters. I joined the Marine Corps and after a couple of years of active duty service, I found myself at my last duty station in Barstow, California which was a two-hour ride from Las Vegas. A buddy of mine that I met in boot camp and we ended up being stationed together. We traveled to Vegas on our days-off every weekend and enjoyed the town quite a bit. When we got released from active duty, we moved here and went to work. As a result of working a couple of years and wanting to get into business for ourselves, it took us a couple of years to save some money and get some experience about living in Las Vegas. We purchased our first tavern. There was no real roadmap of what we intended to do with our lives except that we wanted to do more than just punching a clock for 40 years. What started with one tavern ultimately grew to over a dozen businesses.

TWS 11 | Overcoming Adversities In Business

Growing up on the East Coast pre-Marines, were you entrepreneurial? A common characteristic is seeing that school is not right for you. You want to march to the beat of your own drum. Were you entrepreneurial then or did some of that happened during the Marines?

I released the book named Tenacity where I described my life story. In that book, I talked about a Christmas gift I got one day from my dad, which included a wooden shoe shine box. I was a kid and I was going to a parochial school. There was a uniform with the white shirt, tie and black shoes. The shoes were expected to be shined every day. My dad got me a shoeshine box and while I wasn’t thinking I was an entrepreneur at age twelve. I thought the shoeshine box might pose an opportunity to earn some money. On the corner of the street where I lived was a subway station that took local businessmen to the Wall Street train stop every morning. I’d get up early before school. I’d go down to the train stop and offer a shoe shine for $0.10, which in the late 1960s was not a little bit of money. I could knock out ten shines before school started. I felt a bit of the entrepreneurial spirit earning money, coming up with an idea from nothing and going home with money at the end of the day. It started there.

A group of friends I was with as teenagers started a band. I was not musically inclined and not wanting to be left out, so I suggested that I could be the band manager while each of them played instruments. As the band manager, it was my job to find paying gigs and the entrepreneurial spirit kicked in again. I identified a church hall that I was an altar boy for years earlier. The monsignor let me use the church hall for nothing. I learned a great new word called consignment. A friend in Brooklyn who had a beverage company let me use all the beer and soda I could put in my car and pay for what we ended up selling at the event.

Things were a lot looser back in the late 1960s where now, one would wonder how a teenager sold beer. It just happened. My friend said, “Load up whatever you want, come back, and pay me for whatever you sell and bring back what you don’t sell.” There we were, selling beers and sodas, making $1 or $2 on each one for something that costs us $0.10 to buy and charging admission at the door. We had a great night running our own venue. Shortly after that, I joined the Marine Corps and the entrepreneurial spirit got turned off for awhile until I moved to Vegas and was a civilian again.

Adversity is inescapable. What defines you is how you deal with that adversity. Click To Tweet

It sounds interesting probably the story to why you chose the Marines. First off, why you enlisted and then chose the branch of the Marines as opposed to the other branches of the military. Maybe spend a moment on that.

Another thing that your audience might not be familiar with is the draft. Back in the ‘60s, there was a lottery every year and each birthday would be assigned a number. The lower your number, the more likely you’d be drafted. At the time, there was an ongoing war in Vietnam. If you had a low number in the draft, you would likely be drafted. If you didn’t have a student deferment, you were likely to go to Vietnam. When I quit college, I received a draft notice within days. For all the inefficiencies of the government, the selective service system was on the ball. With so many guys in my neighborhood going to Vietnam and coming back without arms, legs, and deceased, I wanted to optimize my chance of coming back whole and coming back at all.

Rather than being drafted in whatever arbitrary assignment the draft board would render, I went and interviewed with recruiters from each of the branches. I learned about the Marine Corps training. I learned that it was harder than most, but it trained you better for war. I thought by going through that I could optimize my chances at success. I enlisted in the Marine Corps. It negated the draft notice and I reported for duty in March of 1972. Upon graduation from boot camp and advanced infantry training in the summer of ‘72, my buddy and I had orders for Vietnam as did everyone in our battalion in boot camp. At that time, President Nixon announced de-escalation, which meant no one else would go over to Vietnam and many thousands of troops per month would be withdrawn. We ended up trained for war but without a war to go to. We ended up being assigned to a supply center in the middle of the desert in Barstow, California. That’s how the Marine Corps thing happened and how I ended up in Las Vegas.

Out of that story, I find it interesting where it seems like you use some foresight to look at a certain outcome. One being you’ve seen guys coming home without arms, legs or not making it home at all. You made a decision as to how you would mitigate that risk, which nobody wants as a result of their service. Did you notice that foresight previous to this and some of the things you did, whether it was the shoe shine thing or otherwise, and then carry forward that to the foresight that you use in going to Las Vegas?

TWS 11 | Overcoming Adversities In Business

Tenacity: A Vegas Businessman Survives Brooklyn, the Marines, Corruption and Cancer to Achieve the American Dream: A True Life Story

I believe that my parents raising me as they did had instilled in me a level of perseverance and determination to chart my own destiny. Whether it was taking an insignificant Christmas gift like a wooden shoe shine box down to earn money or not want to be left out of the band concept but finding my own place by suggesting I’d be the band’s manager. It was something that developed naturally for me. It carried me through life when I came to Las Vegas and I became a casino dealer. As I worked on the tables every night at the Tropicana Hotel, I envisioned getting into business for myself someday for quite a unique reason. My dad’s three brothers died from cancer. My dad had survived colon cancer. I was mindful that with the strong family history, it was not likely that I would dodge the cancer bullet. It was more a question of when it would come.

I moved to Vegas. I got married and planned to have children. I remember one day, I was standing behind a blackjack table with no customers at the Tropicana. I was thinking, “What would I do if I got cancer one day and I was unable to support my family? How does someone earn money when they cannot report to work every day? In fact, how would you even make a house payment and a car payment when you were earning nothing?” I thought of getting into a business where if I could grow it and put in a good management team, I would generate an income whether I could physically go to work or not for as much as a years’ time. I became a bit driven to find a business that I could get into realizing I didn’t have much of an education. I didn’t have the degrees to become a lawyer, doctor or an architect. I just had a willingness to work and a refusal to accept failure as an option.

With your experience in the Marines, you said your entrepreneurial spirit was suppressed there for a few years. Did you gain anything, whether it was the discipline factor, working in teams or camaraderie that allowed those thoughts in regard to building a business and specifically building a team?

I believe it instills in you a level of determination that you will come up with an idea and whether you have to go through a barrier or around it, not let failure prevail. As a result, if I set my heart on something, I wasn’t willing to take no for an answer very easily. There are multiple instances of such things in the book that I wrote that describes that in greater detail. To find the right business for someone without a formal education was the challenge. One of the things I did as a dealer at night was I decided to become a realtor by day. Las Vegas was a very small town back then but I saw a great growth potential so I could sell real estate during the day. I can pick my hours. I could work the casino job at night.

There's never a wrong time to do the right thing. Click To Tweet

As a result of being a realtor for four years, an opportunity developed, which was a tavern. As I contemplated it, I thought I can hire people that know how to bartend, what a tavern would need is a strong hand, which in answer to your question, the Marine Corps built in me a level of comfort that I was not only in great physical shape, but I could handle myself. Back then it was not like the taverns now. People are very conscious about drinking and driving. Most people have two or three drinks the most and call it a night. Back in the ‘70s, guys would pound down drinks all day long and you had quite a few more drunks than you do in a bar now. A strong hand to run a tight ship was necessary. I felt like I had the training to do it.

You just need to go into businesses and make some good choices with managing books, ordering products before they run out, the simple things. It was a plate full of duties that I had to manage. Getting into that first tavern, later building a kitchen and learning the restaurant business on the go was quite interesting. It turned out to be quite lucrative for us, especially when the unique things about Las Vegas Space Taverns is you can engage in gaming whereas taverns and other cities, including Atlantic City, cannot. When you bought a bar and you had a couple of slot machines in the corner, they weren’t a great source of revenue. When interactive gaming became a reality in the 1980s with the invention of video poker, taverns became less a means of generating revenue by selling drinks, chicken wings and hamburgers, but getting more a gaming property. Marketing your property to bring in players keep them happy with free drinks, good food, and comping them and keeping those $100 going into your machines became the way of business. We ultimately parlayed that first location into a total of four.

As you look back during that period of time, the ‘70s to early 2000s, and the success that you experienced, that’s an environment that changed drastically over that period of time. Las Vegas is what I’m referring to. What would you say were some of the biggest challenges that you faced in building the empire that you built?

One of the big challenges which the book is centered around is as Las Vegas grew with gaming, they began to limit the amount of growth that a tavern could engage in. They are pretty much limiting taverns to fifteen slots. They are requiring that you be a hotel before you can engage in unlimited gaming. There are outlying jurisdictions to Las Vegas with outlying cities, much like you would go from a neighborhood in New York from one neighborhood into another. You would cross the street in Las Vegas and you would be in one of these other cities. It wasn’t a great track, but these outlying cities had their own city councils, their own police departments, and offered more gaming growth because they did not enjoy the building boom that was going on in Vegas. The challenge I encountered was as I wanted to grow in gaming, we purchased a piece of property in one of these outlying cities that did not have a room of requirements.

TWS 11 | Overcoming Adversities In Business


We were zoned for non-restricted gaming and purchased a half-acre of land on the main thoroughfare believing it would be a no-brainer to get the necessary use permits because it was properly zoned. Unbeknownst to me at the time, there was a councilman who was a competitor in one of my other non-gaming business. He intended to be a competitor in the food and beverage and gaming business. He didn’t disclose any of it and he was a staunch critic of our licensing after we already bought the property and started building the casino. He used his small-town police department to frame me in multiple felony charges. It was the training that I received in the Marine Corps that enabled me to overcome those challenges in some very creative and unique ways.

As you could imagine, fighting a city that’s pitting a fight against you with tax dollars when you’re just a small businessman wasn’t easy. To overcome the charges that they framed me with and the levels they would stoop to, to try to do away with me as a competitor to this councilman in the private world of business is the centerpiece of the book Tenacity. I don’t want to give up how it turned out because it makes for a great story with death threats that I encountered, what I did about it, and how I confronted this councilman one day, face-to-face. It was that level of diligence, determination and perseverance that enabled me to ultimately overcome those challenges and build and operate that neighborhood casino.

