Fake Gurus: Where is the Line?

Fake gurus. Where should we draw the line? On one side, we have tons of shady business gurus pumping all sorts of crypto schemes, dropshipping strategies and online courses. And on the other side, we have massively successful billionaires who are endlessly worshipped online. But we never really talk about the middle. What about the people that give out some advice but aren't at that world famous level yet? How can we separate the good from the bad? And where do finance youtubers like Graham Stephan fit in? Well, to answer this, we we need to develop some rules that we can use to assess the value of a particular business guru. Fortunately, it's pretty easy to look back and see who's been making good calls for years and who's clearly just been riding trends and cashing in. So our first filter should just be the quality of the advice given out by a particular person. One of the biggest problems with fake gurus is that they tend to lead you astray. They'll tell you to invest at the worst possible times and then quickly move on to the next trendy investment as soon as the last one collapses. In fact, watching fake gurus pump a particular asset can actually be a good indicator that things are about to crash. That's what happened in 1929, right before the Great Depression. Joseph Kennedy, who was the father of jfk, was a prominent businessman and investor at the time. The economy was booming throughout the 1920s, and it looked like everything just wouldn't stop going up in value. But then a friend told Kennedy that he noticed something very odd happening. Taxi drivers had started giving him stock tips, and his shoeshine boy could give him a complete summary of the day's financial news. As he worked with the rag and polish, Even the homeless man on the street in front of his office wanted to talk about the market. Kennedy took this warning and sold his entire stock portfolio and began shorting the market. The bet paid off big time, and the shoeshine boy has been a metaphor for market bubbles ever since. During a big market boom, everyone looks like a genius since everything is constantly going up in value. But after the market crashes, it becomes clear who's real and who's fake. And I personally experienced this. In 2009, I picked up a book on real estate investing by an author named Robert Kiyosaki. It seemed to have some useful information in it, and it was a nice change of pace from the economics textbooks I'd been reading in college. But something seemed off about it. See, the book was published before the housing bubble collapsed and all of the assumptions in the book were based on the outdated expectation that housing prices would never go down. In hindsight, the strategy he outlined looked a lot more risky than he made it sound. And that ultimately led to him being labeled a fake guru online and eventually even filing for bankruptcy in 2012. So rule number one seems ironclad, right? When we see a guru type hyping an investment, we just need to check their track record and we'll easily be able to tell if they're the real deal or not, right? Well, it's not quite so simple. See, sometimes people make legitimate mistakes, but are still well intentioned. This happens for a few reasons. Sometimes people just get ahead of themselves. Like when Bill Gates published a memo in 1995 about the Internet tidal wave that was around the corner. His message was crystal the Internet was about to change everything, and he was laughed at on late night TV for making such aggressive claims. But here's the weird Bill Gates was wrong in the short term, but right in the long term, the the first Internet tidal wave caused tons of investors to wipe out during the dot com crash, but anyone who built for the long term wound up sailing off into the sunset. So if it was 2001 and you were watching your portfolio of Internet stocks crash, you'd probably be pretty justified in calling Bill Gates a fake guru. But then you'd be proven wrong over the next decade. So we can't purely look at recent track records to determine if someone is the real deal or not. We have to go deeper. Well, maybe we should follow the money. It's always a little suspicious when you see someone asking people to pay for information these days, especially considering how much information is widely available for free online. And nearly everyone who gets called a fake guru regularly has some sort of paid online course that they are constantly shilling to their followers. Dropshipping, crypto trading, life coaching, and more are all ripe targets for paid courses. And I've even seen people selling courses about selling courses. It's extremely meta. But I guess when you've run out of things to teach people, the best option is to just teach them about teaching. These paid products sit at the core of every fake guru accusation. Most people wouldn't care if these gurus were just shouting into the void on social media. The problem always comes when they convince people to overextend themselves and go into debt to pay for some expensive course or seminar that simply doesn't provide the value they promise they so this feels like a simple rule we can apply across the board. If you're charging people Money for information. You're probably a fake guru and should be avoided. But a blanket statement like this doesn't quite work out in practice for a few reasons. Just look at all the counterexamples. First, let's look at the billionaire author of Shoe Dog, Phil Knight, co founded Nike and spent decades building it into a massive global athletic brand. There's no doubt that he's the real deal when it comes to business. He's worth tens of billions of dollars and. And anyone can independently verify his accomplishments in a matter of minutes. He's basically the opposite of a fake guru. But then why doesn't he give his memoir away for free? The book is an international bestseller. It's clearly helped millions of people deepen their understanding of business, and it's even being adapted into a Netflix biopic. Phil clearly doesn't need the money from the book sales, so why not let the information be free? Well, publishing a physical book does have a real cost, as does distributing it to bookstores across the world. I'm sure dozens of people helped him edit the story, translate the book into different languages, and design the COVID art. All of those people should be paid. And $14.99 is a reasonable price to ask people to pay for such an entertaining book. Clearly, the value a reader gets from Shoe Dog is greater than 15 bucks. So instead of getting called a fake guru, Phil got a gleaming review from one of the biggest value investors in history, Warren Buffett. But a $15 book is hardly a strain on most people's finances. A thousand dollar course, on the other hand, actually could be. So let's talk about course sales. This is where lots of