entrepreneurship

Community: The Third Pillar Of A Successful Wealth-Creating System with Raghuram Rajan

TWS 02 | Community

 

The development of every country is different because each country has a different set of resources, strengths, and weaknesses. Raghuram Rajan, one of Time Magazine’s 100 Most Influential People, goes in-depth on why community matters. As he dives into the three pillars of the most successful wealth-creating system, learn how Raghuram views entrepreneurship, intrapreneurship, and the individual development now and then. An author of three bestselling books, he gives his insight on the wealth gap and the rise of poverty, how communities see things differently and make a subsequent change, and the status of today’s central influence.

Listen to the podcast here:

Community: The Third Pillar Of A Successful Wealth-Creating System with Raghuram Rajan

The world is changing daily. New technology, businesses, toys, games and movies, yet there is a growing concern about the gap between the wealthy and the poor. Presidential candidate Andrew Yang proposes UBI, Universal Basic Income. Alexandria Ocasio-Cortez proposes sweeping centrally-driven reform, but it begs the question, “What is the root of the problem? Why would we give the government even more power when their initiatives of the past have always fallen short of expectations?” My guest may be unfamiliar to most of you, but his resume is beyond impressive. He was featured in Inside Job when he was Chief Economist at the IMF, International Monetary Fund. It’s where he openly challenged Alan Greenspan, then the Chairman of the Federal Reserve, at the iconic Jackson Hole Economic Summit in 2005. The challenge was a controversial paper he wrote that cited the excessive risk-taking of certain investors with no corresponding consequence. He was scoffed at by almost everyone there but was vindicated when the world financial system almost collapsed because of what he claimed.

He was named as one of the 100 Most Influential People in the World by Time Magazine and has written three bestselling books, Fault Lines: How Hidden Fractures Still Threaten the World Economy, Saving Capitalism From The Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity, and The Third Pillar: How Markets and the State Leave the Community Behind. He’s Dr. Raghuram Rajan, a former Governor of the Reserve Bank of India. He’s also the former Vice Chairman of the Bank for International Settlements. He is the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago.

This season, we’re talking about entrepreneurship and intrapreneurship, the development of the individual and the difference they can make in their own life and the life of others. I felt that Dr. Rajan’s perspective of the role of community as part of the global landscape is compelling and it reinforces what individuals can achieve in a certain environment. The wealth gap and the rise of poverty is an issue. The typical narrative is that the society safety net, i.e. welfare and money is the solution. That method is easy but ultimately, it’s a Band-Aid, a short-term solution if anything. The lasting change for all individuals requires a mindset change and only the individual can do that. Not a handout, not a paycheck that they don’t earn, but them themselves making that mindset change. I hope you enjoy this second episode of season two of the show. If you like it, don’t forget to spread the word. Leave your review in iTunes and please share this episode on Facebook, LinkedIn or Instagram and get the word out especially for Dr. Rajan and his book.

It is such an honor to have Raghuram Rajan on the show. I’m excited to be discussing your book, but also discussing your perspective on where we stand as an economy and a society. Thanks for taking the time to join us.

Thanks for having me.

You have such an impressive list of accolades. Where did your drive to pursue the career path that you’re on right now come from? What were some of the defining events in your life that impacted the way that you see it?

Different people have different views on where you are. Where I have contributed has been in the area of both economic theorizing and research as well as economic policymaking. If you look from the beginnings, I would say it comes from growing up in a poor country and asking, “Why on earth are we poor? What is it that we’re doing, which keeps us this way?” I had been to other countries that were much richer and trying to figure out what the difference was. It certainly wasn’t the caliber of the people. It seemed to be something else that was making a difference and to that extent, that was in many ways the motivating force behind getting into economics.

TWS 02 | Community

The Third Pillar: How Markets and the State Leave the Community Behind

My wife is from a third world country and when you live in certain circumstances, you tend to accept the circumstances as they are, but once you see the contrast, that’s when those questions begin. What are some of the general conclusions you came to as an answer to that question?

It’s an evolving process. “The question’s always remained the same. The answers change.” I’ve seen the answers change to this question, “Why are we poor?” The answer’s changed over my lifetime. I have a somewhat different set of answers than I would have had as a twenty-year-old. As a young person, you think it’s all about some people having appropriated all the fruits and that’s part of the answer, but it doesn’t explain why they need to keep it for themselves. Why there aren’t more opportunities for everyone else. The easy answer to that point is let’s tax the rich. Let’s spread it all around and we’ll be fine and then you realize the answer’s a little more complicated.

You have to figure out how you create opportunities for everybody. That’s to my mind the real question. How in every country do we create the possibility for everybody to reach their limits? That means first creating capabilities in people. We’re not born as fully-fledged adults with a Ph.D. degree. We acquire all of this on the way. How do we create the environment? That’s where my book on the community, how do we create an environment that enables you to get to that place? Once you have those capabilities, how does the system create incentives for you to use them in the best way possible? How does it make sure that some people don’t appropriate most of the fruits and it’s more widely spread? How do we keep a level playing field both at the beginning, but also along the way? That seems to me the systemic questions we have to answer. It’s not clear to me as I grow older that it’s a menu where we pick pieces from the menu, “I like this, I like that.” It seems more like an equilibrium where a bunch of things happens together and you have to make compromises. “I like this and I like that, I don’t like something,” but that’s part of the reason or that’s how you enjoy the things that you enjoy. You have to give up some other things for that.

I want to talk about some of your past and some of the experiences that you’ve had over the last several years, specifically you’ve been in the positions of authority and influence. Let’s dive into The Third Pillar book that you came out with because I think they all tie together. Would you mind explaining first what the pillars are, specifically what that third pillar is and why you decided to focus the book around that pillar?

To some extent, I was looking at what I thought was possibly the most successful wealth-creating system we’ve had in history, which was the postwar liberal market society. That has three words, liberal, market and I would say, democracy is the third word. Liberal means the state which allows people to flourish. A state which is limited but does what it’s supposed to do to maintain law and order. The market is well understood. That to my mind is the second pillar. There’s society, there’s a community working through democracy to keep the system free, fair and open to everyone. The third pillar in my view is community, but it also implies democracy. It also implies a broader society, which essentially works together.

When you have these, you have the conditions for success as a society. Some people want democracy, but they don’t want markets. Some people want government and democracy, but they don’t want markets. In my mind, the three hold together. The first part of the book is trying to tell you why the three fit together. For example, an independent private sector flourishing in a competitive market is important because it acts as an independent source of the bar. It balances the mighty bar of the state. That balance is important, otherwise an overweening state has a tendency of becoming authoritarian. No matter what democratic structures you have, the state which is unbalanced by other parts.

Look around the world. When you see Turkey led by Erdoğan who has few constraints on his authority. You understand the private sector in Turkey is not much of restraint and understandably because the state controls many levers over the private sector, whether its ability to take away credit or its ability to refuse permissions here and there. You need a more open, flourishing competitive market where you can have the likes of the New York Times or The Washington Post holding the administration in check. You can have a Fox News holding the previous administration in check. You need these independent private sector powers. I’m not saying it’s ideal in the United States, I’m saying that the private sector is more independent than the other countries.

Your perspective is interesting, but I also believe it may not be the perspective that’s held by everyone. You have enjoyed a seed at seeing the world from many different places. I look at those that are in the community and how they’re viewing the challenges and the imbalance because most would agree that there’s an imbalance. When it comes to the environment, what you and I understand as the best environment and what a person that’s had no experience leading Central Indiana or Central Florida, having a limited perspective on things, they would want the same thing in the end. Yet they’re all disagreeing on the environment because that’s where you come in with a lot of AOC and Bernie Sanders and this notion of communism, which is a community. It comes to that third pillar. How has your experience over the years shaped the perspective on how strong you feel about a specific type of environment to allow this third pillar to be as influential as the other two pillars essentially?

How well you will do income-wise is not the same thing as how well you will do happiness-wise. Click To Tweet

It’s not my feelings. What is clear even in the United States, which is a country by many counts doesn’t emphasize the community anymore. Even now, you find that community matters. Some powerful work by Raj Chetty, an economist at Harvard, shows that which community you grew up in essentially determines what your income will be for the rest of your life. He does this by looking at kids that move between communities. You moved from a community which is low down on the performance scale to a community which is much higher up in the performance scale. It makes a world of difference in your life chances. Community matters even in the United States, where some people would argue the community is deemphasized.

Why does it matter? Because it gets you the start in terms of your early education, the early schooling you go to, the values you espouse, your identity, your sense of who you are and your ambitions. You talked about some places in rural Indiana, the ambitions of kids there and I’ve talked to a bunch of them are quite different from the ambitions of kids in New York City. In that sense, it does matter and it does set how well you will do going forward in your life. How well you will do income-wise is not the same thing as how well you will do happiness wise. There are differences between the two. In general, if we want capitalism to work, people, wherever they are in the country, should have the feeling that it works reasonably well for them. They’re not doomed right from the beginning because of where they started.

That’s our challenge because the requirements for participating in the capitalist economy have been increasing because of technological change. The skills you require are far higher than the skills a kid required 100 years ago. A high school education no longer cuts it. How do you get the skills that you need in the communities you’re growing up in? We can’t bring everybody to San Francisco and New York City. You have to have much more community-centered development. The problem is that it’s a vicious circle. When economic activity leaves a community, the big employer in town closes down. What follows is everything else starts breaking down. Your social relationships start breaking down, marriages break down, more divorces, more teenage pregnancies and more drug use. Your school starts breaking down and then you have a much lower chance of succeeding in the economy. Not just you, but your kids.

It’s a vicious circle. How do we break that vicious circle? We’ve had many areas like this in the country in the past, but they’re increasing. The question is how do we reverse this process? The answer is not lower interest rates. Similarly, it doesn’t mean have more fiscal spending. It typically means much more targeted, often bottom-up processes by which we rebuild activity in the community. Bring more jobs, employees and new skills. That means community involvement. It also means outside support, but we need to be much cleverer about this then we’ve been so far.

Maybe go through some of the research that you went through to prove out or to support your thesis. The world is rapidly evolving and you make certain claims regarding how the things of life are becoming much easier, whether it’s the food we have, transportation, or entertainment. It’s unprecedented as you compare it to 100 years ago or even 50 years ago. An individual’s fulfillment and their positive experience of life are being involved in making a difference and contributing in a sense. What things did you do to support some of the methods and direction of strengthening this third pillar?

TWS 02 | Community

Community: Because of technological change, the easy jobs in the middle are gone. You’re left with a choice of either the low-skill job or the high-skill job.

 

The phenomenon I’m pointing to is mental level phenomena. You point to a number of studies which point in the same direction, but the job of somebody writing a book like this is to write it all together to say, “Here’s the big picture.” The big picture can be summarized in one big causal factor. One pillar which is weakened therefore cannot respond. The causal factors, technological change is making such a huge impact on our life. In previous environments of strong technological change, the Industrial Revolutions, for example. Society responded in a big way and said, “Here are the things that have been touched by technology. Here’s how we should respond.” For example, in the Second Industrial Revolution. When you had big auto factories, chemical factories being set up. In the United States, you had a massive high school movement, which created a large number of high schools, but also made high school education free so that kids could go and get that education.

