This New Retirement Risk Just Got Exposed (You're Already Invested In)

There's a $13 trillion lie sitting inside your retirement account right now. Not a risky bet, not a bad investment, a straight lie. Now, the people that are running it, they have a fraud score higher than Bernie Madoff. But what makes this so bad, so dangerous, that this time the money isn't coming from Wall Street or the banks? It's coming from your pension funds, from your 401s, your retirement accounts. This belongs to teachers, to nurses, to firefighters, and Maybe even you. Now, when this unwinds, the fund managers who've already gotten paid, they're not going to take the loss. You will. So here's exactly what we're going to cover in this video: what this actually is and how it got inside your retirement account without your knowledge, the specific math that proves the numbers are fabricated, and the two ways this probably ends so that you can end up on the right side as this whole system breaks and destroys an entire generation of savers. And by the end of this video, you're you'll understand something the SEC completely missed and that one guy with the laptop exposed, and we're going to break it down. So let's go.

All right, let's jump right into it.

We have a lot to break down. Now, this is on the back of a lot of research that's been put together by some other people. We'll link to their original research down below if you want it. But we're going to talk about this $13 trillion lie. This is really dangerous if you have a retirement account, a pension fund, a 401, whatever you have. And I do want to say just real quick, this is a lot of work that we do. Bringing these deep dive thesis all the time. And if you wouldn't mind doing me a small favor and just hit that subscribe button right now, it'll really help out me, the rest of the team that we're all here working really hard. It'll also help other people that need to see this get this information. All right, let's break this down. So the first thing, this is all revolving around something called private credit. Now, over the last week, you might have heard about this because it's becoming a pretty big deal, but most people have never heard about private credit. They don't understand what it is because, of course, you haven't invested into it. You don't even know about it. But basically what private credit is, is it's credit that banks won't approve. So typically the banks issue loans, they give you credit, they give you business lines of credit, business loans, small business loans, things like that. But when banks won't do it, when you're so risky, when you're not good, you don't have good creditworthiness, then they— the banks won't approve it. So they go to private credit. So that already tells you right off the bat, it's like prime, subprime, and then banks won't even touch it. So go to private credit. Now, This is something that we're calling a shadow banking system. Why? Well, the banking system really has 3 purposes, right? So we have storage of money, we have payments, and then we have loans, right? So they're doing all the loans, but not in the traditional banking system. It's a shadow banking system. Now, the reason why we call it shadow is it's not in the light, but it's also much more dangerous. It's not really regulated the way that, that other banking systems are. And a lot of your retirement money is going into here and no one's paying attention. But we're going to break this down. Okay. Now, some of the big names you've probably heard of Blackstone. They're one of the really big participants in this. Apollo is a big one. Blue Owl, they've been in the news a lot lately. I'm going to break down exactly why they're in the news. But the question is, where do they get the money? But before we answer that question, let's just take a look at this. So you can see the growth of the private credit markets. This is going back to about 2000 when they were barely not even existent. But as you can see, even though banks keep getting bigger and the margin requirements keep getting dropped on banks so they can make more loans than ever before, the extent that this private credit is being used is going almost parabolic. Here we have— this is through about 2023, 2025, it's even higher. But you can see the rapid rate of growth. And of course, the red here is all in America here. So you can see it's being used in other countries, but it's mostly being done in America. So it's becoming really popular. But again, you've probably never heard of it. But let's take a look at this. Where does the money come from? Because this is the big piece that's going to maybe irritate you a little bit. Let's break this down. So as you can see here, this sort of breaks down how the private credit system works. So what we have up here, private credit and investors and borrowers. So right here, this is the long-term investment horizon. This is the money that comes in. And right here it says pension funds. So maybe some of your money going in there. We have insurance corporations. If you have money in some sort of insurance policy, it's right there. Sovereign wealth funds and of course retail. So all that money goes into these funds that we're going to talk about here. And eventually it comes down to these corporations that need to borrow money that are maybe too risky, that can't get it from the banks. But it's coming from your pension funds. It's coming from your retirement accounts specifically. Now, the problem that makes this so dangerous is, as I said, it's like the shadow banking system, meaning it's not being watched, it's not being exposed, and it's not being regulated the rest of the system the way the rest of the system is. And the problem is that we have a massive conflict of interest. Now, I said conflict. Or is it a model? Have they developed a model that's a conflict of interest, but it's the way the model works and they need the conflict of interest in order for the model to work. So let's take a look at how all of this works. Now, first of all, one of the big firms that we're going to use as our example here is Cliffwater. So what we can see is that Cliffwater Corporate Lending has been given an A, an A as their issuer credit rating. So on paper it looks great. Oh, A+, A, okay, that's fine. Looks really good. At approximately $40 billion in assets. Cliffwater Corporate Lending is one of the largest US-based perpetual life funds. Perpetual life. So they loan money through that. And A means they have a long-term issuer credit rating. Okay, so they're really good. But how do they get that A credit rating? Well, it's pretty interesting the way that works. Let's take a look at this. So we can see here, this is a Bloomberg TV