fake gurus start making real money. And it's also where things start to get predatory. If a book promises to reveal some secret truth about success, and it doesn't, so what, you're out 15 bucks? But if you spent thousands of dollars with the expectation that a particular course would help you transition careers, and it's filled with a bunch of nonsense, now you have a problem. So it's easy to look at anyone who's selling courses online and can you and instantly label them a fake guru. But I think this is a mistake. I've personally had great experiences with many online courses ranging from completely free to thousands of dollars. And I'll give an example. A few years I was getting really interested in motion graphics and wanted to learn a new program called Houdini. The software is notorious for having a steep learning curve, and I was struggling to make progress by myself. So I paid around $400 for an online class called Stop Being Afraid of Houdini. The class was taught by an experienced Houdini artist and and after watching the lectures, everything really clicked for me. I didn't become an expert overnight, but I learned enough to get comfortable. The key here is that the promise of the course was extremely narrow. The instructor was only focused on teaching you the basics of this particular software and made no claims about what you could do with those skills once you had them. He never said, you'll be able to work on the next Marvel movie or this will change your life forever. Online courses are actually one of the most powerful ways to learn new skills in my experience. And some courses really take a lot of money to produce. Truly knowledgeable people could spend their time making money applying those skills, so you can't write them off just because they're charging for courses. But there's one thing that always seems like a major red flag. Paid advertising. You remember that viral video Tai Lopez paid to promote all over YouTube back in the day here in my garage? It always seems suspicious when someone is paying money out of their own pocket just to give you advice. It just doesn't add up. These ads clearly cost a lot of money to run, so they must have a plan to make a profit in the future. And that's certainly the way it works for most fake gurus. They blast ads out across social media and then slowly push potential clients through a funnel to get them to spend more and more money. It might start with a semi affordable online course, but then quickly progress to more expensive mastermind sessions and in person conferences. But as ridiculous as that Tai Lopez video is, the crazy part to me is that what he's actually saying is completely reasonable. At the time, his pitch was basically to encourage people to read more books about business, and he would make money off of these ads by selling people a book club where they would receive a box of books in the mail every month. Even though Ty basically became the poster boy of the fake guru phenomenon, the importance of reading really can't be understated. Warren Buffett has been a voracious reader for decades, but it was perhaps Marc Andreessen who put it best when he There are thousands of years of history in which lots and lots of very smart people worked very hard and ran all types of experiments on how to create new businesses, invent new technology, new ways to manage, etc. They ran these experiments throughout their lives. At some point, someone put these lessons down in a book for very little money, and a few hours of your time. You can learn from someone's accumulated experience. There is so much more to learn from the past than we often realize. You could productively spend your time reading experiences of great people who have come before you and learn every single time. But even though Marc Andreessen might be saying something similar to Tai Lopez, he's not paying to promote this concept. But there's another billionaire who does run ads. Ray Dalio, the founder of Bridgewater. Dalio has published two massively successful books full of advice, and they've earned broad acclaim. The weird thing is that his team will actually pay to promote his ideas on Facebook. So what's going on? Well, I think Ray genuinely believes that his ideas are worth spreading, so he's okay with paying to promote his books online. There is another possibility, though. These books serve as great recruitment tools for the hedge fund he founded. At the end of the day, a business is only successful if talented people choose to work there. And Ray's books certainly put Bridgewater on the map as a desirable workplace. So if we can't immediately discard information from people who run ads promoting their content, how can we reliably draw the line between fake gurus and valuable teachers? In order to answer this question, I asked two YouTubers who have studied fake gurus over the past few years. James Johnny and Coffee Zilla. Interestingly, they both said essentially the same thing. It comes down to false advertising and predatory marketing. The hallmark of a fake guru is someone who claims to be able to completely change your life, help you get healthy in just a few weeks, or make you a millionaire overnight. The these promises are impossible to make good on, even for the best business leaders in the world. But these fake gurus have no problem over promising and under delivering because they know that there are always more potential customers just around the corner. At least until Coffeezilla makes a video exposing them. So now that we have a solid framework for analyzing fake gurus, let's take a look at Graham Stephan. Graham has been remarkably successful on YouTube and clearly has a rabid fan base who listen to everything he says. He. He easily could step over the line and become a fake guru. But has he? Well, in terms of advice, he's extremely conservative in his recommendations. He's always citing sources and recommending tried and true investment strategies. He's never pumping sketchy crypto projects, and his constant recommendations to buy ETFs have actually become a bit of a meme. But what about courses? Graham does sell online courses, but they're pretty reasonably priced at around $400. And most importantly, they are narrowly targeted at teaching very specific skills, mainly YouTube video production and real estate sales, which are areas where Graham has clear experience. If he was constantly dropping new classes about topics that he had no experience in, that could quickly become predatory. But he doesn't. So Graham clearly isn't a fake guru. But YouTube is still a messy place filled with disinformation and predatory marketing. So stay safe out there. And if you want to learn some business advice from the investors behind Quantum, Coinbase, Airbnb, DoorDash, and many more companies, just watch my video about Y Combinator next. Thanks for watching.