Being in the Marines, where you’re being prepared for war and what’s on the line is life itself, both your own life and the life of those you’re serving with. You’re looking at the discovery process there, I know that it’s profound. I haven’t served in the military but I’m around many who have. At the same time, I look at what you experienced there as far as an understanding of yourself, what you can handle and what you can persevere through or over as it related to this specific experience. What did you learn about yourself that was different from some of the other experiences you had leading up to that?

I learned that as you try to grow, what is inescapable is adversity. You are going to encounter obstacles if you’re trying to do big things. In building nearly twenty businesses, there were certainly some obstacles. Particularly in addition to developing that neighborhood casino, I started in a limousine service. I found that breaking into the transportation business in Southern Nevada also came with some very interesting challenges. If adversity is inescapable, then what defines you is how you deal with that adversity. To fight back and not break the law yourself is very challenging. When your opponents are willing to stoop to anything to do away with you as a competitor, to overcome that and prevail and maintain your level of dignity, ethics and honor was a challenge. I truly attribute service in the Marine Corps to helping me prevail in those challenges.

As a final question, this goes and relates to your experience and what you could potentially teach other budding entrepreneurs, existing entrepreneurs or business owners. What are a top couple of things would you counsel your 21-year-old self, your post-Marine or right as you’re moving to Vegas self that may have helped you navigate waters differently?

I’m pretty happy the way I navigated the waters. I wouldn’t suggest doing something different. I could not have accomplished what I was fortunate enough to prevail in if not for a developing mind, body and soul. Mind, you cannot let adversity overcome you. You need to think about the challenge in front of you and determine a strategy to overcome it. Body, stay in peak shape, not knowing what’s to come. It wasn’t just running a clean and safe feeling tavern so customers would come in. In 2005, I was diagnosed with esophageal cancer. I endured a twelve-hour surgery where I was opened from chin to belly button. They re-sectioned half of my stomach, took out my esophagus, and connected my remaining stomach to my throat. That particular cancer only has an 8% survival rate. That is because of the aggressive nature of esophageal cancer, plus most bodies are not able to be filleted for twelve hours. If I were not in great shape at the age of 53, I wouldn’t have survived that.

In soul, what I refer to is not being religious and going to church every Sunday. It’s more on making decisions that I got coined the phrase to my three children, “There’s never a wrong time to do the right thing.” If you live life by the golden rule, “Do unto others,” and you can attach being in good frame of mind, having a strong body to do what you plan on doing, with the right mental attitude, then a lot of your audience will find that when adversity comes, rather than saying, “I never saw this coming,” they’ll say, “I knew it was coming. I just didn’t know in what way it would come. I’m going to sit down, strategize a way to get over this challenge, and not let failure be an option.”

We’ve talked about it briefly, where adversity is one of those catalysts to grow. Trying to avoid it is unwise because the lesson that you can learn through adversity is profound and they’re going to continue to come. Ron, this has been awesome. Thank you so much for your time. What’s the best way to buy the book? What are the best ways to learn more from you if the audience feels inclined to do so?

TWS 11 | Overcoming Adversities In Business


The book is available in four formats on Amazon, hardcover, paperback, audiobook which I hired Hollywood legend, Michael Madsen, to do my audiobook. Many will know him from Reservoir Dogs, Kill Bill, and the Donnie Brasco fame. He’s from Chicago. He did a great job with my audiobook. It’s also available as eBook via Kindle. All four versions are on Amazon and the book title is Tenacity. My last name is Coury. My website promoting the book is RonCouryAuthor.com where people can hit a link to get to the Amazon site and learn more about me and look at a gallery of over 100 photographs.

This is an awesome conversation. Thank you for sharing your experiences and sharing your book with us. I appreciate it. It’s great to meet you.

Patrick, thank you as well. I’ve enjoyed talking to you and if you ever get to Las Vegas be sure to look me up.

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About Ron Coury

Born and raised in Brooklyn, New York, Ron Coury arrived in Las Vegas in 1973, following two years of service in the U.S. Marine Corps. Ron has been a casino dealer and a Realtor, as well as a partner in restaurants and gaming bars, major graphics and glass companies, and several automobile dealerships throughout the western United States. He is currently a board member of the Las Vegas Metropolitan Police Department Foundation, as well as several companies and charitable organizations. He has three children and five grandchildren and remains active in business and community service endeavors throughout Southern Nevada.


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The World From An Anarchist-Anachronist-Economist’s View with Dr. David Friedman

TWS 10 | Anarchist Anachronist Economist


American economist, physicist, legal scholar, and libertarian theorist, Dr. David Friedman, enlightens us about his view of the world by title, which is the anarchist-anachronist-economist. As he breaks down each of these three terms, he shares his understanding of each based on how they apply to his life. Dr. Friedman has written numerous books, including the notable Legal Systems Very Different From Ours where he describes a number of societies and how they work. He also gives a brief background on how his father, the famous economist Milton Friedman, has influenced his view of the world and general approach to economics. Based on his views on economics and markets, he describes the role of an entrepreneur, what the entrepreneurial drive is, and what drives people. Learn some more amazing concepts in this very informative episode with Dr. Friedman.

Watch the episode here:

Listen to the podcast here:

The World From An Anarchist-Anachronist-Economist’s View with Dr. David Friedman

This episode is an interesting one. It’s an interview with the son of Milton Friedman, one of the most famous American economists. He won the Nobel Peace Prize back in the 1970s. His son is also an intellectual. He has written a few books and also an emeritus professor in law and a few other subjects. This was a profoundly intellectual conversation and it was about some of the philosophy of economics and politics. It got deep and it was intimidating for me because of how it made me think and process some of the information that David was saying. This season of The Wealth Standard is on the entrepreneur, so my intention with David was to get into the environment in which the entrepreneurial mind operates. We definitely got there but it was in a way that I did not anticipate.

If you like what you’re learning on the show, you’re probably asking yourself, “How can I apply this?” That’s why I wrote the book that I released in 2018 called Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream. That saying is interesting. That’s your pretty old saying and it alludes to a system set up for a certain party to win. In most cases, it applies to the political and economic system that we all operate in, which I argue in the book is not set up for us to win but set up for them to win. The book teaches you how to turn that table. For a limited time, you can get the book for the cost of shipping and I’m throwing in the audiobook as well for no cost. Go ahead and head over to FreeBook.HeadsOrTailsIwin.com.

David, thank you so much for joining us. I can’t wait for this interview. I’ve been looking forward to it. The best way to start the conversation is the way you describe the world by title, which is the anarchist-anachronist-economist. Would you mind may be going into some details of what that means?

The anachronist is irrelevant for your purposes. One of my hobbies is historical recreation in an organization called the Society for Creative Anachronism. I’ve been involved with that to varying degrees for many years and it’s a lot of fun. I, my wife and daughter cooked from very old cookbooks back to about the 10th century. I build furniture, make jewelry, tell stories and write poems, it’s a lot of fun but it had not much to do with my political interests. They only very occasionally overlap. Economist because economics to me is a way of making sense of the world. It’s not the study of money or prices or whatever. It’s understanding behavior on the assumption that individuals are rational. What we mean by rational is not how they think but that they tend to get the right answer. On the whole, if you want to go somewhere, you’re likely to start in the right direction. If you’d been there a few times, you’re likely to take the shortest route and much more generally, that you can make a good deal of sense. Not perfect sense but a good deal of sense out of the behavior of people on that simple assumption and that’s what economics is built on.

It then becomes a way of making sense of not only what we usually think of as economic behavior but questions such as, “Why are marriages less stable than they used to be? What affects crime rates?” A whole bunch of anything that comes down to human behavior, you have at least a possibility of understanding with economics. That’s what I’ve done professionally for a very long time but it’s also a way of thinking that I find not the only way of making sense of the world but a very attractive and interesting one. Anarchist, what I mean by that is the ideal society would not have a government. I don’t think that a society without a government is stable under all possible circumstances. In that sense, I’m pessimistic but there is a fairly wide range of circumstances in which that society could work.

My first book, among other things, sketched a hypothetical picture of what a society with private property and trade and without government might look like, where you had what we think of as the fundamental government functions all being provided privately. That was published in the early ‘70s and the third edition with another 100 pages or so, came out maybe a couple of years ago. My book, Legal Systems Very Different from Ours, is where I was looking at a whole lot of mostly historical legal systems. I concluded that, in a sense, what I’ve been doing in my first book was reinventing the wheel because there are historical societies in noticeable number in which law enforcement was private and decentralized. I described a number of such societies in the book, Legal Systems.

One of my chapters is a discussion of how societies work. What I sketched in my first book was a fancy modern society version of what those societies were. When you write an economics textbook or teach a course, you may start out with Robinson Crusoe and Friday and a very simplified picture. There’s a sense in which I was doing the fancy version of what the simplified picture of which it had existed. That was one of the interesting things and it was a fun book to write because I ended up learning about Amish, Romany and Imperial Chinese, a legal system that lasted about 2,000 years. It’s one of the world record holders for longevity and in Athens, which I like to describe as the legal system with the mad economists because they’ve got all clever ideas, which might or might not work.

I’m going to skip ahead to a couple of questions that I had for you. With your specific book coming out, as long ago as it did, a lot of things have transpired since then. The updates you’ve made to the book, what’s changed or have you experienced a rise in a stronger centrally planned government than may have existed in the early ‘70s? What has been your experience in looking at that and analyzing it?

After that, it’s true that as far as I can tell, things are changing in both directions at once. On the one hand, a lot of the bad ideas of the early ‘70s are much less fashionable. Everybody takes floating exchange rates for granted for example. General deregulation to some significant degree happened. The trucking industry and the airlines got deregulated. At the same time, environmentalism has, in an odd sense, substituted for socialism. Back when I was writing, a lot of reasonable people thought that something like the Soviet model worked. A fairly popular view was it’s not a very attractive society. It’s not a very free society. Maybe we want to do that but economically it works. They are developing and they’re going to catch up with us and so forth.

Socialism, in the old sense, is dead. Environmentalism has replaced it. Click To Tweet

We know that wasn’t true. It is as it were by its own standards was a flop. There are people who call themselves socialists but most of them don’t mean, “We should have the government running the steel industry and the auto industry and everything,” which was the Soviet model. They mean a number of different things, it’s socialism. Even back when I wrote Machinery, I pointed out that socialism had become a term with no content and positive feel-good value because it can mean a lot of different things for different people. The most common usage is to refer to a welfare state like the Scandinavian countries, which are basically market societies. In some ways, they’re more free markets than the US but have quite a lot of redistribution.