segment on private markets warns So even TV is warning people. Most people just haven't picked this up. They're warning that private equity, they have a very strong incentive. They have strong incentives. Charlie Munger would say, show me the incentives, I'll show you the outcome. Look at the incentives here to cherry-pick prices that let them reap higher fees at the expense of their clients. Of course they do. They want the most amount of fees. Former SEC chair warns they do things to make sure that you keep getting your stream of management fees. So what they're doing is they're rating their own book. They're picking the things that have the highest fees to make their fund look, look like it's doing better. They cherry-pick and they pay the valuation firm. So they have this vested interest or this, I should say, conflict of interest where they pay the fund or the firm to give them a good credit rating. And if they don't pay them, then they don't get a good credit rating. So that's why it's a conflict of interest. Now, if we peek under the hood and we start looking at the real data, we can start to see just how bad this is. And I put here cooking the books because again, This is all a conflict of interest, and that's how they're getting away with it. So if we go by loan by loan, I didn't go through 2,300 loans. I'm using some of it in some of the research by this guy Nick. I'll put a link to his full research down below if you want to get it. But we can see here he went through, he went through and did the work that the regulator is supposed to do. He went through and did the work that you would hope that the SEC or some sort of regulator would do to protect you. Maybe your fund manager, pension fund manager. Of course they don't. Because they all want their cut. But let's take a look at what he did. So he went loan by loan, 2,330 positions. That's a lot. Good thing we have AI today to do that. But he went through and researched hundreds of them. And here's what he found: 189 loans where borrowers couldn't pay cash interest. So we have borrowers who can't even afford to pay the interest on their loans. But instead of defaulting, Instead of calling the loan due, which would cause them to mark those loans down, instead they just let them roll it into their principal. I understand you're too broke, you can't afford your payments. Don't worry, we're not even going to give you a delinquency. We're just going to allow you to continue to roll that into the principal. We're going to give you more credit because you can't pay for the credit you have right now. They saw that 58 of those were loans that had to be restructured entirely because they couldn't even afford to keep making the payments and they kept putting it into the principal and they couldn't afford that either. Over 50 loans where borrowers aren't generating enough cash to service their debt at all. So on paper, it looks like they keep making money. On paper, the fund's doing amazing. On paper, they report no losses. But when you peek under the hood, you can see that's not the picture at all. What the industry calls non-accruals— they carry on the book at full value. The reason why they want to carry on the book at full value is, again, so the fund looks like it's doing good. Not quite a Ponzi scheme. Sort of like a Ponzi scheme. But the interesting thing is the question is how many of these non-accruals does Cliffwater officially report? What do they actually show? Well, the answer is zero. You see, so they're cooking the books, but how do they get away with it? Well, they get away with it again because they pay the rating agencies to come in and mark their book. And as long as they mark their book to still be active collateral, they look good. We can see right here. If the marks don't move— so the marks being how much their loan book is worth— if the marks don't move, volatility is near zero. If volatility is near zero, then any positive return produces an astronomical Sharpe ratio. So the Sharpe ratio shows the volatility and the return profile of that. And so these are getting astronomical Sharpe ratios because they're showing no volatility. So any uptick Makes it look amazing because there's no downside. But why is there no volatility? Well, because the marks don't move. And again, why don't the marks move? Because the rating agencies don't move the marks. That's what we're talking about, the conflict. We can see here there— we can see it's evidence that the Sharpe ratio being so high, it's evidence that the marks are fiction. So we know that that loan book is not worth what they say it is. It says that they have an A rating. And the marks haven't moved because the rating agencies haven't moved them down because of conflict of interest. But we know they're fiction because of that. It says a skewness of a -2.45 and an excess kurtosis of 1.44. So this is measuring the, the ratio, the Sharpe ratio, to— so we understand how much risk and how much reward profile we have. It says risk is catastrophically asymmetric to the downside. We don't want that. We want asymmetric to the upside, meaning we have more upside than downside. But in this case, you have way more downside than upside. We don't want to invest in that stuff. Kurtosis of 14.4 means extreme events are hiding in the tails. So they're not showing up. You don't see them in the monthly returns, but eventually they all arrive at once. That's the problem. The returns look calm 96% of the time, and then disaster strikes. So what they're saying is that there's massive risk. You can see it if you dig a little bit into the numbers. You can see that there's massive asymmetric risk. So there's not It's not going up. All the risk is to the downside. And that's what's going to catch most people off guard. Okay. And the problem is this is everywhere. When you dig through the private credit, when you dig through private equity, you start to see this is just the way the game is played. The incentive structure. Again, show me the incentives, I show you the outcome. Because of the incentive structure, this is what we get. This is the outcome. Now, what we can see is Apollo, one of the big funds— let's take a look at this— Apollo's own executives admit as much. And we've seen Blackstone, one of the biggest, Blue Owl, they've had to recently now stop redemptions. It's a pretty big deal. You can see some news headlines right here. Trapped in private credit, investors wait to pull out $5 billion. So investors who have their money in there that want to get their money back out, the redemptions are paused. Blue Owl peers push back on private credit risks amid market jitters. You can see private credit funds face redemption crisis. So it's not just Blue Owl.

