How to Get RICH Regardless of Your Age | Unlock Rockefeller’s Secrets in 3 Hours

Wealth Breakthroughs is an exclusive video series where millionaires break their silence on their usually hidden secrets on how to stack up great wealth.

It's like eavesdropping on the private conversations rich folks have with each other behind closed doors.

But I partnered with the series creator, Jeff Hays, to bring that VIP pass to you right here today.

In this episode, you'll learn John D.

Rockefeller's secret to massive wealth, The 4 investments that guarantee returns, how to break the chains of a 9-to-5 life, and how to get rich regardless of your age or circumstances. Get ready to be inspired because today we're all about turning your dreams into dollars. Enjoy.

Hi there. Thanks for tuning in. I'm Patrick Gentempo and welcome to episode 4 of Wealth Breakthroughs. I don't even know where to begin to introduce James Altucher. He has one of the most famous podcasts on Earth. He's a bestselling author. He's made fortunes in the hedge fund world and also become one of the leading tech commentators and crypto experts around. He's also remarkably humble, honest, and has a self-deprecating sense of humor like few other people I've ever met. Today, he's going to show you the lessons he learned from losing millions of dollars and how those lessons helped him make many millions more. He also used one simple, easy-to-grasp strategy he says took him from near homelessness to phenomenal success that changed his life. Get ready for the most unique wealth breakthrough you've seen so far. Here's James Altucher. James, thanks so much for doing this. Really excited to have this conversation.

You know, thanks for having me on the show. I'm really pleased and honored that you thought of me for this.

Well, what's interesting is trying to consider, okay, where are we going to go here? There's a lot of places we could go with you that you could speak to. But let's just first start with your background. What led you to doing what you're doing today?

You know, I'm doing a lot of things today. So I'm a big believer that, you know, everyone always tells you, be focused, stay in your lane. I don't think, I think that's horrible advice, and I don't, I think that works in the self-help world, but does it work in the real world, where I think there's a big difference? I think it's important to explore and experiment, not only ways to approach a career, but ways to approach a life. So what am I doing today? I love to write. I've been writing every day for 30 years. I do a podcast. I have been an entrepreneur. I've been an investor. I've run, I've been an advisor and board member of many companies ranging from $0 in revenues to $1 billion in revenues. The billion dollars in revenues went to zero. The zero went to a billion. So it's funny how that works out. But I kind of came through this in a very different way than usual. I wasn't very interested in being an entrepreneur. Entrepreneurship is brutal and hard and often painful, at least for me. I wasn't a natural. I was natural at being creative and helping other people. I wasn't natural at managing people or figuring out the accounting or profit margins or things like that. I had no business background. I was a computer scientist, and then I got kicked out of graduate school because I wanted to write a novel. So every day I was writing fiction, and finally they said— they wrote me a letter and they said, when you're mature enough, we really like you, but we can't let you sit here on a fellowship. Please leave tomorrow, and when you're mature enough, you can come back. That was in 1991. They do occasionally ask me if I want to come back. It's about almost 28 years later, and I haven't come back yet.

What were you in grad school for?

Computer science.

Computer science.

Yeah, I was very interested in artificial intelligence, computer science. I— my— one of my projects I was working on— I went to graduate school where the computer that eventually became Deep Blue was the computer that beat the world chess champion Garry Kasparov many, many years later, 7 years later. And I was working on that. IBM actually had offered me a job to continue with the team to work on it. So IBM essentially bought the team of which I was partially on, and asked us all to go to IBM. I stayed. I said no. I was one person who said no, but I enjoyed working on it. And but then I switched interests again. I believe in exploring what, you know, you have this inner compass and at different points the compass changes direction and you should follow it. Like, I wasn't going to spend the next 5 years in graduate school if what I was really interested in was doing something completely useless that would never make me a dime of money. And that's all I did for years and years afterwards. So finally I got a job at HBO. You don't mind me going into all this background, do you?

No, but I'm a little curious and confused. Computer science, novelist. Normally those are two very different dispositions or different types of minds and people. So how is it that these two things were coexisting in your life? Did you feel sort of schizoid, or were you just losing interest in computer science?

I wouldn't say I was losing interest in computer science, but I would say often you have to kind of look around at your life and look at the people who are succeeding in what you want to do, and you have to say to yourself, do I want to be like them? 'When I grow up,' and I still do this, I'm 51, I still look around and say, 'Do I want to be like this person when I grow up?' And I looked at my professors, I wasn't that excited by the work they were doing. I still loved computers and so on, but then I, I just loved reading and writing, you know, the thing they teach you in first grade. I really wanted to do it for a living, and I I would just not go to school anymore. I stopped going to classes, and I would read for 3 or 4 hours every morning, and then I'd probably write for a good 6 to 8 hours in the afternoon and evening. I did an experiment for a while, just because I wanted to kind of balance social life, but also have good quality, very quiet writing time, and I still wanted to sleep 8 hours a day. So here's what I did. I slept from 4 to 8 in the afternoon and 4 to 8 in the morning. So from 8 in the evening till midnight, I would go to dinner and hang out with my friends. And then from midnight to 4 in the morning, I would be able to write. Then 4 to 8 in the morning, I would sleep. And then I would read until, you know, whenever. And then I'd sleep again, and the cycle would all start.

Did it work?

Yeah, it was great. And then I was always experimenting with sleeping. Another time I decided I'm gonna have a 25-hour day. So I'll miss a day every 25 days, but I'll have an extra hour every day to work. So I would just basically stay awake. I'd sleep 8 hours a day, but stay awake another hour. So eventually I'm sleeping from, you know, first I'm sleeping from, you know, 10:00 PM to 6 AM, but then gradually a few weeks later, I'm sleeping from noon to 8 PM, and I would just push it back an hour each day. So that was another experiment.

How'd that one work out?

Not as well.

Not as well.

I would get tired. But I did that for many years, and I kind of went through that phase where I thought I was great when actually I was awful. But fortunately, I was hiding in plain sight. I was just writing and not really showing it to anybody. I wrote, during that period, I wrote 4 novels and dozens and dozens of short stories, all of them awful, like the worst things possible. But during that time, of course, I got thrown out of graduate school. I had failed all my classes. I got thrown out of graduate school. Still good enough that IBM offered me a job despite being thrown out to work on the world— this amazing project which became the first chess computer to beat the world chess champion. It kind of was the dream of AI since the 1950s.

Are you a chess player?

I'm a chess master, yes. And I say that not in a bragging way. There's people much stronger than me, including Garry Kasparov, the world chess champion, who lives around the corner from me now. But 20 years ago, I had helped build the computer that beat him. But instead of taking this amazing job that would have been also a lifelong dream, I decided, you know, I'm going to get thrown out of graduate school and write horrible novels instead. And they, again, they asked, they said I could come back whenever I wanted, but I never did. In fact, the dean that threw me out of graduate school is now one of my closest friends. He's my only friend left from graduate school, the actual guy who threw me out. But a few years later, I decided, you know what, I can't do this forever. I applied for a job at HBO. And I had no experience in the entertainment industry. I only knew— I had only worked as a computer programmer to make money. So I had the low— after going to undergrad for computer science and grad school for computer science, I had the lowliest job. I was a junior analyst programmer was my title at HBO. And just to mention, I do really believe in this idea of follow your compass. So at the same time, I had two job offers. One was at JPMorgan and the salary was $80,000 a year. The other was at HBO in New York, both were in New York City. HBO for $40,000 a year. I took the HBO job. Why? I hate banks. I love television. Not gonna take the—

That simple.

Yeah, it's that simple. I never even thought twice about it. I never even considered. But here's what happened. I'm at HBO for a few days. I basically crash everything I touch. And finally, my boss walks into my cubicle, so all the other 8 attached cubicles, you know they're all listening, and he says, "You're not doing well here. It's not working out for you, but we don't want you to fail." So of course, I'm horrified. I'm the new guy. Everybody's listening in the cubicles around me. It's so embarrassing. He had no clue how embarrassing it was. And he said, "We're gonna have to send you to remedial programming classes." I was an undergraduate major at one of the best computer science departments, and then I went to grad. Again, I had put in 10,000 hours programming already, and, but it just goes to show you, education gets you, you know, being in a classroom gets you good at being in a classroom, but does not get you good at the real world. And so I was great at programming for the classroom, but I had no computer skills. So I go to these remedial classes. Finally, I get back to HBO and really begin my first real serious job. I didn't want to start a business at that time, but nor did I want to do what my bosses told me to do. So I was very interested in the internet. The internet was this new thing. This was 1994. And I said to my— you know, HBO was trying to do interactive TV at the time through cable lines. And I said to my boss, why don't you use Hey, there's this brand new thing, the web, on top of the internet. Here's this browser, Netscape. It's slow, but you could potentially stream video. Why don't we try that? And he was like, James, James, James, the internet is for academics. Why don't you let the cable guys do what they're good at? You just do what they tell you to do. And so there was one weekend where no one was around, and I completely wired up HBO for the web. I put— I installed Netscape on every single computer, and I took every database at HBO and figured out how to put it on, you know, an intranet. They didn't even have the word intranet then. An intranet. So I had everything from the employee database to the mo— HBO has a movie database that's kind of like IMDb, where, you know, you click on a movie star, you click on Alec Baldwin, and you see all the movies he's been in. You click on a movie, You see all the stars of it and so on. You could click on their deals potentially. And they even had their cafeteria menu online. So I put everything online. And when everybody got back Monday, I showed everybody. And they were terrified because I had basically re-implemented in a weekend all of the projects they were hand-building or without a web browser. And so, but it actually got very popular. And then all of Time Warner wanted to do it. So I was advising almost all the different divisions of Time Warner. I remember at one point Comedy Central, which Time Warner, HBO owns half of, they called me over and they said, look, can you, we'll pay you as a consultant, even though you're an employee at HBO, we'll pay you as a consultant, can you give us an intranet? And I said to them, I don't wanna get paid, I only wanna do it if you give me the 3:00 AM time slot. You only put infomercials there right now. Just give me the 3:00 AM time slot. And they're like, what are you, this woman who's the head of IT, what are you gonna do with it? And I said, I just wanna walk around at 3:00 in the morning and interview people for the 3 AM time slot on Comedy Central, and then I'll build your intranet for you. So, to her credit, she took it all the way up to the CEO of Comedy Central, Doug Herzog, who later became the CEO of MTV. He said no, correctly, and I didn't do an intranet for them, but I realized, oh, okay, well, every company in New York City needs a website, and they don't even know it yet. And there's maybe 5 people in New York City who know how to build a website. So at the same time, my brother-in-law contacts me. His business is falling apart. What did he do? He made CD-ROMs for a living, which don't exist anymore. There's a reason his business fell apart or was falling apart. And I said, why don't you try this thing? I'll show you this thing called the web. So he was a good designer. He's designing for the web. And I showed him some of the software stuff. But he still couldn't, he didn't speak English, he was French, and French people never learn English. He was here for 20 years already, but he still didn't speak English, and he certainly didn't write English. So he's like, can you help me write proposals? I said, okay. So suddenly now I'm a full-time employee at HBO, but I'm writing, I said, I don't wanna be part of your business, I'm not interested in that. I wanna eventually make a TV show for HBO. But then HBO said to me, look, you made this internet, why don't you be in charge of HBO.com? We need a website. So I said, okay. But I said, let's outsource it to a good company that makes it. So I did competitive bidding, 4 or 5 companies, the only 4 or 5 companies in the city bid to do the website. I picked one company that was the cheapest and the best, so I called him up to inform him, my brother-in-law, where I had written the proposal to me, you got the deal. And Then I eventually left HBO and joined the company full-time. And actually, we were partners in it, and I was in charge of it. And we built up a very big company building websites. We built AmericanExpress.com, TimeWarner.com, ConEdison.com, all the movie studios. And maybe you could tell by the way I look, we built every gangster rap record label website. So Loud Records, Bad Boy Records, Death Row Records, Interscope, Jive. We built all the websites for all their labels, and we built up a nice company. We had this niche in the entertainment industry. And so eventually, like all of these companies, we got acquired, and stock— we got acquired by a public company, stock went way up. I sold every last dime. I said, this is going to be a bubble of stocks. It's eventually— the internet's here to stay. The internet's not in a bubble. But Wall Street seems to be going crazy. All these money people are going crazy. So I sold everything.

What year was that, about?

This is 1999. I sold in 1998. Started in 1995, sold it in 1998, cashed out in 1999, really at a good time. And then I made— after making 10 good decisions in a row, I said, you know what? This internet thing is here to stay. I'm just going to invest it all back into internet companies.

Oh no.

So it'll be diversified. It'll be a lot of internet companies, and, which was not diversification. I didn't know that then. And within 8 months, I lost $15 million, and I was broke. I was dead broke. I had, I remember one time I went to my ATM machine, and I accidentally saw how much was left in the account. I was such, I was so depressed and so horrified by my actions that I had refused to look at my bank account whenever I logged on. But this one ATM, like, said, oh, $143 left. And that same account had had over $15 million 8 months earlier.

You went from $15 million to $143 in 8 months?

Yeah, I just said that.

Yeah, I know.

I'm— I didn't really need to be reminded. I don't need to be reminded of it that much.

Well, I want to bring you back there because What were you thinking at that point?

I was suicidal. I was, I was really depressed. I thought to myself, I'm not a businessman. I'm not an entrepreneur. I somehow won a lottery ticket in this, in the biggest crazy boom ever. And I'm never going to have this opportunity again. I had generations of savings for my children, grandchildren, great-grandchildren. I was going to— I bought my parents a house.

So you're literally depressed and suicidal. You had all these maybe self-impressions about, you know, I'm not a good businessman, I'm not a good entrepreneur.

I already knew in advance I really did not enjoy entrepreneurship or being a businessman, but I was very good. I had two things going for me. I was passionate about what I was selling, so I really believed that every company not only was going to have a website, but they needed a website. So I really can go into any business and explain to them why, and I had the skills to, to prove it. Like, I could make them a website faster and cheaper than any other company in town. And there was literally, there were 4 companies and mine in town. But I didn't like managing people. I didn't really understand it. So I tended to, we had a lot of employees, but I tended to do everything myself. I didn't really know how to understand how when people were bickering or fighting, or if two employees were having sex with each other. I didn't really know, like, how to manage these things. It was just my brother-in-law and me, like, kind of locked in our room doing all the— most of the work. And I would do 100% of the sales. And so, because I was so passionate about this and what the future was and my, you know, how I could help them and brainstorming ideas for what American Express could do, what HBO could do. So for instance, for HBO, and again, I'd worked there, but they became the biggest client of my business for HBO. I said to them, you do such a great job making original TV shows. You're the first cable company to really create these amazing original TV shows. The web is this brand new entertainment medium. No one knew what the web was really going to turn into be. And so I said, the web is this brand new entertainment medium. Why don't we do original web shows? So they said sure. And so this was probably the first web show made for the internet. It is on HBO.com. I called it 3 AM. It was based on my experience at Comedy Central, 'cause I pitched for them to do the 3 AM spot. So I did this for about almost 4 years. At 3 in the morning every Tuesday night, I would go out in New York City, and if you were out, I'll just ask you specifically, if you were out at 3 in the morning on a Tuesday night, probably something good was not happening.

Right?

Right? So that was always the case. I'd go, not a Saturday night, 'cause everyone's having a party, whatever, but a Tuesday night, why aren't you asleep? Why aren't you getting ready for school? Why aren't you getting ready for work? Something wrong was happening. And so I did this for 4 years almost, interviewing people at 3 in the morning, and then I would get the transcript, we would do a design around it, and put 4 interviews a week from 1996 through 1999 on HBO.com. And I really loved doing it, and I suppose That was like, in a weird way, the first podcast in a sense. So we were always doing creative things for every company, and I enjoyed that part, but I didn't enjoy clients because clients will call me up also at 3 in the morning and tell me their problems and their issues, and I just didn't enjoy it. And you have to, and so I sold the company as fast as I could. But I didn't, again, I didn't really, there's a lot of subtleties to valuing and selling a business. People think, oh, you build something and then somebody offers you a ton of money and you say yes and that's that. But that's not how it works. So entrepreneurship is building a company and learning how to get profitable or raise money or whatever. We were always very profitable. So perhaps that was a mistake. Maybe I should have raised money to build something much bigger and lose money in the process because those companies were getting sold for much bigger amounts because then you're selling the dream as opposed to selling a profitable income stream. But the big mistake I made was I thought it was so good that we were profitable. What I should have done was I should have said, you know what, I'm a software guy. I can make software products to help people build websites. So secretly I was making software to help me quickly build websites. So AmericanExpress.com was like 60,000 pages. And so I built software to help me quickly generate 60,000 pages and have communication between all the employees of American Express to help me analyze the new site and where to troubleshoot. And I had all these products I was developing. I didn't tell anyone because I didn't want them to think we weren't working that many hours so they would pay us less. American Express paid us $250,000. When I had $0 in the bank, they were one of our first big clients, and we were looking at each other. They're gonna pay us $250,000 to do this website? So I wrote software to build the website. We built the website in a day but didn't tell them. And what I should have done if I was a smart business guy was say, this is a product, we're selling you a product, and I should have been a product company. When you're a service company, the saying is all your assets go out the door when the light, you know, at the end of the day, 'cause it's the people are your assets. When you're a product company, you make money while you sleep, and it's worth a lot more. It's worth $100 million instead of $6 million. And I didn't understand anything about business, about valuation, about how Wall Street values companies, because that's ultimately, at the end of the day, that's how they're going to value your company. I didn't understand how to build long-term relationships with clients. So I was not really— this is my very first business. I was— I had no business experience at all. I didn't study business. I had been writing fiction for years, and before that, a computer programmer, before that, a nerdy chess player. I had a lot of girlfriends in high school, obviously. And, you know, then we sold the business, stock went up, so I did sell, sell out with a decent amount. But then again, like I said, I lost everything in a very short period because I didn't know any— there's 3 skills. Making money, keeping money, growing money. So I made money, but I didn't know that there was these other skills called keeping money and growing money. And even making money, I was okay at it, but not great. And you could say I was great, but I could say I could have been much better if I knew a little bit more about business. So like I said, I thought I had won the lottery and this is never going to happen again. And I don't know anything. I'm never going to be able to do this again. And I just lost it all. And I had been spoiled. I didn't want to go back to a job. And not that I was too snobby for a job, but I was just depressed. And I had my— I had two little daughters. One was 3, the other was 0. And I said to myself, there— I was, I was so horrified at what I had done. I was losing my house. So I had— one of the things I spent on is I bought a big apartment in New York City and rebuilt it, not knowing what I was doing at all, even doing that. And I was going to lose my house. I owed money in taxes and I had no money. So, so I thought— I, my mind always went to the worst-case scenario of what was going to happen there. And I had these two babies, but I had one thing left, which is I had a life insurance policy that I had bought when I had money. So I figured, look, my 3-year-old and my 0-year-old They're not going to remember me. Their mom, my ex-wife, will be able to remarry. And so I started AltaVista-ing. That was a search engine, AltaVista. I started AltaVista-ing, what is the best way to kill yourself without hurting yourself? Because I didn't want to hurt myself. And also, I had this life insurance policy, so I didn't want anybody to suspect that I killed myself. Because then maybe— I didn't know the rules— maybe you couldn't get your life insurance policy. Turns out there's no way to do it. Both those things, hurting yourself or preventing people from finding out. So I didn't go through with that. But we lost the house. I kind of went into exile. I was so depressed I couldn't leave my room. We moved 70 miles away in the middle of a blizzard to this kind of sort of almost rural area. And I just had nothing to do. I had no jobs, no opportunities, no friends, because when you, when you make a lot of money, everybody becomes your friend. When you lose it all, nobody's your friend anymore. And that applies to everybody you know. You don't know anybody once you lose all the money. So I really didn't know anybody. I had no opportunities, and I was just so depressed I couldn't leave my house. And so I figured, okay, my compass was starting to move again, and I figured I made— I lost so much money investing, it's because I didn't know anything. I didn't, I didn't do what I normally do when I study something. Like when I studied computers and the internet, I had a methodology for getting to be not only good, to getting to be not only good but among the best. Even when I was a kid and I started getting interested in a game, just a simple game like chess, I had a methodology for getting better. You divide it up, you divide a big skill into all the micro skills, and you take lessons from a really great coach and you apply yourself in professional tournaments. And that's how you get good at a skill. That's kind of the basics of how you get good at a skill. So I did that with a game like chess. I did that with computers. I did that with understanding the internet. But I had never done that with investing for some reason. And so I read hundreds, and I'm not even exaggerating, I read hundreds of books on investing, and I still felt like I didn't quite grasp what was going on because I didn't understand the psychology. I was, I almost had PTSD from losing all this money. So I would buy a stock and if it moved for one second against me, I'd have a panic attack. So using my computer background, I wrote software to, I took 60 years of stock market data for every single stock And I wrote software. I had an artificial intelligence background. I wrote software to sort of model the stock market and taking what I learned from all the great investors of the past. I tried to model what they would think, but within software. And then I found all these patterns within the stock market. And so then I started trading slowly, bit by bit with just the little money I had left. I, you know, when we fought, when the We finally sold the house, had tiny, tiny bit of money left, not enough to survive, but enough to put in the market and try to make some money. And it worked. So I was trading every day and the software was basically making money every single day. But now I didn't know any investors. I didn't know anybody in the investment community. I never worked on Wall Street. I didn't know anybody at any bank. So I wrote all these people, all these heroes of mine, new heroes who were investment gods, I wrote to each one of them and I said, hey, can I buy, I'm a big fan, can I buy you a cup of coffee and pick your brain? And I got zero responses. It's not like somebody would say no, just nobody responded. It's not, what is gonna happen? Is Warren Buffett gonna suddenly say, Gladys, hold all calls, someone named James Altucher is gonna fly to Omaha treat me to a 60-cent cup of coffee and pick my brain of all the knowledge I've amassed over the past 60 years of investing. He's not going to do that. Nobody did that. So then I started thinking of something else. I started saying, well, you know, I need to do something that's going to attract their attention. I need to be more creative. And so since— this is since 2002— I always carry around a waiter's pad. And every single day— and this is every single day since 2002— I write down 10 ideas a day. And the reason is, people always say ideas are a dime a dozen, execution is everything. This also is the worst advice ever. Ideas are not a dime a dozen. A good idea is very hard. And the creativity is a muscle, just like any other muscle. If you got into an accident and you were in bed, in a hospital bed for 2 weeks, your leg muscles would atrophy. You would need physical therapy to walk again. And all of us, we're walking around all day long with our creativity muscles atrophied. So I started writing down 10 ideas a day. And they'd have to be like a, like, the topic could vary. It could be 10 business ideas, 10 ideas for you, 10 ideas how Amazon could be better. So I started researching each person I wanted to meet, and I would write, I'd study them enough and study their business, and I'd write 10 ideas for them. And so then I sent each one of the 20 an email again. I said, I don't need to meet you, uh, uh, here's 10 ideas for your business, you know, see you later, enjoy. And of the 20 people, 3 people wrote back to me. Uh, one person I had sent literally 10 software programs. I, I said, I know based on reading your PhD thesis you're very much interested in this style of quantitative programming. So I wrote this software. I'll teach your employees how to use it or not, and good luck. Another person was not only a hedge fund manager but a big writer about finance, and I said, here's 10 articles. If you wrote these articles, I would love to read them. You never have to contact me again. I just, I think you would do a great job writing these articles. I came with 10 ideas for articles that he should write that were very unique, kind of articles. Another person I also gave 10 ideas to, and those were the only 3 people who responded out of the 20. The first person, after several months getting to know each other period, he invested money with me. So he became my first investor, and I started a hedge fund. And he was a professional hedge fund manager. So using the fact that he was a qualified hedge fund manager investing in me, I raised other money, and suddenly I had— I was in the hedge fund business. With the other person, who was a writer, he said, "These ideas are great. I don't want to write them though. How about you write them?" So he hired me to be a writer for his very popular website. It was thestreet.com. It was Jim Cramer. And so suddenly I was a writer. And the third person, I figured, "Oh, I've got these two. I won't respond to him." And then, but 12 years later, I hit reply on his email and I said—