Socialism, in the old sense, is dead. Environmentalism has replaced it. In that environmentalism provides a new set of arguments for why the government should interfere with the free market. In one sense, that’s progress because there are better arguments. Socialists resist wrong. The environmentalist argument is not inherently wrong. On the other hand, in practice, you end up with governments doing undesirable things with environmental excuses. Maybe the clearest example of that would be biofuels. The US is the world’s largest producer of corn or maize and the US is turning something like a quarter of its corn crop into alcohol. The excuse for doing this was the claim that would reduce CO2 output. Apparently, it isn’t true. That is as far as I can tell, the people who were serious about environmentalism eventually came to the conclusion that you were producing at least as much CO2 in the process of growing your crops.

The theory of it is that the crops absorb CO2 when they’re growing to produce your maize and then put it back so that’s nothing, but you also have tractors and trucks moving the corn around and so forth. I gather at least that it doesn’t but having biofuels does push up the price of corn and that’s something farmers like. We are putting a good deal of effort into making poor people in the world hungry by making one of the major food crops more expensive in the world on the excuse of environmentalism. That’s true of quite a lot if you look at it, of what’s going on so that environmentalism has substituted for socialism in the sense of a different set of arguments for the government interfering. However, it’s the case that we have no good way of getting governments to do the right thing. The way I like to put it is there is a term market failure which describes most generally ways in which individually rational behavior doesn’t combine for rational group behavior. For people who are familiar with the prisoner’s dilemma, that’s the two-person version of market failures.

Market failure is not about markets. It is a pattern in human behavior which occurs in a whole lot of different contexts. When I give a talk about it, that includes things like the failure of the market to produce the public good where you can’t control who gets it. It also includes rational ignorance and voting because when you figure out who’s the best person to vote for, you’re producing a public good and you’re producing a benefit which almost all of which goes to other people. You have very little incentive to do that and the result is that most Americans don’t know most of the things they would need to know to have a respectable opinion on who to vote for and they’re rational in that. My view at least is that it’s not that the market is perfect, it’s only that the same things that cause the market sometimes to fail caused the political alternative to failing usually. That market failure ultimately comes because I am taking action where you are varying the cost or where you are getting the benefit either way. If I’m taking action where other people bear the costs, it pays me to take it even if the total costs are larger as long as I get a benefit. If I’m taking action where other people get the benefit, it doesn’t pay me to take it even if total benefits are larger in total costs.

On the market, that’s a fairly unusual situation if it takes a semester or so of Price Theory but roughly to a first approximation. When you buy something, you’re paying all of the costs associated. When you produced something, you’re receiving all the benefits as a result of producing it. Roughly speaking, you have the ideal situation where each individual actor gets the benefits and pays the cost of his action and then he takes the right action. There are exceptions but those are exceptions on the market and those are the normal situation on the political system. A political system almost never does someone making a decision to bear the costs or receive the benefits of it. The result is that with environmentalism, you’ve got a legitimate argument for why if the government did the right thing is it could improve things but the government mostly doesn’t do the right things and therefore, it becomes an argument that has bad effects.

I understand that they don’t do the right things because there are benefits when they make decisions but the consequences don’t necessarily exist.

TWS 10 | Anarchist Anachronist Economist

Legal Systems Very Different from Ours

To begin with, if you took the global warming argument seriously, no country would do anything at all about it unless they had an agreement with all the other countries to do it. I’m in California and it does various expensive things to reduce CO2 output. California CO2 output is less than 1% of the world’s CO2 output. Hence, anything it reduces means that temperatures 100 years from now will be perhaps 100th of a degree centigrade less than they would be if they didn’t do those things. It’s absolutely crazy to do them if you’re thinking of people in California benefiting California by controlling global warming. On the other hand, there may be other reasons to do them as in my biofuel’s case, which is in California but the US federal government, you can get the votes of farmers. Al Gore to his credit, admitted at one point that he was pushing biofuels because he was running for president and it was an early primary. That was a point after he decided it was a mistake.

Because it would help farmers.

Yeah, it would increase the income of farmers by bidding up the price of one of their main crops.

Let’s take a couple of steps back because your view of the world is significant and your explanations have been incredible. You’ve been influenced to be aware of economics and be aware of society in a different way from your family history, which is Milton Freidman being one of the early parts of the Chicago school of economics. Maybe talk a little bit about some of the things that he did that influenced you the most and why?

One thing was lessons in child-rearing. In my view, there are two theories of children. One is that they are pets who can talk and one is they’re small people who don’t know very much yet. I believe in the second theory. As far as I can remember, I never had an argument with my father where he said, “I’m the grownup, I’m right.” It was always, “Here are the reasons.” If I had better reasons, fine. If he has better reasons, fine. That was a very important lesson about interacting with people in general, even at the level of an adult interacting with a child. That would only be one important lesson. My general approach to economics has been very much influenced by his. The way I think of the Chicago school approach, I consider myself a Chicago school economist, is that economic theory gives you plausible guesses but not certain conclusions. It’s very hard to think of any real-world conclusion, which couldn’t be truly consistent with economics. If you make sufficiently extreme assumptions about things like what people value or how you produce things, which economics doesn’t tell you.

Economics takes utility functions, which is what people value and production function, which is how you make stuff as somebody you get from the outside. My example of that used to be the Minimum Wage Law that Jim Buchanan who was a colleague of mine early on used to say that all economists agree that Minimum Wage Laws cause unemployment. That’s not an empirical statement. That’s a definition of an economist. He’s wrong because although you would certainly expect it to happen, you can imagine some circumstances in which it would. My old example was to imagine that there are a lot of consumers who hate the thought that they’re buying something produced by very low wage labor and therefore, they’ll buy more of the stuff that the unskilled labor is produced if it’s paid more. That used to be my example but in fact, there was an article a long time that got quite a lot of attention.

Unfortunately, it has bad effects, but it was a good article in which somebody had an economic theory, which didn’t require his wild assumption in which increasing the minimum wage under some circumstances would increase the employment of low skilled workers. It was a very clever idea. It had to do with assuming that the employers were monopsonies, were monopoly employers and were therefore hiring fewer people in order to hold wage levels down. If you push the wage level up and they can’t do it anymore, then they hire more people. Unfortunately, it’s then get used by people who want to push high minimum wages, which I incur a mistake.

Nonetheless, it demonstrated that not only could you make a wildly unlikely argument for this wrong conclusion. You can make a non-absurd argument for this wrong conclusion. The Chicago method, as I understand it, is you form your conjectures from the theory and you then find ways of testing them against real-world facts. My first journal article a very long time ago was an economic theory of the size and shape of nations in which I claimed to explain features of the map of Europe from the fall of the Roman Empire to the present. I submitted it to the Journal of Political Economy. George Stigler, who was the editor, rejected it on the grounds that I had no empirical tests of my theory. How do you test the theory about the size of nations? I thought of some ways and some predictions the theory made about certain patterns of the shapes of countries at various times.

Market failure is not about markets. It is a pattern in human behavior which occurs in a whole lot of different context. Click To Tweet

I revised the article and George accepted it. One result of that was I have a little more evidence that my theory is true. The other result it turned out was that I had to think much more carefully about what my theory actually was saying in order to figure out how to test it. If you’re trying to link your mathematical model to the real world, you have to be a little more careful about what each term needs. In that sense, a good methodological approach for economics is to use the theory to figure out what you think is true and then say, “If I am right, what implications will it have? What facts or reality that I don’t already know could I observe to test the theory?” That was certainly, I suppose, the largest intellectual influence. My father was a classical liberal. I am a more extreme classical liberal, anarcho-capitalist. It was certainly an influence on me in that way as well. In terms of formal economics, I may well have learned more from other things.

One of the questions I wanted to ask relates to this point, which is how you have come to understand freedom and the different theories of economics that are out there and how has it changed over time? You went back to the past and started to understand patterns and identify patterns. It seems like a lot of the cause of the lack of progress or the cause of cycles is in part by the same force, which as from what you’re saying is a central drive from a government power as opposed to it being done by the people.

There are a bunch of reasons why things aren’t as good as they should be. Certainly, one of them is that governments have the wrong incentives. Another one, going back to my rational ignorance point, is that voters in a democracy have the wrong incentive. That it makes very little sense unless you’re an extraordinarily benevolent person to spend effort figuring out what policies are best for your country. Yet the sensible thing to do if you’re going to be involved in politics is to figure out what political position will make you most popular with the people who matter to you, who might be your family or might be your neighbors, they might be your coworkers and persuade yourself of that policy. There’s some very interesting work by Dan, a Yale law professor, who has looked at issues where positions have become markers of group identity. If you think about evolution for example, that saying you’re against evolution puts you in a particular group as it were or views on global warming or gun control, those would all do that.

His claim is that if you measure how intellectually able people are, the more intellectually able someone is, the more likely he is to agree with the group he’s a part of holds, whether that means believing in evolution or not believing in evolution. He has an explanation for this. He says, “This is rational behavior because whether I believe in evolution as essentially no effect on the world, it’s going to happen with or without me. It has a large effect on my relation to the people around me.” If I’m a professor at an elite American university and I say that I don’t believe in evolution, all of my colleagues are going to say, “Look at that stupid non-educated fellow.” If I’m somebody living in a small town where everybody is a member of the same fundamentalist church and I say, “I believe in evolution,” nobody’s going to want to marry my daughter or me. In that sense, he’s right that it makes sense that it’s in your interest not to believe what’s true in those contexts.

You want to believe what’s true in things where your decisions affect you. You want to believe what’s true about what cars will or won’t run. Whether there’s global warming, it doesn’t much matter from that standpoint, but it matters for how you get along with people around you. In that sense, we do not have a good mechanism for making those decisions. There isn’t one and I’ve argued in the past that shifting more and more things to the market at least gets you closer. There’s this famous quote from Winston Churchill, “Democracy is the worst form of government ever invented by the mind of man, except for all of the others that have been tried.” People usually take that as a defense of democracy, but it isn’t. It’s a critique of government. What it’s saying is the best form of government we have works terribly. I take that as an argument saying wherever possible, shift things away from the government model to the market exchange money. I like to say that the very best form of government is a competitive dictatorship. That’s how we run restaurants and hotels. I get no vote on what’s on the menu but an absolute vote on whether I go to that restaurant and then the person running the restaurant has an incentive to put the things on the menu that his customers want.