All these private credit funds are facing this same redemption crisis. Now, is—

why are the credit funds having problems? Well, part of it is because these are going to businesses and mostly what we'd call white-collar borrowers. So these are not the blue-collar borrowers, these are the white-collar borrowers. And what's happening, a lot of people are saying because of the softness in the job market, AI specifically targeting that layer of jobs is causing the weakness here. Blue Owl, HPS joint private credit funds stung by February losses. So they're seeing massive losses and all of a sudden they're having to freeze redemptions. Never a good sign. James Jamie Dimon, he says that when you see one cockroach, there's probably many more. It's like they say, when you see smoke, there's probably fire. When you start to see that all of these books look to be cooked and they're starting to pause redemptions like a Ponzi scheme would, then you have to imagine there's lots of cockroaches, that there's probably fire on the other side of this. Now, this is a really big deal. It's a really big deal for everybody, but we can decide which way we end up. Now, when I look at this situation, I see two potential outcomes. There could be 3. I see 2. Let's break these down. The first one is that there's a very fast version like we saw in 2008. What do I mean? In 2008, we saw the great financial system unwind. It collapsed and it happened very quickly. All right. Everything broke at one time and then it started to recover again. All right. That'd be the good version. I'll get to the second version first. But we can see back— if we go back to 2008, the subprime mortgage crisis, that the losses on mortgage-backed securities rapidly spread throughout the banks. So it was like contagion. As soon as it started happening, it was like one domino after another and the whole, the whole house of cards came crumbling down really quickly. It rapidly spread through the banks, forcing simultaneous interventions. And so because it happened so fast, because all the banks started cascading down, it required massive intervention at the same time, simultaneously. It says here an unregulated private label mortgage securities market exploded from $148 billion in 1999 to $1.2 trillion by 2006. So this market had grown from $148 to $1.2 trillion, $148 billion to $1.2 trillion. So it grew really fast, unchecked. So the whole system came down with contagion and then it required a simultaneous intervention. So it happened quickly. The system collapsed quickly and the intervention happened quickly. That was 2008. That would be the good version. Okay, let's talk about the version number 2. This one's the most dangerous and it may be the most likely of what we're looking at. Okay, so the second one is the long, slow version, and Japan is the best parallel for this. So with Japan, it didn't break all at once. In Japan, it started slowly, unevenly, and it's gone on for over 2 decades. Look at this. So we can see from 1992 to 2000, over 2 decades, Japan spent ¥86 trillion. Yuan, about 17% of GDP dealing with non-performing loans. Exactly what we're talking about, loans that were going bad and they had to kind of keep papering over them a little bit here and there. But Japan's Lost Decade, or two decades, describes how highly leveraged firms and investors defaulted over time. So not all at once like in 2008. They did it over a period of time. The non-performing loan ratios— non-performing loans sound familiar— started to rise pretty rapidly. Banks merged and they become zombies. They tried to kind of solve the problem. Banks started kind of joining together, merging together to try to solve it. They became zombies. They couldn't afford it. And slow regulatory response. So because it didn't happen quickly, we didn't get this fast regulatory response like in 2008. It happened very slowly and it turned what could have been a short shock into instead a decade of stagnation and deflation, which is much worse. Said here by the mid-'90s, there were vast, vast underestimates and that those losses kept emerging, but in waves. So it was like it got really bad and then it kind of got better and then it got bad and it got better and it got bad and got better. And it went on for decades instead of happening all at once. And here's where it gets really bad. So what does that mean for us as investors? What does that mean for you as an investor if you have money in a pension fund, in the stock market, in the 401? Well, we can see what happened right here. From 1972 all the way here until 1982, for over a decade, we saw investors here in the United States in the S&P 500 lose money. So we saw a peak right here and then it crashed down, okay, into 1974, 1975, and it took over a decade to get back up. But that's not what it was like living through there. So when we look back with a lens, it's easy to go, oh well, I guess I had to wait a decade to get my money back. Well, if you were retiring somewhere around around here or here or here, that's pretty bad. But for us, we go, oh, I guess it was a decade. But what was it like living through that? Because this is really the key piece. During that time, you lost 2% per year after inflation. You lost about 20% of your purchasing power over the decade. So even though it came back, I still lost about 20% of my purchasing power. It's really bad if I'm trying to retire. But what was even worse is the volatility that happened. And what happens is, as investors, our emotions get the best of us and we get shaken out. And so all of a sudden it gets worse. Oh my gosh, I hope it's going to hold. And then it bounces. Okay, it's going to, it's going to bounce. And then it gets worse. Oh my gosh, what's going to happen? I hope it, I hope it finds its footing. And then it falls all the way down. And then maybe it bounces a little bit and we're like, I'm out, I'm out. I'm just going to hold my money and I'm going to wait till it hits the bottom. So I'm going to sell somewhere here along the bottom. And what happens is humans are terrible investors because emotions get the best of us. So we buy the tops of the market and we sell the bottoms. And so what happens when you go back and actually study this period, you see that almost all the investors got flushed out of the market during this time frame. So if you held for a decade, sure, you kind of got back nominally. You lost 20% of your purchasing power. But the reality of people that lived through this situation is they were shaken out of the market. They kept buying at the top. They kept selling at the bottom.

They bought at the top.

They sold the bottom.

They bought the top. They sold the bottom.