12 years?

12 years. So in 2014, this was 2002 I wrote these emails, 2014, I reply, I literally hit reply and I said to him, he had written to me, okay, I'll meet you for lunch. I wrote to him, I replied in 2014 and I said, okay, but instead of lunch, do you wanna come on my podcast? So that's when Nassim Taleb, author of many great books, came on my podcast and I started a career in finance and investing after losing all my money investing. But at this point I'd read hundreds of books, I had written all the software, and because I had no background in investing, it gave me a kind of a blank slate view. So instead of just studying, you know, value investing or growth investing, I studied everything from merger arbitrage, convertible arbitrage, options trading, all the different styles of options trading, of course, value investing. I would read these huge books on accounting so I could read balance sheets from SEC filings. Like, I didn't know what I needed to know. So I would just try to learn everything. And I was so varied that then I started going on CNBC because they knew I could talk about any topic. If Microsoft had earnings, I could analyze them. If the Fed was raising interest rates, I could analyze what it meant historically. If housing was going into a bubble, I could compare it to, is this like the tulip bubble? I knew all the history of these things. I had even written software analyzing the price fluctuations of tulips from hundreds of years ago just to understand them a little better. And so I really became informed on investing. So then a publisher I reached out to, Wiley, was publishing a lot of finance books. So I started writing books for them. I basically shared all my software in one of the first books. Then I wrote a book about Warren Buffett, how he was much more of a Day Trader than people thought. I just wrote all these, like, crazy books about investing that were very offbeat. And, you know, everything kind of cycled into each other. So more people would invest in the fund. I started writing for the Financial Times and the Wall Street Journal. I became a spokesperson for Fidelity for a while. I started speaking for them at conferences. And I built this, this interesting career investing.

So let me ask some questions. So you, you obviously turned a weakness into a strength.

Yeah.

But so there's a couple of questions I have with this story, which I find fascinating. First one is this. So you're depressed, right?

Yeah.

And you're suicidal. You just won the lottery and then lost all your winnings. And then you decide, okay, I have to go learn about this. And you're self-study, which seems to be, you know, kind of your way all the time because it was all self-study.

I knew nobody. I couldn't call anybody. There was no one to call. I didn't even know who would I call. I didn't know any other investors at all.

So what was the psychological inflection point though? Because you're now, you're basically, you got reclused. You went away and got reclused. At what point did you finally say, was it just sheer survival motivation that got you to start moving again?

There was a little bit of that. I had children and I was going, as far as I knew, I was going homeless. Like I didn't know what was going to happen. So I was scared. And I'm not even exaggerating. Like, if every day you're in the fetal position crying for 12 hours a day, you're not gonna be able to help your family. And action crowds out depression. And so I started taking these walks. And one time I was walking past the Bowery in New York City, which is, there's this toll strip of the Bowery, which is all these restaurant supply stores. And I don't know, I just wandered into one of them and I got fascinated with just the form factor, the design of a waiter's pad. I just loved it because you can't— by the way, everybody should get a waiter's pad, and I'll tell you why. Not only could you write 10 ideas a day down, and it's a good format for that because this— if you have a big notebook, there's too much incentive to write paragraphs. This is just bullet points, idea after idea after idea. You can't fit— you're not writing a novel on a waiter's pad. The other thing is If I'm going, let's say I'm raising money as a hedge fund or even as a startup business. I go to a meeting, a conference room, everybody's coming in in suits, they all pull out their, I don't know how you say it, the Moleskine notebooks, it's $500 notebooks they throw on the ground and they have really expensive pens, and then I just throw out my waiter's pad on the table. And 100% of the time, I am not kidding, 100% of the time, One person in the room will say, "I'll take fries with that burger." I don't know why they always came up with that. It was just, that was the joke every single time someone would make. And I would have different answers. But then they would say, "Why do you have a waiter's pad?" And I would say, "It's 10 cents a pad. I'm frugal." And so they know, they know that even though I'm the one who just blew $15 million, they knew I was frugal as opposed to all of them with their $500 notebooks and their suits and everything. So they felt for me. It was a conversation starter, and I became, you know, the center of the meeting, which was my goal because I was raising money. But then I bought these— I bought 100 waiter's pads for $10 for some reason, and the next day I go out and I make my first list. I came up with a book idea, and I wrote 10 chapters for the book, and I got excited for the first time in like a year. I was like excited, like, I'm gonna write this book. And the title was How to Beat Your Friends at Every Game in the Universe. Because when you go home for Thanksgiving, you're with your friends and your family, you eat your turkey, and then someone pulls out a Monopoly board or Scrabble or cards for poker or bridge or checkers or chess. And for every one of these games, I was like a games expert. So for every one of these games, I knew how to win with a shortcut. I'll give you an example. Scrabble, most people think you need a really good vocabulary. It's actually the worst way to win at Scrabble. It's very hard to have a very good vocabulary, good enough to win at Scrabble. But there's easier ways. If I just told you all of the 2-letter words, you would beat all of your friends and family at Scrabble. And then throw in the Q without U words like Q-A-T, Q-O-P-F, Q-A-N-A-T, Q-I, and then you're guaranteed to win. 'Cause this is a hard, Q-I is hard to get rid of, and I just told you how. But if you also know the 2-letter words, you knew X-I, X-U, Z-A, so these are words that are not, A-A is a legal word, then you learn like odd words that are just all consonants, or words like E-D-H. So it's just like 3 tips, and I think—

So let me ask you this. Because you are obviously a very unique individual, right? I mean, most people aren't like you. I think you know that you have a different form of intelligence, a different way of viewing the world, which has driven all these actions.

Yeah.

So you, through this experience, I'd say, wow, you found a way to create success, you know, in your unique way. I mean, not many people are walking into restaurant supply stores and buying, you know, waiter pads and saying, the form of this is perfect to create ideas in here, right? And this is genius. The question I have though is, are there fundamental principles that you've learned based on your experience, 'cause you've had some very tough experiences, that are applicable to us mere mortals over here?

Yeah, and by the way, I am the merest of the mortals. What happened where I built a company, sold it, made millions and lost everything happened to me 4 times in a row over the next 10 years, where I built a company, made it between $1 and $10 million, depending on the company, and then lost every dime of it. Every dime.

So you did it 3 more times after that first one?

Yeah, 3, maybe 4. I try not to remember it all. I remember one time, I was like, again, I had done everything stupid. I had built a company, sold it for $10 million, bought two houses right next to each other, and had a hammock right between the houses. And I was lying in the hammock, dead broke. This was about, again, about 8 months after I had sold the company, and I was dead broke, and it started raining, and I'm like, I just was too depressed to get out of this hammock. And you can't really get out of a hammock anyway unless someone's helping you. And I thought to myself, man, did this really happen again? Like, I am so tired of doing this. Like, I can't, I don't have the energy anymore to do this. And it was, I felt so sorry for myself, and I was also getting a divorce. I was losing these houses. I mean, literally the IRS had boarded up these houses, and I was lying in this hammock. And so finally I said to myself, well, what worked for me on the way up each time? And what was I doing wrong on the way down? And I wanted to make it as simple as possible. And I had read at this point also every self-help book. They weren't really working for me. They're like, it's like getting a vitamin B injection in the morning. Like it kind of holds you through the day and then you're, you know, then you're dead at night. And so nothing was helping me. And so I just decided, what am I doing? What is going wrong here? So I realized on the way up each time there was— it happened to me so many times I didn't even need to do a scientific experiment. I was the scientific experiment. I had— I was statistically significant all by myself. So, so what was going right for me on the way up was that I was basically taking care of myself in 4 different ways. And ever since then, at night, I will check the box. Did I do these 4 things? And so And I got very esoteric how I analyze this, but just the basics is, was I physically healthy? Was I doing something to make myself physically healthy and taking care of myself? Because the extreme is, if you're sick in bed, you're not gonna come up with ideas and you're not gonna execute on them. Execution being as important as ideas because execution is a subset of ideas. There's a spectrum of execution. You can execute poorly or you can execute well, and you need to have good execution ideas to execute well. So anyway, if you're sick in bed, you can't do that. So I do everything I can to be as healthy as possible. I'm not, I don't always eat as well as I could, but I try always to be better than, or do activities that were a little healthier than the day before. So that's physical. Emotional. I wanted to be around good people who I loved who loved me back. And as easy as that sounds, I hadn't been doing that. And I don't think, I don't wanna say most people don't do it, I don't wanna judge, but just judging when I started writing about this and judging from the responses I got, a very typical email I would get was, I got in bed with the wrong partners, I just found out my husband was cheating on me and now I'm going through this ugly divorce and so I don't have time to start a business. So if you're not emotionally taking care of yourself and your relationships, you're not gonna have energy to start a business and to succeed or to be great at something, to master a skill, whatever. Creativity, you know, writing these 10 ideas a day. That very first time I did it, I felt excited. It's like new neurons were connecting in my brain. And that was on day 1. After 6 months of doing it, I literally felt like this waiter's pad was like a superpower and the neurons were firing constantly. For instance, I mentioned that first time I was losing that first house and I lived 3 blocks from Ground Zero. So while I was going broke, 9/11 also happened and it was a crime scene. I couldn't sell the house. So while I was going broke, living in one of the most expensive apartments, unfortunately, in New York City, which was hard to maintain. The FBI was not letting people visit my house. I couldn't sell the house, and it was horrible. Obviously, 9/11 was much worse than my problem selling a house, but still, I couldn't sell the house. So finally, even that creativity, like starting this video, I started figuring out how to sell my house. Like every, I started to feel like you could just drop me off in the desert and I will figure my way out, just because everything was firing off, everything was inspiring me to be creative.

Does every human being possess the capacity for creativity?

Absolutely.

So it's inherent in everybody?

Yeah, I mean, I think I had practiced a little bit. My sales technique was to basically be creative for the client, so I was practicing already some creativity, but not— but when I got depressed, I had lost all my creativity, and But writing 10 ideas a day down and making yourself really sweat. I always know I've got a good list if by item number 7, I'm counting, have I hit 10 yet? I can't come up with 3 more. And I push myself to find them.

So this is not waiting for inspiration, this is discipline.

You cannot wait for inspiration.

So it's basically, I gotta do 10, and if I'm not feeling creative, I have to put myself, I have to flex that muscle basically.

Every single day. I will do it. Now, I haven't done it every single day, but I'll get to that in a second. But when going up, when things are going right, physical, emotional, creative, I have to work on all those. And then what I'll call spiritual, but I don't mean it like in the way of, you know, it's a fill-in-the-blanks kind of spiritual in the sense that you have to recognize what items in your life you can control and what you can't control. Because again, everything is about energy. If I spend too much time wondering, why did this client reject me? Or why does this person not like me? Why did they not return my calls? Why did they stop talking to me? Or why did this newspaper cancel my column? Or this publisher not accept my book? Or this investor not invest? If I spend too much time worrying about the things I can't control, I won't have energy to maximize the things I can control. So oddly, I will put that in the spiritual category. And so I've almost viewed it as 4 separate bodies, the physical body, emotional body, creative body, spiritual body. And just like you might have a heart attack in your physical body if your blood's cut off, I sort of imagined in my mind there was this invisible blood going back and forth between all 4 bodies. And if you were blocked or stuck in any one of these bodies, you'd get a heart attack. A metaphorical heart attack, and you wouldn't be the optimal person that succeeds. And life's somewhat competitive. To succeed, you need— I needed everything working smoothly. I needed no stoppages of or blockages of this invisible blood between the physical, emotional, creative, and spiritual bodies. So every day, today, yesterday, At the end of the day, I just check, did I do something for myself that is 1% better on my physical, emotional, did I improve a relationship, did I do something for the people I love, did I cultivate a friendship? Every relationship needs watering to bloom. Spiritual, did I really, did I obsess too much over things I can't control, which is a very common thing. Or common for me, or did I move forward and do the best I can at the things I can control? So I always make sure I check that box every day. And the times when I lost everything, I wasn't writing the 10 ideas a day down. So finally, this is like 10 years into this, 2010, I decided, you know what, I cannot go through this again. Again, so 2010, 2011, I was still living through this. It was like I was so stressed and anxious, I couldn't sleep because I had just gone broke again. And I finally decided, okay, I'm just gonna do this now and I'm never gonna stop no matter what, whether I'm going broke, whether I'm getting rich. And it's amazing what happens if you do this while you're losing money because it bounces you much faster.

So, two questions. After the pain of going broke the first time, the second time, etc.

It doesn't get better.

You know, I imagine it gets worse even.

It gets worse.

Because how could I have done this again? Yeah. And I learned something.

That— well, a lot of people think it gets better. Oh, you must be really good now knowing when you go broke that you'll be able to bounce back. No. All I'm seeing is evidence that I'm broke.

Right.

And that it's probably gonna get worse from here.

Oh, that's gotta play mind games. I mean, now it's like, you know, now you start worrying about, you know, do I just Bad luck, bad karma, what's going on here? But wouldn't you, was there not some piece of you, 'cause you're obviously extremely bright, that said, you know, now that I've made this money, I'm gonna safeguard at least some little chunk of it to have a safety net should my risks that I take not work out. How'd that not occur to you after a couple times?

Well, I would say it occurred to me after 4 or 5 times. Why didn't it occur to me after the first time going broke, I don't know. Why did it not occur to me after the second time? I have no idea. Why did it not occur to me after the third time? After the fourth time? I have no idea.

So now there had to be a blind spot somewhere, right?

Yeah.

So now the theme of the series is Wealth Breakthrough. What was your wealth breakthrough? So was it discovering the 4 things, or what was it?

The wealth breakthrough was that no matter what is happening— physical, emotional, creative, spiritual— 1% better each day of those 4 bodies. And I know that sounds almost simplistic, and I'm not mentioning money in that explanation, but I'll tell you a story.

Yes.

So there was one time I was involved in a company, it's a billion revenue company, and I was advising them, and I had shares, and we were doing great. We were growing revenues, and I had $9 million worth of stock in this company. So I'm on the set of the series premiere of the TV show Billions. You know this TV show Billions on Showtime?

Oh, yes, sure, big fan.

So in season 3, I was an advisor for the show, but this was before Showtime had even picked it up. I was just, they were filming the first episode, the series premiere had never been on the air, and I had never seen a TV show, despite my years at HBO, I'd never really seen a whole episode of a show being filmed. And I went out to New Jersey where they had mocked up this fake hedge fund, and one of my favorite directors was directing the episode, Neil Burger, who had directed Limitless and some other stuff. And so I was asking tons of questions. I was fascinated. And then in the middle of the day, I get a phone call, emergency board meeting in 15 minutes. And so I excused myself, went out into the parking lot, and I thought, this is amazing. The only way this could be an emergency board meeting is if we got an offer to sell the company, and I'm going to finally be able to cash out of this $9 million worth of stock. This is going to be amazing. This is going to be the best day of my life. Get on the board meeting, and the CEO says, listen, I have some news. Our largest shareholder He just disclosed to us he owes $90 million in back taxes to the IRS. That goes in default of our debt agreement with the bank. The bank is on their way over right now. They're going to kick us out and lock the doors, and they're going to basically divide up the company into regions and sell each region to— you know, they had millions of customers. They had customers like my company. They were gonna sell for a dollar or to get their money back. They were gonna sell each region to a different one of their customers for almost nothing. And I instantly kicked into gear. I've been doing this creative, I've been building my creative muscles for years, so I just start going through it like, I'll buy, I'll buy the company before they get to the door. I didn't have the money, doesn't matter. Ready, fire, aim was my policy. I'll say I'll buy the company. I'll make 20 calls, and I'll find the money. And they're like, no, no, they're on their way over. It's too late. And I said, how about we sell some of the regions, and I'll make the calls to other companies? We'll sell, and we'll raise back their debt. We only owed them a small amount of debt. But— and they're like, no, no, all the competitors already got the call from them. They're going to be able to buy our company for nothing. Came up with 10 ideas right there on the call, and they were laughing even, even though they were all— their lives were all going down the drain. They're like, James, all the ideas are good, but it's just a done deal. It's over. So I get off the call and that was it. I had just lost in that 15 minutes $9 million. I don't count this as one of the times I went broke, even though it's pretty close. That was like the bulk of what I had been working on and And then I'm sitting there in the middle of New Jersey. There's 9 hours left of shooting on this episode. I have no way of getting home unless I call a cab or something. And then what was I going to do at home? I was, I was just going to get depressed. So I just went back in there and enjoyed the rest of the day. I was learning how to make a TV show. This was like a dream of mine. And I loved the show even before it had ever aired. And the writers later told me A year later, I explained what had happened that day, and they were like, are you kidding me? We thought you were just like, were in the bathroom for a really long time. Like, you were back asking questions for the rest of the day. You stayed till you were the last person to leave. We didn't think anything was going on. And that's because at that point, I had built up the fortitude, eating healthy, being healthy, emotionally being around people I loved and who loved me, being as creative as possible every day. I had no control over this situation, so I couldn't— I didn't allow myself to obsess over it. I did have control over how I was going to enjoy the rest of the day, so I didn't— I made the most of the rest of the day rather than just go home and cry in the fetal position, which would have been my default years earlier. And was it bad for me? Yes, but then I knew, okay, I'll just sit down again, be creative, and I'll come up with more ideas, and I'll see what other businesses I'm involved in that I could hit the accelerator on maybe to make an income, all right, a little bit more, all right, to keep myself going while I rebuild. And so by that point, I don't, and like I said, I don't even consider that one one of those times where I went broke. That was just part of the process. I even thought to myself, getting off that call, this is now an opportunity to really test that this method works for me.