I like to shift as much in that direction as possible. What I’ve argued is that you may be able to move everything in that direction. There will still be problems because as I say, the market doesn’t always get the right result and it’s got better odds than the alternative. If you can’t do everything, you can at least move a lot of things in that direction but that’s been my view. I’ve thought through it a little bit more over the years but that’s been my basic view for a long time. The only view I can think of that has changed is I am less optimistic about using the tort system as a substitute for regulation. You think about what seemed like a good argument, which is to say you don’t need to have regular rules against people doing bad things because you can have them sued instead. That only works if you believe the legal system does a good job of figuring out who damaged whom.

TWS 10 | Anarchist Anachronist Economist

The Machinery of Freedom: Guide to a Radical Capitalism

We’ve had a case, which hopefully is not finished, but where somebody was awarded a multibillion-dollar judgment against Monsanto for a product which essentially everybody who is seriously expert in it believes is harmless, but they claimed they got cancer due to it. Some people got cancer. If you’ve got cancer and you handled Roundup glyphosate, you can claim and you can even believe it’s because of that. If you can persuade a jury, first they figure out the cause of cancer, then they say, “We want to punish them because of all these other people.” You can get very bad results. At this point, I’m less optimistic about that as an alternative. The system I want is one in which the laws themselves are generated on the market. That’s what I sketch in Machinery of Freedom, that would do better. I have one chapter in the new edition on market failure on the market for law in which I’m discussing where my best system will still give the wrong answer and then there are places where it predictably will. It’s that I don’t know of anything better.

We’re definitely complex creatures.

There are a lot of us and we are interacting in complicated ways.

You are maybe going on a different angle. This season, I’ve tried to focus on the entrepreneur and the value that they have in the world. As you’ve understood economics and as you’ve understood markets, how do you describe the role of the entrepreneur?

It’s not something I’ve thought about very much that the kind of economics we understand best is Price Theory. It usually starts out by assuming that everybody makes the right decisions. It’s therefore missing a lot of issues necessarily of the person who figures out that everybody else is doing it wrong and then does it right. Individually, I believe in that and that I have various points. I’ve made investments where I was basically betting my prediction of the future against the market prediction. The first one was when I bought Apple stock and that was when the Macintosh first came out, the original Mac. I was a professor at Tulane Business School at the time. I told one of my colleagues that I was planning to buy a Mac and he said, “Why don’t you get a PCjr instead?”

It occurred to me that was a natural question for him to ask because they’re about the same physical size. It was an absurd question to anybody who was familiar with the technology because the Mac was one of the very first machines to use a graphic interface, which is what we all take for granted. I knew about graphic interfaces because I had seen a movie about the Xerox PARC work with the original graphic interface. I also knew that the processor the Mac used was a Motorola 68000, which was a much more powerful processor than the probably 8086 or 8088 that the PCjr used. It was one before that was normally used from multi-user machines. Why was that? Because running the graphics interface takes a lot of horsepower. There’s a lot of processing invisible to you as the user that goes on to do it in the way we now do it rather than doing it in the way we had done it.

I had a computer before that, neither of those before the Mac existed. I knew about the normal way of doing what’s called a command-line interface, which is much clumsier but much easier with the computer. I said, “I know that his question is silly. His question is the question that almost everybody investing in the market would ask.” A very small fraction of the people in the market a long time ago were sufficiently into computer technology to know about Xerox PARC, to know about graphics interfaces and to know about different processors. Therefore I said, “The market is probably pricing Apple correctly in every other respect. They’re missing a very large positive, therefore the stock is underpriced.” I wasn’t an entrepreneur in the sense of starting a company, but I was willing to bet against the world. I’ve made a number of such bets, some of which had done very well.

Going to that example, you identified something but then also the nature of the Mac coming into the marketplace. They understood that there would be a competitive advantage possibly maybe it was a bet that they made but there’ll be a competitive advantage having a more graphic interface because of how people respond to colors and to graphics.

You want to believe what's true in things where your decisions affect you. Click To Tweet

It’s not responding to colors and graphics. It’s the difference between doing something by moving stuff around on the screen and doing something by typing in words. We try to imagine eating dinner using a text-based interface and you say, “Take a fork, stick a fork in spaghetti, twirl fork around, move fork,” as opposed to fork. It was a much easier and more intuitive way of interacting. I should say Bill Gates knew it too. My second successful investment was in Microsoft. The reason there was that I observed that the dominant word processor and spreadsheet on the Mac were both made by Microsoft. I said, “Why in the world is Microsoft investing its resources in a platform where they have no advantage?” Microsoft was running the operating system for MS-DOS at the time because it was pre-Windows, yet they are willing to go to a considerable effort to have a word processor and a spreadsheet on the Mac OS where they’ve got no advantage over anybody else.

I know that graphics interfaces are the path to the future. I bet Bill Gates knows that too. I know that you can’t run a graphics interface successfully on the current PCs because they don’t have enough horsepower to do it but that’s going to change. Processes are getting faster. The people building those computers are going to build faster computers. I bet what Bill Gates is doing is using the Mac, which is a tiny market compared to the PC market, as the testbed to develop a word processor and a spreadsheet that worked well in a graphic interface. Then in another few years, when his world moves to graphic interfaces, which was Windows, he’s going to walk into the market already having his testing programs. That’s in my view why Word and Excel are the dominant word processor and spreadsheet. I said, “If Gates is clever enough to do that, I ought to buy stock in this company.”

Do you define whether it’s Steve Jobs or Bill Gates and their drive to come up with these products that don’t necessarily exist or to make these company decisions to test and eventually get on the marketplace, do you describe that as an entrepreneurial drive?

That’s entrepreneurial behavior but it’s not something that I can fit into economics beyond observing that exists. There are other things like that. There are technologies that are very important to the economics that we don’t understand.

Is it natural for that behavior to occur if you have a specific type of framework?

It probably occurs in most frameworks though. I bet there were entrepreneurs in the Soviet Union and they were entrepreneurial about different things. They were entrepreneurial about. “How do I get my kid into a good school? Who do I have to do favors for?” It was a perverse system so they weren’t doing useful things mostly. There are certainly social entrepreneurs, people who are good at making other people like them and good at creating friendship groups. Entrepreneurial behavior is broader than the market, but it certainly plays an important role in the market. Let me give you a different example of a technology I don’t understand though I appreciate it and that’s why some companies are happy. There was a lumber yard near here, which unfortunately no longer exists. My general feeling buying lumber there for projects I was doing was the people there liked each other and liked their customers and felt like that kind of place.

On the whole, I get that feeling about Southwest Airlines. I like riding them and everybody tries to give that impression. I’m sure to some extent it’s true of some of the competitors. How do you do it? If you are the president of a company, what are the decisions that result? You can see it’s not a trivial problem because, on the one hand, you want to punish employees who do a bad job. On the other hand, punishing people will make you unpopular with them and their friends. There’s clearly a highly developed technology for running companies. All I can say is for me as an economist, that’s a black box that we describe it as a production function. You put some inputs in and you get some outputs out and you might be able to observe the production function but don’t understand it. It’s just as I don’t understand the details on how they make cars. That’s got to be very complicated.

TWS 10 | Anarchist Anachronist Economist

Anarchist Anachronist Economist: Behavioral economics explains why people make mistakes and why lots of people make the same mistakes.


I was reading a review of a book, which was discussing the difficulty of primitive technology. It was an interesting story but I don’t know if he’s right. His account is that there are a number of cases in the nineteenth century where you’ve got European explorers who end up somehow stranded in an environment where the local primitives are doing fine and starve to death. His point is that surviving as an Eskimo or surviving as a hunter-gatherer in the Amazon requires a lot of very sophisticated skills. He goes through details of this long sequence of things you have to do to hunt seals, most of which would never occur to you. One of the main foods in South America is manioc, which is poisonous. Therefore, there are elaborate procedures for purifying it. There are lots of technologies we tend to think more about modern technologies but human beings have been doing complicated things for a very long time.

Have you studied behavioral economics or looked into what drives people? Why do they behave and do certain things based on certain circumstances?

I’ve read Kahneman’s book, Thinking, Fast and Slow. It was a very good book and that was our Christmas book. It was the book we gave as a present to anybody we didn’t have a present for. What he’s doing is explaining why people make mistakes. The basic logic of that book is that we have two different metal machines for doing things, what he calls the fast mind and the slow mind. The slow mind is what we normally think of as thinking rational thought. When I look at a screen, what I am seeing is not some gray here and some pink here, some little round brown circles with black dots in the middle there. I’m seeing a human face and a wall of an office and eyes and pupils and so forth. I’m not doing any explicit analysis to do that. I’ve got incoming a pattern of colors and yet very fast background processing. It resolves that into a picture of what I’m actually seeing.

Kahneman’s argument is that the slow mind is a very scarce resource that consequently, we can’t afford to think everything through. We have a whole bunch of rules of thumb which worked pretty well but not perfectly for the 99% of our thinking that’s done in the background. If you analyze what those rules of thumb are, you can sometimes figure out what mistakes we’ll make. That’s a neat idea. I don’t think I’ve seen any interesting economics using that. Certainly, people are trying to use that in economics but that’s because, in order to be a successful academic, you’ve got to do something that looks new. If you have an issue that smart people have been thinking about for 100 years, saying something new about it is hard. One way is saying, “We’ve got a new approach. We’ve got this thing called behavioral economics. Let’s do the behavioral economics of X, Y and Z.”

Maybe there’s something good being done in there but I haven’t actually seen anything which struck me as my knowing anymore as a result. What I want people to do behavioral economics with is not my field. It’s macroeconomics. If you think about why there are recessions and depressions, involuntary unemployment and stuff like that. In the part of economics that I understand, none of that happens. In ordinary Price Theory, prices always moved quantity supply to quantity demanded labor like everything else. It’s a nice model. It’s something we understand and it describes quite a large part of reality but it clearly doesn’t describe all of it because you do have these episodes. I don’t do macro but as far as I can tell of the people who do macro, almost all of them involve a theory in which people are making the same mistake over and over. What the mistake is buried with a different version of macro.