What is interesting is that there was also a time of a lot of immigration, but the immigrants who came into the United States were not well-schooled. They were experienced carpenters, they experienced plumbers. They had the experience, but they didn’t have schooling. They were not appropriate for the factories where you needed to know trigonometry to set the angles right in a machine that the kids that had gone through high school knew how to do. That’s how America dealt with the Second Industrial Revolution and many Americans benefited from that. I would argue that we need to figure out what the appropriate response this time is also. What you see is because of technological change, the easy jobs in the middle. The ones that required even a high school education. That was the technological revolution of the past and you could get decent incomes with that education.

Those jobs are disappearing. The manufacturing jobs, which were well-paid, unionized jobs, even the jobs and services. The job of a clerk who used to you have to know accounting, you have to know how to add and subtract and so on, used to fill large ledgers. That job doesn’t exist. It’s been automated. These jobs in the middle are gone. You’re left with a choice of either the low-skill job, you’re a security guard somewhere or the high-skill job. You’re a consultant at McKinsey. In between, it’s a long ladder, but there’s also not many on that ladder because the in between jobs are gone. How do we position people now for those jobs higher up in the ladder? How do we position them with the strongest skills?

That has become the central question. The problem is it all starts with the community. My colleague Jim Heckman at the University of Chicago was a Nobel Laureate in economics says, “By the time you’re five years old, you’re basically done for life in terms of your trajectory.” Because you had the early childhood health support that you need to keep you healthy through life. You’ve learned some of your habits. Your vocabulary is different depending on whether you grew up in a professional household or in a household which is poor where parents don’t talk that much. Sometimes there is a strong correlation between income levels and how much you can afford to have time to prepare your kids. Therefore, the life chances of that kid, even by age five, are different depending on how they grew up. In this world where it matters, for you to get those good jobs, you have to have that early preparation.

You have to go through a decent high school to be able to manage in college. It’s not enough that college has opened their doors to you. You can spend six years and dropout. One of the biggest problems in US education is the high dropout rate from college. These kids dropout with huge debt. Part of the problem is they’re not well-prepared for college in the first place. How do we get them that preparation? It starts with the community. That’s why I say we need to repair our community first in order to have a chance in this technological revolution.

Discovering happiness or fulfillment is the general desire of everyone to an extent. Click To Tweet

What are some of the ideas that may move the needle? It is quite an undertaking. One of your areas of expertise is behavioral science and how human beings behave in large part is habitual or subconscious. That’s where you’re making claims of where we derive our vocabulary, where do we drive our opinions on certain things. It’s not like you snap a finger, make an argument and suddenly people have a different way of viewing the world. From a community standpoint, making that shift, what are some of the ways that you see at least the majority of the community seeing things differently and making the subsequent change?

It’s a great point you make because it’s something that can’t happen from the outside. Somebody’s clicking their fingers out and say, “You’re the community, you got to pull yourself up.” What you see again and again is it comes from inside. You have to maximize the chances of it coming from inside, but you can’t force it from the outside. It’s a few people getting together. In the book, I talk about the Bilston Community in Chicago, which basically was crime-ridden. The number of deaths 100,000 was approaching the deaths in Germany during the height of World War II. There were drug wars in every part of the strip there. As one of the community activists told me, change came when they found a body outside one of the six churches and said, “This can’t go on anymore.”

The Pastor asked, “Who amongst you is willing to stand up? Who amongst you is willing to take the first step?” A bunch of young men came together and one of them volunteered to take on the task of community revival. The first task was essentially bringing down the crime. With that level of crime, no employer wanted to come in. They also did interesting things to arrest the crimes. For example, they found that much of the crime was localized in a few bars. They petitioned the city of Chicago to close down those bars in the neighborhood. They found that one of the problems was people didn’t want to call when they saw crime because they feared the criminals would go after them “Why are you ratting on us?”

They got a whole bunch of people to call the police at the same time and say, “There’s a crime here in progress.” They also persuaded them to get out of their houses. Crime flourishes in dark spaces, get out, light it up, come up and crowd the criminals out. It was a community effort, which brought down some of the crime. They did things like saving the local bank, which was going out of business. This combination of things helped them become more attractive and to some extent, they’re paying a modest price for that as a whole a lot of businesses are coming in. A lot of people from outside want to live in the Bilston neighborhood because it seems much more attractive. They are getting a little bit of gentrification. That’s not entirely a bad thing. There are some bad aspects to it in enforcing some old-time residents out, but they are going in the right direction.

TWS 02 | Community

Janesville: An American Story

It’s a perfect example. At the same time, you look at the root cause of that happening. It was a dead body in front of a church. Have you found in your analysis of the things that typically you have these events happen, like these earthquakes that shake a person and make them realize, the pain of staying the same is worse than the pain of changing and making changes. Did you see that as a fundamentally dynamic as far as how communities make the changes and adjustments that will strengthen their core and that pillar?

I’m not sure every community needs to have that wake-up moment. Some will, whether it’s drug abuse, crime or a large employer shutting down. There will be different triggers for them to see that, “Things can’t go on this way. We have to change.” There’s a nice book, Janesville, on how the big employer in town GM shutdown in Wisconsin Town and how the community came together. She leaves it where the community is trying to put things back together, but it’s not successful thus far. Since then, Janesville seems to have made some progress and things are a lot better than they were. In fact to the extent that the community police are issuing parking tickets. That’s a sign of development. You have so much traffic that parking tickets are being issued. More broadly, I would say the reason I emphasize Bilston is I want to say that communities that are far down and plagued by poverty, drug abuse and crime have found ways to lift themselves.

I see this in poor India that there are villages that decide, “We’re not going to depend on the use of government coming in and digging irrigation tanks and irrigation ditches for us, we’re going to do it.” It’s that old frontier mentality in the US that we’re going to do it because there’s nobody else is going to do it for us. That is a mentality, but in a developed country, there are many sources of help also. I’ve been talking, for example, to the Federal Reserve Bank of Philadelphia where they have an entire department which is trying to energize some of these community efforts. Bringing communities together, getting them to learn from each other. There are many sources. There’s a lot of wealth in this country and that wealth is sometimes in private philanthropic ways, for example, the Kaiser Foundation in Tulsa. In public ways we have something called the Opportunity Zone set up by this administration, which essentially offers tax benefits if you invest in communities that are falling behind.

There is help available, but it’s hard for Washington or some far away state capitol to understand what needs to be done in the community. The planning on what needs to be done has to become much more internal. Who would know that the significant problem in Bilston was a crime, that once you dealt with the crime, other magic would happen? It’s trying to figure out what are the two or three key impediments that if I fix it, it will set it back on a virtuous cycle and reverse the vicious cycle that locals know far better. There are many examples, some of which I cite in the book, but elsewhere of people thinking, “What can we do that’s different? What can we do to get the community engaged?” There will be failures, but it’s a way out which is easier in a developed country where the key is attaching yourself back to the national economy.

These are fascinating points. It’s something I think about a lot. I know that there are many others that are asking similar questions as to how is this wealth gap going to end up. It’s moving, but is it moving in the right direction? That’s where you have the primary narrative that exists that the federal government is the power of influence that should be fixing this problem and it continues to build. There’s a lot of movement, especially with the large part of the Democratic Party where the solution isn’t necessarily going back to communities.

The solution is using central powers to influence change through Universal Basic Income or redistribution of wealth. I look at how significant the claims you’re making. You’re trying to solve symptoms with those central-influence initiatives instead of the actual root of the issue. The world is evolving and just to see what the world has done in the last few years is incredible. You look at the central powers, it’s not reasonable for them to adapt to the rate of change that’s occurring because they’re far away and by the time a decision needs to be made, it’s too late.

I look at the significance of your perspective and what you’re making claims on as something that would move the needle. That was the intention of the United States in the beginning, wasn’t it? The reason for the 10th Amendment was to keep powers more local than federal. There are many other questions I have as a follow up to this, but I’d love to see how you’ve looked at the state of the United States when it comes to the immense amount of government power that exists. Their adoption of this role to solve problems and to make everything right. Do you see other signs of how this central influence is shrinking or do you see that there are still issues to be resolved there?

The development bar for every country is different because each country has a different set of resources, capabilities, and impediments. Click To Tweet

I don’t want to argue to your earlier point that there is no rule for the central government. Since Gerald Ford, every president has been the education president. How are we doing on education? Not very well. We need to figure out alternative approaches. I would agree very much with your thinking that central is difficult because the problem that each place faces is different. Some one size fits all policy device in Washington is not going to work. As support, central is fine. As a prime mover, it’s probably not what the doctor ordered for the country. This chimes well with the resilience and the self-empowerment of people, which has always been true in the United States.

I worry that in these communities, empowerment is feeling that sense of empowerment. That also leads to a different problem, which is that you look to the nation for your identity and for your answers, rather than for the people around you. That’s true in a number of countries. It’s growing in India also. When you start looking for the nation as a resolution and you become more nationalist in spirit. Nationalism is not a bad thing, but nationalism which looks for the enemy as the reason for your problems becomes problematic. It’s easy to point fingers outside, point fingers at minorities within the country, but that’s really no solution because it’s not them who are holding you back. It’s you that has to change. Part of the reason why I emphasize it back to the roots approach is it seems to me we need to rediscover identity back in our communities.

When I say this too many cosmopolitan people who dwell in big cities, they laugh. They say, “We left those communities long back.” In the United Kingdom, 80% of people still identify with their village or their town as their community. They’re not the rootless people that sometimes we see in cities. I’m not saying that’s a bad thing to be a citizen of everywhere, but there are many people who are a citizen of somewhere. It seems to me that they need to find ways to address their problems and we need to think about how that can best be done. This is why I say balance. It’s not all the central government. It’s not all the community. It’s not all the markets. Some balance between the three, which is going to help us get out of our problems.

The fact that this is not the United States problem. It’s a problem in France, in Germany, in China and it’s a problem in India suggest that we need a model for the world of the future. That’s in a sense what I’m trying to propose. At some level, some people have decided that, “Where’s the big tax? Where is the big government program?” These are all milk toast, but there is a big idea here which is let us focus on being a centralized government and governance as the way forward, rather than put more burden on a centralized government in a fractured society yet.

I love how you describe the community in which certain things take place. Going to the original proper role of government was to essentially protect this environment. That’s where obviously the Scottish Enlightenment had much influence on the Founding Fathers to develop the constitution and develop the environment in which commerce was to take place. We’ve gone away from that and it’s understandable. At the same time, there’s always a price to pay and we’re paying it because of how people believe things should be. I look at the future and it’s incredible what human beings have been able to create the potential in one mind can change the world and it could change a community.

TWS 02 | Community

Community: It’s a balance between the central government, the community, and the markets which is going to help us get out of our problems.

 

That’s an environment where you essentially have handouts or you have this theory that you should be taken care of. I don’t know if it ever leads to a person to discovering happiness or fulfillment, which is the general desire of everyone to an extent. That’s where you look at the examples that you cited, whether it’s Chicago or other places where people face adversity and figure out how to make adjustments and thrive because of that. It’s so inspiring but it comes down to the notion of forest and trees, because a forest is an abstract, forest doesn’t exist. A community is also abstract. It’s a group of people. The individual right and the protection of their rights is due to what the individual can create in the right environment if that’s what the overall consensus is.