And so that's the problem of living through this. That's the problem of having this long, slow version, which is what we're looking at right now. Happened over 20 years. The market chopped down 10%, up 20%, down 15%, and we all got shaken out. Retail got completely destroyed because, again, they sell the bottom, they buy the tops, and they do that over and over and over. Okay. So now that we know all that and thankful that we have the benefit of hindsight today, we can go back and study what's happened in the past. What are we going to do about that as investors and how are we going to think about this? Well, first of all, who's exposed here? So we have to understand that retirees are the ones that are the most exposed because they're the ones that are living on that money right now. And if it starts going up and down while they're trying to live on it, it's going to be very difficult for them. But it's also bad for any of us that have money in the market. We can see that pension plans have been pouring billions into private credit funds. So if you're— if you have a pension plan or you have some sort of a plan administrator that's running your 401 or mutual funds, You probably have exposure here. And the key is a very important key here is that participants do not choose these complex allocations. So you have money in your retirement, your company's retirement plan, your pension plan, whatever. You didn't choose this. No one gave you the option. Hey, do you want to invest in this private credit? And hey, look at how they get rated and how they mark their market and look at the Sharpe ratio. You didn't get that. You don't even know you're exposed here. Most likely you didn't choose this. And it says here, savers rarely see or if they see, rarely understand private fund documents altogether. So here's what you want to do. First, know what you actually own.

What do I buy?

I talk to so many investors all the time and they're like, well, I have my 401, I have my mutual funds. But your 401 is just a wrapper like an IRA. There's stuff inside of it. What do I have in there? I have money with my pension fund. What does my pension fund hold? So the first thing is know what you actually own. You want to understand your exposure. Then what percentage of your portfolio is exposed to this? What percentage of your portfolio is exposed to private credit and private equity? Get on the phone with your, with your plan administrator and ask them that question. What percentage of your portfolio are you exposed to this stuff? Then understand the difference between asset marks. So start to understand, well, they're saying the value is this, but is the value really that? How do I know that's where the value is? And we want to start to understand how they mark the value of those assets. And then finally, dig your well before you're thirsty. Build a system before you need one. So start thinking, shoot, if I have all this exposure to this, maybe all my money's in this pension fund and I don't really have any control over that. What happens if we're exposed to this? What happens if we go into this lost decade? What happens if we have this volatility?

What am I going to do?

And you want to start building a system before you need one. That'd be investing some of your own money outside of that system, trying to get exposure in areas that may be counter to that or some way to protect yourself. Because the private credit market, it's a problem. It's going to continue to be a problem. As Jamie Dimon said, if you see cockroaches, there's probably more. And we could be like 2008. It could be swift and a swift recovery, or it could be more like Japan's 2020. I'm going for more Japan 2020. Let me know what you think down in the comments down below. Again, share this with somebody who might be exposed to this and may need to be aware and make a phone call. Share with a friend.