As best as I understand Austrian Business Cycle Theory, which I don’t understand very well, it involves the idea that the government produces money, drives down the interest rate and businesspeople then assume the aggravate will be low forever. Make investments on that basis and then discover lo and behold, the government stops producing money. Interest rates go back up. We’ve got to liquidate a bunch of stuff but that’s stupid. It will be stupid the sixth time it happened. You would say after a while, “We know why interest rates are low. It’s only going to apply for the next year.” Various short-term investments you can do even if they pay with a low-interest rate than long-term. Similarly, the simple versions of Monetarist Business Cycle Theory are, as I understand it, that you’ve got some level of rate of increase in the money supply will result in a certain level of inflation. Everyone takes that for granted, then the government stops increasing the money supply.

Workers still expect the annual wage rise implied by that inflation but at that wage, employers don’t want to hire as many workers as they want to work. You’ve got unemployment. You would think that after a few times, people would start saying, “Let’s watch the money supply figures.” One of the things that behavioral economics does is explain why people make mistakes and why lots of people make the same mistakes. I want somebody who’s interested in macro to see if he can use behavioral economics in order to explain why people don’t solve these things in the way I’m describing but that’s not my project. That’s just a project I’m trying to sell it to someone else who does stuff. I have a variety of such projects that I try to get other people interested in.

The slow mind is a very scarce resource that, consequently, we can't afford to think everything through. Click To Tweet

What are ways in which the audience can learn more about you, follow what you’re up to and some of the projects you’re working on and so forth?

To start with, I’ve got a webpage which is DavidDFriedman.com. On that webpage, there are links to most of my published articles and the full text of several of my books. That’s probably the easiest way. There’s also a link to my blog and it has interesting stuff on it but I post very rarely to it because I got interested in somebody else’s blog, which has a lot more activity and lots of interesting conversations. Mostly, I’m doing things on Slate Star Codex, which is the name of a blog that I don’t run but where I participate. In terms of my writing, I have a book called Legal Systems Very Different from Ours. You can get on Amazon and it’s a very inexpensive Kindle. I don’t remember whether I made it $5 or $3 but something like that. The Machinery of Freedom, which was my first book and the third edition, is also an inexpensive Kindle as well as the print version.

Not in audio format?

Machinery is also in audio format. I haven’t checked if anybody’s buying it. Part of the reasons in audio format is that I self-published Legal Systems, I needed somebody to do a cover for me. A nice lady on Facebook, who obviously was familiar with my work, designed a very nice cover for it, which I used. She also said that I ought to have Machinery as an audiobook. I figured she’d done a favor for me, I would do one for her and she might be right. It might be useful. Machinery third edition you can get as an audiobook. My only other audiobook is my first novel, which is called Harald and that one I had recorded a long time ago for other reasons and then once audiobooks became important, I figured I might as well turn it into an audiobook. I’d like to do an audiobook of Hidden Order but that depends on whether or not we get the rights back from the publisher. I wrote a Price Theory textbook a long time ago and I’m in the final stages of creating a third edition of that as a Kindle, which I’m going to self-publish because it went out of print and when it goes out of print, the rights revert to me.

Hidden Order was basically the Price Theory textbook rewritten into a book for the interested layman. It’s not intended as a textbook. It’s a book to anybody who wants to teach himself economics. I’m sure you can still buy copies but I don’t think they’re actually printing it anymore. I’m hoping that it’s sufficiently out of print and I can get the rights back and then I’ll make that into a Kindle and maybe also into an audiobook. I’m less certain of that. I’ve got a variety of other books people might find interesting. My second novel Salamander, which I like, and I’m going to have a third novel fairly shortly. Those were all for fun. None of them were very successful but some people liked them and I liked them. My book Law’s Order, which is an explanation of the economic analysis of law, which was what I’ve been doing professionally for a good deal for many years. I hope people would find that interesting. I have a book, Future Imperfect, which is looking at ways in which technological change may radically change the world over the next many years.

Is that in the works?

That released years ago and that’s available. I don’t even know if it’s a Kindle because it was commercially published. I wasn’t doing it but it probably is. Certainly, there is a print version. I could make an audiobook, but I need permission from the publisher. That one, my view is that the future is very uncertain. When people talk seriously on we have to solve problems 100 years from now, they’re making a mistake that we don’t know enough about what the world is going to be like 100 years from now to do those calculations. What I’m doing there is looking at a bunch of different technological revolutions that might happen. If it happens, what are the implications? What are the problems? How might you deal with them? After I wrote and published that book, I gave a talk at Google on the book. I started out by saying that I thought global warming was a pretty wimpy catastrophe. Temperatures go up by a few degrees centigrade, sea level goes up by a meter or so in 100 years. I’ve got three different ways of wiping out the human race faster and I do. In fact, you could see I also have on my webpage a link to a whole lot of videos of talks I gave.

Does it include the one you did with Google?

That is in fact there but lots of talks on different things. Some of them are audio and some of them like that one is video. If you go to my webpage, it’s not a very fancy webpage but if you look down and you can find the link to my recorded web talks and interviews, that will give you lots more of those.

David, this has been fascinating. Thank you for taking some time to share your expertise. This went pretty deep but this has been a great addition to this season and people got a lot out of it. Thank you so much.

Important Links:

About Dr. David Friedman

TWS 10 | Anarchist Anachronist EconomistDr. David D. Friedman is an American economist, physicist, legal scholar, and libertarian theorist. He is known for his textbook writings on microeconomics and the libertarian theory of anarcho-capitalism, which is the subject of his most popular book, The Machinery of Freedom. Besides The Machinery of Freedom, he has authored several other books and articles, including Price Theory: An Intermediate Text, Law’s Order: What Economics Has to Do with Law and Why It Matters, Hidden Order: The Economics of Everyday Life, and Future Imperfect.
David Friedman is the son of economists Rose and Milton Friedman. He graduated magna cum laude from Harvard University in 1965, with a bachelor’s degree in chemistry and physics. He later earned a master’s and a PhD in theoretical physics from the University of Chicago. He is currently a professor of law at Santa Clara University and a contributing editor for Liberty magazine.


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Chris Martenson on How The Money Works In The System, The Economy, And The World

TWS 9 | How Money Works


There are some remarkable people who never let their curiosity die even as the world fails to provide them an answer. Chris Martenson, the co-Founder of Peak Prosperity, kept on seeking the answers to how the money works in the system, how it was created, and how the economy works. In this episode, we peel back some of the layers on the knowledge and insights gained from his perspective of the world as he taps into how we can create a world worth inheriting, not only from the economic side but the personal and natural side as well. Take a deep dive with Chris as he talks about reconciling the advances that have been made in the oil and energy sectors, the geopolitics with other countries, the system of unfairness that perpetuates in this world, and more.

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Chris Martenson on How The Money Works In The System, The Economy, And The World

I have an individual who I’ve known for several years. His name is Chris Martenson. He’s the Cofounder of PeakProsperity.com and also the co-author of the book, Prosper!: How to Prepare for the Future and Create a World Worth Inheriting. We get into some interesting topics. We peel back some of the layers on his perspective of the world. Please welcome my guest for this episode, Chris Martenson.

Chris, it’s awesome to have you on. Thank you so much for taking the time. I imagine some of our readers know who you are. For those who don’t, would you mind telling your story and what led up to what you and Adam are doing with PeakProsperity.com?

This is a story. If I’m favorable to myself, I’ll call it enlightened self-interest. I was a genius like everybody, investing in the 2000 stock market. I was a corporate guy at that point in time. All of a sudden, my portfolio got shredded. I’m a curious guy, I started asking questions my broker couldn’t respond to. My background is a scientist, so I like data. I like digging around and forming hypotheses. One thing led to another. Soon, I was asking him uncomfortable questions that he couldn’t respond to. I read this book called The Creature from Jekyll Island by G Edward Griffin. It talks about the money system and how it works, which surprised me. I’ve got a PhD in biological science and an MBA. Somehow, in all that education more than anybody should go through, I hadn’t learned how money works in the system. I was taught how to compete for it and all that stuff, but not how it was made. This seemed like I discovered the headwaters to the Nile like, “A lot of important stuff happens here.” That led to this inquiry. Within a few years, I lost my passion for my job. I exited that carefully. I spent two or three years in sabbatical, trading the markets and developing other ideas.

I ran across this idea of how money was created and how the economy works. I was looking at macroeconomics and at debt levels. I came across energy, peak oil and all those issues. The environment wrapped in as well. I put all these pieces together and said, “I have to tell people about this.” It became a mission of mine. I was down in church basements talking to anybody who will come. It’s bad presentations when I started. These are terrible. For anybody reading who sat through those, bless you. They were awful. It was such a big amount of material, it took forever to figure out how to distill it. That’s what I did. I went through this distillation process. Somebody in the audience said, “You should put that online. A hundred people a pop are not enough.” I couldn’t figure out how to do that and struggled. I started putting it online. This thing is called The Crash Course. The last chapter was finished in October of 2008. Things fell apart and people were interested in the message. It got this thing called The Crash Course, which should be a disaster. It’s some guy speaking over about three hours of slides.

I remember it coming out. It was a voiceover PowerPoint.

It’s just a voice. I don’t even think I used my face, maybe on the first slide and that was it. It ended up catching on. People were ready for something to explain a little bit larger about the world. I’m an educator at heart so it was a very educational material. People came to me saying, “I learned something. I feel smarter. I feel like I understand something. Why isn’t anybody else talking about this? Why didn’t my teachers explain this to me?” It caught on and got translated into twelve languages. I ended up, through that experience interacting with and meeting my business partner, Adam Taggart. He’s got all the skills that I needed because I was running a one-man show. He’s got all this business and marketing savvy. He was the Vice President of marketing for North American Mobile Yahoo. He was ready to leave that. We joined forces and created this thing called Peak Prosperity, which is our website. That’s the short version of how we got here.

You used the word surprised when you read The Creature from Jekyll Island. That’s a monster of a book. What was the single most important surprise that you’ve identified?

It’s that this is an ongoing pattern of bailout and trouble. I understood that this system of capitalism we’re in is not capitalism. You have this creative destruction by Schumpeter. Businesses undergo that process quite frequently, but not the banking system. They’re shielded for everything. It’s a heads-they-win, tails-you-lose. G Edward goes through many years of history. It’s savings and loan, the railroad crisis and all these different crises to show that the banks made all this money while they were busy inflating, doing dumb things and taking risks they shouldn’t. Things crash and they got bailed out. Heads they win, tails you lose. Wash, rinse and repeat. When I read that, it was almost as eerily prescient as 1984 by George Orwell. Once I had read that, I understood the blueprint for what was going to happen from the crisis onwards. Everything that he wrote about happened again. That was surprising to me that it’s this well-known, this obvious, this repeated and it’s still not talked about. It surprised me to find it in his book. I had to go and research it. I thought, “This guy must be wrong.” It turns out he wasn’t wrong.