I look at your experience and you obviously had a front row seat at the financial crisis of 2008 and 2009 and you saw what happens in how decisions at high levels can impact the entire world, which it did. Being a part of a higher education program at the University of Chicago, you come into these conclusions. It isn’t just you waking up in the morning and saying, “I’m going to write a book about this third pillar.” That’s why I find it fascinating how much you’ve experienced where things succeed and where things fail. I’m a fan and I appreciate all the work that you’ve done. Where do you propose your theories? What are you trying to achieve with this book other than getting the ideas out there? Do you have some initiative that you’re trying to push forward?

I’m starting that process and it starts first by publicizing the ideas, but then people start calling you and say, “Come talk to us. We were doing this stuff.” I’m learning more because there are many different ways that communities are coping. I got a call from a group at the World Bank, which is dealing with coal-dependent communities across the world and how they’re dealing with the fact that coal is largely on its way out. How do they recover and what different ways are different groups across the world doing it? This is a powerful way if they figure out what best practices are of trying to spread the word across the world. Here is how they have coped in Austria. Here’s how they coped in Australia. Therefore, let’s figure out whether you can do some of these things.

Part of what I want to do is figure out how you can emphasize more of the success and make it happen more widely. I do want to say that part of this comes from my experience in development. I said I grew up thinking why we are poor? As I looked at development and I studied it, one of the most interesting findings in development is the low explanatory power of influence from outside to how a country develops. You would think a lot of money coming into the country from countries that are giving money from across the world should make this country grow fast. It doesn’t.

For a variety of reasons, it has low power. What happens is when a country like South Korea says, “We’re going to make a change.” The development bar for every country is different because each country has a different set of resources, capabilities and impediments. It’s when they figure out that they need to make a change, it is when the rest of the world can be helpful by buying their goods, trading with them and so on. That idea has percolated into this book, that when you look at successful communities, we don’t know what the recipe is because the recipe is something they figure out because they’re close to the problem. You do know that it often has to come from inside.

Thank you for sharing. I wish you the best. It’s something that is a growing challenge. Humanity is fascinating to observe sometimes where we’re at and we’ve become a global community essentially because of the ease of communication. Sometimes ideas are where most of the power comes from. Getting an idea in a person’s head and then getting it to get out of their head if it’s the wrong idea or unprincipled idea, that’s a big challenge. I look at intellectuals such as yourself and other powers of influence, not necessarily from a central government standpoint, but whether it’s a media or authors that are rising to the challenge.

I was at a financial conference up in Whistler, Canada. Ray Dalio with Bridgewater and a massive hedge fund. The majority of his thoughts were directed toward taking some of his understanding of capitalism, free markets and being able to institute that in Central Connecticut to improve the poverty and crime situation there. It’s one of those things where the problems are getting to the point where they’re boiling over. People like yourself are making and going to make a difference.

Thank you very much. I do hope to stay engaged. I hope we get more people to start thinking about these issues.

Thank you, Dr.Rajan. It’s wonderful having you on and I wish you all the best.

Thanks for taking the time.

Important Links:

About Raghuram Rajan

TWS 02 | CommunityRaghuram Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. He was the Governor of the Reserve Bank of India between 2013 and 2016, and also served as Vice-Chairman of the Board of the Bank for International Settlements between 2015 and 2016. Dr. Rajan was the Chief Economist and Director of Research at the International Monetary Fund from 2003 to 2006.

Dr. Rajan’s research interests are in banking, corporate finance, and economic development, especially the role finance plays in it. He co-authored Saving Capitalism from the Capitalists with Luigi Zingales in 2003. He then wrote Fault Lines: How Hidden Fractures Still Threaten the World Economy, for which he was awarded the Financial Times-Goldman Sachs prize for best business book in 2010. His most recent book, The Third Pillar: How Markets and the State hold the Community Behind was published in 2019.

Dr. Rajan was the President of the American Finance Association in 2011 and is a member of the American Academy of Arts and Sciences and the Group of Thirty. In 2003, the American Finance Association awarded Dr. Rajan the inaugural Fischer Black Prize for the best finance researcher under the age of 40. The other awards he has received include the Deutsche Bank Prize for Financial Economics in 2013, Euromoney magazine’s Central Banker of the Year Award 2014 and The Banker magazine’s Global Central Banker of the Year award in 2016. In that year, Time magazine chose Dr. Rajan as one of the 100 most influential people in the world.

 

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today:

Entrepreneurship: The Season 2 Kickoff

TWS 1 | Individuals In Nature

 

Pulling metaphors from The Matrix to the life we have now, we can see the parallels of how we have been built into systems that ultimately stop us from seeing the opportunities beyond. As the second season kicks off, Patrick introduces us to a new topic we’ll sink our teeth into. We depart from capitalism towards entrepreneurship – specifically the entrepreneur and intrapreneur and the difference between the two. Prepare yourself for a new season that will question your assumptions on life, career, finances, and investments.

Watch the episode here:

Listen to the podcast here:

Entrepreneurship: The Season 2 Kickoff

“The Matrix is a system, Neo. That system is our enemy. When you’re inside, you look around. What do you see? Businessmen, teachers, lawyers, carpenters, the very minds of the people we are trying to save. Until we do, these people are still a part of that system and that makes them our enemy. You have to understand most of these people are not ready to be unplugged, and many of them are so inert, so hopelessly dependent on the system that they will fight to protect it. Unfortunately, no one can be told what the Matrix is. You have to see it for yourself. The Matrix is the world that had been pulled over your eyes to blind you from the truth. The Matrix is a computer-generated dream world built to keep us under control in order to change a human being into this.”

I’ve always loved the parallel of our experience of life to the movie, The Matrix. As you and I begin a new season together, our focus is on a topic that is individual in nature. You’re going to question your assumptions about your life, your career, your finances and your investments. If you’ve read the previous four seasons, I believe you’re ready. It’s funny I used a Matrix quote in the book that I released. One of the editors actually made a note in their copy not understanding the reference associated with the red pill and the blue pill. That brings me to my next point. If you haven’t seen The Matrix, go see it because it’s a pretty cool movie. It’s definitely applicable to what we’re going to cover this season.

Our system of education from elementary school to middle school to college specifically, and how that creates this system of expectations when it comes to what we’re supposed to do after that, which is go to grad school or get a job and pursue a career. That career with its benefits, the desire to stop working and contributing one day, hoping that the financial markets and the 401(k) retirement plans will make us millions and be our retirement savior is this system that we are experiencing daily. Is that what you really want? Is that system giving you the fulfillment, joy and excitement that is possible? The Wall Street Journal had a piece about those who retire before the age of 62. I think it’s as applicable to those that retire after 62 or 65, but it made reference to the decline in longevity. Dying sooner than expected, having to do with the symptoms associated with unplugging from the opportunity to contribute and to provide value to others. Hopefully, you have gathered over the last few years and for those of you who have read the book, that I truly believe that whatever suppresses the human spirit to continually grow and expand through experience is one of the greatest thefts in history.

Uncertainty is one of those human needs that we all crave. Click To Tweet

On the other side of this system, that wall that prevents us from seeing what’s possible is literally infinite possibilities to give our life a constantly renewing sense of purpose from what we discover about ourselves and what we individually can bring in value to others, how that makes us feel, the financial remuneration that it gives us. That from what I’ve experienced, that red, is what makes us feel alive. This season we are shifting from the ideal environment of growth, which is capitalism. It’s the ideal environment of growth and expansion to what the individual can do in that environment. The theme specifically is the entrepreneur and intrapreneur. Let me talk about the difference between the two. The history of the entrepreneur is pretty fascinating. This is the definition that I like most. It’s the capacity and willingness to develop, organize and manage of venture with taking risks in order to be successful and turn a profit.

There was another term that when the idea of an entrepreneur or the word entrepreneur was used, it also referred to an adventure. I did an episode about the principle of uncertainty. Uncertainty is one of those human needs that we all crave. It’s the feeling of being alive, whether that’s riding a roller coaster or going to a movie or traveling to a foreign land. It’s something we all crave. That adventure spirit is within all human beings. I believe understanding, for yourself that is, because there are different degrees of it and it applies differently to different individuals. Understanding that sense of adventure and experience is part of what gives life its meaning. There is an economist, his name is Jean-Baptiste Say. He’s famous for Say’s Law when it comes to understanding the demand side economics or demand-driven economics. He identifies entrepreneurs as the driver for economic development, emphasizing the role as one of the collecting factors of production where they’re able to allocate resources from less to fields that are more productive.

I find entrepreneurship fascinating because if you think about it, what we experience in life on a daily basis, I think we often take for granted. Hundreds of years ago, what exists was merely a possibility. It was dirt. It was natural resources. Look at what we’ve taken as humanity and made into whether it’s television, video, lighting or the internet. Step back and put yourself in the position of a time traveler and travel from 500 years ago to now, it’s unbelievable to think about. It all started with a human being and another human being then another human being, being able to take our potential and apply that to the resources of life that we all have access to.

TWS 1 | Individuals In Nature

Individuals In Nature: There are opportunities to be entrepreneurial, to take risks and buck the status quo, to question authority, to question assumptions, and to question the system.

 

What does that have to do with you? The TV has been invented, the camera has been invented and the internet’s been invented. How does that apply to you? It’s not so much the actual application of entrepreneurial principles or the idea of entrepreneurship, but it’s adopting the mindset of solving problems, of making things better, of making things more efficient by looking at something and figuring out a way to make it better, to create more value. I believe this comes differently based on the individual. This is where I dive into entrepreneurship. Looking at entrepreneurship and intrapreneurship, this is where you fit in. You fit in because you have individual strengths, you have individual talents and abilities that you’ve been gifted with. It’s different for all individuals. You’ve had experiences up to this point that has given you an idea of what life is about. I think most of you are driven and you’ve discovered things that you’re good at based on how you feel, based on receiving some reward or achievement, or based on what others have said about you.

I believe that right there is one of those seeds of opportunity to be nurtured. With that nurturing, come incredible opportunities for your life but also for the level of satisfaction and the level of wealth that you achieved. This season, we’re going to get into a lot of topics that have to do with the changing environment, not from capitalism standpoint but the change in that system that Morpheus in The Matrix refers to. The system of education is changing rapidly. The system of business is changing rapidly. One of the guests I’m going to have on is going to talk to you about the majority of companies in ten years will have a majority of their workforce, 70% or more, as either working remote, as contractors or freelancers, pretty bold claims. In my experience, what I’m seeing out there is incredible.

I’m actually going to release an eBook that I’ve been working on for a while that is speaking to this future of work, the gig economy and all of the jobs that exist. The employment opportunities that exist that are either a contract, freelance or remote and what that allows is unprecedented. What that allows is for you to discover what are the details and job requirements of those specific opportunities and what can I do? What can you do to invest in yourself to obtain the certifications, obtain the experience and obtain the attributes in order to have one of those positions? What that allows you to do is work 15, 25 hours a week maybe less, do it on your own terms and mix in the lifestyle that you enjoy.

Understanding the sense of adventure and experience is part of what gives life its meaning. Click To Tweet

It’s not the typical way in which people think about their future. It’s the sacrifice of now for a better future. It’s putting money away into a 401(k), an IRA or the markets in hopes that one day they’ll be enough where you don’t have to work. I’m going to break it to you that working is a part of life but working in something that you don’t like doing and that you want to escape from through retirement, that’s your choice. Your choice is to do something you don’t like and you’re doing it by sacrificing enjoyment, achievement, pleasure and happiness for money. Because of where we’re going as a society, I believe that you can take very little money over the course of the next four months and you can learn more about yourself, learn more about what you’re good at.