Yeah.

And I just focused it as that. But again, I kind of always viewed these four— these four bodies in a completely different way, almost like my own personal religion.

So let me ask you this, because now this all leads up to, I think, an important question, which is: how would you define wealth?

I define wealth as you're completely in line, or you're completely aligned with this inner compass that tells you what you love doing, where you can do it, how you can do it, and where you need to be right now to do it. And the way you keep that instrument clean, that compass clean, is I'm always going to get back to these four invisible bodies, the physical, emotional, creative, spiritual. Every day is a challenge, right? Life's pretty hard. So some days I will obsess on something I have no control over, or some days I'll be disappointed. Oh, that person wasn't the friend I thought. Or some days, you know, I won't be as creative. You know, I'll have 10 bad ideas, but at least I wrote down the 10 ideas. If you're writing 10 ideas a day, that's 3,650 ideas in a year, maybe one will be good.

The compass, the whole compass really integrates into this, this, this process of these four things. They're connected. But yes, the thing that I see that I'm sure you've observed is that, yeah, so we've gotten this amazing arc of a story, you know, that you've just told, but it started with you talking about being in grad school and having a compass and saying, my compass was leading me somewhere else. That's been your constant companion that you've identified early on in your life.

And I guess the difference is, is that sometimes I would lose track of where the compass was pointing. The lens would be dirty because I wasn't keeping this invisible blood between these four bodies flowing as well as possible. And then the compass would be unclear. And that was very important for me to realize is that I can't really, I would always think money was the end. And so once I made the money, chapter 2 of being a human would begin and I can just wipe my hands, everything I'd done before to be a good human, I don't have to do anymore. I got to this point of being a good human 'Now I could just do whatever.' And that was just the wrong way to think. I would just instantly get punished for that. And punished is the right word. I would punish myself in a weird way. So people always ask me, 'Well, what do you do with the ideas afterwards? Do you keep them around? Do you follow up on them the next day? Like, well, how do you keep track?' No, I throw out the ideas every day because you're not gonna— what am I gonna do, come up with 10 great ideas that I'm gonna do every day? No, once in a while something will stand out like, oh, I kinda like that. So the next day my list will be 10 very simple execution ideas on that one idea from a week before. And then maybe I'll do one of those execution steps. 'Cause that's what I realized too also, and this is more related to the nuts and bolts of building a business or succeeding with an idea, but people say execution is everything, and they seem to think people know what that means when they say execution. But I've seen 5 different people take the same idea and execute them differently. And sometimes the execution will be so bad that there would be no conceivable way this person could succeed as a business, as an idea, whatever. But then sometimes the exact same idea, I'd see someone execute it flawlessly, and that will work. And so, so execution ideas, as I said before, is a subset of ideas. You If you have an idea, what are the next steps is the question. That's the list for the next day. You have to make them good execution steps. Are they good ideas? Maybe one of them is. And then if you want, the next day you could try to execute. First off, at any given point, I might have 30 halfway decent business ideas, but for various reasons, I'm not going to execute on them. I'm not ready yet to execute on them. I don't have certain abilities or connections to execute on them. But you always want to figure out, how can I test out an idea? And you want to figure out the simplest and fastest way to test out an idea. You only know something is good if you do it. You know, everyone always says doing is the only way to know, right?

Right.

And, and knowing is the only way to do. So you have to know a lot to do something, but then to know— but then to know if something is a good idea or not, you have to do the idea, and otherwise you'll never know. So the critical thing is You expend as little energy as possible until you're going to decide to really push yourself on this idea. And again, let's call that an experiment. So part of my philosophy of making money, of living a creative life, of having fun, is to experiment with as many ideas as possible, as much as possible. So what's an experiment? I'll get— can I give you one example?

Sure.

This is a stupid, dumb example, but it was an experiment. I took the best-selling book of all time, Fifty Shades of Grey, and I found like a Word document of it, and I went on fiverr.com, and I found some random person in India for $10 who will do this. I said, take every word in this book and replace it with a synonym, And I found another person on Fiverr.com, and I said, "Make a cover for me." I changed the title of Fifty Shades of Grey to another title, but it sounded like Fifty Shades of Grey a little bit. And so now I had, within a few weeks, I had a 500-page completely new book that was exactly Fifty Shades of Grey, except 100% of the words were different. So instead of saying, um, "Julia had to rush back to her tests," It would say something like, "Shannon went as quickly as possible back to her classes for examinations." And so every word is different, and I did that sentence by sentence for Fifty Shades of Grey. I uploaded it to Amazon, which is all you have to do to publish a book on Amazon, and to this day I still have this book on Amazon under a pseudonym, of course, and it actually sold 85 copies, but it has gotten no reviews because it's probably hard. I've never even read it. Has no reviews. But that was an experiment that also took me about an hour of my time. Why not do an experiment like that just to see? What if it sold as well as Fifty Shades of Grey? Who knows? So I'm doing experiments constantly. At any given point, I'm in like 10 different experiments.

So what are your main activities right now? Like, so I see you're still being creative, you're running experiments, like— that book. What are your main activities now?

Uh, so I have a podcast I've been doing for 6 years, and I interview peak performers in any industry. And I love doing that because I love— how did somebody learn to be the best in the world at what they do? How did this race car driver learn to become the best race car driver? How did Kareem Abdul-Jabbar learn to be the best basketball player? There's plenty of people who are 7 feet tall. There's not that many 7 feet tall people who are the best basketball players in history. How did Richard Branson go from being a music magazine publisher to the owner of an airline and then a billionaire? Or how did Sara Blakely go from selling fax machines door-to-door, not knowing anything about the fashion industry, to having one of the biggest clothing companies in the world? Or Tyra Banks go from being a model having a TV show now in its 31st season. So I'm always fascinated, how do people learn? How do people achieve peak performance? Because I always, I wanna develop my own methodology built on top of these 4 bodies where you can continue to whatever you're interested in, and your interests constantly change, whatever you're interested in, I don't wanna put 10,000 hours now into learning, into being great at something. I wanna find out, how the best in the world get to be great, and then I wanna model that so I can at least taste greatness as quickly as possible. And so that's the podcast. I write books. I've written 22 books at this point. Some of them have sold 299 copies and were horrible. One of them has sold over a million copies. Hopefully more of them will get there. And I enjoy writing, and I've, experiment with different styles of writing. I've been writing almost every day since 1990, so I love exploring different genres and ways of writing and points of view and so on. I help run different businesses. I'm an active investor. I'm invested in over 30 businesses. I help run a business right now involving, you know, financial newsletters and education and so on that I hope helps people in ways that Wall Street has abandoned people. I own a stand-up comedy club, and I perform anywhere from 3 to 10 times a week. This week I'm performing 6 times, and I help run that club. That's my least favorite activity. I really just like going on stage, but during the day sometimes I'll have to think of my material, and I'll watch other comedians. Even for public speaking, long before I was doing stand-up comedy. I've been doing stand-up comedy, I'm in the 5th year of doing that. Long before doing that, before I would give a public talk, I would always watch stand-up comedy obsessively, starting about 24 hours before the talk, because we have these things in our brain called mirror neurons. So if you don't know how to climb a ladder, but you watch someone climbing a ladder, now you know how to climb a ladder. You don't need to do it. Your mirror neurons have taught you how to do it as if you were the one doing it. And the same thing for public speaking. Stand-up comics are the best public speakers. So I'm going to watch the best public speakers before a talk, and so my mirror neurons will still be firing, and then I'll give the talk and I'll have the benefit of that. So I've always loved stand-up comedy. It's helped me in other areas of my life, but I was too afraid to go on stage. Now the past 4 or 5 years I've been going on stage, and it's worked very well for me. It helps in every other area of my life. So being a chess player has helped in every other area of my life. Being, for a small amount of time, a professional poker player has helped in every other area of my life. Being an entrepreneur has helped in other areas. Being a comedian or a writer has helped in other areas, and so on.

So after this amazing story of your life, with all the lessons learned along the way, So now here you are, your early 50s. Are you happy?

Uh, no. I mean, I don't like the word happy. I think if, let's say, I play a hand of poker and I win a lot of money in that one hand, you get this surge of dopamine, and right then I'm happy, right? The happiness you get on a dopamine hit is much better than general everyday happiness. But that's why dopamine is absorbed by the body within seconds. So it's a special kind of happiness, but people, I think, strive for it too much. You know, you get it only so many times before you get addicted to it. And, but I think well-being is something a little different. And I do think I have a certain degree of, of well-being, and I think that's what, you know, being around people you love, doing what you love to do, being healthy, you get kind of this satisfied well-being. You know, 'cause sometimes you don't wanna be happy. Sometimes, for instance, I'm melancholy, and I actually like that feeling as well. I might miss my kids if they're not around. That's a melancholy feeling, not a happy feeling. I think people are too addicted to, you know, there's books, Happiness this, happiness that, being happy all the time. That's not an interest of mine.

Is it maybe fulfillment?

No, because I don't know what's gonna fulfill me from day to day. You know, 'cause I'm always trying different things. And, you know, I think really it's just, did I follow my own process? Then I know I had a good day. And I always tell myself the best predictor of a good day tomorrow is a good day today. And I just try to follow this process as much as I can. And sometimes I fail, and so the goal is to, as consistently as possible, keep to my daily process.

Do you know of any future aspirations you have that, uh, you know, that you haven't done yet, saying this is something that I want to do in my life that I haven't done yet?

Yeah, but like random things. I mean, there's nothing— because I always know I'll, I'll figure out each day, and it might be something completely surprising and unusual. Like, I never thought I would be so interested in doing stand-up comedy as an example. I loved it, but I didn't think I would do it. And I've never written a thriller novel. I've had a lot of thriller writers on my podcast, and I always break down their process, really trying to understand, and I read all their books and then try to understand. And so I think I can make a stab at writing a thriller novel. I'd like to do that. I definitely don't want to start another business again.

Yeah, you're done with that.

I hate it. And you don't need to start a business to build wealth.

Wealth.

The average multimillionaire, according to the IRS, not according to me, has 7 different sources of income. So a job or being an entrepreneur is just one source of income. So I like to invest in very small amounts of money, like a very small— like I will never invest more than 1% of my net worth in any one investment. But if an investment takes off, I'll make a lot of money. And if an investment fails, I only lost 1% of my net worth. So I like looking at small private companies to invest in. And I have a methodology behind investing. My number one rule is someone smarter than me has to be investing alongside of me. So I can never think I am smart enough to invest in XYZ genomics company. Or XYZ Robotics Company or whatever it is. If I see, oh, let's say Warren Buffett is invested in a company and I'm never going to say— if I run into him at a cocktail party, I'm never going to say, Warren, how could you have been so stupid, like, to invest in that company? No, I will just write the check. I don't even care what the company is. Here you go, Warren, you take your own fee on it and just give me the money when it makes money. And So I'm always with people smarter than me. I don't have to do that much due diligence on the company and I no longer advise companies because that was very stressful, like that $9 million example. So once a company calls me for advice after I've invested, I remove them from my phone book because they're going out of business. So, but fortunately, because I follow this advice, the, the, my co-investors have to be smarter than me. The CEO has to have built and sold a similar company before. Just those two rules, and there should be some revenue generation already, so he knows how to make money, and I know that he knows how to sell, or she knows how to sell a company because they've done it in the past, then I never have to think about it again. And so I'm able to invest and not take too much energy and conserve energy for doing the things I love.

So, incidentally, I think that that's genius investment strategy. It's because it's simple and it makes a ton of sense.

It works because venture capitalists will always say, oh, 9 out of 10 companies will fail. Nope. I mean, right now, every single company I'm invested in is over— what I say, over the hump, meaning they're doubling in revenues every year, or they're profitable, or they no longer need to raise money. They're now deciding, should we wait 1 year, 5 years, or 10 years before we are big enough that we sell or exit? So this strategy works extremely, extremely well.

So you're building— you're You're building your wealth now not through running or starting a business, but through investing in other businesses.

Correct. Although, I mean, it's only recently I built a business. I started a business in 2015. In 2018, it did $60 million in revenues. But again, I knew I wasn't the person to run it. So at first, I hired a CEO and a complete management team, and they all lived in other cities. I didn't want to live in the same city. You know, sold the company, but still I have an active profit share with it. So, you know, again, I use as little energy as possible to create as much success as possible. But I don't think I'm gonna do that again. I'm done with that. Except for owning a comedy club, unfortunately. The worst investment ever. That is not a good investment. Nobody should buy a physical space.

So you're talking about from the real estate side or the sector of being in a comedy club or both?

Both. Who's gonna buy a clothing store? That's a horrible idea.

Yeah.

Restaurant is usually a bad idea. I'm a bar/comedy club on a side street in the Upper West Side. It's in business and it's treading water, but it's not Uber.

But this is for your own fulfillment, right?

Yeah, yeah.

So in that respect, it's a good investment because it brings you some pleasure in your life?

Yeah, like I don't own a home. I don't buy a car, I don't own a boat. So many of these things that as people get older and have some money they could spend, they buy other things that I don't like. I bought this for probably a cheaper price than what other people spend on their houses or their cars or their yachts or whatever, or their vacation homes or their vacations, period.

Why don't you own a home?

Let me, let me frame it in a different way. Would you ever say, you know what, I really like Apple stock, so I'm going to put my entire net worth in this one stock and then I'm going to borrow 500%— I'm going to take everything I own and then I'm going to borrow 5 times that and put it all into Apple. And, and I can't sell it when I most need it. You know, you would say to yourself, boy, if someone said to you they were going to do that, you would say, do not do that. That is the worst investment strategy I've ever heard. Even if Apple was 'Apple's a good stock.' And they're like, 'No, no, no, trust me. I'm going to borrow this money and Apple's going to kill it.' And everybody does it. You would say no, you would never do it. So house is the same thing. Just replace Apple by house. You put all— most people put all their— the money they can afford into the down payment. Then they borrow another 400% or 500%. And then every year they have to maintain— they spend extra money they didn't account for to maintain the house. To take care of it, to pay property taxes, which are always volatile. And then let's say they need to sell it, they're desperate to sell it. You can't, because usually when you're desperate, other people are desperate, and you can't sell. So it's illiquid. So it's worse than Apple. You can't sell it on a stock market. You sell it on an illiquid housing market. So a house is just a horrible investment. Think about why houses exist. A factory wants to create wants to pay as little as possible to its workers. So, hey, we'll lend you the money. This is traditionally 100 years ago. We'll lend you the money to buy a house. Don't worry, we want our workers to be happy. And so everyone is forced to live around the factory and you can't sell it. So your income, you're not mobile, so you can't choose to have a different job. You're stuck with this income. So your income mobility is more difficult. Like housing has never been a good idea. Housing could be an investment, but not in the US. US is a poor investment.

Well, so, you know, it's interesting because I think it used to be you're going to work in that job in the factory for 30 years and retire and during— and mortgages would match the time that you're going to be working there. So you pay off the house. That's kind of a retirement. But in today's world, it seems like a very different scenario.

Yeah, the average person changes jobs every 4 years.

Yeah.

So and a lot of people are leaving the workplace because of automation. Even though we're at a low— the lowest unemployment rate in 50 years, part of the reason for that is that so many people have left the workforce due to automation. And so they're not counted in the employment rates anymore. They're on disability or some other kind of program, and they no longer count towards the unemployment rate. So this is a problem systemically right now, how much automation will affect the labor force and levels of you know, well-being in the labor force. It hasn't totally hit yet, but it's one of those things that's going to hit very soon. And so it's just something to be careful of.

Well, I feel like I could talk to you for about a week and, and still get fresh new stories and information from you. But this has been a really fascinating journey.

Well, thank you for having me on this, this, this series and this show. And yeah, I skipped over a lot of stories, but that's That's fine. I think I got to the meaty ones. I'll ask you one final question because this was related to my very first idea list. How do you beat your friends and family at Monopoly? Do you know the answer?

No.

Get the orange properties, you know, like Tennessee, St. James, New York Avenue. And I'll tell you why. What's the most commonly— you know how to play Monopoly?

Yes.

Do you know the most commonly landed square in Monopoly?

I don't— which one?

Jail, because you can go to jail by landing there on the dice. You can land on the go-to-jail square, and there's two community chest cards that make you go to jail. So jail is gonna be the most commonly landed on card. The most common dice roll of two dice is 7. 7 puts you right in the middle, you know, 6 through 8, but you're right in the middle of the orange properties. So if you own all the hotels on the orange properties, that's gonna be the most common properties people land on. You'll just clean up. Now just beat your friend, anybody you want at Monopoly.

Well, now we're going to have a bunch of people that run out and go pull out their— blow the dust off their Monopoly boards and say, let me play this game again now. I'm going to beat everybody.

That's okay. I have one other trick, which I'll tell you after the show's over so you can beat them.

Okay, great. I'll get some inside information now. James, it's been really, really a joy to be with you today. Thanks so much.

Thanks so much. I really appreciate it.

We are so excited about the momentum that's building from Wealth Breakthroughs. It's actually beyond our expectations. And I want to give a special thank you for those of you who already jumped in and bought the series. It means a lot to us. It tells us that it's adding value to your life. And it also supports this work so we can continue to do it and get this information out to the world so people everywhere can have their wealth breakthrough. So thank Thank you so very much. Hope you enjoyed that interview with James. James is the classic big idea, swing for the fences wealth breakthrough story. Now let's switch gears. Did you know there's a strong case Why you should avoid retirement plans like 401(k)s and IRAs? Did you know John D. Rockefeller built much of his fortune using one little-known secret? And do you know there are just 4 investments preferred by the 1% that are 100% guaranteed to hand you reliable returns? Any of those 3 questions grab your attention? I bet they all did. Well, Unpacking the mysteries of wealth, figuring out what makes it flow towards some people and away from others, how to be smarter about money in ways big and small every day, and showing folks how to break the chains of the 9-to-5 life is the specialty of Garrett Gunderson. He's one of my favorite people on earth to talk to about money and wealth, and we're pleased to present his new interview to you here in episode 4 of Wealth Breakthroughs. So Garrett, when I think about the idea of having a wealth breakthrough, you're the first person that comes to my mind and for good reason, because how many years I've known you and my experience the first time I met you and how radical a thinker you were in this realm had a massive impact on me. So I'm really excited to have this particular conversation.

Me too. I always like our conversations.

Yeah, they lead somewhere, don't they? Yeah, absolutely. Somewhere productive. So let's start with you first as far as your kind of trajectory. You know, what was your upbringing? How did you end up doing the type of work you're doing?

Well, look, I, I grew up in a coal mining town. I mean, my great-grandfather left San Giovanni, Italy, left his family behind for 7 years, became a goat herder and eventually a coal miner. And it took him that 7 years to save up enough money to have a house and afford to get them over to the United States. So that creates a lot of scarcity. And then my grandfathers were coal miners, my father was a coal miner, so I came from a very blue-collar background where the belief was if you just work hard enough, everything's going to work out. But the reality was it didn't, right? Mines went on strike, there were mine disasters, things like that. So when I was 15, I was playing sports and in school, and I want to have a job to have some extra money, but it was a little hard to do and navigate sports, so I actually started my first official business. Detailing cars. So I just cleaned cars. My dad being a coal miner, bring home the surface vehicles for the bosses. I'd clean those up. My mom worked in a credit union. They'd repossess the vehicles. I'd clean them up so they could sell them for more. And then I started winning young entrepreneur competitions, and that came with money, and I wanted to invest that money. Now, my mom, being the Italian that she was, her money management method was put money in a coffee can, put it in the cellar, and you don't ever give anyone else that money, right? So there's just all this accumulation, scarcity, pinching pennies type of mentality. So when I was like, I want to invest, she wouldn't sign off.

So you had, as a teenager, I guess you had some money. What kind of money were you talking about?