When I had a chance to interview him a few years ago, I let off with a question. I said, “Your Wikipedia opening paragraph says, ‘G Edward Griffin is a noted American conspiracy theorist.’” It said all this denigrating stuff. The Creature from Jekyll Island came out somewhere back in 1996. I said, “Many years have passed. How many people have come to you with a concrete thing saying, ‘Here’s where you got this wrong in your book because it’s all names and dates and it’s all sourced?’” He said in the entire time it’s been out, he hasn’t received one single piece of counterfactual information. He hasn’t had to issue any retractions. He hasn’t had to correct anything. Still, he’s the conspiracy guy. What he did was he touched a nerve. He showed how the banking system operates. That’s a no-no in our culture. Thanks to him for doing that. The biggest surprise is, “How did I not know about this?” You’d think about all that education, going through all this system and getting to the level. I made it to vice president of SAIC. I’m not an unaccomplished person and I’d never even heard this information before. To be hidden in plain sight is a shock.

A lot of the information he goes through isn’t part of the typical narrative of what finance is and what politics is. You have that book that’s written and you have a lot of people still speaking about not exactly what that book alludes to. There’s more they’d understood in what led up to the 2008 crisis and maybe more of what’s going on with where we’re at. Yet, the typical American is not aware of how banking works. They’re also not aware of what history shows us in regards to how intervention leads to unintended consequences. Peak Prosperity is a podcast and a blog. You write a tremendous amount. What is its mission and vision? Does it carry what you have discovered over the years due to more people or is there something different?

It’s two big parts. One is problem definition and education around that. Without appropriate context, the other part of our mission, which is about helping people become more resilient and more prepared on the solution side, you can’t even start with a solution until you understand what you’re up against. We ask everybody to start with the context. You don’t have to agree with us. Look at it. You have your own opinions. Say we’re completely wrong. That’s all fine. For people who look at the world this way, it’s a lot of data. Look at all three E’s in the story: economy, energy and environment. When you look at them from a systems perspective, you go, “This is unsustainable. It’s going to change.” The big question is, “How and how do we prepare for that?” Those are the two big pieces.

It’s a little bit like Hidden Secrets of Money by Mike Maloney. He’s doing an incredible job about money, but we’re also layering in this ecological context that’s necessary. The energy context is also necessary. You get that in one spot. It gives you this point of view of where the world is going to head. What do you do about it? That’s part two. This is why we exist. Our mission at Peak Prosperity is to create a world worth inheriting. I’m pretty convinced based on all the data and trajectories I’ve got, we’re on the wrong path. We’re not doing that. I wake up every day. I’m actively trying to figure out how to create that world worth inheriting. It means, mostly, we have to change the narratives that people hold so they can align their actions with that new narrative.

You can’t start with a solution until you understand what you’re up against. Click To Tweet

First off, explain what the data is telling you about where we’re at. Going to your mission, how is the context and the narrative that you see the world differently than mainstream?

Narratives are hard to change, even at the individual level. They get even, in order of magnitude, harder to change at the cultural level. At the cultural level, you might have something like, “Here’s a statement. Be fruitful and multiply.” That was a great guiding principle 2,000 years ago. It’s a little bit less obvious that’s the biggest challenge before us or the thing we should be focused on, but there it is. What we’ve had is this narrative that said humans are at risk. We’re at war with nature. Even 100 years ago, people are still battling with nature. Now we’ve hit the edge of the globe. The data is all parked there. When you look at the number of fish declines in the ocean or seabirds, the disappearing insects, what’s happening with the soils, their disappearance and the fact that glaciers are disappearing at this point in time. You can say, “We don’t have that same narrative of 100 years ago,” which our imperative is to grow as fast as possible. That’s the story we all live by. Every portfolio and every investment is geared for infinite perpetual growth. That might happen, but the data I have says, “Let’s look at that imperative for growth.” All growth comes from energy. You would know this if you were an organism and your primary source of energy is food. If you deprive an organism of food, it gets stunted. At worst, it dies. The question is, “Where is all this energy going to come from?”

When you wander with me over to the energy field, look at where we are in terms of global oil discoveries. We’re tapping more stuff in the shales place, but they’re not tasty like the old ones. They’re a little harder. It’s still worth getting but not the easy stuff. It’s like we’ve eaten through the fat on the seal. Now we’re on some ribs. That’s fine. The question is, “What’s after the ribs?” In this story, there’s nothing. The ribs in the story are the basement rocks. There are no pre-basement rocks. This is the source of stuff. We don’t have a plan for what we’re going to do when those run out. This isn’t super far in the future. This is within our lifetimes that they’ll probably tip over and go backward. The EIA itself in the United States thinks that shale grows until about 2025 and then it’s in permanent decline thereafter. 2025 is like tomorrow. Particularly if you’re a parent, you’ll realize, “These years pass quickly.” The amount of changes we’re going to have to make to live in a world where we have slightly less oil instead of slightly more oil is enormous. It impacts jobs, careers, portfolios, hopes and dreams, pensions and everything you can imagine. It touches that.

The truth is energy is the dominant thing and everything else is a subset of that. If you don’t have this energy, you get none. That’s the part I’ve been trying to alert people to is to have this bigger perspective. What I’m trying to do is teach fish about water. We’re so surrounded by this water, this energy that we don’t notice. I’ve got lights on me in 71 degrees. All this stuff that’s the equivalent of having hundreds of energy is bringing me this amazingness. That’s something to appreciate and have gratitude for. Don’t take it for granted. Think through what happens when that begins to go away. Our country is not prepared for this at all. There’s zero preparation for that.

How do you help people reconcile the advances that have been made in other energy sectors? I look at the things you’ve been saying regarding peak oil for a number of years. There have been lots of innovation and different alternatives. How do you help leaders reconcile this idea that we’re going to run out of oil and there isn’t an alternative to it?

It’s hard because the average person reading this doesn’t have almost to become an expert in it to understand it. The headlines that you might read about it are always geared towards puffing up the current narrative. I get these all the time. People say, “Look at this. The scientist took something and here’s a beaker of it,” or, “They’ve got this new battery that can do extra. Look at these ultracapacitors.” Every time I scratch at it, they go, “It’s on a bench somewhere.” They’re using rare materials so it won’t scale possibly or it’s wicked expensive. In many cases, people are confusing a source of energy with a store of energy. Once you start picking at that a little bit, you discover that the time to scale the cost in the story is extraordinary. Let’s imagine we all want to drive electric cars. What do you have to do? In the United States, we need a whole new electrical grid. We’re going to supply that amount of electricity. We need to discover new sources of electricity, which is going to be a challenge all on its own.

TWS 9 | How Money Works

Prosper!: How to Prepare for the Future and Create a World Worth Inheriting

Is there enough lithium and cobalt? Not right now, but maybe if the price went up a lot. Are there enough plants to build this? Not yet. Do we have enough engineers? We don’t. Once you start looking at it, it’s hard in this consumer culture. I go on Amazon. I click a button and the big round rolls up. What I’m unaware of is the incredible logistics and supply chain that had to be in place for that to be true. That’s all equally true in the energy space only. We don’t have that Amazon warehouse built yet. We don’t have the supply chains. We don’t have the infrastructure in place. None of that has been done yet. That’s the thing I keep coming back to people with. It’s like, “I’m as hopeful as the next person,” but we’re not putting our attention there yet. We will. I hope not before it’s too late. Nowadays, our attention is creating trouble with Iran or pumping more money into the stock market so it goes higher. We’re doing things that are buying us time but we’re not using the time. That’s my prime complaint we’re around this.

The way in which we process information these days is superficial. We only go one or two levels deep. As I’ve followed you over the years, you could look to those innovations. They’re there. When you start to go into the third to sixth layer and see how integrated the oil world is, whether it’s in the supply chain or in the plants or the origination of the actual energy, it’s fascinating. You’re still seeing a problem even though there have been innovations and improvements on that first or second level. In those deeper levels, there are still some pretty significant issues.

It’s fairly complex, but not really if you think it through in a little bit. People say, “What about renewable energy?” Nate Hagens re-termed it for me and it stuck ever since. It’s replaceable energy. Let’s look at a solar panel. The cost has come down a lot. They can create electricity at a fairly cheap rate when the sun is shining. The question is, “How did the panel get there?” Some workers showed up. What did they eat? Food. How did the food get there? It was grown on a field. Once you find every single thing involved in getting that panel there, there was oil involved somewhere from the mining of the silica to the manufacturing plant. We have this many examples so far where we have a replaceable energy system, be it a wind tower, a solar panel or electric car where that entire thing is created using only the energy from that same system.

We understand it intuitively with farming. The sun is the energy in the system. If a farmer can’t grow more crops using that energy in calories, they’re expanding. They’re going to go into deficit. If a cheetah spends 1,000 calories catching 800 calories of gazelle, they run into trouble. The question is, “Can we create these replaceable energy systems using only their own energy?” The answer is we don’t know. That would be a great experiment instead of another $500 billion to the bankers, let’s put $10 billion towards creating a model place where that’s exactly what happens. Put up panels. Build them only with electricity using electronics from panels and create more panels. Watch what happens. Do that one or two turns of the cycle. That would be a good experiment. There’s so much hidden fossil fuel subsidy in that whole part. It’s a mistake to think that you click the button and the panel shows up. There’s a lot in between those two steps.

Especially with what’s going on in the Middle East, the turmoil is increasing. No one knows what’s going to happen. Typically, it’s always associated with oil to some degree.

If you don’t understand where we are in the oil story, none of the geopolitics makes sense. It has nothing to do with Iran. We don’t like their leaders. There are horrible leaders all over the world that the United States never says anything about. They don’t happen to be sitting on any oil. I’ve been to China. I’ve talked with people that are fairly high up in the Chinese leadership structure. There are a lot of scientists there. They got a lot of PhDs. One gentleman there said to me, this was when Obama was president. He somewhat caustically said, “We don’t have any community organizers at the top.” That’s Obama’s background. He was a community organizer. “What do you mean by that?” He said, “To get anywhere in China, you have to have managed at least 100 million people for a couple of years. You break your way up and you work through. Everybody has an advanced degree.” They don’t have lawyers. That’s not a specialty that they revere. Compare that with Washington, DC. Almost all are lawyers.