We’re going to have some guests on here that represent some of the personality tests that are out there, Myers-Briggs, Kolbe, DISC, StrengthsFinder, so that you can start to discover where do you feel the most alive? Where do you receive the most fulfillment? What are the strengths that you have that you may not be aware of? How do you apply that to specific job opportunities, employment opportunities, whether it’s within the company you currently work for or outside of it or on your own? I’m not saying that entrepreneurship is for everyone. It has been an incredible journey from a positive standpoint, but I’ve equally experienced the other side of the spectrum where I had self-doubt, where I had relationship issues, where I had financial failures. Believe me, it is something that I know is not possible for everyone. It almost wasn’t possible for me and I’m still experiencing it.

Sometimes people can’t work for someone else. That’s where I categorize myself, I look at what’s right for you and that’s a question you have to ask yourself. You may have to ask it more than once. The idea of an entrepreneur is thrown out. There are entrepreneurship classes in school, there’s entrepreneur thrown through social media. I think the definition of entrepreneur definitely needs to be questioned, but that there are opportunities to be entrepreneurial, to take risks and to buck the status quo, to question authority, to question assumptions and to question the system. I believe that’s your responsibility. It’s my responsibility. That’s why the world exists the way that it does is because someone questioned why. Why does it have to be that way? Why do we have to communicate through just phone? Why can’t we communicate better?

Henry Ford said that if he was to ask people what they want, it would be a faster horse. An entrepreneur or a Henry Ford or whomever, the Wright brothers, they looked at what would make life easier, and they came up with ideas to make life easier. That’s where Say’s Law comes from. I believe that there’s an entrepreneurial spirit in all of us. I believe that there are ways in which we can grow, expand and achieve a better future for ourselves first and our family then our community, those we serve those who we provide value to.

The season is around this topic. We have those that are very reputable economists. We have authors, representatives from these different personality tests. We have a family of some of the most famed economists that are out there and the impact that their father specifically had made on them and have allowed them to see the world from a different standpoint. We are facing a lot of turmoil in society right now. There’s so much communication out there, sometimes it’s hard to know what to believe. I look at issues, whether it’s in Venezuela, issues that are in China or in Russia. I also look at issues that are in the United States where you have these political influences that are very compelling. They speak well, they’re good marketers. Their narrative is compelling. At the same time, I believe that politicians will always be politicians. There’s always an agenda behind the scenes. Understanding principles, understanding what life is about is going to allow you to ask better questions. It’s going to allow you to support those people that align with your values.

In the end, what I’ve discovered in meeting with thousands of people and doing business with thousands of people interacting with authors, reading hundreds of books, is that most humans, if not all, have something very similar in common. They want a feeling of achievement, happiness and satisfaction that does not come from a job with benefits. It does not come from a 401(k) or putting money in the stock market. It does not come from retiring. I believe that it comes from you discovering what you’re about, what your strengths are, your abilities are and taking that and applying it in a way that allows you to live a lifestyle that you love.

An understanding of what life is about is going to allow you to ask better questions. Click To Tweet

I’m excited to have some of these interviews. I’ve already had a few and I think you are going to love them. I’m also going to try to be more interactive. Check out the YouTube channel and also on social media. Make sure you’re sharing this stuff. If you like what you hear or see, we want to get the word out. If you haven’t already, read the book that I released, Heads I Win, Tails You Lose. You can get a free couple of chapters. I can’t wait for you to experience that book. A lot of the principles I’m going to be talking about and I talked about last season, the theme of capitalism. The seasons in 2018 were Life, Liberty and Property. These are things I’m passionate about and I want to hear from you. I want to make sure that you understand the material and you’re getting something from it. Make sure you start interacting, make sure you’re giving me feedback through the different channels. I can’t wait to experience your journey just as much as I can’t wait to experience mine. Thank you and we will be back soon.

Important Links:

 

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today:

Applying Capitalism In Today’s Market with Ryan Moran

TWS 17 | Applying Capitalism

 

We all aim for personal and universal freedom. In today’s economy, this freedom is protected by capitalism where the people own and run businesses as opposed to the government. Founder of Capitalism.com, Ryan Moran goes in-depth with the idea of capitalism and Even Stevens’ bankruptcy, Alexandria Ocasio-Cortez’s political phenomenon, and Andrew Yang’s philosophy. The host of The One Percent podcast, Ryan gives his take on opening up to the ideas of freedom in entrepreneurship and the opportunities that exist in the current era and more.

Watch the episode here:

Listen to the podcast here:

Applying Capitalism In Today’s Market with Ryan Moran

My guest is Ryan Daniel Moran. He is the Founder of Capitalism.com and host of The One Percent podcast. He’s a father, a Browns fan and a future owner of the Cleveland Indians. This is going to be an awesome show. I’m stoked because you’re the owner of Capitalism.com. I’m sure there’s a cool story to that in addition to having that site. There’s a big responsibility if you’re branding that domain and how you’ve come to understand capitalism. I’d like to start with how you are defining capitalism.

My favorite definition of the word capitalism was from Hayek. He says, “It’s an increasing system of strangers serving one another.” It’s a system through which we are incentivized to serve one another. I had an economics professor in college. His name was Dr. Ivan Pongracic and he had escaped Soviet Russia. He was almost caught smuggling Elvis records and Fender guitars across the borders. They made it punishable by death if you did that. He said, “You know what I did? I raised the price.” He used to talk about capitalism was the system through which we practiced freedom.

In order for us to get ahead, we have to serve one another. It’s where we are incentivized to do so. That’s also why we see such a pushback on the left against capitalism is because we’ve forgotten that it’s simply the way we exercise freedom. When we go in and try to fix freedom or force freedom or try to allocate freedom to be more “responsible,” we distort it. We all agree that personal freedom and freedom is a high aim. When we can put capitalism as the protector of freedom, the system through which we have freedom, it’s a universal principle that no one can disagree with.

It seems everyone would agree with you on this notion of freedom, so why is there such disdain for capitalism?

It’s because of short-term desires. If your reference point was several years ago, then you are naturally going to look ahead only for the next few years. If your reference point is 100, 200, 500 or 1,000 years, the path forward is obvious. It’s like trading stocks versus being an investor. It’s like flipping houses versus being an income investor. It’s like trying to make money on the internet versus building an internet business. Capitalism is the same. If a twenty-year-old is looking at the state of the world compared to when he or she was eight, there’s not a good reference point for how the world acts.

All that person is going to see is problems. They’re going to see who doesn’t have healthcare. They have no reference point for who had healthcare 100 years ago. They’re going to look at the way they think the world should be through the lens of problems rather than looking at the trend of the world over the last hundred years. If you have never traveled, if you haven’t lived a few decades, if you haven’t studied history, you would have a short-term view of the world in which you only saw problems. Our job is to paint a different picture and to be relentless defenders of that freedom so that the loud voices don’t get a foothold in what we know the world needs to do.

If you were in a debate contest and stood on the other side, how would you defend that, “We’re not 1750, Ryan. We don’t trade wine and bread and potatoes. We’re in a civilized modern society where healthcare should be a right.” How do you take that stance and defend it against capitalism?

The way we defend that stance is by coming back to the fundamental agreement that we want the same things. I have a high percentage of liberals converted because most of them have the perspective that a conservative or a libertarian doesn’t want poor people to have healthcare. We have to dispel that myth. We have to say, “I have the same goal as you of ensuring that the least of those around us have access to quality and affordable healthcare. Let me tell you why my plan is a better way to get that than somebody else.

I heard Naval Ravikant talk about Universal Basic Income. He was talking with Scott Adams. When Scott Adams asked him what he thought of Universal Basic Income and Naval said, “We’re going to have it. It’s going to come from the private sector. We’re going to have phones be so cheap that Google will give them out so that you use their apps and their platform.” You’ll basically have a universal standard of living. We don’t need it to come from the government. That type of argument is how I persuade the other side to come to our side of the argument. You say, “We’re after the same goal.” Your way of getting there is to trust Trump and all of his friends to come up with a plan. How confident are you in that happening? My plan is this and I have a high percentage rate of getting people to convert after that.

Challenges will always occur, but there are always people looking to solve challenges. It’s like an instinct in us. We see the challenge where we will look for opportunities. I always look at The Jungle Book where Mowgli is this character that’s different from the rest of the forest because they’re to survive and he has this instinct to come up with solutions for this and solutions for that. That’s human nature. Even though we have challenges, when you do create that environment of freedom, people are able to exercise and are able to try things. Ultimately, there are solutions that create the betterment of everyone. At the same time, there’s a little time involved there. Whereas writing a check to somebody is the easiest thing to do and typically people want that short term solution. That’s where they tend to go and to gripe about.

Our brains are wired to produce happiness as a byproduct to increases in survival chances. Happiness is an illusion. Happiness is chemicals that fire when our brains think we have a higher chance of surviving. The only way we do that is by solving problems. We solve the threats that we have to our own survival. We unlock happiness by solving problems. Biologically, we are wired to solve problems. Unfortunately, we tend to fire short-term versus long-term if we’re in a threat situation and most people have the perception of threat, even though our livelihoods and our survival is as good as it has ever been.

Ray Dalio was talking about this whole idea of Universal Basic Income and the threat of artificial intelligence and people are going to be displaced by jobs. There are many solutions that the government can come up with, but there’s something about humans where there has to be a fulfillment side of their life. If there’s not, then life becomes the opposite. It’s unhappy. When you’re not able to solve those problems, it robs people of the opportunity to find fulfillment or find happiness.

TWS 17 | Applying Capitalism

Applying Capitalism: Happiness is a chemical that fires up when our brains think we have a higher chance of surviving, and the only way that we do that is by solving problems.

 

I think those of us who identify as Capitalists or Libertarian should be disappointed in Ray Dalio. I don’t know where his tune changed of seeing the pie that he created and started to feel guilty about it. His entire thesis on this speaking tour that he’s been going on is that we need a better way to allocate pieces of the pie. What Dalio mistakes and seems to overlook is there is no pie. There is no limited amount of value. He should know, he created a big one. He helped a lot of people along the way.

He aggregated a lot of capital.

That’s a good distinction. Based on his background when he’s raising capital from a lot of places, there’s a fixed amount versus it being a creation. Overall as a community, I think we should be disappointed in the message that he’s starting to spread.

I want to dive into your story around Capitalism.com because it’s one of those things that you buy and you can monetize. At the same time, if you have a philosophy around what it means and what you want the world to understand what it means, that’s a big responsibility. What’s the story behind your intrigue and interest in the idea of capitalism? Maybe your parents were these staunch-like Libertarian F.A. Hayek followers and you went to Mises University when you were little.

I went to college to be a pastor and I did not go that route. I had an economics professor who basically gave a talk that changed my life where he was talking about how the greatest way we can find nods or find our greatest purpose or find our maximum dollar amount. However you divide that up, our highest calling is by using the marketplace. Seeing price as an indication of where there was a need or where there was a value or where there were opportunities to create something. That completely changed my brain and altered the course of my life and my career. Add that in with some doubts that I had about my faith, it was a perfect time for me to make a switch. I ended up going to school and studying economics while building my first business, while the 2008 crash and the election were all going on at the same time.

