Billionaire Recession Advice: Stop Investing in THIS (2023)

You really need to hear this out because it really changed my life and I hope it changes yours. There's been a massive shift in the economy in 2022, and my investment thesis has changed. I've taken all my cash out of banks and I've put it somewhere else that's both safer and gets me a higher return. The way you put your money has to shift because the economy has changed. And at the very end of this video, I'll tell you my entire investment strategy and what I have shifted towards now. I'm 33 years old and I crossed $100 million in net worth last year. And much to my dismay, there was no parade. I'm still 2000 times poorer than the richest man in the world. No songs written about me. I have talk many billionaires to try and figure out what my investment strategy was going to be to get from 100 million to a billion. Because the economy has changed. Things are priced differently. There's inflationary pressures. Real estate is a is hanging on by a thread. Crypto is crashed, stocks have crashed. So before we can get into the investing part, you have to understand what to actually do with the cash itself. While you wait to make your moves, what do you do with your cash? If you've ever heard Warren Buffett or you heard people in the news say he has X billion dollars in cash or cash equivalents, he doesn't actually have it sitting in cash. He has it sitting in something else. That's better. I'll explain what that is in a second. I'm going to rew, rewind and explain what actually putting cash in a bank account means and why it's important in today's environment. So when you put cash into a bank, you're actually writing the bank alone to then loan your money and get something back. People don't know this, but you actually are a creditor of the bank. So if a bank goes out of business, they owe you money. Now what happens is the bank will do one of two things. They will either loan money to the government by buying bonds. Now why do they do that? Because the likelihood risk that the government is going to be able to pay them back extremely high. Why? Because they can print the damn money and give it back to them, or they will loan it out to people on mortgages and things like that. They loan the money out again and they make more than they pay you. And so right now, if you look at your account, they'll pay you between 0.1 and 1% annually on your money. Boom. That Sucks. They take your money for 0.1% a year and then they give it to the government and the government gives them 4% a year. So they get 40 times what they pay you by giving the US government money. Now here's what's most important about debt. When you loan people money, there are two factors. One is, what are you going to get back? Which is the interest rate. And the second is how likely are you going to get it? The interest rate is if you loan someone a money for a house and it's 5% or whatever. Then if you put 100 grand and you get 5,000 back and you get paid that for taking on risk. Now this is what's crazy, and I didn't understand this when I was putting my money in the bank. If the bank goes under, you lose all your money outside of the FDIC insured amount. The FDIC right now is completely bankrupt anyways. And on top of that, if it exceeds that amount, you get stuck in the bankrupt company. Whoop dee doo. What if there were a better alternative that was lower risk and had higher returns? I just learned about this, and the reason I always ignored it was because it looked boring and ugly. What we decided to do before I tell you the big investment strategy that we've invested like the big money into, we decided to take that money and buy U.S. treasuries. And you're like, why would they do that? Because I'm not seeing Treasuries as an investment vehicle. I'm seeing it as a bank account. Who is more likely to go under? Bank of America? United States Government. Bank of America more likely to go under. Who pays me more? Bank of America? U.S. government. U.S. government. On top of that, you can take loans against Treasuries for up to 80% of the value. So if you get $100,000 in treasuries and you get $4,000 a year in interest, I could take a loan for up to $80,000, keep earning my interest, and then put it somewhere else. You're like, why don't they talk about this? They are happy to take your money and go make 5% on it and pay you 0.1. That's the business. Why would. My entire structure of investments has changed over the last five years. Really? Last 10 years, the first chunk of my life was SM ME 500. I put all my excess cash into learning skills, getting access to people, coaching, mentorships, workshops, et cetera. Highest return investment I still have ever made today. Number two, once I had more money than I Could possibly reinvest in courses and coaching and whatnot. I started plowing it into the S&P 500 because that's what Uncle Warren told me to do. Figured if it worked for him, would work for me. The third phase came from post sale. All right, so we sold three companies last year. I talked to a bunch of different friends who were very, very wealthy, and one of them is a very good investor. He outlined a strategy for me that he called a barbell strategy, which is, I have stocks over here, real estate over here, very little in between, and then I just have my private equities of the companies that I own. So I'd make money here and plowed into these two, right, with basically nothing in between. Here's the thing that you don't know. In the last two years, I've maybe made five investments, and those investments represent in total maybe 10% of the cash that I have. I didn't realize what the problem was until I saw a video from Dave Ramsey. And before you cast judgment, you really need to hear this out because it really changed my life, and I hope it changes yours. So I was watching a video where Graham Stephan was having Dave Ramsey analyze his investment portfolio. And he said, hey, Dave, don't you feel like I'm over indexed on real estate? 80 plus percent of my net worth is in real estate deals. Dave Ramsey gave one of the wisest responses that I've ever heard in investing, and it changed my life. He said, well, Graham, if you put a big circle on the table, and I'm loosely paraphrasing, and we had to say, what percentage of your knowledge is real estate versus stocks and bonds and other stuff, what would you say it is? He said, oh, well, I don't know, 80, 85% of what I know is really about real estate. He looked at him, he was like, well, then that's a perfect distribution for you because it reflects your knowledge.

If we were going to put a portfolio together of your knowledge base, it would be 80% real estate, 20% stocks, maybe.

So where you invest is what you know. And so then he went on to say, I have talked to many, many billionaires, probably far more than I have. He said, I've learned two things from them. They don't do many things, and the things they pick are things they understand and they do a lot of them.

They find something that they like and that they understand and that they're good at, and they do it a lot.

And for whatever reason, the combination of understanding that in the circle, this is the slice of the pie that he knew. And that the people who are the richest in the world just pick one game or two games they know really well and they do a ton of those games is what changed my perspective. My takeaway was not, oh, I should go have 85% of my portfolio be real estate, because 85% of my knowledge on investing is not real estate. And the reason I wasn't able to write checks for two years despite having this theoretical barbell strategy, you know, we had laid out with a friend of mine who's awesome at investing, is that that was his investment strategy. Was it Alex's investment strategy? What are the things that I actually know? It turns out not a lot. What I am good at is we're very good at service based businesses. That is where I thrive. If I just write my money into deals, there I could do that with my eyes closed. And so I had a deal that came to me recently, way bigger than any real estate deal that I've ever even thought about participating in. I just looked at the guy and I was like, I will write you an unlimited check. How much do you want? I understand that business. This is something that I've spent my entire life doing. And this is a Warren Buffett quote. It's only risky if you don't know what you're doing. And so if you don't know what you're doing, the reason he gives the s and P500 advice is that you don't know what you're doing. So just put it into 500 companies and you'll be okay. But where you get the outsized returns is playing in a game where you have an unfair advantage, where you know more than everybody else does. Now I'm at a point where I feel pretty comfortable writing sizable checks into actual private deals. I'm actually pretty risk averse, but in this world, I know the risks and so I can name them and I can know where to look for them. And I'm like, oh, this is appropriate. It's risky if you don't know what you're doing. Step one, invest in you. Step two, invest excess and indexes. And then when you feel like you're good enough at your main game, then you have the stockpile and you can deploy it, and then that starts the compounding machine. My investment strategy after all of this time has gone completely back to my business strategy, which is singular focus. Do the things you know, do more, do it better, and keep doing that for an extended period of time. And it would be unreasonable that you don't win.