Unfairness is one of the worst social sins you can commit. Click To Tweet

When I talked with them about the resource stuff, they get it. They said, “The business of China is business. The business of the United States is war.” That’s fine. We think we’d rather go about this with our magic checkbook. They understand where they are in the oil story. They admitted to themselves when their own peak of oil was going to happen, which was 2018. It’s in the rearview mirror. China has publicly announced that. They know they’ve got big issues. They also know they can walk to the Middle East, which is a distinct advantage to countries that have to sail there. They’ve got their eye on the prize. That’s the larger game that’s happening here behind the scenes. You want to know about Russia and why the United States is so at odds with Russia. You have to understand the power Russia has, given that it’s very few people have massive eight times their own property with a lot of natural resources. It includes oil and gas, which they’re supplying to Europe and increasingly to China. That’s an important lens to have in the story.

I’m assuming your audiences are not just domestic. You have audiences that are around the world. What are you seeing them take away from what you’re teaching them regarding these points and the other things you write and talk about?

In the English-speaking countries, primarily the UK and Australia, I’m noticing a lot of people who are gravitating to this message saying, “We’re on the same path.” There’s no, “Here’s how we’re doing this amazingly over here.” There’s almost a resignation that it looks like things are going to have to get worse before they get better. This is noted in every English-speaking country. Most of Europe too is on the same path, which is increasing totalitarian age. It means the organization of their society. It’s more oversight, fewer civilian liberties as it were and an increasing neoliberal event, which means very few people are getting most of the gains. The pyramid is getting tall and top-heavy. Italy broke that model. We’re all starting to see that rise of populous pressure as the unfairness of that. In the tippy top of this pyramid, these people didn’t get there because they built more awesome stuff for the most part. Most of them got there because they siphoned money out of a system that creates money. They’re skimmers. That’s fine, but it’s a very unfair thing. We’re all primates. We don’t like unfairness. Unfairness is one of the worst social sins you can commit. It was Plutarch, all the way back. He said, “The oldest and most fatal ailment of all republics is the gap between the rich and the poor.” If that gap is created out of thin air at no work and no risk and handed to a small crew of people, it’s where the unfairness builds.

The strong narrative regarding media and news is you still have a huge influence from that top. Do you see that going away?

They’re working harder at it. They’ve gotten a lot better at that control as well. This is something that myself, and a number of people I consider colleagues, are observing very much. We get heavily throttled on places like Twitter, Facebook, Instagram and other places where they have algorithms. As soon as you say something about the system and about the unfairness of it, you’ll notice that you put that tweet out and it’ll get maybe 8% to 9% of the engagement that would be typical. It was throttled in some way, shape or form. That ability to shape the narrative is critical. There are two ways about that as well. One is the sin of commission. They lie and make stuff up. There’s omission where they don’t talk about stuff. One of the biggest omissions I saw has been the yellow vests movement in France. There are hundreds of thousands of people and lots of injuries. It’s got blood, violence and gore. It wasn’t picked up. It wasn’t talked about. There was almost a virtual ban on that in the US media. I talked to people all the time. They’re like, “I didn’t hear about that.” It’s one of the biggest things ever. That’s the sin of omission, where they leave stuff out.

It’s a horse race where social media and the internet for a while was allowing people to go out and find that new information. There are throttles on it. You’ve seen YouTube say, “We’ve got algorithms. We’re going to ban anything that they consider hate speech, a conspiracy theory or whatever. These things always start with one thing you could justify. It spreads rapidly. If you wanted a better definition of fascism, it’s a merger of corporate and state. The so-called progressives in this story are engaging in some of the most fascist behavior I’ve seen, which is, “We’re going to burn books.” That’s the equivalent of burning books when you’re like, “We know which ideas are harmful.” I grew up at a time when ideas, even if they were harmful, you were free to go, “I don’t like this one.” You could encounter them and wrestle with them. I don’t agree with this idea that there are harmful ideas and if you expose people to them, it ruins them. I don’t fall under that. For the many state people, they do. They think they hold the right views and they have to protect other people who aren’t as sophisticated as them. It’s a very patronizing I’m-better-than-you thing.

TWS 9 | How Money Works


The funny part is a lot of people who are ideologues on both sides are some of the most misinformed people I know about. They get their own little echo chambers around things. That polarization is strong. I never thought I’d find myself here in the United States as quickly. I understand the seeds of civil war now. I never quite got the Balkans and what happened. Now I get it. What happens is you have powerful people who splinter groups and stand them up against each other. What I’ve been trying to do is to get those two groups to understand, “You’re fighting the wrong people in the story.” Police and protesters are on the same side of the story. These protesters are usually saying, “I’m getting screwed somehow.” If the police understood what was happening with their pensions, they’d understand that this is where the problem is. Everything that can be done to prevent that discussion of the top, it’s what I see going on. It’s a shame on those in the media who are complicit in that, whether overtly or covertly, whether they understand that or not. They ought to be asking questions about freedom of speech and providing appropriate context so we can have the right conversations. The trend we’re on ends in a bad future that I want to avoid. I’m not dark, gloom and doom. I’m a very hopeful guy, but we don’t have a lot of time to wrestle the ship to a new direction.

What do you see as some signs of hope out there? It sounds like, from your perspective, there may not be any. Do you see any reasons to be optimistic?

There are plenty of reasons. A lot of the young people in the story have a surprising amount. All revolutions start with the young, in some way, shape or form. This is setting up to be a generational thing. I do talk to a lot of the older generation because they have the wealth they want to preserve. I get that. You don’t want to spend your whole life building up. There’s the brass ring. Now would be a bad time for it to all go away. The young people are looking at the story increasingly and saying, “I don’t have anything to gain from preserving the status quo.” We’ve seen the million-plus student marches against climate change in Europe.

Young people I talked to are out there doing incredible and creative things around farming, in a way that’s regenerative and not disruptive or extractive. It’s hard work, but you have to understand systems on a whole different level. It’s different from saying, “I know exactly when to apply the roundup and the Unix.” It’s a different story. I see people wanting to do the right thing. I see people doing the right thing. The enemy in the story, if there has to be one, is the keepers of the status quo. They don’t want anything to change. They want to keep their power. They’ll do increasingly desperate things to keep that power locked in. The more they do, the more this gets compressed. The hope that exists for me is there will come a time when it breaks again. We can then have the right conversations. It’s only if people have the right understanding, the right context and are ready to take the right actions.

Going into the way in which you analyze things, which is very quantitative, where do you see the role of the entrepreneur? Sometimes it’s difficult to put into an equation. Do you see that there are those that are young or maybe even aware of these issues and trying to do something about it?

A couple of things are nested in there. First is the role of the entrepreneur. I’ve trained all my kids to be entrepreneurs. I don’t believe in working for a paycheck anymore. I haven’t for a long time. You need to have multiple sources of income. Lots of people have been forced into that regime anyway. You’ve got to be an Uber driver on the side to make ends meet or the so-called gig economy thing. An entrepreneur is saying, “There are needs out there. I can meet those needs in some way, shape or form. Here’s what I’m good at. Here’s what I’m not good at. I’ll get a team together. We’ll go and do that.” That is the way to the future. Anybody who’s just sitting there and relying on a single source paycheck is exposed. In the next big downturn, it could go away. I don’t care if you’re a highfalutin lawyer at a white-shoe firm or you’re a driver for a long-haul trucking company. If all you got is that one paycheck, you’re at risk. Everybody needs to understand assets and understand the system, as it exists. I get to talk with and hear a lot of stuff from Robert Kiyosaki of Rich Dad Poor Dad. He keeps drawing the same grid. He keeps pointing out that the people who draw a paycheck are tax donkeys. They get hit the hardest.

All revolutions start with the young in some way, shape, or form. Click To Tweet

If you’re a small businessperson, you’re the so-called entrepreneur. If you have a practice, a CPA firm, dentistry or something like that, you’re the worst. They’re crushing you. It’s 60% marginal tax rates when all is said and done. For people who are out in real estate or the investor class, the taxes go away. When I came in contact with them, they’re like, “Where was this information? Where was my dad with this information? Where were my schools?” It’s like this hidden secret. It came out into the fore when Hillary Clinton, during the primary debates, asks Trump, “You pay zero in taxes.” He said, “That’s because I’m smart.” It’s true if humans respond to incentives. There are incentive structures out there that entrepreneurs find out about faster. Everybody should learn what the system is, how it works, what it punishes and what it rewards. I came to that story late in life. Once I found it out, I’m like, “I’m going to use the system as it exists.” It’s not something that’s widely talked about.

That’s an example. You said, “What are the narratives that have to be changed?” Do you know how hard it is to convince somebody that the whole narrative of, “I go to a good school. I got to Harvard and I’m working for McKinsey on a partner,” even in that job arc, it’s still a job. Nobody ever got rich working for a paycheck. Those people are still plugged into that system of, “I have to give the right answers and do the right things to earn this paycheck.” It takes time to back people away from that, deconstruct the narrative, help them understand what the tax code looks like. Help them think about where their value is. Help them think about what wealth is and how you generate it. Not all things can be measured in dollars. There’s a lot of unpacking. It has to be done before somebody is ready to step off, bite the bullet and go down that particular path. The future is going to belong to people who can be nimble, be flexible and add value to whatever situation. The way I waggishly put this is I tell people, even if you were in Leavenworth supermax prison, there’s an economy in there. You can get whatever you want. Humans will always have an economy. Don’t worry about that. The question always in any circumstance is, “What’s an offer? What do I have to offer? How do I get what I want?” Those are the pieces that entrepreneurs figure out earlier and faster.

I’ve heard you speak about this before and you’ve written about it as well. You have those entrepreneurs that are naturally driven, that will take the initiative, see problems and come up with solutions. Normally, the process is there is some extreme pain. There’s extreme adversity where the narrative changes. The context and the way of doing things change. Speak to that. You have been writing a lot about potential Black Swan events. Can you comment on those two things?

If you’re an entrepreneur, you’re out taking risks. You’re going to fail. Things are going to go wrong. With entrepreneurs, you need to learn quickly that failure is another way of finding out more rapidly what doesn’t work. That took me a lot of deprogramming. If we’re thinking about, “What’s a new campaign? How can we reach more people?” I’m going to try and plot this whole thing out. There’s something to be said for the fail early, often fail and fail quickly. Try something. Learn from it and keep going. Our school system punishes that behavior. Everything is supposed to be the next right step. Entrepreneurs, you need to find out very quickly what you’re good at, what you’re not good at and who are people you can rely on. Build your team. Do all of that stuff and figure out how you can move quickly. Some people are wired for that. They end up being entrepreneurs. They drop out of Harvard because they have to start something called Microsoft. For other people and for me, it’s a learning process. How can I be okay with that? I know people who changed me because I watched them. They’re excited by their failures like, “That bidded early.” I would be a little bit more hesitant around that.