Those were my formative years and the opportunity to acquire the name that represented all of my biggest interests was presented to me and it was to acquire Capitalism.com. Since then we’ve been building out events and a platform for entrepreneurs because I believe ultimately we only change minds and we change direction by changing individuals. I don’t think that debate on a grand scale is how we ultimately change people’s mind, we lead by example. At Capitalism.com, we help entrepreneurs build businesses and invest the profits and I’m playing the long game. The more millionaires you create, the more kids you have with those financially-educated individuals as parents. That’s ultimately how we change perspectives.

In order for us to get ahead, we have to serve one another. Click To Tweet

Let’s talk about applied capitalism. There are a lot of ways to approach this, but business has changed significantly as far as how capital is raised. In some cases, profitability doesn’t even matter. A right to raise capital is an idea matter. How are you applying what you’ve learned about capitalism in that philosophy to what you teach others about businesses and maybe how you treat your own businesses?

Your basic capitalist theory, things get easier over time. Resources get freed up. You have more access to opportunity. That is your point about things changing so much in the few years. Capital is abundant. The opportunities for advertising are cheaper than ever, at a higher scale than ever. Any message can go viral at any time. Things continue to get easier. I don’t buy into this narrative that it’s somehow getting harder. It’s getting easier and there are more opportunities. However, it’s changing faster. You have more creative destruction than ever before. We all love it until it happens to us, but if we’re going to be consistent with our argument then we have to either adapt or go find a business. We see capitalism in action. We see lots of new opportunities be liberated. We see a lot of resources become available. These are things that didn’t exist for us as a society.

Joseph Schumpeter and the whole creative destruction principle is powerful, but it goes to more of the long game than the short game where a lot of the lessons are learned after a lot of the chaos ensues. Hence 2008, 2009 where there are some incredible lessons learned by people. We’ve become stronger because of that not weaker. You are looking at what you discovered as more of a philosophical approach to capitalism based on the economics people of the past, which are not all obviously pro-capitalism. You started to apply that to business, but it sounds like you experienced some of that creative destruction like a business going under, a business becoming obsolete or you hired the wrong team. Did you go through some challenges to learn that principle?

Haven’t we all? If you’re not failing more often than you are succeeding, you probably aren’t a real entrepreneur. I was journaling about the fact that it only takes one big breakthrough in order to pay for all of your failures. Thankfully, we live in this world in which basically all of our needs are met for almost no money. We’re close to having a universal basic living standard. Unfortunately, we’re all comparing ourselves in terms of status, which is why there’s this myth of wealth and equality, which we all know is a myth. Since we have our basic needs met, you can pretty much fail at scale until you win. We all love it until it happens to us, but if you can develop that muscle of being comfortable swinging and missing, then one at-bat is all it’s going to take in order for you to have the impact that you want to have.

I have stopped measuring progress in dollars because dollars are a commodity. Wealth is a way to make things happen faster. The more dialed in you are to the type of life you want and the things you want to do, money becomes a byproduct of doing that well. It becomes gasoline for you to make it happen faster. I have changed my tune a little bit where I became an entrepreneur because I wanted money, then you realize all money is a tool to make change happen. If you identify the change you want to have, you can swing and miss all you want, eventually pay dirt happens and that justifies your failures and allows your successes to happen that much faster. It’s the purpose of money and capital in the first place to fuel the distribution of goods and services, to fuel the distribution of good work. That’s what it’s there to do.

What do you use as your primary measurements of whether or not your business is successful?

TWS 17 | Applying Capitalism

Applying Capitalism: If you’re not failing more often than are succeeding, you probably aren’t a real entrepreneur.

 

Part of it is am I happy? Part of it is, do I like doing what I’m doing? Another is client happiness and scale. Are people voluntarily sharing what it is we’re doing? I had a professor in college who was supposedly an expert in this idea of the diffusion curve of distribution. If you get those loud early adopters, they bring them to the rest of the world. If you have a core group of raving fans, they bring your message or your market, they bring your product and service to the rest of the world. Part of how I’m evaluating on it is, “Are people talking about it? Are people diffusing it for me?” If that’s the case, I know I’ve done something well in the world.

Let me break into that a little bit. There was a restaurant chain called Even Stevens. Have you ever heard that before?

I’ve heard of them.

They’re in Chapter 11 bankruptcy, but they had this culture of doing well and impacting people. Their business model was set up where if someone bought a sandwich, one sandwich was donated to the poor. From a profitability standpoint, how do you reconcile wanting to do good and wanting to impact people, yet at the same time bringing in more than there’s going out.

When I was in high school, my first real job is I worked at Dunkin’ Donuts. At the end of the night, we had hundreds of extra donuts. A lot of them went to waste. We threw them away. A lot of them we donated to food shelters. There was so much waste we could give some to shelters. I could take some to school the next day and I did. We could throw away a bunch. There are a lot of wasted donuts. The only way that you can have that type of good waste is if you’re running a profitable enterprise. The people who talk about the TOMS Shoes model and they have their own financial problems with the idea of we’re going to give first. It’s a great idea, but you can give a lot more when you’re running a profitable enterprise. Profit is excess. Profit is extra.

It is a reflection of a gap in the marketplace. That’s a good thing. You are doing well by making a profit. Profit is a reflection of doing well. It’s not like the bad thing you get. Profit is the reflection of you doing well. With that, you can do whatever you want. You already paid your debt to society by doing the good thing in the first place and you have profit as a byproduct. If you want to take that and have a more additional impact, go for it. You’re under no requirement to do so, but you will do more good in putting all of those sandwich profits into more sandwiches and you’ll probably have excess that you can then sustainably giveaway. The idea of doing something that matters and getting paid for it is self-perpetuating and self-rewarding on its own and then you can do what you’d like with the profits.

It only takes one big breakthrough in order to pay for all of your failures. Click To Tweet

The reconciliation then what I’m assuming is obviously you want to be benefiting customers. You want to have a good time, be happy and feel fulfilled in what you’re doing, but at the same time dollars are important from a measurement standpoint to ensure there’s more coming in than going out.

The reconciliation is Even Stevens would have done a lot more good in the world if they were running a profitable enterprise.

As much as we would think there are more supporters of the free market and laissez-faire capitalism and allow people in the markets to solve problems. There is a growing philosophy that has existed for a while using the narrative of social good and that the capitalists and money hoarders are these fat guys that live in big mansions. Let’s talk about Alexandria Ocasio-Cortez who is an interesting political phenomenon and Andrew Yang. Maybe we’ll start with AOC. What’s your pulse on her? How do you view the attraction to what she is saying and why she’s gained much ground from building a big audience in the inner circles of the Democratic Party but also in society as well?

My pulse on her is that she is extremely smart. She is one of the smartest politicians ever. The idea that she is a stupid 29-year-old Millennial is a false narrative. If you think that, you’ve played right into her hand. If she was not 29-years-old, she would be the Democratic front-runner for President. A waitress turned social media celebrity is already leading the direction of the Democratic Party. You do not do that being an idiot. The only person in politics smarter than AOC is Donald J. Trump.

How do you see the parallel between her and Donald Trump? It was the same way with him, it still is.

They are the two smartest people in Washington, DC.

TWS 17 | Applying Capitalism

Applying Capitalism: Universal Basic Income is socialism with lipstick. It’s not an enhanced form of capitalism. It’s just a different way to redistribute from the government.

 

Do you think she got to that point overnight? She came onto the scenes in a short period of time. Is that a natural ability to be that persuasive? Maybe she was a waitress at an incredible restaurant in New York City, but where did it come from?

It came from a combination of talent. She’s incredibly intuitive in terms of what she needs to say in order to get attention. It’s a talent with what she looks like. If she was a white ugly dude, she wouldn’t have the following that she did. We have to be real about it. We can’t ignore that. We all have natural privileges and what she looks like is one of hers and the other was timing. She’s perfectly well-timed. Her message for her talent stack in this state that the Democratic Party is in where it’s essentially a leaderless party. She walks in and has the benefit of applying that talent stack to this timing. It’s been a combination of all of those things like Donald Trump was a combination of all those things, although he had a much longer game than she did. She’s the benefit of social media and she’s got a good social media strategy. She entered into the conversation when it needed a polarizing figure to counter the President.

You’re taking the stance and this is a deep stake in the ground and a flash in the pan.

I am curious to see what she does. If you look at her overall strategy, she’s already effective in the way that she wants to be effective. The Green New Deal is her wall. I know there are people who disagree with me, but I’m confident, the wall is not a real thing. The wall was a marketing tool. Donald Trump knew there was never going to be a wall across the border. He knew this and because he knew this, he knew he would always have a rallying cry to point at the enemy. If his supporters didn’t get their wall, they could always say, “It’s going to happen. The Democrats are standing in the way.” There’s never going to be a wall. It’s a marketing ploy.

It’s the same thing with the Green New Deal. AOC comes out with this ridiculous plan that we’re all talking about and she has changed the narrative to be about which pieces of the Green New Deal are feasible and which ones aren’t. Based on that, we’re going to calculate it, discuss it and argue about it. That’s exactly what she wants. She’ll get pieces of it over time and she’ll always be able to look across the aisle and say, “They said no.” It was a brilliant move to make the Democrats vote on it. That was painting them to a quarter. It was smart to the Republicans to do.

I would say that whole Mike Lee velociraptor thing totally played into her hands. I understood where he was coming from, but I’m like, “How do you think that’s going to make you look any better?”

Profit is the reflection of you doing good. Click To Tweet

I do think that she is here at least for the next few election cycles. I’m curious to see how her message changes. Once Donald Trump is reelected and many years go by and you will basically have two leaderless parties because Mike Pence isn’t the incumbent. He will never be president. The Democrats will have no leader. Pete Buttigieg could have been that, but he blew his shot. As a result, I’m curious to see where AOC is. She’ll miss the cutoff to run again. She could play kingmaker. If that’s the case then she’s around to stay.

Some of this stuff she says is like, “Nobody says that.” There’s an agenda behind it. What does your crystal ball say her agenda is? What is she trying to accomplish? Political career or do you think there’s something more nefarious behind the scenes like socialism and communism?

I think back to the Occupy Wall Street movement. I don’t know if you ever visited any of the Occupy. I had much fun going and debating those. Eventually what happened, the movement died. It went away and then became Bernie Sanders supporters. They gave way to another failed movement. Socialism is such a tired idea. I don’t fear the noise that it has in the world because no one wants it. The movement of capitalism, the movement of freedom is too powerful. That will prevent a socialist uprising from taking old. My crystal ball says that AOC will continue to point her finger at enemies. She’ll continue to have a wave of followers. She’ll continue to be impactful on the left, but her message will change unless we have another economic meltdown and then all bets are off. At that point, I have no opinion. I have no idea what would happen.

Let’s go to your next hot button, which is Andrew Yang.

He was on your show before he was running for president.

He was officially running for president when he was on. It’s interesting to see what he’s done. He’s not taking abrasive a stance as AOC, but still he’s between the whole hologram. He’s going to show up to debates in a hologram. He’s doing a good job marketing it. How do you look at Andrew Yang’s philosophy, which I would say is definitely part socialism, part progressive, part accommodating the rising Y Generation?

TWS 17 | Applying Capitalism

Applying Capitalism: You become libertarian real quick when you’re an entrepreneur because you realize you want to keep what you earn and you only get to earn what is made on your own merit.