Oh, look, man, I was more in like the Millionaire Next Door mindset when I was a teenager. I thought if I just never spent money, I could accumulate a lot. So the first year in business, which was about 8 months total, I think I made $600 of net income, but then I won $500 for taking third place for the Rural Young Entrepreneur. The second year I took first, it came with $1,000, and then I won it for the state, which came with $5,000.

And all statewide championship, you win on this statewide.

So Governor's Young Entrepreneur. And I remember getting handed that $5,000 check and thinking that was a lot of money.

Yeah.

And it's like, oh man, I'm going to invest this money. That's big time. And I didn't realize it was just a drop in the bucket. It didn't really matter in the grand scheme of things, but at least got me thinking. It had me asking different questions, had me going in interviewing the wealthiest people that I knew, which to me at the time was who had the biggest homes, right? That was basically the mindset I was in at that age.

So then off to college. What was next?

Yeah, I did go to college. I had a scholarship. I went to Southern Utah University, a small college, but fortunately I became a senator there. And the year I became a business senator for the college, this guy Steve Harrop showed up and he was gonna be a professor. And so he had managed money for 25 years and ended up managing $5 billion of strong investments. At the time, it was the number 2 investment company in the world as far as performance performance and ranking, and he just decided his next 25 years he was going to pay it forward. So I greeted him when he came on board. I ended up getting to know him a little bit, found out he wanted to work out, so I became his racquetball partner. But after racquetball, we'd go get a yogurt and we'd just sit down and talk and ask him a lot of questions. And at that same time, I was doing an internship, June of 1998, in the financial industry. And when the market started to go down in 2000, he became instrumental and me facing all my clients and saying, I don't know what the hell I'm doing. You invest in the market. I don't know how long this is going to last on a downturn. Telling you you're in it for the long haul doesn't sound like the right thing. Telling you the market's on sale seems insulting because you've already got your money in and it's going down. So we save people hundreds of thousands. It would have been millions, but I was pretty young at the time. And then in the year 2001 and 2002, my clients did 44% positive return and 41% positive return, and they were out of the market 80% of the time. And that's where my financial journey really began.

Yeah.

When you had that sort of, I guess, call it epiphany, where you got to see, you know, how the difference in performance in those 2 years, what did you start thinking? Like, how did that affect your decisions about what you want to do with your life?

Well, the way it really affected me was in the year 2000, because I went from being this little financial Einstein of my community, a town of 12,000 people, and a lot of them, I'm becoming— they're becoming my clients simply because no one's really talking to them. I'm having them cash in EE bonds and put it in mutual funds. Yeah, '98, '99, everyone's making money. Now the market goes down. A lot of my clients are family members, so family reunions become more awkward than normal, right? So I'm showing up and they're like, what's going on? And that's when I had to tell them I didn't know what I was doing. And that's when I went on a journey for 26 straight months, flying somewhere once a month, spending anywhere from 2 days to a full week, and I was just interviewing people. I leveraged my age. See, when you're 19 years old, almost anyone will talk to you because they want to pay it forward, right? So I didn't have to write a check to get that mentorship. I just asked questions and I had a little red memo pad I would flip and I had all these questions I'd ask them. I'd go meet with actuaries, I'd go meet with fund managers, I'd go meet with people that were working with and advising people on Wall Street. And I just got a huge awakening during that time of what was really going on because I saw people that were worth $20 million and they sold stocks, but they had less than 5% of their portfolio in stocks. And so that was kind of shocking. And then I went and saw a family office for the first time, which is a group that essentially the client wasn't even there. But this guy was presenting a $400 million transaction and it was all these people doing real due diligence. I wrote a book, What Would the Rockefellers Do? And what the Rockefellers did to create generational wealth was they actually hired financial professionals that just worked for their family. So the Rockefellers had their own group of accountants and attorneys and investment advisors and fiduciaries and risk management specialists that helped manage their entire family wealth. And so hence family office. Now in today's world, these family offices, it means you're under one roof and you've got this entire team of professionals, but they might manage 10, 20, or 100 families. And so when I saw that, I was like, this is phenomenal. How does this work? Because the client wasn't even in the room. They weren't even past that stage to bring the client in to say, here's something we think you should consider. And I just saw that their first emphasis was how can we be tax efficient? How can we be tax efficient? Because that's a guaranteed return. And my question changed from where should we invest to what are the guarantees in finance? And I found there were 4 areas that you could have a guaranteed return.

What are they?

All right. So the first one is saving on tax. The majority of the population is overpaying on tax. And with all the tax law changes, It's almost everyone, including me. I think about it all the time, but I just got what's called a DPAD credit because I'm, you know, creating books and all this stuff. And I was able to go back 3 years and amend those returns because of DPAD or Section 199 and get that amendment. All right. See, because I'm constantly asking these questions, I'm constantly bringing new people into my life and I know what conversations to have with them. So the second one is interest. There's a lot of ways you can save interest, whether it's you reallocate So let's say that you have an underperforming asset like a certificate of deposit or a bond or something like that, and then you have a loan that you're paying more interest than what you're earning. Why not cash that thing out, pay it off, and it's a guaranteed return, right? Or you can restructure the loan, right? If you have collateral like a car, you could refinance a car and pay off other loans that might be double that interest rate. And all of a sudden, car loan improves your credit score. Improved credit score might allow you to refinance a mortgage and refinance that mortgage in today's interest rate environments. Will save you a boatload of cash so you can restructure, you can reallocate, or you could renegotiate. All loans are negotiable. And if you know how to have that conversation and how to set yourself up to look good to the banks and institutions, you can lower the interest rate. So we got, you know, the IRS, then we've got interest. Next is investments. Investments are riddled with hidden fees, hidden commissions, non-performing fees. And if you can discover where those are, you can boost your returns substantially. Now, it seems like it would be incremental because if I told you, hey, you could earn 9.2% or 10%, that doesn't sound really big, right? But it's logarithmic. So think about if you had $100,000 over 30 years, that $100,000 could grow to $1.74 million at 10%. At 9.2%, it grows to $1.4 million. That's $340,000 from what seemed to be inconsequential costs.

Right.

The other big part on investments is people just participate in the downturn when they don't need to. They can create measures and structures to cash out, sit in cash, and then when everyone else loses, they can buy and make money on the buy. The fourth place is insurance. There's duplicate coverages, there's improper structure, and all you really have to do is say, how can you insure the catastrophic and not the inconsequential? So you give the insurance companies less money and you only insure the things that would actually derail or harm you. And there's a lot of money that you can put back into your pocket while still protecting yourself.

So from a categorical standpoint, what makes this really interesting is a lot of times people are saying How can I invest and what kind of return can I get? But literally, that kind of return they're trying to get, you know, it could be gained just by getting more efficient in all those 4 categories you just mentioned.

So inside of What Would the Rockefellers Do, we did this study. We said, what if someone had $1 million to invest? And we can take a zero off and make it $100,000, or we can add a zero, make it $10 million. The number isn't as important. But we said, what if you had $1 million? What rate of return would you have to earn if you're in a standard situation where you have 2 loans right, where you have a business or even a side hustle. What would you have to earn on that money in order to equate what it would take if we went through those 4 I's of the IRS, interest, investments, and insurance, and just remove the drag and keep more of what you make? And the rate of return would have to be 44%. Wow. Or it would have to be tax-free at like 30%, right? Or 29%. That's extraordinarily hard to get. Warren Buffett's at 22%. Ray Dalio maybe is getting those numbers. But the majority of the population isn't. And by the way, they're taking unnecessary risk to try to get that higher return. And a lot of times it doesn't pan out. And that's hard to sustain that for year after year. Maybe a business can grow 50% one year, but we're not going to see the major players like Apple double in size over a year, right? Or double their stock value. So these are the things that are so essential because if you could be more efficient, you get a win right now. If you go those 4 I's, if you can make money on the buy, which was another thing, when I said we got really high rates of return while sitting in cash. There's an entire philosophy that when we're in distressed economies, those people with cash are king. Right now, the wealthiest families in America have 36% of their assets in cash and cash equivalents. Well, everyone else is being taught to be fully deployed and allocated into retirement plans that are illiquid, that they couldn't get that cash if they wanted to. So being in cash means you have negotiating power when people need to liquidate. And the big reason this happens is because we've overemphasized as a society net worth. Net worth is a number on a piece of paper that could be converted into cash, but typically doesn't directly equate to cash flow. So we've overemphasized muscle like, okay, we're going to have this, we've got this big net worth, we got bragging rights. It's kind of like revenue for a business. Revenue is impressive. It's awesome. But it ain't what you make, right? It's what you keep, right? So instead, we're looking at cash flow and those people that don't manage their cash flow appropriately, recessions decimate them. And the people that make huge amounts of money are the ones that have the cash to help create liquidity for those people at a deep, deep discount. That's called making money on the buy.

Well, pausing on that for a second, if we look at saying, okay, keep a large chunk of your assets in cash or cash equivalents, you know, one side says, well, you don't want to do that because with inflation, you know, every day that cash is worth less and less. Whereas if it's in an asset and And that asset happens to be moving up, then of course you're not losing it. But I guess there's an offset saying by having that cash, you know, the opportunities when they occur, and they always do occur at some point, the return on those opportunities because you're in cash are extraordinary, which is why you want to stay there.

Right. And here's the thing. We can all have great opportunities come our way. A lot of people don't have the ability to capitalize on that. But recessions create conditions for massive opportunities, not just an opportunity.

Right.

And right now we're in the longest period of time in U.S. history without a recession, although we're showing all the signs of the recession. And there's too many people that are overextended, overleveraged, utilizing credit, and that's been boosting the economy. And as that cuts back, those people that have cash will find the people in distress that were only focused on net worth and can get a 40% return in the short term. Maybe they missed out for 2 years. Maybe they didn't earn any money during that time. But they're going to make up for it when they come in and capitalize, just like we talked about in 2001 and 2002.

So showing up at the family office seemed to be an inflection point while you're taking notes on your little red pad, and certainly led you to some of these conclusions. What happened from there?

So at that point, it was actually an interesting year because I would come back to the firm that I was working for, and they'd bring in attorneys and investment advisors, and they'd pitch these ideas. And I was labeled a fanatic because I just asked so many questions. And then they would say, well, but, you know, because I'm questioning how they get compensated, essentially.

Right.

And so it took me a minute, but I had to start my own thing.

Let's talk about that for a minute, though. You're questioning how they're getting compensated. How are they getting compensated?

Well, typically it's by commission or by fees because of assets under management. You referred me someone once and I quoted them for us to help them would be $20,000. And he said, that seems really expensive. I said, okay, well, it's all relative because I've looked at your portfolio and how'd you do last year? He goes, well, I lost money. I said, well, did you know that you paid $19,600 in fees even though you lost money? He said, no. I said, well, see, in the old days when you were robbed, someone showed up with a gun on a horse or something. Now it's just automatically coming out of the account. But I know how to look for those fees. And they said, oh, and by the way, this was someone who had 33 businesses. So we saved him $39,000 per month in going through saving on tax, restructuring loans, using the very 4 I's that we talked about. And after that, we became friends because I said, how do you— how expensive do you think we are? And he just giggled about it, right? Like, New Yorker guy too, by the way. Yeah, Boston.

Yeah. So, so $39,000 a month just on savings, which— what would it take to generate that additional $39,000 a month in trying to create new business?

Well, think about it in today's world. If we think about investing. Like, there's people that are putting money in retirement plans.

Okay.

Retirement plans follow a faulty notion anyway, because it's all based upon an accumulation theory that it's how much money you put in. And so that's the notion it takes money to make money, which a lot of people unfortunately believe. That's not true. Then it's what kind of return can you get? And most people believe that's high risk equals high return. So they're taking an unnecessary amount of risk. And then it's how long can you wait on the time? So money times rate times time. So they put money in these types of plans. And let's say that they do okay. Let's say they do really well. As a matter of fact, they get $1 million in these plans because there's not a lot of retirement plans with $1 million. Yahoo Finance did an article saying it's about 1.2% of people.

Wow.

So that's not great. Now let's look at today's interest rate environments. Interest rates are so low. That's amazing for business owners. It's terrible for retirees because if your interest rates are 3%, you have $1 million, but you're only getting $30,000 per year in interest that's all taxable. So you're a millionaire on paper, you're a pauper in life, right? And that's the unfortunate thing here. So if we're trying to generate $39,000 per month from a retirement plan, think about the amount of money that needs to be in there. We're talking about 8 figures, 8 figures of money. And how are you going to get there? This guy was in his 50s. It's going to take a long time. It's going to take really savvy investing because a Standard Mutual fund is not going to get him there.

You ask all these questions, you find out about people's fees, and you're starting to look at it not from how can you get paid, but from the, from the point of view of the people you're trying to serve. And you decide you gotta go out on your own, right?

And this is, this is the difficult piece of that, because at that time I had tasted what it's like to get paid commissions. It was pretty good. Yeah, it's pretty easy.

Yeah, right.

The transaction happens, like, oh, what do I pay you? I'm like, oh, I get paid a commission. And You know, it's like they don't even know what's leaving their hands. And then I'm now going to, okay, we don't get paid commissions, we don't get fees on assets under management. You just have to write us a check. That's a more difficult stance. Yeah, I think it's the more ethical stance. I think it's the more valuable stance. And as you know, I even put guarantees on like, if we don't find this money and put it back in your life, it's on us and we'll pay you back.

And that's how you started your new business.

That's how we started the business. And by the way, the very first fee I ever charged.

Yeah.

Was $1,500. I remember the person looking at me like, that's so ridiculously low, I don't trust you, right? Like, I was like, oh wait, $1,500 per quarter? You know, like, I already threw something out there, but it was just, it was just so foreign, and it was so like, it was difficult to just— and then all of a sudden they started exponentially going up on our side because our performance of what we could provide for them went up. And we're like, great, let's look at this as, are you okay if I get paid $100 grand if I save you $2 million? And people are like, great. And if they weren't, then they're just not in the right mindset.

So you then went out, created your own firm, you had some partners. Yep, and real partners. And then where'd that go?

We did, we did really well. I mean, we did well enough that we bought a company plane and, you know, had all that kind of stuff. But in 2006, that company plane went down with two of them in it.

Wow.

So we, we started to host events and we created a monthly membership. This is before WordPress and Kajabi and all these things that are basically free that you could use as a platform. We had to go build something that cost us hundreds of thousands of dollars to deliver content on a daily basis because what we discovered is no matter how much money someone had or how much money we could save them, if they couldn't conquer the scarcity mindset, it didn't matter because there's no greater destroyer of wealth. And I don't care how much luck someone has, how much discipline, what kind of rate of return they can get, what financial advisor they have. If they're in scarcity, that fear, doubt, and worry destroys wealth and they'll find a way to mess it up.

—So your premise, and this is important because we're talking about wealth breakthroughs here, right? So your premise is that mindset is the greatest destroyer of wealth, or can be, right?

And like, I'll see people— I'll put a video out there and people say something like, yeah, that's fine if you're wealthy, and I could never be that wealthy, because of either where they're born or their circumstance. But all of it comes down to their perspective. Our perspective determines our action. And so most people's perspective is is stuck in one of two paradigms that are both scarcity related. One is playing not to lose. Playing not to lose, from the coal mining town I came from, is where you're holding on to the past. You don't want any innovation. You want fossil fuels and coal to be the future because that's your skill set. That's what you know. That's where your paycheck comes from. And you'll hold on to that and grasp onto that. And people that only focus on keeping the past the same are in the most dangerous, painful place moving forward. Now, there's other people that we might even see on the COVID of magazines. We might hear about getting awards. And they're stuck in a different paradigm. That's the play-to-win paradigm. And a lot of people wear it like a badge. Like, I play to win. And what they'll do is they'll hustle their life away. They'll lose family. They'll lose friends. And they'll be aggressive, right? I play to win. I'm just going to put all the chips on the table. And they get wiped out and they have to start over. And then they get wiped out and they have to start over. And they get more bitter and more exhausted. And there's more body bags laying around them as time goes on because they're only thinking about the future. There's no celebration along the way. There is no acceptance, and it's almost like people that have just never healed from whatever trauma in their life, they're just going, I got to fill this void, and if I'm successful enough, then maybe people will love me, maybe they'll accept me. And, you know, you see a lot of entrepreneurs in that situation. Both are forms of scarcity, both are highly dangerous. My philosophy is win then play.

So what is, what is win then play, and how might that apply to a wealth breakthrough?

So win then play begins with abundance, right? And look, society helps to propagate scarcity. Society's trained people to be busy and consume. That's the belief that if I work hard enough, I'll have what I want. It's the belief that one day, someday, I'll be able to retire and finally get to live life. So it's always in the future, right? It's always eventually, or it's I'm just never spending any money, so I'll be okay, right? It's one of those things. And it's kind of like, I feel like Wall Street went to A Christmas Carol and they left at intermission. So they thought Scrooge, they thought that was a good deal. Like, oh, look at him, all of his money, right? Even though They miss the redemption story, right? And that's kind of that penny pincher that tell— they get blisters on their fingers. And on the other hand, you've got the notoriety of like, ooh, here's someone that does so, so much good in society, but they don't do good for themselves or for their family, or they don't enjoy life. So win then play is that you actually create a game worth winning. You make sure the juice is worth the squeeze, and most importantly, you enjoy the journey along the way because you're coming from abundance. Abundance says, hey, even if there's a finite amount of resources, there's innovation, there's human ingenuity, there's creativity, and in abundance we believe that profit is evidence of value creation. In scarcity, profit is evidence of deception and coercion. So people don't want to be rich because they think of rich people as bad or wrong or taking something, because in scarcity it's a zero-sum game. One person wins at the expense of another. There's no cooperation, there's no communication. It's completely competition that they try to decimate and destroy. People in play not to lose are trying not to be destroyed, and people in play to win are trying to destroy. And win then play, it's you create a compelling, exciting future, but you enjoy the journey along the way. And when it comes to money, it comes down to 4 things. Number 1, make money on the buy. You're not waiting for 30 years. You're looking at how you can buy because of the situation that your cash can buy a deep discount so you're profitable from day one.

Give me an example of that.

In 2014, there was a business that just skyrocketed coming out of the recession, but the problem was the person leading the business was teaching something that wasn't their ultimate expertise. And when they got into some trouble or hit some bumps and stumbled along the way, they lost their voice. They lost their ability to deliver the value they originally created, and they were willing to let it go, but they didn't want to lose their legacy. I was able to come in and buy that at a deep discount based upon that distress. And so right away I was profitable. I just interviewed a couple of people that bought businesses because the business owner had had something happen with either their health in one situation or with their family in another situation, and they had to unload that so they could focus on something because it was very important to them to take care of those things. So they were willing to let that go at a deep discount. Or real estate. There's people that they could go and buy that piece of real estate because they know what to do with it, and the person that owns it doesn't, right? Maybe they can go in and say, hey, if I fractionalize this into 10 pieces and sell this as a corporate retreat, I can sell it for 20% more. But the person selling it is going, I can't rent this thing out because I don't know how to rent it. So they're going to sell it for 30% less. You're already at 50% improvement simply because of your knowledge.

So you win on the buy. So basically saying don't, don't invest in something and wait some time into the future, but find a way to win immediately on the transaction.

Right. So I just did this today. Okay. Today we want to create a new product that helps people navigate the recession. And so rather than going and building it, we said, why don't we pre-sell it? So we sold 600 tickets to the virtual summit. So we had 600 people registered and they were now watching and then we filmed it and let them know, hey, we're turning this into a product. So they paid for all the production. We tested out what was working, what wasn't working. So we now have 600 people going, I want that. And now we'll have a product just 2 months later that we can resell to the marketplace and then they actually get a video.

So that's fascinating because it's, and I've heard this may be done like on, you know, testing an infomercial with a book, but the book isn't written yet. If there's no interest in the book, then they won't print the book, or if there are orders that came in, just refund the orders and you don't have to get into it.