Even though with everything that’s going on in the world, as you and I are talking, I don’t know that a tanker didn’t get sunk in the strait and oils are about to triple in price, which could blow up a million business plans. You need to be aware that these Black Swan events can happen. For people reading, the Black Swan event is coined by Nassim Taleb. He’s a quantic economist guy. A Black Swan event has three characteristics. One is nobody saw it coming. It’s rather unanticipated. It has a big impact. Afterward, all the experts are going to tell you why it happened. They’ll explain it post-facto. It’s because they didn’t see it coming, they probably didn’t have a good understanding. Black Swans are a feature, not a bug. They’re a feature of complex systems. All the scene was trying to say is in a normal bell curve of possible outcomes, the tails are fatter than we’re wired to believe. These things happen more frequently. We need to plan for them. How do you plan for something that you can’t anticipate? You have to have resilience and buffers. You have to be ready to change your operating methods very rapidly if something happens.

China decides they’re not going to trade with the US anymore and shuts their ports down. A million companies are screwed because their supply chains are entirely linked to that. The ones that survive are going to be those that spent zero minutes worrying about that and saying, “That’s a done deal.” They found a new supply chain. These things happen. You’ve got to be adaptable and flexible. What we found though is that this is almost entirely a psychological process. It’s not something you can teach at a martial arts studio like, “Do this. Wave your hand like that and you’ll be good.” Instead it’s like, “Can you train yourself to be flexible so that when something comes, you’re able to have something other than a tunnel vision still?” “I’m ruined.” That’s a point of view. “I’m not going to be ruined. Other people will. I’m moving. I’ve got to keep skating in this story.” The psychology of it is very important. That’s why we talk about eight forms of capital people can build up. That’s on the solution side. We didn’t spend a lot of time there.

TWS 9 | How Money Works

The Crash Course: The Unsustainable Future of Our Economy, Energy, and Environment

The most important form of capital is not financial capital. It’s your emotional capital. If you fall apart at the first sign of trouble, I don’t care how much money you have. That’s what we learned from all these crises that you study how and why people thrived if not beyond survived. They thrived in Zimbabwe. Even now, certain families are making their new fortunes down in Venezuela. You see all the chaos and the people who are screwed. Their tunnel vision is too tight. Russia broke apart in the USSR into Russia and the satellite states, fabulous fortunes were made. The difference in every single time was there were people who looked at that breaking moment, saw the opportunity in it and skated into it as hard and fast as they could. Luck plays a little bit of a role, but chance favors the prepared. That’s how we’re looking at this. It’s to understand the context so that you aren’t surprised. You can spend the least amount of time being surprised. You can keep moving. There’s going to be a lot of opportunity in the story and a lot of loss too.

The catalyst for those that win in the end is preparation.

I like what Scott Adams, the creator of Dilbert, says about this in a book. He says, “Goals are for losers. It’s systems.” The example he says is if you say, “I want to lose ten pounds. That’s my goal.” Almost nobody achieves that goal. You put a system in place, which is, “I’m going to wake up fifteen minutes earlier. I’m going to eat like this instead of that.” You put your system in place. Your system runs. Before you know it, you’ve achieved all these other goals.” The question is, “What are your systems of mental preparation? How are you taking the time in any given day to make sure that you are as balanced and have as much mental space in your life?” It’s that you’re appropriately charged, recharged, looking at the right things, asking the right questions and not being afraid to ask the hard questions, which is, “Am I doing the right thing or should I even be doing this at all?” Those are the successful practices that are going to separate those who thrive from those who don’t.

What are some of the things that you are paying attention to? You’re focused on it as information that’s worthy of what you have learned about the past, whether it’s stuff that’s going on in the Middle East, whether it’s the political environment, the economic environment in some of those micro sectors? What are you paying attention to that you’re assuming is going to tell you about what’s to come in the future?

Nobody can predict Black Swans. They come when they come. Afterward, we’ll all try and figure out what happened. I’m fortunate to have this job that I do, to call it a job even. It’s to read all day. I’m probably reading close to eight to ten hours a day and then writing and synthesizing. I spent about a quarter of that on world events. I’m not a geopolitical specialist or analyst. That’s most likely where we’re going to see a Black Swan event come. I spent about a quarter there. I spent maybe 40% on watching the financial markets. We have this theory. It’s called from the outside end. Troubles are always going to start at the periphery. Everybody’s talking about the stock market, “Did you see what the NASDAQ did?” I’m watching the edge of this thing. I’m looking at the triple C junk debt. I’m looking at funding that’s happening at the margins. I’m watching the weaker countries. This is where you’re going to see the first warning signs that something’s gathering steam towards the center. I spend the rest of it stretching my mind out.

I’m checking out a full lecture series by a Stanford professor on human behavior. I’m trying to understand how humans are wired. There’s a biological side. That’s fun. You can get a Stanford education for free if you have YouTube. There are great lecture series there. I’m reading a lot of books about things like NLP, human psychology, trauma and things like that. I’m trying to understand how we’re wired and how that comes together. What I care about is not that people have information but that they take actions. There’s always a gap between those two things. Understanding belief systems and how we’re wired are critical things to understand. You give somebody all the information in the world, but they may still not make the right decision. Marketers have known this for years. People make decisions based on an emotional. This is not denigrated. Emotions have steered us well for many millions of years of evolution. They’re finely tuned. I tell people to trust their intuition a lot. The question is, “Is there a way to hack into that system and understand how I can change my own belief system even faster?” If I find that, I’ll share that.

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There are lots of books out there that discuss our unique way of looking at the world and our decision-making process, which you’ve alluded to is, for the most part, done through our emotional and instinctive reactions to things. You find people very seldom that are able to create that system of making a decision, where they’re able to balance or mitigate their emotion. Oftentimes, emotion doesn’t do the best outcome. Have you read Robert Greene’s new book, The Laws of Human Nature?

I have not.

He wrote The 48 Laws of Power and a few other New York Times best-selling books.

I’ve read that one. That was a great one.

I haven’t commented that much but this is what we’ve been discussing on the show. It’s a lot of these topics. It’s interesting to see the alignment. I see a lot of others that are speaking to these things as well. Hopefully, this convergence of theory around what’s to come in the future allows there to have some breakthroughs by people to take control. In the end, the theory and the strength of that theory aren’t one person. It comes down to a larger group of people that are able to help to combat the status quo, which is also in a sense gaining power.

I love the topic area. I’m learning a lot about it. It’s a little bit of art and a little bit of science. I love where science is going with this. Once upon a time, you had this crude ego, id, Carl Jung, great giants. We’ve learned more since then. We understand the neurobiology and the neuroendocrinology. We understand the sympathetic and the parasympathetic system. We understand our amygdala. We understand the wiring a little bit. Even with that, understanding is nice but insufficient. We can understand how to take our associate thought trees and begin to use those to rewire things. Our brains are more plastic than we thought. This is a dialogue between the emotion and the cortex. There are ways to get to change that more rapidly.

Seeing how that’s advanced and how that’s developed and you’re watching all these bright people start to put some pieces together, here’s my operative model. It’s mind, body and spirit or energy. If you get all three of those in alignment, I’ve seen people make changes in minutes, including people who have been stuck in so-called talk therapy or pharma therapy for years if not decades. In minutes, with the right combination, those changes happen. Most of those things are found at the edges. That’s why I told you I spend my time at the edges. It’s a mainstream orthodoxy. Go get your main clinical psychology degree out of Case Western. They’re many years behind, what’s out there on the forefront. It proves into putting. It’s to work or not work. I’ve seen with my own eyes and my own experience that these things work. That’s good enough for me. I’m a pretty skeptical guy.

I would love to go off on that tangent about all of what you said. I’m assuming you’ve written about that on your blog and talked about that in your podcast.

It’s smattered around. It’s there, but I have all these big areas that we’re looking at. I’m trying to synthesize them into some coherent story. It’s a lot to look at. We live in the information age.

We’re overwhelmed with it. How can readers learn more about you, Peak Prosperity, your podcast and what you’re up to?

There are lots of ways. PeakProsperity.com is the main website. It has a public and also a subscription newsletter service. The subscription side is for people who want to go a little deeper into these topics and have these conversations one-on-one in a commentary behind the scene. We’re on Twitter, @ChrisMartenson. We’re also on YouTube, @ChrisMartensondotcom. You’ll find lots of people who want to start somewhere. The first time they’ve heard of me, they haven’t watched anything. Start with the Accelerated Crash Course. It’s 53 minutes. It takes the entire body of the three E’s and plunks it down into one spot. That will change your life if you haven’t watched it before. It has for a lot of people. Start there. Our book, Prosper!, on Amazon is the solution set. We go into each of those eight forms of capital, financial capital and emotional capital. There are six others. We break each one of those down with the hypothesis that if you’re rich across all eight, you’re going to be resilient, happier, healthier and more ready for whatever’s coming in the future, whatever that is and whenever it comes.

Chris, it’s been an honor to have you on. Thank you so much for sharing your wisdom.

Thank you.

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About Chris Martenson

TWS 9 | How Money WorksChris Martenson, Ph.D. (Duke), MBA (Cornell) is an economic researcher and futurist specializing in energy and resource depletion, and co-founder of PeakProsperity.com (along with Adam Taggart). As one of the early Econo-bloggers who forecasted the housing market collapse and stock market correction, Chris rose to prominence with the launch of his seminal video seminar: The Crash Course (also published in book form, Wiley, March 2011).

It’s a popular and well-regarded distillation of the interconnected forces in the Economy, Energy and the Environment (the “Three Es” as Chris calls them) that are shaping the future, one that will be defined by increasing challenges to growth as we have known it. Of course, such warnings need solutions, which is why he and Taggart published the manual Prosper! How to Prepare for the Future and Create a World Worth Inheriting.

In addition to the analysis and commentary he writes for millions of readers at his site PeakProsperity.com, Chris’ insights are in high demand by the media as well as academic, civic and private organizations around the world, including institutions such as the UN, the UK House of Commons and US State Legislatures.


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