Most people spend spend their entire lives building wealth and they never once think about what happens to it when they're gone. You know, they just assume that their kids are going to figure it out. They assume that the lawyer is going to handle it. They assume that the money just transfers, but it doesn't. 90% of wealthy families lose everything by the third generation. And it's not because the money wasn't there. It's not because they picked the wrong investments. It's because they passed down the assets, but they didn't pass down the operating system. So in this video, I'm going to change that. I'm going to show you the exact system I've built to make sure that my wealth doesn't die with me. I want to show you how you can do the exact same thing. And it starts with something most people have never heard of. Are you ready? Let's go. All right. Now, to start this off, I want to kick it off with just a personal story. If you follow along, if you watch me on Instagram, by the way, if you don't, there's a link down below. But you'll see, like, I travel around the world. I do a lot of crazy things. Last week I was jumping out of helicopters in Canada. And this week coming up, I am riding my dirt bike across the desert of Baja down to Cabo San Lucas. And so my wife, she's like, man, you know, like, I'm worried. Like, what happens if you disappear? Like, what happens if something happens to you? Right? What happens if I don't come back? What does my family know about the wealth? How do they know what to do? How do they manage everything that we've built? So of course, like, we have life insurance and we have money and we have assets, but like, where's the instructions? Is there a document? More importantly, Are there a set of rules or do they just get the money and they don't know what to do with it? They spend it and then it's gone. There's a saying, shirt sleeves to shirt sleeves in 3 generations. What this means is that we have the first generation that they earn it, right? They build all that wealth, they build the machinery, right? The second generation typically a lot of times hopefully can maintain that. But by the time it gets to the third generation, they completely destroy the wealth. And the thing is, is it's not a money problem.. It's not that the money runs out. It's an instruction problem. It's an operating system problem. It's a values problem. Now there's 3 reasons why wealth dies. All right. First, there's no rules. So every decision that they get is just emotional. They get the money, they don't know what to do with it. They didn't earn it. They don't respect it. And so there's no written principles about that. The second reason is there's no structure, right? So the person didn't earn the wealth. They didn't build the system that generated the wealth and everything that lives in the person's head just died. And so what happens is when they die, then things go a lot of times into probate court, maybe into legal battles. Taxes start destroying it, all of those things. Another true personal story here. My sister, unfortunately, her husband died when her kids were just very young, and I had to watch her go through this firsthand. It was terrible. It's a nightmare that you don't want to have to go through. It's crazy how much the state will fight you over assets that you basically own, right? You're, you're married, right? You should have those assets. It's a complete nightmare. And so you don't want that to happen. Now, the third one might be the most dangerous one. And it's not because there's not enough money and it's not because of probate. Maybe you have the will, you have the trust, whatever. But the most important one is the identity transfer. You see, what happens is I have built a system for my assets to continue to multiply. I have built a system where my taxes don't get paid to the government. They buy me more assets and my assets pay for my life. And that can go on in perpetuity. And in the second generation or the third generation, those assets will be worth so much money. But if my heirs don't know about that system, they just see the money. They don't have the identity. They get the balance sheet, but they don't get the operating system. That's the problem. We need to make sure that identity gets passed down. And don't worry, there's an exact step-by-step process. I'll walk you through how to do that. But real quickly, if you just think about this for a second, think about your kids. Think about how well you've trained your kids. But more importantly, think about this. Think about your grandkids. I've heard that the sign of a good father isn't how well their kids behave. It's how well their grandkids behave. Think about that, right? Did I teach my own kids good enough to teach their kids? That's the real question. And how do we do that? Well, we give them a set of instructions, which we'll come back to. You see, most people think about estate planning and again, they think about the wills and they think about the trusts and like, yeah, I wrote something down. It's in my safe. Yes, I have an attorney, right? That's, that's the asset transfer. But again, what we want to talk about is the legacy transfer. And what is the legacy? The legacy is me. It's my values, it's my vision, it's my principles, it's my rules. And I don't want to say my, my, my, but like, I'm the one that had those values, vision. I'm the one that had those