Yeah, I pre-sold Killing Sacred Cows, 22,000 copies before it was ever released. I pre-sold it by saying, hey, I'll give you this— back then it was DVD— and this teleseminar series and these transcripts, and you'll get that right now, but you won't get the book till it's complete. So they kind of knew what the content was going to be in the book, they could benefit from it now with the bonuses, But now I already knew I was going to hit New York Times. Now I already knew there was going to be momentum. See, erroneously in play to win, people go borrow money. They let venture capitalists into their life that start to control all their actions, that minimize who they are with their micromanagement, and sometimes even push that owner and founder out and change the vision of the company or squash it because it's not profitable enough, even if it's profitable, right? I would rather see us go right to the customer and say, do you want this? Let's survey. You help us tell— you tell us what you want. And then guess what? We'll help build it. But you're going to pay us 50% of what it's going to cost when it's done. You give us feedback, you become the case studies, and then you don't owe any money and you've already got the momentum of people utilizing it. That's making money on the buy. That's win then play. We can use it in business, we can use it in real estate, and we can use it in investing if we have knowledge. Too many people are gambling and calling it investing. They're out there investing, hoping that it's going to work out, hearing that everybody else is doing it. I got to get in cryptocurrency. Oh, I got to get in this type of real estate. But they don't have the expertise. So, they don't know when to exit. They don't know if it's the right time to buy. You know, and they'll look and say, "Well, look. Warren Buffett makes a lot of money in the stock market." Really? Warren Buffett buys companies. He's got enough money that he buys the company and employs his management philosophy throughout that. And all of a sudden, he has a degree of control over the profitability versus someone who just buys a share. And I guess they can have one meaningless vote. But it doesn't mean enough to influence that company. So he can make money on the buy, maybe because of a parallel company he has that that company can support. And there's that horizontal integration. You know, we've got a friend Mike, uh, that he would— went and bought a company because he knew how to list manage, and all of a sudden he turned that into profitability from day one. That's making money on the buy. All right, so what's—

you said there's 4, so make money in the buy. What's the next one?

Second one is cash flow investing. We've been trained, taught, and educated that everything's about accumulation. It's about long haul. It's about sacrifice. It's It's about scrimping, saving, you know, delaying and deferring. Instead of that, look at cash flow from day one. How can you become a cash flow investor that you get recurring revenue? Recurring revenue can cover your personal expenses because here's the deal. Everybody's saving 10% of their money if they're doing what they're supposed to, and then they try to earn 10% on that. But what ends up happening is they don't earn 10%. It's hard to save the 10% and then they're not where they want to be. What if you have enough cash flow coming in to cover your basic life expenses? Either from assets like real estate or businesses or even your own business and entrepreneurial income inside of it, that's the income that comes in even if you don't show up. So I'm not talking about when you're in the mix of things, I'm talking about when there's scale and leverage there. When that covers the basic expenses, 100% of your active income can be reinvested. You have a 10 times advantage over anyone else in that situation. So if we start shifting towards cash flow, number 1, we're alarmed when things don't work out, Where if we're in accumulation, we might find out when it's too late that it's not working out. It's not on track. There isn't good enough pacing. It's declining. So cash flow becomes that indicator. The third one is efficiency. That was the 4 I's: IRS, interest, investments, and insurance. It's plugging the leaks and keeping more of what you make. And the fourth one is actually that state when you create economic independence. You've already won the game. Choose how you want to play from there. You're not forced to make any decisions. You don't have to go to work to make the ends meet or to pay the bills. So you get to say, what is your life going to be about? What impact you want to make? What's your vision? Because remember I mentioned activity and consumption is the detriment for so many people in play to win, right? They're not thinking about vision. Vision is when we break through the norms and creation is the highest form of reality and it's the highest compensated thing out there. Vision is the rarest commodity. And to me, vision is when we talk about something so compelling, but it's outside of our reach. We don't have the bandwidth, we don't have the money. Maybe It's bringing maybe even a little bit of fear where we're like, I don't know how to accomplish it. But if it's inspiring enough to others, we now have created a miraculous space where people can come and support what we're up to. And when people can get beyond their own capabilities, that they can enroll other people in the capabilities and in bringing this forth, that is where real wealth is built. That's the breakthrough. Wealth breakthrough is vision. There's no greater way to earn money than vision because dollars follow vision. And vision is the most scalable, leverageable thing that exists in the world. When everybody else is trying to borrow money to leverage, may or may not work for a lot of people. But where the ultimate leverage is, is in two forms: our mental capital, which is our ideas, knowledge, wisdom, tools, strategies, and relationship capital—people, networks, organizations, you know, individuals, customers. And the bridge between those is business. So how do we take our mental capital to serve people? And when we can leverage that because we've created a big enough picture that isn't just about paying the bills, that isn't just so selfish, it's only about us, which retirement is such a low barrier and a low mark. The icons— I've heard you say it— the icons never retire. Why? Because their vision and purpose is big enough to compel them forward until the day that they die. And they typically have, if they take care of their health along the way, longevity. Right? Right. So I really look at vision as the ultimate breakthrough when we escape what society says success is. And when then play, it's when we've created a vision worthy of our life. When we've discovered our own sole purpose, our values, our abilities, our passions, and when we combine that for something worthy of getting up for every single day, if that vision's bigger than our problems, we find a way. If that vision's compelling enough, other people come and be part of it. And that's why the rich get richer, is because rich people have vision and poor people have work ethic.

So, well, and without a vision, the people perish, you know, as the old adage goes.

And I'm not yelling at you, man.

No, I know, you're just passionate. I know, you're just excited.

I get it. It's the Italian side of me.

So one of the things that I think bears some investigation, because a lot of times when we talk to people who are, hey, you know, you're doing a thing on wealth and on wealth rates, yeah, you know, they've got this desire to be wealthy. Given your experience, how do you define wealth?

See, being rich means having money, but being wealthy to me comes in 5 tracks. And in these tracks, we're not looking for balance because balance is impossible. People are out of balance all the time. When you're in flow, you're out of balance, and flow is a great thing. And I think there's a lot of guilt and shame when people are trying to be perfectly balanced. What we're looking for is depth and harmony. And those 5 things, it begins with money. Money is part of our wealth. If you don't have money, you better be in a loincloth out in the woods with a bow and arrow, otherwise it's going to be a tough living, right? So money is important, and people that say that it's not important usually don't have much of The second thing is purpose. If we spent the same amount of time looking at our purpose on a daily basis as we do managing our finances as a society, life would get exponentially better because purpose drives money. When money's the beginning thing, like I remember going to school and it said in my textbook, the purpose of business is profit. And I looked at it this way, the responsibility of business is profit. The purpose is why you're doing what you're doing. Right. And if your why is not compelling enough, profit won't see it through during difficult times. Right. So purpose is so instrumental because that's the vision that can help us reach. And that vision and purpose is the container in which we live, the actions in which we take. Then the third one is mindset, because you can have all the money in the world, but if you have a poor mindset, you'll be afraid of losing that money every day. You'll destroy relationships, you'll lose sleep, you'll have stress, you'll die early. Mindset is essential. It is part of wealth. Absolutely. Then there's health. Health is part of wealth. If you don't have your health, you'd probably spend every last dollar you had to get that health back. There's that, you know, proverb that says, hey, if you have your health, you could have thousands of dreams, but if you don't have it, you're probably going to have one, right? You're just trying to get that back. And there's a lot of people that sacrifice their health in the name of riches, and then they end up finding out that those riches slip through the cracks just trying to get their health back. And then finally is social. So social wealth means Relaxation, recreation, and rejuvenation. You are your greatest asset. Not a stock, not a bond, not some piece of real estate. So what are you doing to take care of yourself and enjoy life along the way? And win then play, we celebrate the wins. We consider quality of life. Money alone is a misleading benchmark because there's always someone with more. And no matter how much you have, you could live in Zimbabwe where it gets deflated to nothing and it's not worth anything. The ultimate wealth is that you have relationships that are rich, that you have experiences that you enjoy, and that you have quality of life so that you actually can live a long period of time. So it's money, it's purpose, it's mindset, it's health, and it's social aspect. That's wealth. And what I mean by depth and harmony— depth is presence. Depth just means it's not about quantity all the time, it's about quality. It means that you are present when you're in what you're doing. And then harmony is that you're deliberate and intentional about what you do. So there's times when I'm writing a book, I'm not in balance. I'm writing, you know, I'm not seeing my family as much. But then I'm taking 2 months and spending time in Italy later on because I don't believe in retirement. I'm retiring along the way by having experiences, and I'm retiring that concept because my purpose is greater than just the selfish notion of me living and not having to work anymore, right? Because I feel like I have more to contribute to the world, and I think everyone does. But the people that have to retire, like my dad, that was a coal miner, retire from that shit. But you don't want to retire from something that actually calls to who you are in that vision.

You know, I've heard you describe people you've worked with before that are— they have a lot of money, right? They're rich, I guess, in that respect, but they don't live wealthy, right? What do you mean by that?

These are the people that read, you know, they're the broke millionaire, they're the miserable millionaire. You wouldn't know that they had the money because they've never spent any of their money. These are people like when I flew to Vegas to visit one of my friends, he picked me up. I think the hubcap rolled up and hit someone at the— you know, such a jalopy vehicle. He's making a good 6-figure income but his car didn't have air conditioning. Now, this is what that's like in Vegas in August. The windows are up and you're not sure if it's a sauna so you're so hot. So, you roll down the window then it's a blow dryer. Which pain do you want, right? I'm like, "Thank God we're going to get to his house soon." When we got there, he had it set on his thermostat at 82. I was like, bro, if I give you $5, can we just get that down in the 70s somewhere? See, there's plenty of money that's being compiled, but if it's never utilized, what good is it? And if it cripples a mindset to only be thinking about what we can save instead of how we produce, reductionist thinking actually helps us to avoid wealth because no one shrinks their way to wealth. Wealth is a game of expansion. It's a game of value creation at the, at the core of it. How do we deliver value to others? And if we can deliver it to more people or we can more deeply impact the people we serve, the more wealth we're going to have, especially if that's aligned with what I would call our sole purpose, or if that's aligned with our vision and purpose.

So you certainly advocate living within your means, but people take that to varying extremes maybe that you disagree with. So how would you define living within your means?

My immature mind early on in my life believed living within my means was cutting things out and eliminating. Like when I was first getting married, My father-in-law says, if you guys want to live in the basement, you're free to live there rent-free. So I tell my wife, I'm like, hey, we should move in your parents' basement. She goes, I guess you don't care about having sex. I was like, okay, maybe we should have a little bit better budget than that. But see, you could save yourself into misery, right? And that's kind of living within your means is people think about cutting and cutting isn't going to get you wealthy. There's intelligent cutting and then there's the mindset that you only focus on that, right? So the second thing is to be more efficient within your means. This is to plug the leaks. This is the 4 I's. IRS interest investments and insurance. We want to design that right. But the last one is the game changer and this will separate everyone. It's to expand your means. When I wrote Five Day Weekend, I had this framework, which is first off, let's help you to make more money. You got to be in the right mindset to expand and grow and make more money. Then second, when you make that money, let's help you keep more of the money that you make, not by budgeting, but by intelligence. Then the third thing was now it's time to grow your money. See, and when I was a kid, I wanted to grow the money before I did anything else. Like, I wanted to skip these steps and make my money make money, even if it was only $700 or $5,000. And then finally, the fourth thing is you've got to invest back into yourself. No matter how far along you are, you've got to put your ego in check and be infinitely curious. Curiosity is key for wealth, because if we feel we've arrived at any time, that's a dangerous place to be. We're at a faster, more rapidly changing world than ever. In the next 7 years, more of the S&P 500 will go out of business than the last 70. Well, that's because small technology allows people to do big things and you don't have to have massive amounts of money or capital. You just have to be able to create value. And we've seen that over and over because even in the last decade, we've seen a lot of those companies didn't make it. So in that, let's go to the second piece of how to be more efficient within your means. So the first one is the IRS, and there's a framework to save. And look, it doesn't matter which country you live in. I just like to keep it 4 I's. Or maybe now, because we're talking to the world here, say it's to dot the i's and cross the t's, right? So then we have 3 i's and 1 t, and that's tax, right? And this framework works no matter where you are. There's 3 parts to it. Now, there's 2 mistakes people make around tax all the time, and it destroys wealth. One is to defer tax. Deferring and delaying tax is detrimental from a standpoint of we don't— I don't know anyone that trusts the government. Do you think they're going to lower taxes in the future? I mean, they're addicted to their consumption. And the way that they handle that consumption is either by borrowing or by taxing to cover what they borrowed. Right. So I think that with the US being $23 trillion in debt, I don't really trust that they're going to lower taxes in the future. And if you defer those taxes, you have a few things working against you. One, inflation. Inflation means in the future you have to have more money to buy the same number of things that you buy today. That means you're going to be pushed into a higher tax bracket. Because you have to have more money, right? Just to maintain lifestyle. The second thing is because the government's addiction to spending, they might have to raise taxes in the future. And if you have a financial planner tell you to be in a lower tax bracket in the future because you don't need as much money to live on, they're planning for you to fail. You should run. Yeah. Okay. The second thing is, and I see this far too often, people spend a dollar to save 37 cents. I did this early on. I bought a car because you could do a Section 179, which meant if it was is over 5,500 pounds, you got to write it all off in that year that you bought it. So it's cool, I can write that off, I pay less in tax, but now I have a depreciating asset that I didn't even want.

Yeah, say you didn't need the car.

Right, so I spent money, I didn't make money, right? That's like someone going, oh, it's a 50% sell, buying something I didn't want or need, right? Yeah, you just lost money on what you bought if you didn't want or need it. So what to do instead is, first thing is you got to build the right team. Second thing is you maximize your deductions. And third thing is the most powerful. You reclassify your income. You got to have the team. And this is the hardest thing, even though it's the easiest thing to understand. You just got to have data, whether you're using an app to get your data or whether you hire a bookkeeper, a CFO, or, you know, a controller. Timely data is essential. If you get your data to your accountant after the year's over, you overpaid on your taxes. So you've got to meet at least quarterly with your team. You got to have the right data to have the meeting. And the other 2 people on the team are going to be a tax strategist and an attorney. Most people miss the attorney, and that's where the biggest tax advantages are. A tax strategist might be a CPA in America, but it might not be. Some CPAs are more historians telling you what you owe based upon what you earned, not how you navigate the tax system. Because sure, we have a few hundred pages of why we have to pay taxes, but then we have thousands of pages of why we don't, if you know how to navigate it properly. So This is the 3 people. You got the controller, you've got the tax strategist, and then you've got the attorney. And if you own commercial property, you add an engineer. An engineer can do something called a cost segregation study that anyone that owns commercial property, which is greater than a fourplex or a commercial building, they can get accelerated depreciation. One of the reasons why Trump pays so little in taxes is because of that feature right there. So now you want to meet with these people every quarter and your job is to think outside the box, to be a brainstormer. Their job is to think inside the box and what the rules and regulations are. When I have these meetings, I go, hey, I just bought a side-by-side Can-Am, right? These are like, you've seen it, the turbocharged golf carts going 100 miles an hour on the dirt roads. They're the price of a car, right? So I start the meeting by saying, can I write that off? And they say no. And I go, wait, it's in the intro to my speaker video because I just filmed me and my family in it. Everyone that comes and does my podcast will be able to ride in it. Here's the liability waivers showing that they can ride in that. It's going to be in other videos including the intro and outro of the podcast, and by the end of the conversation, we're gonna write 50% of that thing off.

And this is what's fascinating, because I think what you're saying— I agree with it— is that people over-delegate to these so-called experts, and they're more Monday morning quarterbacks than quarterbacks, right? Right. Yeah, they're looking backwards rather than saying we gotta go score some points.

Wealth is built in proactivity. It's easy for all of us to be reactive, retroactive, or reactive. It's easy. Yeah. But the people that are proactive are the visionaries. The people that are proactive have the riches. The people that just are busy and active and consuming, they get spoiled.

But this is a great example where you walked in and said, oh, can I write this off? And they're like, no. And most people, I'm going to say 98 out of 100 times, are probably going to say, okay, what's the next item on the agenda? As compared to you saying, wait a minute. What if? Not so fast. What if? I'm not your friend.

What if? What if? In what cases could it be written off? Would there be any situation where any organization could write this off, right? And then I'll go into, I'm going to Italy, I'd like to write that off. And then they laugh and I go, well, I think I needed my annual corporate compliance meetings. And like, oh yeah, I think better with wine in Italy than I do in my home in Utah. And then they laugh. But then by the end of that, I think it was 55% of that trip I got to write off. I filmed while I was out there. I got footage of where my great-grandfather was from. I mean, we did certain things to help justify that. So you want to have these quarterly meetings, and then every 3 years you want to look back and see if you missed anything. So going back, maybe people have missed research and development. They've developed something on the internet, they've built an app, they've improved a software system. They can get credits for that, for in the United States, for example. Or I had to have research to write my books, and that research allowed me to get domestic production credits of $28,000 one year. $31,000 another year, $32,000. I was able to go back. That's money that I'd overpaid. So every 3 years, a different set of eyes. Every quarter I have the meeting. It's a 20-minute to an hour meeting depending on how many items. And here's how I run that meeting. The second column here we're talking about is deductions. So deductions, I just have 2 rules. Number 1, I say, does this expense relate to my business? And so this is now assuming people want to build wealth. And even if it's a side business, a business is a huge advantage, right? 83% of people that have side businesses want to make it a full-time gig. We're moving into that type of an economy, and 70% of people in America have a side business. But most of those are not set up to maximize tax savings. That'll be the reclassification strategy here in a minute. But all I do is I go, could this relate to my business? And if I'm uncertain, I just document it for that quarterly meeting, right? And if it does, then I make sure to get it reimbursed by the business, but I charge it to a personal credit card. That way, if I don't end up using it, it's not infringing upon my corporate veil. What this means is, if you're a corporation and you accidentally spend money out of the corporation on personal things, you don't have the liability protection you thought you had.

So even if, when it comes and you allocate and you say, okay, the company paid for this, but then I took it as a distribution after the fact?

That would help, but it might not always hold up. I like it as clear as possible, but that would at least be an argument. Okay. They're going to— what they're going to do is if you ever sue, they're going to call that an alter ego. Alter ego. This isn't really a business. This is just, you know, Patrick or this is just Garrett. So, so I like to just charge it, then I write it down, then I have those statements in front of me. And then when we have the meeting, I go, I bought this, I bought this, what can I write off? And then we go through some of it's a percentage we can write off. Sometimes I get a flat out no, but every now and again I get a flat out no. And I go, what type of companies could write this off? And my favorite was, I like to buy nice clothes sometimes and I'd like to write those off. But the uniform code says if I can wear them out there every day, it's not really a write-off. I said, but guys, Hollywood's buying normal clothes for their actors all the time. Are you telling me they don't write it off? They're like, well, they're a production company. I said, oh, so if I had a production company, which I have a TV studio, I have a podcasting studio, I have clothes that stay there pretty much all the time. Could I write that off? And they're like, Well, if it's a production company, yes. See, I'm here to brainstorm and challenge. They're here to keep me within the laws. Right. On that call, I could be as wild and crazy as I want because we're not filing anything. Right. Okay. And there's so many rules out there that people miss. The Augusta rule where I can rent my house out for 14 days. I get to rent that to my business if I want, write it off in the business, but I have to claim it as personal income. Or I could pay my kids. I can pay my kids up to $12,000. That's tax deductible to the business, tax free to them, even though I control the accounts.

Slow down for the people who are writing. Okay, so let's get back to this Augusta rule. Yeah. I want to make sure I heard you correctly. You're saying you could rent your house to your business for 14 days and you don't have to take it as income?

Right. So the Augusta rule is the nickname for it. And the way it came about is there was a senator out of Georgia who happened to own a home in Augusta. Now, that was his second home. So there was 14 days a year he could rent that out for a lot more than any other time of year. That's during the Masters. Right. So he wanted to rent it out, but he was frustrated they had to pay tax on that. So he just slipped that into one of the bills. And now that tax code got changed that you can rent out your home and that doesn't have to be to your business. It could be to anyone. You could Airbnb it for 14 days. You don't have to claim it as income. Right? Right. So it's just tax-free money or you get to write it off for the business and get to take it as a personal income tax-free 14 days or less. That's what I'm saying.

So the business can expense it, but you can take it personally. You paid it well. Yeah. And I have to imagine there's some parameters around how much you can rent it for. Right. Yeah. But But as long as you're in line with what might be considered a market rent, in that case, if you're— if it's during the Masters golf tournament, you can—

that's the beauty. Yeah, is the parameters are dictated by the demand, right? So when the Super Bowl was in Atlanta, I had a bunch of clients in Atlanta. I called them all and I said, this is the time to host something at your house. Go on Airbnb, see how much homes similar to that are renting for. And they were like, oh my gosh, it's astronomical. Sundance. Yeah. In Park City, which is— how much bigger rent is it during Sundance?

It's, it's astronomical. As a matter of fact, like tenfold, right? At least some companies will come to town and rent people's stores and pay their whole year's rent for the two weeks, right?