 

First of all, Andrew Yang says that Universal Basic Income is capitalism starting from not zero. I say no, Universal Basic Income is socialism with lipstick. It’s not an enhanced form of capitalism. It’s a different way to redistribute from the government. I don’t care for Andrew’s policies one bit, but he’s running a flawless campaign. I have to give him credit for doing an amazing job at running for president, but I don’t care for him one bit. He knows he’s misleading people. He knows that he’s making up problems that don’t exist. If you watched his Joe Rogan interview, he sat there and talked about problems that are not real like truckers being replaced. Their wages are going up. There’s a shortage of truckers because there are many other unskilled opportunities. There are many low-skilled jobs and many opportunities for low-skilled people that there’s a shortage of truck drivers because nobody wants to work those long hours driving a truck. What has happened? Truck driver’s salaries have gone up. There’s recruiting happening to get people to become truck drivers. No, we don’t have a problem in all the truck drivers going away. We have an increased demand, prices going up. He makes up problems where there are no problems to address, but he’s getting a lot of attention for it.

He’s the only one that’s on that bandwagon. There are a lot of the Silicon Valley elites that tend to feel the same way. When you do have that insight into technology and the speed at which things are becoming automated. The argument I would say has some merit to it when you think as far as the automation of certain unskilled things. Are you saying the transition to that is going to take longer than people think? Where are you coming from?

The Universal Basic Income, if it replaced all other government programs, would be a step in the right direction, but that’s not what Yang argues for. Yang is arguing for doling out checks to everyone. Not only is it not appropriate, but it’s also not needed. We talked about how the standard of living continues to rise and real prices continue to decline. The trend is going only to continue as we talked about in the example of Google giving out free phones. That is going to continue to happen and it’s happening at a faster rate. Look how the idea of a grocery store is in our society. We take it for granted, but a grocery store has only existed for this much of our history and we talk about food prices. Food prices are at an all-time low. I can go to the grocery store and get goji berries from China for $8. It’s the whole idea of “I, Pencil,” that famous piece that go into the pencil. I’m not of the opinion that Universal Basic Income is even necessary because we continue to have fallen-prices and increasing set of living.

It’s one of those things where it’s hard sometimes to distinguish, unless you’re a professional marketer like yourself, what’s really being said. It makes total sense to me and from Donald Trump’s standpoint. A lot of his tactics whether it was the debate tactics or his tweets or his punch lines, the amazing nature in which he marketed himself and won. I look at AOC and some of the same things. I would say that you have some insight than most don’t because you can read between the lines and I can see that with Andrew Yang. I don’t think he’s as conspicuous. He’s using somebody where there is a stronghold behind his theory because of Silicon elites. They have all of this concern with artificial intelligence, Moore’s Law and how this is all happening and it’s getting out of control. We’re going to have to provide for people’s well-being. You’re basically saying he doesn’t necessarily believe in it. It’s a narrative for him to run on.

If you look at how our brains are wired, we are influenced by momentum and direction more than anything else. The projection of where things are going in the future. You and I and everyone reading know that the trend of the world on a macro level is impressive. The things we’re about to invent and create are that much more impressive. In order to get attention, Andrew has to stand there and say, “There’s this thing going on that is going to replace all of the jobs.” He has to set the trend for how things are going. He talks about suicide rates going up. He doesn’t mention that they are higher in the fluent than they are among those at the bottom. He talks about the correlation between suicide rates and economic hardship. Economic hardship is at an all-time low. He is going to talk about the paint a picture of a trend that is happening because you are likely to pay attention if the future is a coming trend that is dangerous. He has a terrible solution of giving out free money to people, which is why he’s capturing attention. He’s doing a wonderful job at it, but he is doing it intentionally misleading.

The society, in general, has been highly influenced by movies and TV and what we’ve been told to future is. We’re always looking to the future. I’ve never made the connection that there are these short-term spikes and interest and intrigue on purpose to gain attention and popularity based on how we’ve been programmed in the sense of society.

No one grows when times are good; you grow from pain. Click To Tweet

It’s the first time that a message can be delivered at scale like in a click of a button. It’s because of that, we are incentivized to do whatever gets attention on a mass scale, especially when you’re doing something like running for President. This is new in our evolution for that to even be possible. That’s why it’s a battle with the truth and a battle with reality.

Let’s do this because this has been an awesome conversation. Thank you for sharing your insight. Hopefully, this was valuable to the audience. Why don’t you talk about maybe some something that’s more a little more positive? You obviously are getting negative feedback on ideas of capitalism, which is understandable, but what do you see as the positive things? How are you seeing people open up to the ideas of freedom, entrepreneurship and the opportunities that exist and are open to while we live in such an amazing time? Talk about your pulse there and if you see that growing in popularity to that perspective.

If we remove the labels, if we remove the way we define it, freedom and capitalism are more popular than ever. If you look at your average college graduate who is faced with the decision of, “Do I get a job or do I start my own thing?” Look at young people where the most popular desired job is to be a YouTuber. I look at some of my peers who were saying, “Do you know what I want to do for a living is playing video games on Twitch.” These were absurd ideas, but because we have many new opportunities, the opportunities for entrepreneurship are greater than they had ever been. Entrepreneurship requires personal responsibility. You become libertarian quick when you’re an entrepreneur because you realize you want to keep what you earn and you only get to earn what is made on your own merit.

Based on that, I’m bullish and optimistic about the trend of young people, yes, a loud core is following AOC. All of their peers are making $1,000 a month from YouTube and they don’t need Andrew Yang to dole out cash to them. “Do any of them want to give up those opportunities?” “No.” It’s why I don’t fear when Elizabeth Warren says she wants to break up Google. It’s not going to happen. They’re creating too many opportunities for people. I’m incredibly optimistic. I see the political theater going on is entertaining but not a threat at all. The trend of capitalism, the trend of freedom is way too strong. I can see that trend accelerate if we look at a macro view, if we look at 100, 50 years ago. Technology is only going to accelerate that because only half the world has internet access. There is still an entire half of the world just coming online and having access to information and having access to opportunities. The global marketplace is about to double.

One of SpaceX’s big projects is the satellite internet and bringing that to Africa, India and parts where they don’t have the infrastructure.

When that happens, you’re going to see a boom that we have never seen before. That requires markets, freedom and capital. We are still on the up and up and that is only going to continue.

TWS 17 | Applying Capitalism

Applying Capitalism: Capitalism is the only system in which bad ideas fail.

 

That’s where the optimism part and part of me is excited about the future, my future, my kids’ future. At the same time, I look at things that have happened that have put the world in a tough spot. Whether it’s the unfunded obligations we have with the amount of debt that’s out there with Social Security and pensions having major issues. I also look at where you have a big percentage of the Nasdaq who is on the brink of junk status, looking at how capital is being raised to fund companies that aren’t necessarily making a profit. The only way they can be payroll is to continue to get rounds of funding. How do you reconcile your optimism with some of the real things we’re facing?

It’s for those reasons that sometimes I do look at certain companies. I do think we are right for that to adjust, but I think we can look squarely in the face of government policy specifically interest rates as dictated by the Federal Reserve. I know they’re independent, but they’re the fourth branch of government. They’re manipulating interest rates. We all agree that has been a problem and it’s the reason why we have the asset prices that we have. Those things have to adjust. I am bullish on the fact that when we get punched in the mouth and if we have an economic collapse, all of those opportunities get funded into the new things that have already been opened up.

The number one job among children under twelve, they want to be YouTubers. I’m not suggesting that all the coders are going to become YouTube stars. That would be a boring channel. The reality is we’re on the cusp of new waves of opportunities starting to hit mass. When we have a reset or if we have a transition, it’s simply going to be one era to the next era. It’s what happens after every meltdown is you open up industries that didn’t exist before. Contrary to what Andrew Yang would like you to believe, that will happen.

I have a theory that the greater the hardship, the more you expand the possibility on the other side of the spectrum. That’s in personal life and that’s in business too. The wounds hurt in the short-term, but the process in which you heal builds a stronger muscle to do more and be more. We have some pain. There’s a lot of pain, but the lessons that are going to be learned from society are going to be incredible. It may not feel like that when you’re the one that’s not getting your pension check, your social security check or the cost of things have gone up or however, the economy responds to it. At the same time, you look at what good is going to come from it because people are hardwired to solve problems and to help others overcome challenges. They didn’t necessarily have the word Capitalism back then. People observe the marketplace and they intuitively figure out, “I’m going to go do this because that’ll benefit that, but it’ll also benefit me.” It’s weird how we operate, but it’s going to be as you put it at scale.

No one grows when times are good, you grow from pain. It’s why the bailouts were damaging. Not because of the misallocation of resources, not because of taxpayer cost. It was dangerous because we deprived ourselves of the beauty of pain. Pain makes us grow. It makes us better and it makes us solve bigger problems and as a result, we’ve gotten soft. We are afraid of getting punched that we don’t even enter the ring. We don’t even have a chance of victory anymore. By the time we get punched in the mouth, you’re going to have a lot of scared people running around who will have to learn how life works, which is exactly what should happen. I get the benefit of working with a lot of entrepreneurs and I did a little bit of a podcast interview tour where I interviewed in person Gary Vaynerchuk, Brian Lee who has $3 billion companies at 47 and Bedros Keuilian the Founder of Fit Body Boot Camp.

All three of them are the children of immigrants. I saw this as a trend come up. I asked them about it. The universal feedback among those three was, “I came here with nothing. I had to learn how to create and solve problems and work hard. People who were born here, people have had it good since they were born, they don’t have that hustle. They don’t have that ability. If I go to Ukraine and speak to entrepreneurs who are first generation capitalists, they’re hungry. Any sniff of freedom they cherish, hung onto, cling to and fight for. Any advancement they have from where they grew up, where their parents were oppressed by the government, where they had to escape tyranny, they are ready for opportunities. Here we want to go back to government control. We accomplished what everybody else wants and we’re getting soft. We could use a good punch in the mouth and it will be welcome refreshment when it happens.”

It’s long overdue, but everything you’re saying I would echo that. I see it in my kids. My wife grew up in the hood of Mexico. Her brothers have moved here and sometimes when there’s a safety net, it’s amazing what people will do not to learn the lesson. That’s the other part of human nature, even though we’re compelled to create value and to solve problems, we’re also compelled to be lazy sometimes or find shortcuts. It’s one of those other attributes of humankind that you need been to be leery up because kids these days are soft at the same time they’re meant to understand how efficiency plays into solutions. When those times get difficult, I have a good feeling they’ll have the wherewithal to learn technology, understand the technology and how that applies to whatever the challenge is at hand.

They will have to. There’s no choice in the matter of capitalism. One final piece on this is I’ve made the argument that the way we can convert people who disagree with us, who ask about converting people to our side of the argument is if you remind them that capitalism is the only system in which bad ideas fail. When things collapse, a lot of bad ideas will go with it. A lot of companies that raised money and can only make payrolls by raising another round, they will fail because they didn’t have value in the marketplace. You can’t say capitalism is the only system in which good ideas succeed. Theoretically, you could have a government create a great solution. The chance of that happening is low, but it’s possible. Capitalism is the only system where bad ideas go away and we will see that in the next crash unless the government gets involved, which is antithetical to capitalism.

This has become a calling for you. At least that’s what it sounds like. I know it’s a big responsibility, but thanks for all you’re doing to advocate these ideas. How can people learn more about you and follow you? I know you’re active on social media. What are the best ways?