principles. I'm the one that had those rules that created the wealth in the first place. So it only makes sense that those values should be passed down to the next generation. If they're going to manage it. Okay, so let's break down exactly how we do this. And I do it through something I call a family constitution. Now, the family constitution can be very simple. It can also be much more complex. As a matter of fact, I'll give you a tool if you want to do this on your own at the end. But a family constitution is basically a written document. Think of it like the American Constitution, the greatest constitution ever made. But it's a, it's a document and it codifies your family's values. All right. It basically spells out what your values are, what your long-term vision is, um, all the different rules that you have about how you've built the wealth, how you use the wealth, how the wealth should be transferred, all of those things. All right. Now, what are some of these rules that should be there? What are some of these principles? Well, it comes down to what you want your values to be. How should you pass those down? More importantly, like, how do you view the world? So for example, do you value, um, health? Well, maybe you want to make sure that your heirs value health. Do you want to value giving? Well, Maybe you should value giving. Do you value education? Do you value faith? What are these values that help guide your decisions? And then we can write those things down. How did I build the wealth? What do I think about wealth? For me, it's not just about money. The reason why I only— the only reason why I care about money is I want to give my family more options and I want to help more people. So I wouldn't want to give money that would contradict those things. I wouldn't want to give money to my heirs that doesn't give them more options and doesn't help more people. I don't want them to be lazy, sitting on the couch getting paid to do nothing. That would be contradictory to all the values that I have. I want them to prioritize health. I don't want them sitting on the couch drinking soda, watching Netflix. That would be against my values. How can I make sure that a certain percentage of that wealth gets donated to the charities of my choice? For example, I told you one of the things I'm going to be doing is riding my dirt bike across the desert down to Mexico.. And over the years I've been doing that over 2 decades now. I give back to many charities along the peninsula. That's been my life. Well, I kind of want my money to continue to give to those. And so maybe that should be in the constitution. You're starting to get the idea. Okay. So that is the structure. First of all, I want to make sure that I've built the system and I don't just pass down assets, but I pass down the system and the system has a constitution or set of rules. One of the families that you hear about the most, they've been able to pass wealth down from generation to generation longer than any other family in history. I'm talking about the Rockefellers. You've probably heard of them. And they didn't just pass down capital, right? That's not how it worked. All the other families, the Carnegies, whatever, they lost their money. But the Rockefellers, they passed down frameworks, they passed down rules, they passed down the operating system. As a matter of fact, J.D. Rockefeller, the, the the founder of them, he wrote 38 letters to his son. It's a— it's amazing. You should check it out. Each one of those life lessons was education and contribution, contribution requirements, structural rules. Now, again, other families like the Vanderbilts, they had more money at the same time, but they lost it all. All right. Now, in order to do this, in order to pass this down, there's 3 layers that you want to think through and there's 3 layers in there. So the first one is going to be your vision. And your values. All right. So this answers who we are. Who is the Moss family? What does the Moss family stand for? What are the values that we have? We're, we're, you know, we're adventurers, we're caregivers, we're truth tellers. We're a family of faith. Right. All of those things. Who are we as a family? Why do we build wealth? What do we believe about money? What do we believe about stewardship? What do we believe about creating value? What do we believe about giving back to the world? Why do we build wealth? So I want to build all of that into the vision part, who we are, why we want to build wealth. Think of it like I'm, I'm leaving a letter to my heirs, right? I'm going to give this to my kids, but I'm going to give it to my kids, which will give to my grandkids or my great-grandkids who may never even know me. So it's like, these are the things that I believe made me who I am today. These are the things that I hold important in the world. These are the things that I want you to know. No. And if you don't live up to those values, then like the Soup Nazi in Seinfeld, uh, no money for you. So those core values, they should be codified, they should be written down, right? They're written down in code, they're written down so everybody can see those. Okay, so now this layer becomes the lens. So when someone wants to start a business again, if they want to take a risk, they want to spend family capital, we're not going to argue about their opinions, right? They're going to reference what the values are. Okay, then