So we're looking for those unique opportunities at the time that we do it. It's all in documentation. Documentation is your friend. And I know there's going to be people that listen to this and they go, this sounds risky, right? I'm here to tell you that I've been doing this for over 20 years now. And we haven't had audit issues because this is all legal and ethical things. And part of what I'm giving is very US-centric. But here's the deal. I've had people in Canada that have heard this platform that saved $100,000. This guy Yuri, because he's using the framework, it's a little bit different with the nuances, whether you're in Australia or the UK, but you can use having a team, meeting with them every quarter, asking these kind of questions. That's how you're going to navigate the whole thing. How much can you pay your kids a year? $12,000 a year if you're in the US.

So you can pay them $12,000 a year. They don't have to pay tax on it, right?

Yeah. And here's how you navigate that properly. You better have them do $12,000 worth of work. Okay. So early on, I missed these deductions because I didn't really know what could I justify these young kids of mine to do. I didn't realize I could have a model by putting on my website, and that's $2,500 apiece per year. I missed that. But that's a union standard right now. I'm like, well, how much do I pay an emcee at an event? What if I had my son introduce me before I went on stage? So I brought him out, he's 9 years old, introduces me to 1,000 people. He's fired up and stoked, the crowd's fired up and stoked. Then he signed books with me for 5 and a half hours afterwards. Wow. Now, he didn't sign nearly as many books as me because he tried to write and take forever, but he was fascinated. It was cool because the What Would the Rockefellers Do? It's a legacy book, and there's my son, right? Or I had to take a red-eye once to speak in Boston, so I brought the kids because I didn't want to torture my team with it, and they're handing out books and they're there with me. Those are higher, you know, dollar things than if I have them mow a lawn or if I have them file something. So you've got to document what they did. You can't just pay it with no documentation because some people are going to be afraid like, well, am I going to get in trouble with the IRS? This is legal and ethical strategies. Absolutely not going to get in trouble with the IRS. Amendment, the IRS is going to say yes or no whether or not they approve that amendment based upon what you send them. So you've got to have the right tax team.

So what's the next thing we should consider?

Well, reclassification is the game changer. So some people do a good job maximizing their deductions. Almost no one does good with reclassification. There's 4 ways to reclassify. One, you take active income and reclassify it to passive income for tax purposes. I'll give some examples. Two, you take ordinary income and make it a capital gain. Capital gain could be 0%, 15%, or 20%. And the top tax bracket in the US is 37.5%. So you can see the savings there. Number 3, tax-free income, which is almost exclusive to capital gain assets like a business or a piece of real estate or a highly appreciated appreciated stock, and then tax arbitrage. Now, tax arbitrage sounds complicated, but it's this simple: if I spend a dollar on something, I better get more than a dollar back from the government. No more dollar for 37 cents, right? It's a dollar for $2. Okay, so let me give just an example or two in each area. Active to passive, you can set up a corporation, you can pay yourself a reasonable salary if you have employees. What is the test in your industry? You know, I know you, you have a background of being a chiropractor, and we look at the reasonable salary for chiropractor versus what Patrick Gintempo, the chiropractor, would get. Two very different numbers. But as long as you're in the reasonable salary test, you pay the rest in distributions. Distributions avoid self-employment tax, which is as high as 15.3%. Right. So you're just paying yourself two checks instead of one. Right. Or let's say that you own a building and you could actually rent that building out to your business, charge yourself the highest possible rent based upon the comparables, and that's going to get you a passive income at 1099 instead of W-2. That's going to save you that money as well. So ordinary income to capital gains. Let's say you do business internationally. You do, right? You guys do business internationally. Sure. You could actually run that business of anyone that buys these documentaries outside the United States through an international sales company. And anything that flows through that company is capital gains. So you've just reduced your taxation to capital gains.

It's automatic capital gains. How did I not know that?

Well, I want you to interview me. So if I keep giving you an insight every time you interview me, I keep being in everything that You do.

So that's my secret. That's working.

Yeah. Tax-free. There's several ways, like just to give a more obscure one, but that's completely tax-free is called a 1202. A 1202 says if you have a C corporation that's at least 5 years old, but it was started after like 1983, you could sell up to $10 million tax-free on a business and tax advantaged above $10 million. So I've only seen that happen once, but it's worth knowing about if you have a business that could fit that category. There's other things like a caps trust, which allows you to spread your taxes out after over 10 years or up to 20 years. There's something called a charitable trust where you can actually donate your business to a charitable organization. When the business sells, it funds a trust that you get to be the first beneficiary of. The charity keeps whatever's left over when you die, which is estimated to be 10%. So you give the charity 10% rather than the government 20%. And by the way, you get a tax deduction for what they think you're going to leave behind at the charity. So not only do you not pay tax upon the sale, you get tax break. That could be a 50% swing for people, right? So there's— that's a few tax-free examples. And tax arbitrage, I'll just give two examples. One, I bought some artwork. You've seen the artwork before. I bought a big collection at a deep discount because I agreed to never sell it on the open market. And after 3 years, I started to donate it. When you donate after 3 years, it moves from book value to appraised value, and those museums get it appraised when I donate it, and I get a deduction for the full appraised value. So I spent $300,000, I got $2.2 million in tax deductions. Wow. So I got paid to own art. And then another thing is a conservation easement. Let's say, you know, we have a mutual friend that had a lot of land out there in Colorado close to Florissant, right? And I'm like, hey, you have all this land, are you ever going to develop it? He said no, but he had 30 1-acre lots, right? And then a bunch of other acres. I said, if you do a conservation easement saying you're never going to develop it, you get that tax advantage over a century right now today. And so all of a sudden you can get major tax advantage. In some cases, depending on development rights, could be worth as much as what you paid for the property. Well, people in Florida that own property where these turtles that, you know, dig and everything, if they give that up in a conservation easement because of the preservation of an endangered species, it could be a high, high value. Or someone in West Texas owning land that they have a hard time selling that has a lot of sand that could be used for fracking, you get it appraised as if you were to develop it for fracking, and you might get a 6.5 or 7 to 1 tax deduction. So all of a sudden you're getting paid for the land in tax benefit rather than trying to sell it to someone that may— it's not developed yet. So those are just a couple tax arbitrage examples. So look, I know that this is a lot of information in a short period of time, but this is the bottom line. 3 by 3 by 3 by 3. The 3 columns. You want to have a team, 3 people on that team, right? You got the controller, or bookkeeper, that could be someone very part-time. You've got either tax strategist, you've got the tax attorney, which is mostly reclassification. The tax strategist is mostly deduction. The second column is deduction. The third column is reclassification. Look back every 3 years, see if you missed something. Meet with them every single quarter. Ask compelling questions. And the hardest part of this is finding the team. If you find the team, the team— the game is won in win, then play. The game is won a lot of times when you pick the teams, right? You pick the right financial team. You've already won because they can help you navigate. Like that family office, like I saw when I was 22 years old, man, they have major, major, massive advantages because of what they could do that no one else gets a chance to do.

Well, so let's say now that I'm earlier on. Yeah, I'm working, but I've saved $30 grand. Yep. And I want to have a wealth breakthrough. I want to, I want to start moving toward building financial freedom in my life. What would you recommend?

So the first thing I recommend is you got to set up a separate account. It could be a checking, savings, or money market, but we need a more elegant tracking system. What I find is people have insatiable appetites when money's sitting around, and businesses have an even more insatiable appetite in finding excuses to spend the money. So the separate account is a wealth capture account. It's a place where you're saying, this is my money that I'm going to automatically save, but then deliberately invest. And your first benchmark in that is you want to have at least 3 months set aside for personal expenses. That way if you have a health issue, a family issue, a financial surprise, which we all are going to have those sometimes, you've got more staying power. From there, I would look into cash flow banking. Cash flow banking is a Rockefeller method of how they've perpetuated wealth. My belief is why not buy net worth and build cash flow? Most people only focus on building net worth and neglect cash flow. Right. So how do we do that? This is very interesting because this is something that happened in the 1950s. With GE. GE decided they wanted to recruit the very best talent in the world. But to recruit that talent, they said, how do we do that so that we could be number 1 or number 2 in every category we're in? So what they decided is we got to go recruit these executives that already have a job and offering them something their current organization can't. So they went and they recruited them and said, we'll give you a pension. Now, the way they funded the pension was the right way initially. They didn't use the stock market. They bought life insurance, corporate-owned life insurance. And here's what would happen. That would build cash value. That cash value would supplement the pension after the person retired, and the person would die, and the death benefit would come back tax-free to the corporation and give them between 6% and 7% tax-free after expenses, right? This got so big that Walmart got in trouble because they were even buying it on their greeters, you know, and people like, hey, you just profited from grandpa's death. So what, you know, kind of got some, some negative press. But, but ultimately, we can do this as individuals. We could buy cash value policy, but you've got to design it right. You've got to design it how the Rockefellers would design it, or, you know, really wealthy families, which is very cash heavy. So rather than getting 1% on your savings account or 2% if you're in an internet bank, what the banks do is they can take a third of their reserves and put it into cash value policies. Now, these are cash heavy, very cash heavy from day one that they can pull the money back out, but it doesn't get hit with tax. It's protected from liability and bankruptcy, right? It's available and accessible within 30 days of when it's first deposited. And they can usually get it within 72 hours upon request. Right. And if the market goes down, it does not go down. So rather than getting 1 to 2%, you're getting 4 or 5% tax advantaged. So now you've got a place to store this cash that you can then capitalize when other opportunities come along. And that's where you got to be patient and discover your investor DNA. Where can you invest where you have unique insight, unique knowledge, and unique ability and then you look for making money on the buy. Or if you own a business, it might be putting money into the business to increase profits, might be hiring someone, it might be putting a piece of equipment into place, it might be your own personal education. But the place that you never get to stop investing is into yourself and into your knowledge, into your network and into your mentors. That makes the biggest difference because we all face scarcity sometimes. We all face cash crunches. We all face changing economies. And we don't want scarcity thinking to ever take over and make high emotion create poor financial decisions. Right. So you want that outside perspective. And then from there, I think investor DNA is where we really discover our core competencies, our core values, our core drivers so that we're interested in it. And then we focus instead of diversify. Diversification is admission of ignorance. I don't know what's going to work. Let me spread myself thin. Diversification is a play not to lose strategy that if you're really affluent, makes sense because you have more money then you can allocate to the things that you know, maybe. Right. So it's more of a stability thing. But as a growth strategy, it's a horrifically bad choice, especially if it's a lot of— you're spreading yourself thin and things you don't know. You're playing defense, right? Andrew Carnegie said he put all of his eggs in one basket and watched it like a hawk. And so if you build your foundation, you have your liquidity, you have your cash flow bank. Now you have permission to capitalize on the right opportunities. So for me, there's only a few places I invest. I invest in my businesses, which I have 3 businesses. I look to expand. I like it because it's 3-dimensional. Number 1, the more cash flow that can come in without my involvement, the more equity I create. And I actually get to hear from the people that I serve. I get hugs sometimes. I get gifts. My mutual fund never gave me that. It gave me a piece of paper in the mail to tell me why I just lost money. So, so that's a very different thing. Or business acquisition when the economy turns. That's for me. For other people, that investment might be real estate. But only if you know real estate. And you're not going to know everything if you're just getting started. Is it going to be fix and flip for you? Is going to be, you know, cash flow real estate on rentals? Is it going to be commercial? Get really, really good at one thing and look to make money on the buy. $30,000 might not be a ton of money, but it can get you started. Invest in your education first and your infrastructure second, and then third, capitalize on opportunities when they arise. But don't go prematurely allocated. Right.

So is there a level of patience here? So if we got the $30,000, like, I got to go do something with it as compared to saying, Let me educate myself really well about something before I start jumping into it.

If you want to be wealthy. Yeah. Wealth requires that patience. It doesn't mean we sit around and wait for things to happen to us. It means we invest in our knowledge so we're prepared when the opportunity comes.

So let's say that, okay, take that to the next level. I get that. I don't know what I might have passion about yet. I want to survey the landscape a little bit and maybe something will start to to, you know, pop out to me saying, oh, you know what, that, that really captures my interest, right? Is there— how would you recommend starting down a path saying I want to see maybe where I have competency or what I might have passion around if I don't know what that is right now?

Look, courses help, right? What they're watching here with Wealth Breakthroughs help because you get exposed to a lot of things, right? In my book Five Day Weekend, we wrote about a ton of different types of investments, most of which I would never touch because they would bore me, right? See, early on, I wanted to make more money as an investor than an educator. So I had over 100 real estate properties at one time, and you know, I didn't like it. I didn't like deferred maintenance issues. I didn't like dealing with property managers. I didn't like dealing with financing and banks. And so it was more drudgery. It was supposed to be passive income, but it was very active. So I said, why am I in real estate and real, real property when I can be in intellectual property? I like creating content. I like writing books. I like being on video. I love interviewing. I love being interviewed. This is something I'm passionate about. And I didn't discover that early on. I discovered that more in like 2007, right? So I had almost 9 years of being an investor and I invested in 2 IPOs. I invested in a hard money lending fund that I started and initiated with 2 other partners, which was a nightmare, the amount of work. And all these things derailed and distracted me because I thought based upon the books I had read that real estate was the only place to put your money. And for the right person, If you're going to treat it like a business, it can be a good place to put your money. But for 70% of people out there, they're just starting. It's a horrific place to put your money because you're not ready. You don't understand, you don't know. So you've got to invest in that education. You've got to be exposed to things and see if you really are intrigued. If you're interested, what are you reading about? Like, we've got people because of you that are so intelligent in health, they invest in health-related companies, right? You know, I invest in financial and intellectual property-related companies. So, you know, that's really the places to look. But first, plug the leaks. And probably the first place to invest is in the team because you've got to have the advocates, people that do due diligence, people that save you a bunch of cash, and people that got your back to tell you when you're not thinking straight. Because I put on rose-colored glasses before I'm ready to make that investment. I'm trying to do due diligence, but I'm just looking for all the evidence that confirms my bias. Right, right. Where when I have other people like Norm and Ryan and Andrew who are my due diligence team, they don't have that same attachment and they can prevent me from making those missteps or mistakes, or at least making sure I have better collateral, that I have better protection, or that I'm negotiating at a different level.

Well, as always, Garrett, it feels like we're just getting started, but boy, that's a lot of great information. Really appreciate you coming and sharing it. And I know that this is some— this, this segment is something that's probably gonna be watched a few times. A lot of takeaway value. So I appreciate you not not showing up with fluff, but showing up with some, some real value that people can put to work. So thank you.

Thanks for the work you're doing and appreciate the friendship. Thank you.

Hi, and welcome to your episode 4 bonus interview. You won't want to miss this one. Marco Santarelli is the founder and CEO of Norada Real Estate Investments and a well-known podcaster. Investor. In this bonus interview, he's going to show you how 90% of millionaires created more wealth through real estate than any other investment. He also has a 2-step wealth building blueprint you can use to build endless streams of active income. Even better, what Marco's going to show you can work for anyone regardless of how old you are or where you are in life. Settle in for a good one. Here's Marco. Marco, thanks for taking some time with us today.

Thank you, Patrick. Glad to be here.

So you're a big fan of real estate investing. So how did that come about? What got you into real estate?

Well, I don't know how, but at a very early age, I just knew I wanted to be wealthy. And this probably happened when I was in the range of 8 to 10 years old. So I made it my mission at the time to study wealth, business, money, whatever it could be. And I just became an entrepreneur at an early age. In fact, I was coding at the age of 13. I couldn't buy real estate, but I was studying real estate in my teens. When I turned 18, I bought my first rental property. It was a townhome unit. I bought it, fixed it up, I leased it, I managed it myself, held it for a number of years. The biggest mistake I made at the time, not knowing it at the time, is I sold that property. But that's when the writing was on the wall. And I just continued going down that direction. I got my license, continued to buy real estate, and learned as I went.

Did you go to college or you went right into business? I went to university.

And interestingly enough, I took criminology. Huh. Had nothing to do with business, but I thought that law enforcement was what I wanted to do. But I realized that, number one, it wasn't my passion. Number 2, I couldn't make the type of income to create the wealth and sustain the wealth that I wanted. So I shifted gears and I became an entrepreneur, started some businesses, and invested in real estate.

And has it pretty much been real estate from day one for you, or any other businesses that you were in?

The short answer to that is I've had multiple businesses and therefore multiple failures, and experience is the best teacher. So when you can fail, fail fast, and fail forward, you build on your past experience. Experience and success to do better and create more the next time you move forward. That happened with real estate, but it also helped me with business. But I combined all that experience together to help me not only invest in real estate personally as investment, but to create a business wrapped around real estate investing. So now I can show other people and teach other people what I was doing happily, and that's what I'm ultimately passionate about.

When you were young and self-studying, were there any particular influences that stand out?

Early on, it was Tony Robbins. I still have to this day the Personal Power Program on audio cassette with the journal, right? I don't have my values, my goals written in that, but he was an influence. Brian Tracy was an influence. I don't think I had a lot of mentors early on in the real estate space. I just knew from conversations with other people that real estate has been and always was the true wealth creator. I mean, wealth is held in real estate, but if you know the right strategies, you can create and build wealth rapidly using real estate. So not only did I come to learn quickly at an early age that real estate was a wealth creator, but it was a way to create enough passive income that you could become financially free. And knowing that as a teenager, I decided to pursue that and build as much income as I possibly could to funnel into investment real estate. Because if you can do that, if you can figure that part out, the key to creating wealth is actually to learn how to create as much active income as you can and convert that into passive income. Because the more passive income you have, the faster you will achieve financial freedom. So the key to going from active or earned income to passive and portfolio income is really the key to creating financial wealth.

So do you make like a distinction between income and wealth or, you know, being rich, say, because you're a high earner versus having true wealth, or are they kind of the same thing to you?

They're related, but there's a distinction. So when we talk about wealth, let's differentiate wealth and being rich. Okay. Okay. So someone who is truly wealthy, financially speaking, will always be wealthy. Why? Because we're talking about streams of income, you have passive income. It's predictable, it's sustainable, it's passive. Someone who's rich might look good on the surface. They may have, may have a lot of possessions, they may have a lot of money in the bank. But the reality is, is that we're talking about chunks of cash. So if you burn through it, if you have $1 million and you're living off $100,000 a year, you can sustain yourself for 10 years. But then what happens? At that point, you're broke. The wealthy person now has passive income that's sustainable and predictable every single month, every single year, that they can survive forever. And not only that, pass it on to their heirs. So when you're truly wealthy, you have the ability to sustain and, and, and hold your, your wealth and your lifestyle and more so whatever you want to do. You have the freedom. Not only it's financial freedom, but time freedom. You have that. You don't have that if you're rich. So the income from being wealthy comes from the passive income that you have from your assets, the assets that you build to create that passive income. Like the real estate that I was buying. The reason I bought the real estate was to create the wealth through equity that I can now turn into more real estate that kicks off a steady stream of passive income. So now I have the passive income to create the financial freedom I need, yet keeping the equity at the same time.

That's true wealth. Did anybody in your family, your parents or other people, were they like, have this type of personality you did toward, you know, wealth creation or having wealth breakthroughs, or was it a different upbringing for you?

I wasn't born with a silver spoon in my mouth. Both my parents worked sometimes two jobs. I did not come from wealth. In fact, my parents were immigrants from Italy. So my mother worked two jobs for the longest time to make ends meet. My father was extremely conservative. He did not want to buy a house. He did not want to invest in a business. My mother was completely the opposite. She was entrepreneurial and my father held her back. But recognizing that, I got a taste of both mindsets. But I chose my own path. I just knew again early on that I did not want to work 9 to 5. I did not want a J-O-B, which some people refer to as just over broke. You know, the reality is, is that about 60% of the US population doesn't have a financial plan. 47% can't even put $500 together in the case of an emergency. 50% of the US population doesn't even have $500 in savings. It's a pretty scary thing. That doesn't necessarily mean that real estate investing is not attainable for most people. I'll never say it's attainable for everybody because it's just not right for everybody. But I never came from, you know, an environment of of wealth or riches or even education for that matter. You know, I went to public school, but I found my own way. I just identified with it.

And you're first generation here then? Yes. Wow. So that's quite an American dream success story in a sense. You know, parents, son of immigrants that finds his own way. So what are most of your business activities now?

I actually have my finger in 5 businesses. The core business is the real estate investment business where we freely provide knowledge, education, resources to real estate investors or want-to-be real estate investors. I just call them people. And ultimately, it's not about the education. It's actually about taking action and building a real estate portfolio. So now you have that passive income and you are creating wealth. So once you have the education and you have the willingness and the ability to invest, We have properties in 22 different markets around the country at any given time. They're completely turnkey ready, tenant occupied, professionally managed.

