Why Shaq Bought a Carwash

What if I told you that Shaq made more money from boring businesses than he did from ever playing in the NBA and that we're going to break down exactly how he invested so that you could do it too. I think Shaq might be the only professional athlete that I would seriously want to trade his investment portfolio for. The crazy part about that is that most 60% of the pro athletes out there end up broke within five years of retiring. They're not joking when they say that professional athletes died to death in their lifetime. Meanwhile, we got basketball's friendliest giant making more money as a retiree than he did during his legendary 19 year NBA career. Also, did anybody know that Shaq's a DJ? This giant man, apparently with a smoke machine behind him. I don't even know. So you know it wasn't Kazaam, oddly enough, that made him bajillions of dollars. It was actually things like his car wash. Although Kazam kind of Oscar worthy. I don't know, 7:1 or not. I thought it was interesting that his upward trajectory was basically by doing things that private equity firms do all day. And maybe that's why he said this to his kid, which I love. He said, you're not rich. I'm rich. And he seems to think about that philosophy all over the place. The best financial advice he said he ever got was from a guy at a bar who turns out to be Lester Nispel, one of Hollywood's top business managers. But I guess still a guy at a bar. And the advice was save more than you spend. Riveting. But I think we can basically stop there and say that Shaq actually learned a lot more from watching people like Magic Johnson build out his boring business portfolio. He's tight lipped about his earnings, but let's do a little estimation. You guys want to guess what Shaq made in the NBA versus what he made after he got a 27.5 million annual contract for playing for the Heat. And he had endorsements that still make him about $20 million or have made him about $20 million alone. The rest of his entire net worth of which they say is about 160 to $180 million, comes from boring businesses. Real cash flow means that you make money while you sleep, not while you dribble or film genie movies. I don't know. So you could sell your soul to startup Hustle, but why not put some of that money to work and have it work for you? I think what's interesting is he built something that I like to call the financial flywheel basically goes like this. If leverage is the ultimate goal, then you want your money to work for you. How Shaq basically did it is his breakdown, which is was he had a business already, right? His business was the business of him in the NBA. The flywheel in that business was we had Shaq in the middle. He was the one that was making the propellers go and around it. We had his salary, then we had his endorsements, then we had sponsorships from doing paid speaking gear to basically trade in his time for money. Although he made a lot of money for that time traded to. Then he said, instead of putting myself in the middle, I'm going to take myself out and I'm going to replace it with my money. So if I'm over here doing my MBA trading time for money thing, I'm going to take all the money I make from that. I'm going to put an another flywheel over here that's gonna have my money in the middle and the money is going to make more money. One part of the flywheel is 155, five guys restaurants. He owned about 10% of the company's entire franchise portfolio. 17 Auntie Annie's 150 car washes. 4024 hour fitnesses. 9 Papa John's one offs like a Krispy Kreme and a City Plex. 12 that's like movie theaters. Then he had Shaq's shoes, affordable Walmart sneakers. These bad boys, they sold over 120 million pairs, which is wild. You guys even heard about that. And what he also started doing that was really smart was buying up these small businesses while he was in the mba. He doesn't need another side hustle because he has financial leverage. And this is something that we're all kind of discouraged from doing when it comes to our income streams. Most of our nine to fives are just jobs, right? To pay the mortgage, rent, et cetera. But how can we replace ourselves from the flywheel if we get fired? If we trade our time for money, there's no way that we can put money in the place of our time. And it's a lesson that most professional athletes learn the hard way when they're forced to retire and they've realized that they've had spend creep, they have lifestyle creep while their income continues to go up with them. But finally they retire and it goes down and crashes. So while car washes and Auntie Annie's are not anywhere near as sexy as playing in front of hundreds of thousands of people, do they bring in dollars you bet. So now his portfolio, they think when he was first getting out, it was around $160 million. Now it's more like 400 to $500 million. And what's wild is that extra, what do we want to call it? 200 and $230 million comes from the guy who had the highest annual salary while he was playing in the NBA and still made a majority of his wealth outside of it. This is what I call the economics of boring. There's a difference between fame and rich. Unfortunately, today's entrepreneurs often confuse the two Basic economics. Yes, you can be in demand, but careers are asset classes in yourself. So when everybody wants a certain kind, AKA everybody wants to be a ball player, guess what? They get inflated and your returns drop. What you actually want instead of that is you want to get into boring businesses where there is not this demand and supply imbalance. I call this part of the Lindy effect. The Lindy effect basically states that the longer an idea has been around, the more likely it is to stick around and stay in style. So I find this interesting that these principles seem to translate to business too. Lindy effect is typically thought of in economics. So a hot new nft, bored ape, yacht club, whatever, is probably not going to be around as long as a laundromat or a car wash. The Lindy effect, if we're on the curve, is less on this new hot thing than it is on this old boring item. And that's how you want to think about what to put your money into. You may be familiar with Nassim Taleb, author of Antifragile. He put another twist on this discussion, saying that the failure rate of the new is actually much higher than that of the old. Even though we may think that old things are going out of fashion or less valuable than new ideas or businesses. So think about that for a second. Everybody says to me, cody, why would you own a laundromat? Why would you own a car wash? Aren't laundromats going away? Doesn't everybody have them? And they assume that because something is old, it is less valuable. Whereas just because something is novel and new and shiny does not actually mean that the value is higher. This is food for thought as you think about the next time you want to allocate to an asset class. Because it's not just Shaq that's on the boring business trend here. This is a ton of people who are big celebrities like these guys. And in fact, you know, we got the man, the myth legend himself, Warren Buffett Pinball machines. As the story goes, 17 year old Warren and his friend installed a $25 pinball machine in a barbershop. A year later they sold the business and they spread across Washington D.C. for over a thousand locations, which was a huge amount of locations and money back in the 1700s when he did it. Just kidding. It wasn't that long ago, but he says it was still the best business he was ever in. And do you know what else was Warren Buffett has been a part of? He's been a part of acquisition after acquisition that focuses on boring businesses from railroads to news sites to vending machines. Even at a young age. Last one I want to hit you guys up with is this is Magic Johnson and Magic Johnson, Shaq I think learned from. He has a portfolio of businesses that go from, you know, movie placement to coffee and $600 million in net worth. You can check out some of his business businesses right here. This guy owns 125 Starbucks. He's the largest outside owner of Starbucks outside of, you know, Starbucks movie theaters and malls. 31 Burger Kings, EquiTrust Insurance. I love insurance businesses. 24 Hour Fitnesses. Stakes in the Lakers, the LAFC, Major League Soccer teams, LA Sparks, the Dodgers. He owns a JV to rebuild LaGuardia. About damn time. Partnered with Canyon Capital to finance 30 real estate developments. Owns a bunch of media channels like Me Too Energy Uncharted power Walker & Co. Which is like beauty products and owns part of Marvel Experience and Walt Disney Imagineering. Just it's a little taste. You can see. He actually lists his full portfolio online and Magic Johnson Enterprises. Magic. If you want to come on anytime, do a YouTube video. I'm here. We can talk about boring businesses together. But the moral of the story is that the billions do not have to be complex. Boring wealth is all around you. If you look at some of the wealthiest individuals out there, their niches are pretty dull. We've got the Waltons of Walmart retail, Koch Brothers manufacturing and distribution. We've got Robert Kraft. Coal, mining, oil, real estate. So the person who runs your neighborhood car wash, they're probably a lot richer than you think. I mean Shaq does, so that's probably a pretty good reason. 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