the next layer we want to go through is the rules of the wealth around the stewardship of the And kind of more importantly, like, how is the wealth supposed to be used? So this would be principles on the wealth stewardship. So my investment philosophy, how I think about spending and consumption rules. So for example, we never sell assets to pay for consumption, right? That's one of my core rules. We only sell assets to buy more assets. For example, a charitable giving. How much of that wealth should be given to charities? What type of charity should we do that for? Now, there's So there's 3 never-break rules that I like to think about in my own personal constitution. This is for me, doesn't have to be for you. But again, as I said, we never sell assets, right? If we need liquidity, we borrow against our assets. If an asset sold, then we rotate it into another, another asset. We never consume it. As a matter of fact, as I wrote out instructions for my wife and my kids, I have one set of instructions for my wife. I have another set of instructions for my kids if my wife and I were to die. Like, open this, call this phone number, here's a set of instructions. But it's like, here's how much cash flow is coming in. You can take this money and create more cash flow here. If you need more cash flow, you could borrow against this asset and put it here for even more cash flow. And then if you need even more cash flow, which they never would, then you can take these assets and borrow against that. So I've laid out this whole set of instructions for them to follow if they want to do that, but we never consume the asset. Assets. Again, uh, use life insurance, use your— use your assets, build more life insurance if you need to, whatever you can do to get that done. All right, then we want to have the declaration. Um, and there's a difference with the declaration and articles, right? So the vision is like a Declaration of Independence, but what are the specific articles that will make it true? So like, we pursue our goals with persistence and discipline, right? Sounds great. What does that look like? We want to operationalize the world. If I had persistence or if I had discipline, what would I be doing? How would a trustee 2, 3, 4 generations later, how would they know if that's true? Right. We want to make sure that all those values are measurable. Right. We don't want it just to be fluffy words that seem like they're saying something but really don't say anything at all. Okay. Then the third layer is governance and evolution. This answers how does this thing actually get used over time, right? Governance is, is who manages it, who gets the voting rights, who gets to be the trustee or pick the trustee, who gets the votes. We want to lay out what succession plans are, like rules that the heirs must use to plan for the next generation succession. We want to think about how the Constitution can evolve without being completely gutted Sort of like what's happening to the US Constitution. But this is not Moses writing on stone tablets. You can change it. You can change it from time to time as things change. Feel free to change it. It's part of the reason why the inheritance isn't just the assets. The inheritance is passing down the system. So I have a set of rules, as I kind of said, laid out like, hey, turn this into cash flow here. Here's the ways we'd use cash flow, borrow against asset, but shoot, in 5, 10, 15, 20 years, that might not be a good strategy anymore. Which is why you don't want to just pass down the assets, not even just the system. I need to pass down the thinking. I need to pass down the values that created that system so it can be fluid. Okay, now if you're watching all this and you're thinking like, hey, this is great, uh, I want to do this, but I don't know where to start, or, um, you know, I'll get to it when I have time, or I'll talk to my attorney about it. Well, I built something for you. It's a family constitution planner and it's an AI bot that I, that I built. And basically it's just going to walk you through each layer and it's going to interview you. It's going to ask you one question by one question by one question. It'll format the whole thing and then give it back to you. I'll give it to you for free. There's a link down in the description down below. But if you want to do this on your own, the first step would be pull out a piece of paper, open up a word processor, Google Docs, whatever. Start with a blank piece of paper. Write down just your thoughts. Just start brain dumping. Right now, I might do this without doing this first before I even start with AI. The reason why is sometimes AI puts things in your head that maybe shouldn't be there, sort of like Inception, uh, that it planted in your brain. So I like to start with sort of my own brainstorming first, write down a couple things that I have that are important to me, write those down. All right, then step number 2 is do it with your spouse, uh, do it with your spouse. But what I would do is have them do it separately. So I don't want to influence my wife's thinking or vice versa. Have them do it together, and separately and then come together with it, right? I want her input. She wants my input, but I don't want them to go together. I don't want to supersede. I want to make sure that we're growing together, not apart. And then step number 3, then we can go into the AI tool.