So you do like a vetting process for people ahead of time that want to invest in real estate?

Yeah, it's a system that I created. I mean, to give you the history of the system, really, it happened back in late 2003 when real estate was on fire. You know, markets were appreciating all around the country. I chose to get back into real estate investing, but full time because I'd just come out of a dot-com crash at the time. I was the third co-founder of a dot-com business. Painful. Very painful. You know, it's one of those rags-to-riches stories where you think you're going to be a multimillionaire overnight. And we were on that path. But when the Nasdaq crashed, all the venture capital funding dried up. And, you know, we had to close the business. We had to shut it down and I had to lay off 105 people.

How important is it for people to understand that? Because we could sit here, have a conversation, talk about all the wealth you built in real estate, how you advise other people to do it, etc. And boy, isn't this great? But maybe what people don't hear are the times where, you know, the dark night of the soul, you know, you think you're going to be a millionaire. There's a dot-com. So how do you overcome that psychologically and keep going to rebuild and to find new ground to stand on? Stand on to be able to create wealth?

You really need to be clear about what you're trying to achieve. You need to have a purpose. You need to know what you want. And you need to have written goals. I know you hear this time and time and time again. The reality is a small percentage of people actually sit down, think about what they want, and write down their goals. It's not a hard exercise. But there's something about doing that that puts in motion the things that you need to do in order to get on the path to gain the knowledge you need in order to get to that next level, build the team, and start executing on whatever your plan is.

So this is, this is kind of important because especially coming from, you said, some of the influences like Tony Robbins or Brian Tracy who were all about goal setting, right? And, you know, documenting what it is you want to make happen. So you talk about, you know, hey, it's not that hard and this is, this is why it's important. What do you think the psychology is of someone who says, I have ambition but they won't get to a point where they'll start writing down goals. What are they telling themselves, or what do you think that means? What's—

how do you interpret that? If they don't have the ambition, they probably don't have clear enough goals, um, and— or they don't have a burning desire. They really don't want it bad enough. Because we all have the same amount of time. We choose to do what we do in that time. And so whatever's driving you to do what you do is where you put your priority. If you're watching TV every night for 3 hours, clearly that, you know, you're either really lazy or you don't have clear, specific, measurable, attainable goals that excite you, that fire you up, that make you want to do something better for yourself, for your family, for your legacy, your heirs. But when you can create that passion, you will take action. You will do what it takes. You will build a team around you to execute on the plans that you build. It's not that hard. People just hold themselves back through fear. They talk themselves out of what they could do. Look, to get results, you need 3 things. You need the ability, the willingness, and the execution. If you have those 3 things, you can achieve almost anything. That makes perfect sense.

So let me ask this in your perspective. What aspect or what ratio would you say of your success personally? And maybe we could extrapolate this as a general rule, is your headspace and what ratio of the outcome is you choosing real estate as the vehicle? Like, you know, because some people say, oh, it's— well, real estate's just a great investment. And I heard you say sort of, well, not for everybody. It's for maybe for a lot of people and certainly is for you. But how much of it is the, you know, if somebody's trying to have a wealth breakthrough right now, they're trying to say, I wanna, I just wanna get on a path and, and, and break through and, and become wealthy. So some might say, well, real estate is the path. Could be true. But how much of that is their headspace? 90%. Wow. Okay. So I wasn't expecting that answer.

The reason it's 90% is because everything starts, ends, and lives in your head. Mm-hmm. What you do, What you achieve and what you don't do and what you don't achieve all starts from your mindset. You know, the great book Think and Grow Rich, Napoleon Hill talks about this extensively. That's why that book is worth reading at least once a year. I'm part of 5 masterminds. I was part of 7. It's very time-consuming, but I want to surround myself with like-minded people.

And incidentally, I'd say the investment in these masterminds is not small, right? I mean, some of them are as much as $25,000 a year or so.

I have friends that have $100,000 masterminds. I have 3 friends that have $100,000 masterminds. I'm not in those ones, but I am in the $25,000-$35,000 masterminds. Why do I do that? Because I want to surround myself with like-minded people who are achieving, who are goal-oriented, achieving the same types of things that I want to achieve, or maybe not, but they're all trying to better themselves. They believe in personal development. They believe in growth. They want to better themselves and achieve more. So I go there to learn, to grow personally inside and outside. It's not just the information I get from the mastermind, but it's the networking and the growth that I get from it. But mindset is so critically important. You have to, first of all, believe that you can achieve what you want to achieve. And if you don't feel that way, follow my first rule of my 10 rules for successful real estate investing, and that is educate yourself. If you just sit down for a couple of hours a week and read a book and just set a goal to finish a book every week or two on real estate, on anything personal development from Brian Tracy, Tony Robbins, whatever it may be, Awaken the Giant Within, whatever it is, you will start to believe that you can achieve more than what you're actually doing because your limiting factor typically is either you, and if it's not you, it's the 5 friends that you you hang around with the most. Because if you average out their income, it's probably going to be what you're ultimately going to earn and make. So if you are broke, find 5 new friends who aren't.

So if I were to ask you, okay, I'm going to get started on this path. I want to read a real estate book or real estate investment book. What's the first thing that pops into your head?

Well, fundamentally it's Rich Dad Poor Dad. And the reason I say that, not that it's a tactical book that's going to give you the how-tos. I mean, we teach the how-tos, but getting into a space where you get out of the matrix, to use that analogy of, you know, the movie, where you understand what assets are, what cash flow really means, what income-producing assets are for, and the difference between consumerism and investing and all that stuff, you know, you really need to start there and then build upon that. So the entire Rich Dad book series is a great place to start. Gary Keller's book Millionaire Real Estate Investor is another great book. This is going to give you a lot of the mindset and it's going to give you a lot of the strategy that you need. There's still more to be learned in terms of the tactics, but then that gets to the question of am I an active real estate investor or am I a passive real estate investor?

Which are you?

Well, I'm both, but that's because I'm a full-time real estate investor and I have the time and the the knowledge and the ability to do it. But if someone came to me and said, what should I be? I would say, look, stop watching, you know, TV and all these, you know, flipping shows, because that really is not real estate investing by my definition. When you're fixing and flipping properties, you're making, again, chunks of cash. It's transactional. It only lives for as long as you're actually doing the active job of buying distressed properties, fixing them up and flipping them, assuming you're making money at it, 'cause you can lose money lose a lot of money just as easily as you can make money. But a lot of people have been kind of brainwashed into thinking that, oh, that's real estate investing. It's a form of real estate investing, but you're putting up all the capital, the time, the energy, the knowledge, and taking on the risk to do that. Real investing means that you're acquiring and building a portfolio of income-producing assets that are generating passive income so that way you don't have to work every month or every year. You can live off of the income from your assets. And it doesn't have to be real estate, it could be other stuff, but I just happen to love real estate 'cause it is the most powerful wealth creation tool and you could do it the fastest. So for the most part, if I had to pick one, absolutely I'd be a passive real estate investor.

You help people achieve their own wealth breakthroughs, I guess, through your educational services, in part at least. So let's say I'm somebody who, I want this now, I decide I'm gonna get on a path here, I wanna walk, I walk into your environment, you know, your services, and I say, okay, here I am, how do I get started? What are the steps that you take me through to turn me into a real estate investor that can build wealth?

So 99% of the time when someone actually contacts us, whether by phone or on our website, they have two things. It's what I call their capacity. Capacity comes down to two things: cash and credit. So credit is the ability to qualify for long-term financing, essentially a 30-year fixed-rate mortgage, which is beautiful. It's great debt, not good debt, it's great debt. So the capacity to qualify, the credit to qualify and the capacity, meaning the capital, you can invest with as little as $18,000, $20,000, $25,000, because let's face it, most of the income-producing real estate that builds a great portfolio is in the range of $100,000 to $200,000 for a normal 3-bedroom, 2-bath home in a good quality neighborhood, what I'll call a B+ neighborhood. So that's all you really need in terms of capacity. So when those people come to us, they've already somewhat self-selected themselves and educated themselves. And a lot of times because of our podcast or books that they've been reading, such as the ones we just talked about. And now they're saying, hey, I'm ready. I'm, I'm willing to move forward. I just need someone to hold my hand and I need the team. So the reason they would come to us— and I don't say this to be, you know, you know, a pitch or, you know, self-promotion— but the reality is, is we have already vetted all the teams of people that you would need in 20 to 25 different markets.

So let's talk about what, you know, who needs to be on this team. So pretend for a minute you don't exist, but, you know, as far as you don't have a team or something to plug in, and I'm trying to go out, figure this out, learn how to do this. So assuming you didn't have that team, now you say, okay, you check, you know, what kind of capital do I have? What kind of credit do I have? And I've got the ability to get started from those two things.

What's the next thing I do? Really, the starting point is to build your team. But the starting point to that is really to have a conversation or two, what I call a strategy session, with someone who's already an experienced real estate investor and can hold your hand and guide you along. And for us, we call them investment counselors because they're essentially counseling you. So what's the key?

Like, so let's say, you know, you didn't have a team when you got started. You know, it was you basically getting figured out. So what did you see? You found property, you had certain criteria around it, I'm assuming. So what kind of criteria I'm looking for?

So, okay, great question. So now that builds out to, you know, a whole other conversation. So when I first started in late 2003, early 2004, I was living in Orange County, California, and I was investing 2,000 to 3,000 miles away from Florida all the way up to Michigan. I didn't have a team. I had to build my team. So I had to not only find and vet the people that were going to be on my team, but I had to create the systems that would allow me to invest from a long distance and do it successfully. And sure, I've lost a lot of money in the process. I've tripped, fell, got kicked in the gut. And that's actually important.

So let's go into the mistakes. So the roles for the team are what? I guess you need a realtor to find property for you, right? That you can trust, that knows what you're looking for. Is a part of that team a banker or a lender, somebody that, you know, is predisposed to understanding you and being able to lend?

So let's address that question first. So here are the key people on your team. There's going to be more. You need an acquisitions person. It may not be a realtor. It just depends on what your strategy is. But essentially someone who's going to bring you the deals. Okay, it could be a new home builder, could be a turnkey real estate provider, it could be a real estate agent or broker where they're just pulling it off the MLS. Maybe you're dealing with a wholesaler because you're doing some of the work. It's an active approach that becomes a passive investment. So your acquisitions person. Second, you need financing. So you're going to need lenders and mortgage brokers to be able to get you the financing because you could leverage your money 5 to 1, which is fantastic. You need property management, key person on your team. Property management is critical. In fact, I jokingly say you live and die by your property manager. So you really need professional full-service property management in all the markets unless you're managing it yourself.

What do you allocate for a percentage of the income to property management?

I always budget 10%. The reality is, is because of the relationships we have, it'll range from 7 to 10. It averages 8%. Okay. But at the end of the day, I'm not going to nickel and dime my property manager. The cost difference between 8, 9, and 10% is nominal. I just want to have great management, and I want my manager focusing on me and my, my inventory, my portfolio. In other words, my assets, as much as possible. Because at the end of the day, I want them leased for as long as possible. The, the expense in owning property is not that 8%, 9%, 10% management fee. It's really the turnover. The turns are the costly expenses in owning investment property. Now, now it's a built-in cost. You expect it, you budget for it, and you plan for it. So it's not like it's going to be a shock or a surprise. But the longer you maintain and keep a tenant without having that turnover, the more of that cash flow or positive cash flow you retain.

So we got 3 key members of the team. You know, somebody to help with acquisition, lender, and property management— professional property management, I think, is the term used. What other members do you think are necessary?

Well, I'll add two more to that list because these are people that you're in communication with on a regular basis, be it monthly, quarterly, semi-annually, or annually. And that is your asset protection attorney and your tax advisor. You'll always be working with a tax advisor because you're your tax situation will change from year to year and you always want to minimize, reduce, and eliminate taxes. And so a tax advisor will be the key person on your team for that. And that person—

Are they specialists pretty much in this area? They need to like specialize here or a typical tax advisor would work?

I would say that they need to be specialized enough in the sense that they truly understand investment real estate and the tax laws surrounding it. Ideally, if they're real estate investors themselves, you can probably be assured that they understand it. They've studied it.

That's actually a really good little— do you invest in real estate? Good. Right. You can work with me. Right, exactly. I like that.

And then that person is going to be in communication with your asset protection attorney from time to time because all the entities that you have as asset protection vehicles have to fit the financial strategy that you have that's being set up by your financial advisor. So there is tax impact or implications for each entity that you set up and where you reside and what states you invest in. So those two people are going to be communicating.

When we interviewed Robert Kiyosaki for a previous series, he talked about the great tax advantage, and others have too, in real estate investment. So can you walk me through that? Like what, You know, if I'm somebody that says, hey, I want to get— it's hard, it's hard to accumulate wealth when you're getting taxed to death. As soon as you start making more money, you get less of it. And it's like, how do you start to accumulate any real wealth? But it seems that through real estate investment, there's ways to get great tax advantage. Can you speak to that a bit?

Yeah.

So not being a CPA or a tax advisor, I will give you kind of the nuts and bolts. Essentially, if you do it right, you can own real estate, income-producing real estate, and build a portfolio and become not only wealthy but rich at the same time without paying tax, which means that it's not that you're breaking rules or avoiding to pay tax. What you're doing is you're deferring, you're minimizing your tax impact and you're deferring tax. Done the right way, you could defer it forever. And then ultimately, when you pass your portfolio down to your heirs, there's a reset in the cost basis of that portfolio where now the people who inherit your real estate portfolio are starting at a new cost basis so they don't pay any tax. But the short answer to your question to get to that is, number one, you have passive income coming from your properties. When your taxes are done right by your tax advisor, the depreciation that you get from the properties can minimize or essentially eliminate the tax impact from that passive income. That's the first. There's a second as well. The second is the fact that you build equity over time in your portfolio, which creates net worth, creates wealth. And then you take that and you build more wealth, which is something we can talk about. But if you were to sell that property, you would be responsible for paying capital gains taxes. Right. But if you do something through the magic of what's called a 1031 exchange, tax-deferred exchange, which is just the tax code in the IRS book called 1031. It allows you to effectively sell property and take the equity and roll it into other real estate, more real estate, which allows you to accelerate your wealth creation because now you're leveraging up and building a larger portfolio quickly from the equity gains from the previous properties. And you don't have to pay taxes on that, or at least not now. And if you do it right, ever.

You can basically just keep deferring it. So if I were to do, you know, maybe a high-level walkthrough, if I'm understanding you correctly, basically you've got, you can offset your passive income, you know, from a tax advantage that there is as far as depreciating the property. And so when you pay 20% down, you know, you only have 20% capital in, but you depreciate 100% of whatever the value of the property is over some period of time. Time. And then when you do sell and you have the windfall, rather than paying tax on the windfall when it happens, you can reinvest and then you can keep deferring that tax as you keep doing that. So I see how, as you're expanding and growing, especially if you're using debt to acquire the properties, you're offsetting income. That's, that's how they're not paying taxes and they keep deferring it down the road. Yeah.

Just to drill that down into both of those just a little bit more for, for the sake of clarity. The depreciation on residential real estate, like 1 to 4 unit properties, is 27.5 years. Why 27.5 years? I have no idea. I don't know where that number came from, but that's just what the IRS—

some negotiation.

Yeah, right. So you take the improvements, which is everything but the dirt, because the dirt won't depreciate. But you take everything else, the sticks and bricks that sit on the dirt. The IRS will allow you to take 1/27.5 as a fraction of that every year. Without spending a dime. So it's a non-cash deduction, which is amazing, which means you don't have to spend a single penny to get that deduction, that depreciation. Right. Now, again, if it's done right, you'll never have to recapture that later because you can keep rolling your equity into new properties. And there's, you know, just—

it's the government saying, we want you to keep investing in real estate. So that's, that's why they give you that incentive rather than, you know, you can defer your tax if you'll put money into real estate again so that they want to hold up the real estate market through that tax incentive. Yeah. Yeah. Yeah. So it's really, you know, so now I see, well, this is why maybe real estate, I don't know of any other area to invest where you get that kind of advantage.

There really isn't. I mean, have you ever known the government to be good at creating affordable, safe, clean, affordable housing for people?

No, that never happens.

Right. They don't know how and they're terrible at it, but they know that entrepreneurs and individual investors like you and I can do it and do it well. So, they incentivize us through the tax code to do the things that they can't do well. So, that's really what the tax code is if you look at it. Most of it is about deductions, not about taxation.

So, let's talk about maybe then, you know, maybe a little bit more the spiritual side of this for you because, you know, obviously, you had a desire to, you know, be wealthy. You created, you know, this real estate business that you have toward that end. And that's satisfying in and of itself. But is there, is there a spiritual side of saying, you know, I like the idea that I go to work every day and what we do translates into clean, affordable housing, you know, safe, affordable housing for people. Does that ring into your experience at all?

The spiritual side probably lies within my overall mission. So my personal mission has become the company's mission, and that is to help 1 million people create wealth and passive income through real estate so they can become financially free. So that's, that's our company's mission. That was my personal mission. It's just become the company's mission. It's the vehicle to help fulfill that. So the reality is, is we're in a country where the population is growing rapidly. In fact, the population is growing faster than the number of housing units we create every year. So that provides a phenomenal opportunity for us because people need a place to live. Whether they're buying or renting, they need to come to somebody who's providing them that service. Your tenant is a customer of yours. You have to look at your real estate business as a business and treat it that way and operate it that way. So if I'm providing you safe, clean, functional housing and you're paying me $1,000 or $1,500 a month in rent and you're happy living where you live and I'm treating you well, I'm happy, you're happy. It's a win-win. The city's happy, they get their property taxes. The community's happy because it's not a vacant property. You know, it's just an all-around win. So if you can keep doing that, feel good about it, so you're providing a valuable service, that's the best way to invest.

Yeah. So your activities now, as you said, you do training, training other people how to do it. You're an active investor yourself that you manage. So are you still mostly single-family homes? Apartments?

What do you invest in yourself? So my favorite is single family. It's the most abundant asset in real estate. It's, it makes up about 70% of the housing stock. It's very liquid. It's easy to understand, easy to get into, fairly easy to get out of because you have a very large exit pool of potential buyers or investors. So I love single families, duplexes, and fourplexes. That's really the product type that we specialize in, and that's really most of what me and my team and I hold. But I've invested in apartments. I just closed on a 22-unit package a couple months ago in Florida. So whatever can generate wealth, create wealth, and create passive income, and is a prudent play, a prudent investment from day one, so you've got positive cash flow, it carries itself, and it's in a market and a neighborhood that will appreciate over time, that's a smart investment. You have to have all those elements. I call cash flow the glue that holds your deal together. So you have to have that cash flow because equity grows over time. Appreciation happens over time. It just has to in an inflationary environment like we have. So if you can have the longevity, the sustainability to be in the game and invest intelligently, you will become wealthy.

What are the hazards? What are the potential risks? Potential pitfalls for getting into the type of real estate investing that you recommend?

One of the biggest mistakes I see investors make, and I made this myself early on multiple times, is thinking that I'm going to dip my toes in the water or I'm going to start small, which means for a lot of people that I'm going to purchase a $40,000 or $50,000 rental property, which often is in a C, C-, maybe a D-class neighborhood. The problem with that is a couple-fold. Number one, and, you know, I'm being careful in what I say, but the facts are the facts. If you look at the tenant class or the demographic of the people that live there, they typically don't have a high regard for the property that they're living in. You know, they're more transient, they tend to create more damage, they have more problems, self-created or otherwise. That just create headaches and hassles, whether for you and/or your property manager. Number 2, that $50,000 property probably was $50,000 10 years ago and probably will be $50,000 10 years from now. So if your goal is to create wealth, create equity, grow your equity so you can leverage that into more real estate and increase your passive income, that's not the place to do it. So don't start small in terms of these inexpensive properties in D-class neighborhoods. Now everything's relative, of course, you know, coming from California or even in Salt Lake City, you know, a C-class neighborhood may not be $50,000, it might be $100,000 or $150,000, whatever it may be. But you need to start the right way and continue to build your portfolio the right way, which means that you are following your investment criteria. So you set your investment goals, you break that into an investment criteria, criteria and you follow that criteria because that is your playbook or your recipe for what you're going to be investing in. And it'll tell you where you're investing and what you're investing in. So that's the first mistake is starting small supposedly, but buying inexpensive properties.

Don't do that.