My handle is @RyanDanielMoran on Instagram. My podcast is Capitalism.com. There’s a generation of young people out there who need an outlet for entrepreneurship and this the only way we’re going to convert them to our side of the aisle. If Robert Kiyosaki had a rich son, it might be me taking the torch to this generation that is polarized on capitalism versus socialism.

Ryan Daniel Moran, it’s been a pleasure. Thank you much for taking the time. You are putting up some amazing content. What I also love about you is you’re bold, you speak your mind and you’re a seeker of truth. It’s inspiring. Thank you.

I appreciate it. Thanks for having me.

Important Links:

About Ryan Moran

TWS 17 | Applying CapitalismRyan Daniel Moran is a serial entrepreneur, author, speaker, and investor. He is driven by the belief that entrepreneurs solve problems, and that the world needs more empowered entrepreneurs.

As the founder of Capitalism.com, his mission is to champion and serve entrepreneurs, because entrepreneurs drive change, create jobs, influence the economy, and uplift their families and communities to create a better world.

Through his training and podcast at Capitalism.com, Ryan is responsible for creating more than 100 millionaires, many in 12 months or less! He is passionate about sharing the knowledge he has gained from founding, running, and investing in a number of e-commerce, and physical products businesses.

 

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today:

Understanding Social Capitalism with Josh Lannon

TWS 15 | Social Capitalism

 

Doing good and making money does not have to be mutually exclusive. The world economy needs entrepreneurs to take a stand, create jobs, and solve problems. One such entrepreneur is Josh Lannon, a social entrepreneur committed to building businesses that focus on the development of people and creating positive change. Josh, along with his wife, Lisa, is a Rich Dad Advisors on Social Entrepreneurism and Behavioral Change. They are the Founders of Journey Healing Centers, which was later on acquired by Elements Behavior Health in late 2013. Their current venture is called Warriors Heart, a private drug and alcohol treatment center that focuses on serving the men and women in uniform – both active and veterans – and other warriors. In this interview, Josh defines social capitalism, how he understands it, and why it’s important in our day and age where the amount of social problems continues to grow.

Listen to the podcast here:

Understanding Social Capitalism with Josh Lannon

The individual that we have on, Josh Lannon is a dear friend of mine and we’ve had some incredible conversations over the years. With what he’s doing now as a business and as a social capitalist is changing so many lives. Josh is the co-author of The Social Capitalist book which is part of the Rich Dad Advisor’s series. He is the President and Founder at Warriors Heart which is in Bandera, Texas, a healing center for first responders and veterans. Josh is one of the most committed and hardworking guys I know. He’s a social entrepreneur committed to building businesses that focus on the development of people and creating positive change. Josh, thanks for taking the time to talk about capitalism from your vantage point.

Thanks, Patrick.

We had an interview a few years ago when your book came out. Instead of getting into the breadth of your story which goes deep, take a minute to define what social capitalism is as far as how you understand it. Why is that important especially in our day and age where the amount of social problems continues to grow?

I’ll frame up a little bit of personal story because it connects in the why. Any social entrepreneur and social capitalist is driven by a why, a mission. Many years ago, I quit drinking. I got sober, I went through a program. I quit drinking. I made a declaration to God, to the universe. I said, “Nothing’s ever going to control me like that ever again.” I’m not going to let this alcohol control me again. I’m going to jump into my recovery, my sobriety and reclaim the power back in my life. There’s a saying, “When the student is ready, the teacher will appear.” Robert Kiyosaki came into my life many years ago. The message I got was, “You’re addicted to money.” That hit me at my core. Here I am freshly in sobriety, I make this declaration and then Robert’s teaching me and I’m learning that I’m dependent upon money. When I think about it, the average person, you take away their paycheck for two weeks, there’s a major detox that’s going to happen. There’s fear, there’s all that stuff that’s going to happen where it’s like, “How am I going to pay my bills? How am I going to take care of my family?”

It’s like you take a drug away from someone. He’d go into the relapse or you go into detox. It was like, “I’m going to learn how to master money. I’m going to study money. I want to become a student of money. I want money to serve me and not for me to serve money.” With that, since I’m not going to allow money to control me, what’s my drive if it’s not money? Money’s never been enough. You make good money then you get bigger toys and it’s this drug that’s always going and going. It is a mission. What’s your purpose in life? What’s your mission in life? What’s your why? To me, that’s what social capitalism is. Yes, money is important because it keeps the whole thing afloat and going but it’s not the main purpose. The main purpose is your passion. It’s your why. It happens to be serving those fellow alcoholics, addicts that are struggling with chemical dependency. I knew that on a personal and intimate level. My business, my passion became helping other guys get sober and we built a multimillion-dollar business out of it.

It’s amazing because what you’re saying is rarely dissected. In the end, what is money? Money is a tool of exchange, but it’s the medium for different aspects of value. If you look at what we exchange for our electricity, food, house or rent, the value isn’t in the money. The value is in what its exchanged for. I would also say the creation of money also comes from you being valuable in some aspect. What I’ve discovered over the years is when you align a higher purpose to the value you’re providing, it multiplies.

TWS 15 | Social Capitalism

 

I’m a capitalist. I want to create value. I want to create products and services that improve people’s lives. I’m also a socialist that I want to take care of people when they’re down and they’re hurting to be there as, “I got your back. I got you covered.” It’s not one’s right, one’s wrong. It’s how can we blend the two together where our businesses have a higher calling than money. Our businesses add value to our lives, to our communities, to our nation and to the world. That is a higher calling than money.

What I found this season is that everybody defines capitalism differently. There are many ways to define it. Some are accurate, some are rhetoric and opinion but in the end that’s what people believe that’s their truth. I looked at the consensus. What I’ve looked at is the definition of capitalism dating back to when the actual term was created. There is accountability that there’s more produced with the resources expended. If you look at that especially when it comes to a social challenge whether its poverty or what you’ve specialized in for years which is substance addiction typically is to throw money at the problem essentially, not necessarily have care for profit or accountability. How I describe profit is that you have more output than you have input. Talk to that as far as how you’ve come to understand capitalism and its role in the accountability over expending certain resources for a given issue.

It’s interesting because there’s such a polarity now of thoughts and confusion of definition of what is socialism? What is capitalism? You see it as this underlying anger out there. The truth of the matter is I want to increase or improve the value of people’s lives. I do that using business as a source for good. It’s a power to do that. I’m not going to use capitalism to create cigarettes. I don’t believe in it. It harms the body. People get addicted to it. On the other hand, it’s like someone else says, “You have freedom of choice. You can smoke if you want. I don’t care.” I’m not going to have my energy, my focus, my resources invest into something I don’t believe in. That’s what I love about entrepreneurs and capitalism because we have freedom of choice to create something we want to that adds value to people’s lives.

Typically, the value you bring to the marketplace was Journey Healing Centers previously, now it’s Warriors Heart. These are challenges that seem to be increasing where individuals are relying on substances and essentially becoming addicted to them which ultimately negatively impact their lives. This challenge is approached with a government as the body which takes on the challenge. You’re approaching it from a different standpoint. Talk about why you’ve decided to go that route and then what you see as the difference between your approach and what would be essentially a government approach.

With Journey, we sold that business several years ago and we refocused. Warriors Heart is our main operation now. Warriors Heart is on a 543-acre ranch outside San Antonio, Texas. We serve active military veterans and first responders. What we found is that where do our military go if they need help? On the private sector, they go to a facility that has a mixed population. They’re mixed with civilian, if you will. Civilians, they’re curious on, “What was it like over there? How many people did you kill?” They have amateur questions and guys don’t want to hear that. They don’t want to go through that. There’s definitely a difference between a civilian and a military guy. It’s the same thing with our police officers who work. The VA is another option for our military which is a major institution. They’re not prepared and have been able to handle this flow of guys we have coming back and they’re overwhelmed. There’s no anything good on that side for the military.

On the police and law enforcement, it’s the same thing. What are you going to do, mix them in a population with guys that they may have arrested? They get it as like, “We’re both struggling but we’re on opposite sides of the fence.” The solution was why not a private organization like Warriors Heart step forward and say, “We’re only going to serve this warrior class population, a niche market exclusively.” What we’ve done is we’ve gone through all of our licensing accreditations and TRICARE approved so we can take government insurance. We’ve got contracts with the VA and they are paying for our guys, for our warriors to go through our program. The modality is we can move faster, leaner and use technology for the treatment for PTSD, treatment for chemical dependencies in this holistic model that is more effective than what’s happening in the big institutions.

TWS 15 | Social Capitalism

 

You look at the issue and you’re hitting on some things. I often think that throwing money at problems should be the last resort. I know some of the challenges you faced in being able to get the sign-off, whether it’s the VA or insurance for what you guys do. In the end, what’s driving you to get that because you understand potentially a better way to create some true healing and lasting healing in those that experienced trauma in a unique way compared to most people is the level of accountability because they’re giving you to sign off on insurance, giving to sign off on funding from the VA. If you don’t create a high-level experience with good success, then that’s essentially going to get cut. Whereas, I would say a lot of government programs don’t operate exactly like that. Maybe talk to that. What have you had to do generally speaking to make this business work?

It goes back to the why because that’s the core that drives everything else. I’m in recovery, I got sober 2001. My wife was a police officer in Vegas. Our partner in Warriors Heart was many years in the military, retired out a tier one operator. He was in Delta. We get it on a personal level. The population we’re serving and the struggles they have. We built it from the end user’s point of view and walked through the front doors of a program. I get it how scared to death one is. I don’t want to eat crappy food and talk to crappy counselors that they’re there because they don’t want to be there but they’re just collecting a paycheck. We built a team of professionals that get it on a human level and they’re mission-driven. One of the major deciding factors in why we’re doing things better is because we’ve lived it.

You guys were featured on The Today Show. It was an inspiring testimonial for the change that can occur. It’s a change of heart for people that experience things that most of us can’t even begin to empathize with. Talk to us about the difference you’re seeing in the lives of those who have put their life on the line for the protection of the country or for a community if it’s a local first responder.

Finding your purpose, your passion, or your tribe that's doing what you want to do and joining that team will be the fuel to keep you going. Click To Tweet

The Today Show was a great exposure on who we are and what we’re doing. We partner with incredible companies like Grunt Style and Black Rifle Coffee. We’ve been featured in a number of television shows. The word is getting out. Teddy goes on The Today Show. He’s a great human being. It got to him, war and trauma. What he used was alcohol to medicate. He’s sober now and he’s given back and he wants to talk to people. He’s like, “Brother, my battle hasn’t stopped. It’s refocused now because I want to help other guys get sober.” That’s the fight. I get it. Even now they gave a hug to a young ranger battalion guy that was in our program. He’s on active duty. He’s extremely grateful. He’s like, “Thank you for what you guys are doing and how you’ve built this program. There’s nothing like this out there anywhere.” The fuel that feeds the spirit is talking to the guys on the frontline, going through the program and seeing it in their eyes. It’s like, “It’s working. Keep moving forward.”

It’s not just your why and what you’re driven to do. Talk about how that mission and why it impacts your company.

It should impact any social entrepreneur or anyone that says, “I want to do more in this world than make a bunch of money.” It’s to find your purpose, find your passion or find your tribe that is doing what you want to do and join that team. That will be the fuel to keep you going. That’s extremely important.