All right.

So we use AI as a brainstorming partner. The Family Constitution Planner, the AI that I put together, it's going to walk you through it question by question. It's going to walk you through all the layers. It's going to format it all into a clean document. And then finally, step 4, It's important, so put it on your calendar. Block out some time. I don't know, give yourself an hour, something like that. It's not a form. It's a conversation with your future family. Think about how I'm talking to my future heirs. Step number 5, once you get it and it's formatted, read it out loud. Read it because someone else is going to be reading in the future.

Edit it.

Add some stories to it. Add some of your personal stories so they can get to know you. Make it sound like you. It's not a legal document.

Okay.

Okay, now the urgency is that life isn't guaranteed. Tomorrow's not guaranteed. Anything could happen to you at any given time. So it's better to have anything. It's better to have something than nothing. Okay, so again, tomorrow's not guaranteed. Get this done. Like, I don't know, get it done on Saturday and then make it real. Okay, the family constitution is completely useless if it just sits in the AI or it sits on your computer. So you want to make it accessible So print it out, bind it, give copies to all the adult family members, store a digital version, reference it whenever big decisions come up, pull it out, ask if I should update my values, if I need to change any of my plans, if I want to change what the family culture is about, anything like that. And then make sure, you know, hopefully you have an attorney, get it with your attorney. Okay? Make sure it's in your trust. The trust structures, they're tools, a living trust, an irrevocable trust. Of course you can do LLCs. Family foundations, whatever. But make sure all of this is with your attorney. So again, if something happens to you, there's a phone number they can call and they can get the whole process going. Now, most people are going to hear this video and they'll probably agree with it. Hopefully you agree with it. Then you're going to go right back to running the exact same financial plan that you were before. Hoping, praying, no plan. Listen, don't do that. If you want to have a better plan, the next video right here breaks down the actual framework that wealthy people use to build cash flow, preserve assets, and create long-term wealth. So click on this video right here. I'll see you over there.