So you mentioned one key mistake that you've made, you know, starting out and investing in real estate. What are some other ones?

So one of the other mistakes I made early on is I hired my real estate agent who was my acquisitions person at the time to be my property manager. So, she supposedly knew how to manage properties and she probably did a good job but I wouldn't go as far as saying she did a great job. The problem was is that she had to split her time between working with clients as a real estate agent and being my property manager. But really where the proverbial crap hit the fan happened was when she collected $6,000 of rents in cash. It was a market where a lot of people paid with, you know, money orders and cash. She took $6,000 of that and never sent it to me. She claims she had sent it to me. She claims she had dropped it off at UPS, but there was no tracking. And so I never received that $6,000 for that one month of collected rents. And my mistake was just using the wrong person. And, you know, for the right job, I needed a professional property management company.

Wow. Okay. Yeah, that, I'm sure early on was a mistake that hurt not to get it, you know, the 6 grand.

Yeah, 'cause I had mortgages to pay.

Yeah. Wow. Interesting. So, okay, well that's a good one to learn from. What else?

A big one is choosing the right neighborhoods. Again, you know, you want to invest making the right decisions right from the beginning. And investing in real estate should not be based on price or what you can afford. It should be, what do I want to get from my investment? You know, am I after growth or cash flow or a combination of the two? What type of tenant or tenant demographic do I feel comfortable with? Do I resonate with? Do I want? And so for me, I, you know, we classify neighborhoods as, you know, A's, B's, and C's and D's, and more granularly, you know, A+, A-, So for me, the sweet spot lies in what I would refer to as a B+ and A- neighborhood. It's kind of the best of both worlds. I know I'm going to have appreciation and appreciation potential going forward. I know there's an exit strategy there, there's a retail market, so if I ever need to sell that property, I can. But at the same time, I'm not going into premium areas where the pride of ownership is so high that they're is no cash flow because the properties are just very expensive and the cash flow is just not high enough to, you know, meet the operating expenses and the debt service for that property. So I like the range of B to A neighborhoods. The mistake I made early on is I was investing heavily in C-class neighborhoods, and they look great on paper, but the reality is, is that when you have tenant turnovers, they're costly. They'll wipe out the entire cash flow for that year. And unfortunately, there's very little to no appreciation in many of those markets, those neighborhoods. So you really don't stand to gain anything at the end of the year. I didn't know that at the beginning. You know, I was still a relatively green, out-of-state or long-distance real estate investor. But having learned what I learned through experience, which is the best teacher, I've become a very seasoned and effective and efficient investor. And now I know exactly what to look for and I can identify it within, you know, 5 minutes.

Is there milestones where you're kind of graduating in this world saying, okay, I've got— I did my first property, you know, in the style that you're describing, then I was able to add a second, maybe a third. At what point am I in a new category? How many properties do I have? And let's— I know that maybe, you know, what kind of properties you're talking about, but let's say they're $100,000 or so single-family homes. At what point am I going from kind of an initial investor to a little bit more of a matured place? Like, what are the— and at what point do I have to hire more staff and team? You know, what's kind of the milestones in this path?

So some investors choose to build a portfolio where they get to 5, 10, 15, 20 single-family homes or duplexes, and they have enough equity where they cash out of those, not by just simply selling them because then there's the taxation, but they 1031 into larger properties as they go. So they, they move from single families to duplexes and fourplexes. Then ultimately they take the equity in those fourplexes and they start getting into small and then ultimately medium-sized apartments. That's one direction. The other direction or strategy, if you will, is to continue building a portfolio of these 1 to 4 unit residential properties. And there's nothing wrong with that. We have a client, for example, his name is Lance, and he started off with zero properties. Bought the first 4 very quickly, within 1 year through us, and to this day has bought over 35 single-family homes. And he's got a passive income of over $10,000 a month. He's got a great portfolio and a lot of equity. He doesn't have any, you know, desire to move into apartments. He understands and loves the single-family unit of real estate, and he's happy there. So there's no right or wrong. It's really just what you're comfortable with. From a time perspective, I'd like to think that you should probably budget 5 to 10 minutes per month per property or per unit, per door. Really, that's just accounting. You're just reviewing your statements each month, communicating with your property managers, which is usually by email if and when necessary, and just managing and overseeing. So you're the CEO of your investment empire, if you will. You oversee your property managers who are your frontline management, They're managing your assets and they're handling the accounting and everything else can be automated. Income comes into my checking account every month from the properties in each LLC. And then I have auto payments set up for principal, interest, taxes, and insurance. So I have inflow, I have outflow, what's left over is my net cash flow. And it just sits there in the checking account until I redeploy it into more properties or other investments.

Is each investment a separate LLC or do you hold all your single-family homes an LLC apartments and how do you— what's your entity structure?

So that question is an asset protection based question. There is also a tax element to that. So I'll give you a 40,000-foot answer to it. The general rule of thumb, and I am not an attorney and I do not want to be one. The general rule of thumb is that you will hold your property assets in LLCs in the state that they reside. So if you have properties in Atlanta, Georgia, you're going to create one or more LLCs in the state of Georgia, and you will title those over into a disregarded entity, an LLC. Disregarded simply meaning that it is not an operating business. The taxes come in and go out, they flow through, and you just report it up to whatever the holding company is. The purpose for that LLC is simply for asset protection. Now then the question becomes, how many properties do I hold in that LLC? The better question to ask is, How much equity do I want to hold in that LLC? Because you can have 5 properties in there with no equity, then there's nothing to go after. If there's a lawsuit, there's nothing to sue for. Right. I'm not suggesting you do that, but really it comes down to a comfort level. You have to draw the line in the sand and say, okay, I'm— when I get to $100,000 in equity, I'm going to split out any multiple properties that I have in an LLC into other LLCs and just keep it diversified, if you will, that way. This is a conversation between you and your asset protection attorney. What I wouldn't do is put everything you own in one LLC and think that's good or okay. It typically isn't. And I don't think any asset protection attorney would tell you to do that.

I imagine, though, you can get insurance, you know, to cover a lot of this too. And it may be an umbrella policy to, you know, kind of be a buffer between what your liability is and what the assets are.

Great question. Always have insurance. That's not even an option or a discussion point. So, you will always have property insurance to cover for the basics, you know, hazard insurance. You'll always put $1 to $2 million of liability insurance on your properties, each property. Then in addition to that, you'll want gap insurance or umbrella insurance to backstop anything that wouldn't be covered by that. So, insurance is not an option. You always insure everything you own. And then insure yourself and insure, you know, everything through an umbrella policy is just a backstop. So that is in addition to the entities for asset protection. Who shouldn't do this?

So now, you know, I mean, everything you're laying out says, my gosh, this seems like, you know, the best type of investment, you know, to, you know, for wealth development, etc., for all the reasons we discussed. Are there some people that you'd say, you know, this is not the right type of an investment for you? You should be looking in other directions?

I would like to think that everyone should own real estate, but the reality is a lot of people are just not financially responsible. Unfortunately, in our school system, we don't have financial education, very little to none. And so people graduate high school and get into college and they know very little about money and how it works. And if they knew what an asset is and what it can do and how to create passive income, and know that there are other options than just having a job where you're exchanging time for money, where you can actually put money to work and it doesn't even have to be yours, it could be OPM, other people's money, where you're putting other people's money to work for you, which is what we do all the time as real estate investors, all the time. We leverage our investment capital 5 to 1. In fact, I've done many deals where I've put in zero, I've leveraged 100% of it and still been cash flow positive. That's possible to do. The point is, is that I'd like to believe that most people, if not everyone, should own real estate. The reality is, is a lot of people don't understand finance, don't understand money, and are not financially responsible. They have a consumerism mentality. And if you gave them $1 million, a year from now they'd be broke because they would blow it all. So no, it's not for everybody. You need to, again, have the ability and the willingness and the knowledge to invest. And you can gain those things. You could become those things. The knowledge is out there. In fact, a lot of it's free. It's given away free all the time.

So you mentioned these 10 rules you have. Can you share— you said the first one's education, educate yourself. Yes. So can you share some other ones?

Yeah. So a big one is to be market agnostic. And let me explain why this is a big one. Being market agnostic, and this is really where I started in 2004, when in 9 months I had purchased 84 doors, 84 units. So in a very short period of time, I had amassed a pretty large portfolio, but none of it was in California. In fact, I wouldn't touch California with a 20-foot pole. It's just too expensive. The numbers don't make sense. It's a high-risk market. A lot of downside. In fact, we're depreciating in most markets in California right now. So it's not a place I would want want to be anyway. But being market agnostic is understanding and realizing that here in the United States, we have over 400 metropolitan statistical areas, and every market is local. In fact, you could argue that every market is hyperlocal. What's happening in Detroit, Michigan is certainly different than what's happening in San Diego, California, which is certainly different than what's happening in Salt Lake City, Utah. Every market has its own drivers and dynamics. So what is happening in terms of price price growth, population growth, positive or negative, the rental market, et cetera, et cetera, differs dramatically in some cases between markets. So if you want to be an intelligent, prudent real estate investor, you have to understand that you need to put your capital to work in the markets where it's going to work the hardest for you, grow the fastest, and generate the highest rates of return, cash-on-cash return and total return on investment. How do you do that? You pick a market that has immediate cash flow, an immediate rate of return, and growth and growth potential. And at the core of that is really just jobs and job growth. Right. So you have to be market agnostic in order to be able to make those intelligent decisions, meaning you can't be married to a market. If you— unless you're market agnostic, you're not going to be a very successful real estate investor. The analogy I like to use is this: I do tons of research and I determine that Coca-Cola is the greatest stock to buy today. However, I don't live in Atlanta, Georgia, where the corporate headquarters of Coca-Cola is located. Therefore, I cannot buy Coca-Cola stock because I'm not in the same market. How ridiculous is that, right? So when you separate yourself from the markets and you choose markets based on the fundamentals and the trends and what's going on, you will become far more successful than you would otherwise.

So that makes perfect sense. You want to go to where the stars align basically for what your investment is, not where you are geographically. What other rules do you have?

So geographic diversification. So I hate when stockbrokers and financial advisors say you should diversify because really they're saying, you know, let's not diversify. You know, we're just throwing darts at the wall and just seeing, you know, what sticks. The reality is a lot of stocks will go up, a lot of stocks will go down, or funds will go up, funds will go down, and you can't really predict with a high degree of certainty, you know, what's going to happen. So how do you safeguard against, you know, the changes in the market, which is emotionally driven, very psychologically driven, and you have very little control over? You diversify. Well, in real estate, you can diversify but intelligently, and the way you do that is you diversify Geographically, we already talked about markets being different, and what happens in one market is different than what happens in another market. A very simple example is the more recent announcement by Amazon where they were trying to find, you know, HQ2, their second headquarters. Well, that was a big deal because it's going to bring thousands, if not tens of thousands, of jobs, plus a bunch of businesses that will surround themselves around that Amazon distribution center because they want to be right there to just drop off inventory quickly and cheaply to have wide distribution. Well, that just brings a lot of jobs, therefore population growth, therefore demand for housing. And so now you have upward pressure on prices and you have demand in the rental market and rents will go up as well. Knowing that, you have to be market agnostic like we were talking about, but it allows you to invest in other markets because of things, dynamics that are going on. So my rule of thumb, very quick and dirty, is basically if you're building a real estate portfolio, do 3 to 5 in 3 to 5. What does that mean? It means pick a market that aligns with your investment goals and your criteria. That could be Kansas City, Missouri. It could be Atlanta, Georgia. It could be Dallas, Texas. And you invest in 3 to 5 properties in that one market. Now you have a footprint in that market. You have a management company managing your small a small portfolio of 3 to 5 properties. You can grow it beyond 5 if you want, but have that footprint in that one market. When you get to about 5 properties, identify a second market that's geographically different, and often that'll be in another state.

Are they almost always metro? You keep saying metropolitan areas. Are you sometimes going more rural, or are you sticking close to the metropolitan areas?

Well, that's a good question. It's in the MSA, the metropolitan statistical area. So if you look at a place like Dallas, it's made up of many submarkets which are actually independent cities. They're not Dallas proper.

So you include those in?

Yeah, I'm talking in general terms like the Dallas metropolitan area. I wouldn't say you're investing in Dallas, the city of Dallas, or in McKinney or necessarily, you know, Arlington or anywhere there. It really depends. Again, like I said before, real estate is hyperlocal, so you have to not You start off by looking, this is actually one of my other rules, is take a top-down approach. You start with the market and work your way down to the submarket, and then ultimately to the neighborhoods, and then you're investing in properties that are specific to that neighborhood. That's how you get into the hyperlocal aspect of real estate. So when I talk about Dallas, I'm really talking about regions within the Dallas metropolitan area, which is, you know, another conversation, but I would just want to be clear, Not that I'm saying anywhere within the city of Dallas or the metropolitan area of Dallas.

Right. So, yeah. And I think you answered my question because I'm saying, okay, when you're saying, you know, pick 5 or, you know, invest in 5 and move to another area, you're saying completely outside of the Dallas metropolitan area. Yes. Okay. That's what I was trying to get at. Okay.

Right. So we're going to buy 3 to 5 properties in the Dallas metropolitan area. We'll identify specifically where, you know, the data is out there to figure that out pretty easily. So once we've done that, you could do that in the course of, let's say, 3 months. You could do that in the course of 3 years. It doesn't matter. You've got a footprint in Dallas, in the Dallas metro. Now we're going to pick another market. If I've, if I've identified Jacksonville, Florida, as being the next growth or hybrid market that I want to invest in because it aligns with my investment goals and criteria, we start building a 3 to 5 property portfolio there, and then we do that one more time in a third market, and we can do 4 or 5 different markets if we want. But that creates a great foundation of having about 15 properties spread across 3 metropolitan areas. And that's the place to start. You can continue to build it from there depending on what your strategy is. You can just accelerate the payments, pay them off, and have 15 properties kicking off $1,000 to $2,000 a month, you know, in income and live off of that. Or you can take a fast track and accelerate your, portfolio growth by taking that equity that's growing in those properties and refinancing or doing 1031 exchange and redeploying that equity into more property to build a larger, faster portfolio. So ultimately, when you do get into your cash flow strategy, it'll be much, much larger than what it would be just taking a kind of the slower approach, which is, you know, 3 to 5 and 3 to 5.

Great. So those are, I think, some pretty good rules. Any other ones that come to mind?

So another rule of thumb is really, you know, my 8th rule, and that is use professional property management. It's kind of like a no-brainer in a sense. There's no reason why you should be managing your own properties. I think your time is more valuable than, let's say, an 8-9% management fee that you'd be paying to a management company. So I would rather spend my time with my family, focusing on things I'm loving and passionate about, and looking for more investment property than trying to, you you know, manage my properties, which may not be time-consuming, but it's just not something I want to do. I refer to property management as a thankless job. It's not something I would ever want to do. I certainly wouldn't want to start it as a business. So let other people do it. And, you know, that's just my rule.

That was definitely, over the years, an inhibition for me is, you know, the idea of being a landlord just was never attractive to me. But you're saying there's professionals that can handle this for a small piece of the, of the income.

Right, and so they're professionals. They understand the tenant-landlord laws. They know how to deal with tenants, properly screen, qualify, and place them. Why should I be doing that, especially from, you know, 2,000 miles away when I'm investing in other markets, when I can have someone do that easily, quickly, professionally, and minimize my downtime? Another rule is my 10th rule, and that's a key rule, if you will, but it's just a benefit of investment real estate, and that's leverage. The fact that you can leverage your investment capital with real estate 5 to 1 is incredibly powerful. It's a powerful wealth creator. So I can take $20,000 today and purchase a $100,000 3-bedroom, 2-bath home in a market like Indianapolis, parts of Houston, Memphis, markets within Alabama like Montgomery, Huntsville, and do very well with that property. I'll have a very good cash-on-cash return, but I'm only putting 20% down and I'm borrowing the other 80%. But guess what? I get 100% of the benefits. I get 100% of the amortization on the loan, 100% of the appreciation, 100% of the tax benefits, 100% of the cash flow. And I also benefit from the fact that my 30-year fixed-rate mortgage is being amortized not just by the payments that come in every month that By the way, my tenant is paying, not I. But inflation is eroding 2% to 3% or 4% of that loan every year. So I'm getting kind of this phantom or invisible rate of return each and every year just from the forces of inflation. The bank is not benefiting from it. I am. They're not readjusting for inflation. It's to my benefit. So being a debt holder, meaning that I'm borrowing the bank's money to purchase income-producing assets for myself makes me a beneficiary in many, many ways.

Yeah, that's interesting because, you know, just thinking about having $20,000 sitting in cash somewhere, you know, and maybe getting some small insignificant return as compared to saying you can leverage up, have all the advantages you just described, seems like a very unique opportunity as far as trying to build wealth with smaller resources.

Yeah, I'd like to think that most people should start with $100,000. And believe it or not, a lot of people have access to $100,000. They don't even realize it. And this is true for the coastal markets, the expensive markets like California, even in Utah, New Jersey, New York, where they have $100,000 or more sitting in their property, whether it's their principal residence or maybe a second home or investment property. I call that dead equity, dormant equity, idle equity. The fact is, is the return on that equity is zero, right? But what if you could take that equity, even if you're borrowing against it, let's say $100,000 at 6% interest, interest-only loan, which is only $500 a month in payments. But you can turn that $100,000 into 4 or 5 income-producing properties in the Midwest or, you know, in some of the other markets that we're in. Now, all of a sudden, you've not spent that $100,000. You've invested that $100,000. All you've done is you moved it from your IRA, self-directed IRA, principal residence, other property, wherever it may be, and you've turned that into 4 or 5 rental properties that are now creating cash flow for you and creating wealth through gains in equity. And in 5 years, you can take that newfound equity and rework that. You can pull it out or refinance and turn that into a larger portfolio and increase your passive of income and accelerate your wealth creation. So anybody that can come up with $100,000 immediately, whether it's savings, income, or otherwise, and turn that into a small portfolio of 5 properties, and every 5 years you essentially refinance and rebuild and build up, leverage up your portfolio, in 10, 15, 20 years, you'll be amazed at what you've created. That is how you can get to financial freedom. And I break financial freedom into 4 categories, if I can touch upon that. Yeah, please. So think of it as a pyramid. The largest part of that pyramid is essentially what I call financial frustration. You know, this describes a lot of, you know, the American population where they just can't seem to get ahead. You know, they're always chasing their tail. They just can't get a break. You know, they're always broke. Whatever the case is, they're financially frustrated. Even people who have regular income from a W-2 job feels that way. But when you break out of that, you get to a point where you have financial stability. And this is often what happens when people get married. Now they have two incomes coming in and there's some more breathing room or you get a promotion or whatever the case is. But when you're financially stable, you're making ends meet, you're not overly stressed, you're living paycheck to paycheck. Maybe you're putting putting some stuff away, but your income is typically coming in from active income. You're working for it. When you start investing with the mindset of building passive income, what happens is you go from financial stability to financial independence. You've achieved that when you have predictable and sustainable passive income coming in. And that's the key. It's got to be passive income because it needs to should be 1 to 2 times your living expenses. If you were to lose your job or quit your job, you can still maintain the same lifestyle that you have because you've got 1 to 2 times your monthly income. You're covering the nut, as they say. But it's got to be predictable and sustainable. Then that last layer, that small tip on that pyramid, is what I refer to as financial freedom. At that point, you've achieved 3 times or more, ideally, it would be 10, 20, 30 times, you know, whatever your monthly living expenses are. And that's just a matter of what your financial goals are. You know, you set those goals, not I. But financial freedom is when you have true time freedom. You have enough passive income, which is reliable and sustainable, coming in that you don't have to worry about anything financially. You've achieved everything you wanted to achieve financially, or maybe not, but you've got everything that would be a concern covered. And now you can get on to bigger, better things, things about your mission, your purpose, whatever fulfills you, you know, spiritually or otherwise. And that's really a great place to be because you can sleep in in the morning, you have no stress, you know, you can give back to the community, you could do things, go on a mission, whatever it may be.

Well, Marco, we've covered a lot of ground and explored what I think from a wealth creation standpoint, it's really a magical world this world of real estate in the way that you approach it. So I really appreciate you taking the time to share all your experience with us.

It's been my pleasure, Patrick. It's been a lot of fun.

To see the next episode in the Wealth Breakthrough series, check the video right there next to me.

I think you'll love it.

Continue to believe, and I'll see you there.

The attack surface for hackers is growing explosively.

This is a crisis.

The blockchain is the new architecture for the internet.