TWS 15 | Social Capitalism

 

These are experiences that most don’t have and are challenging. If it’s a normal 9 to 5 person that’s hired and shows up for a paycheck, they handle things differently than a culture that is driven by purpose. I know there’s a form of social capitalism which is called conscious capitalism which was popularized by John Mackey, the CEO of Whole Foods. Talk about how the culture approaches these difficult challenges and how that might be different than how a person shows up to a typical 9 to 5 job?

It goes back to mission, purpose and passion. You see it with the teachers at school. If they’re protected by a union that they can’t get fired on, they’re not performing and they’re miserable. They’re horrible to be around. Every business, unfortunately, has those that probably should move on but they’re stuck there because of the paycheck. They’re scared to death to leave but they’re miserable. It’s like “Why are you here?” They say, “I need to get paid.” You’re making everyone else’s life miserable too. Why should we live like that? Life’s too short for that. Let’s move on. It’s not always easy but it’s worth it.

I interviewed a guy and he wrote the book of Free to Learn. He’s a professor at Boston College. He’s a former professor at Boston College. He’s retired now but he talked about the school system in general and learning in general. He advocates in his book a program called the Sudbury school. It’s a theory or philosophy about how they run now. Teachers are essentially on a one-year contract and are voted democratically by students and parents to renew their contract. It creates a dynamic of accountability that typically does not exist in the traditional school system. You look at those who would sign up for that type of position. If it’s a tenured professor, there’s no way they would ever do that. Most of them wouldn’t. We look at the teachers that are there, they understand what that means but still decide to face the challenge anyway. Their drive is going to be different and the stigma out there has been to continue to throw money at school hoping that things get better. In the end, that goes right back to the money issue as opposed to the mission and the driven facilitation of education or any other endeavor.

Structured governance function, so the structure is fundamentally flawed. It doesn’t matter how much you add to it, add money, add fuel. The structure can only handle what it can handle. You’d have to redesign the system.

There was a successful Ray Dalio who runs Bridgewater Associates. It’s the biggest hedge fund that’s out there. I heard him speak and he was talking on this specific topic. It resonated with me because he lives in Connecticut and his wife does a lot of volunteer work in Hartford. I grew up right outside of Hartford, Connecticut. He talked about the growing danger that exists on the streets of Hartford. He was talking through what he has been pushing, which is taking successful business people, entrepreneurs and figuring out solutions to improve situations like that because it was specifically referencing kids weren’t able to get to school because of how dangerous it was to walk there or take the bus system.

The statistics showed that if a child could get to 10th grade, then they would have this X% of success once when they were an adult. How they do that came down to figuring out the resources that are being allocated and having metrics-driven accountability which ultimately is like profit, where’d you have a resource and is to produce a better result. I look at how challenges are part of human nature. We’re always going to have challenges as a society but the way in which it’s approached from a capitalistic standpoint isn’t profited which people are mostly confused with. The rage that people have with capitalism comes down to businessmen being greedy and wanting more money and profit.

TWS 15 | Social Capitalism

 

As I’ve looked at it and discovered what the underlying theory has been since the beginning, it’s essential to take certain resources and to improve whatever situation which is enhancing efficiency or output. It’s to take stewardship, be a good steward over the resources available and make a difference with those at a higher level. When I first started to learn this, I thought about you and Lisa. What you guys have been advocating for so long which is the idea that there are lots of social issues out there. Being approached from a purely socialistic standpoint is going to have a waste of resources with little accountability and not much output. As opposed to a capitalistic perspective where you’re able to make those resources more efficient and increase output and have higher levels of accountability.

You need to be an exchange. Create a system that you’re an exchange because if it’s one side, I’d say socialism, you give and the other person’s taking. It creates a sense of entitlement. That’s not what it’s about at all. It’s not about giving away everything for free. It’s being an exchange. That’s what keeps a healthy country, community going. We’re an exchange, it’s like my kids, they got to do chores. Am I paying them for it? No, that’s part of living in our house and part of them getting food, fuel, electricity and all that stuff. That’s part of being a member of our family here. I’m not going to pay you to take out the trash.

I have a laissez-faire way with my kids where we don’t have tasks they’re responsible for. I try to use principles. I talk about our home. Our home is where we come home and we rest, we have great memories and it’s where we feel safe and where we can re-energize. The way in which we treat it has to reflect what we believe its purpose of being. It’s not like they understand what that principle is but I try to govern through that principle and value of respecting your home, acknowledging its role in your life and treating it with respect as opposed to the task of picking this up and picking that up. I look at following orders and what happens when people are operating through being told what to do as opposed to being the operation having to do with following a set of principles and values. As we conclude our interview, how have you found your mission, your principles, your values, and your code, which I know is often used in the Rich Dad world? How is your code allowed that heightened level of accountability for you guys, but also maybe your family and your team?

Our past is a gift. It can help guide our future if we take it, study it, and look for the purpose behind it. Click To Tweet

I’ll frame that around the family. It’s interesting in business we write business plans. We have regular meetings from daily huddles to weekly meetings, quarterly meetings or annual meetings. We have values, we have a mission, we have vision, purpose and all that stuff we understand and that’s how we were taught and trained to build a business. Why not take those principles into family life? What’s the mission statement for our family? What are our family values that should guide our decisions? Do we have family meetings every week? Do we have annual retreats that we get together and we spend time with our family? What’s the vision? What are our goals? What are the objectives? How are you doing with your goals? What bottlenecks are getting in the way? How’d you do in a track meet this week? How was the football practice? What are your goals?

We know how to do this. Why not incorporate it into the family? Why not incorporate it into a social enterprise that we are passionate about and we want to improve the quality of or solve this social problem. We have the fundamentals. It’s principally driven. They can be applied in all aspects. I love what you said about with your family and using values and principles because it’s true. It rings to me and that’s how we run our family. Is it perfect? No. We do our best but it helps guide the decisions and creates a rhythm within our family because if you look at any culture that survived a long period of time. There are rituals to it. Rituals are what helps keep the bonds together. That’s what we do. We create rituals in our family and in our businesses.

People in general, in whatever unit, whatever capacity, we’re volatile, we’re emotional, we react to certain things. We perceive certain things in a certain way. Principles and mission are like the compass. It’s your true north. Principals don’t change values. It can’t be something and something else. This is a value and it can’t necessarily be argued. It sets this compass as to how you behave and if you’re not getting certain results, it could be because of the environment. It could be because of other people but typically you go to, “Am I aligned with principles? Am I aligned with my values?” If not, then that’s the starting place as opposed to blaming other circumstances.

TWS 15 | Social Capitalism

 

I look at kids and that’s the thing. With business, I would also say with family, understanding this helps to solidify a paradigm and perspective of those that are within our stewardship to look at the world. It’s that pay it forward thing or the compound effect where you make a difference. Somebody understands what mission-driven means or they understand what the principle of creating value is. We versus me, that right there is not for a singular purpose, but the application is most endeavors that we partake in as humans.

That’s part of the problem. In Robert’s book, FAKE, he talks about that. We’re taught by fake teachers. In other words, we’re taught by people that are not doing it themselves. As a financial planner, most of them are broke. They’re just salespeople or a personal trainer that’s overweight or a marriage counselor that’s been divorced three times. It’s like, “Why not hone integrity with what you teach? I’m not saying it’s right or wrong, I’m saying if you’re going to teach people, then be in integrity with those values all the way through. How I am at work is how I am at home. I don’t shift. It’s me. I want to be in integrity. I have to act one way in this environment. When I’m around my guy friends, I act another way. It’s like, “No. I love my wife, so I’m going to be consistent with that value no matter where I’m at or whatever it is.”

It’s humanity. It’s life. We have different groups and experiences but the principles apply to every aspect of it. It’s one of those things which has helped me in the different roles and hats that I wear where if you’re out of integrity in one area, it’s going to affect all areas. That’s where you’ll be clear about what your principles are and what your purpose is. It becomes that true north and it allows you to realign because we all get off-course and we’re all going to get off-course, but realigning there has to be some sort of standardization there to come back to equilibrium. Josh, this has been awesome. What are other ways in which people can follow you or learn more about you and about social capitalism?

The main thing is WarriorsHeart.com and then we’re also on Facebook. That’s most of my activity and focus. The last thing I would like to say though with that and social entrepreneurism purpose and mission is to look back in your past. For all of us who go, “What should I be doing? What’s my mission?” Look back in the past and a lot of times the answers are found in the past. All that crap I went through as a kid and drinking, I didn’t want to tell people that I’m an alcoholic and in recovery and all that stuff, that’s the past and say maybe I went through that for a reason. It made me stronger and it gave me the right to teach it moving forward. That could be where you find your answers.

I love the quote, “Life happens for you, not to you.” You look at the experience as they’re unique to you in the lessons that you’ve learned and what you’ve become because of it. That has shaped you into who you are, embracing that and appreciating that is empowering as opposed to being ashamed or embarrassed by it.

Our past is a gift and it can help guide our future if we take it, study it and look for the purpose behind it.

Josh, thanks so much for being on. I hope our readers have gotten a lot out of the interview. WarriorsHeart.com is a way to follow what Josh and his wife, Lisa and their team are up to and the difference they’re making in our warriors now. Follow them on social media. Josh, any final words?

Thank you. Patrick, we’ve known each other for years. I love you like a brother and I’ve been honored to be part of this journey with you. Your family is incredible and I appreciate that you’re in integrity with what you teach.

Josh, I echo everything you said right back to you and times a few multiples. We’ll have you on soon again.

Important Links:

About Josh Lannon

TWS 15 | Social CapitalismThe world economy is crying out for entrepreneurs to take a stand, create jobs, and solve problems. Doing good and making money does not have to be mutually exclusive. With an inspiring story, Josh and Lisa Lannon, both of whom are Rich Dad Advisors on Social Entrepreneurism and Behavioral Change, turned a problem into a solution, built a passion driven organization, and have envisioned the coming megatrend of social entrepreneurialism. A global trend of individuals demanding more from their life’s work, the Lannon’s advise on building organizations and investing with purpose, focusing on a triple bottom-line: People, Planet and Profit.

They are the Founders of Journey Healing Centers, an accredited drug and alcohol treatment center with 6 locations in multiple states and successfully treating thousands. In late 2013, JHC was acquired by Elements Behavior Health, a leading nationwide provider. The Lannon’s current venture is called Warrior’s Heart. A private drug and alcohol treatment center that focuses on serving the men and women who are Veterans, Military, Law Enforcement, First Responders and other Warriors. Both, Josh and Lisa Lannon, are known for their personal story how they overcame life’s obstacles, applied the Rich Dad Principles and moved onto the fast track.

 

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today:

Breaking Down The Biggest Myth About Entrepreneurs with Jim Beach

TWS 10 | Myth About Entrepreneurs

 

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

Listen to the podcast here:

Breaking Down The Biggest Myth About Entrepreneurs with Jim Beach

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

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

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

TWS 10 | Myth About Entrepreneurs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TWS 10 | Myth About Entrepreneurs

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

 

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

Their level of interest in what?

Whatever they’re doing.

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

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

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

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

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

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

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

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

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

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

TWS 10 | Myth About Entrepreneurs

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

 

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

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

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

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

Joey got off the sofa.

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

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

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

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

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

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

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

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

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

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

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

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

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

I learned a lot.

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

Of course.

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

TWS 10 | Myth About Entrepreneurs

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

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

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

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

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

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

Awesome to have you on.

Thank you so much. It’s been fun.

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

Important Links:

About Jim Beach

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

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

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

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

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today: