What is "True" Tax Rate? With Roland Frasier and Ryan Deiss

You're listening to Business Lunch with Roland Fraser. This is your seat at the table. Hey, everybody. Welcome to another episode of the Business Lunch podcast with Roland Fraser. That is me and my business partner, Ryan, who is in the other box.

That's true. And if you're listening to it, that's just. I'm the other voice me right now.

This one, he's in another box on my screen.

So now.

Anyway, it's nice to be here today and looking forward to sharing some cool things with you. I know the first thing that I was hoping we might chat about, Ryan, is something that we go through ever so often in our business. Kind of funny that it ever gets to be a thing because we know that it's something we should pay attention to. But I know we got an email from our head, our chief of staff, our chief of staff, Keenan Shaw, who said, oh, my gosh. And want to share a little bit about what he said and what's going on there.

I don't have his exact email up in front of me, but, I mean, it's basically like, holy crap, we are spending way too much money on stupid tools that we're not using. Was base was basically the gist of it. Right. Is there anything big that I'm missing?

No, that's it.

Yeah.

It was just. It was in. Even after having experienced whatever caused him to have the shock and then diving into it, even when he was writing the letter, it was still there for him.

It was still going through.

That was pretty interesting.

Yeah. And truly, this is something that we deal with all the time, you know, and it was kind of funny because we went to Keenan, we're like, oh, yeah, we need to do another, you know, kind of tools and subscription audit. And this is just something that we. That we need to do. We do it once a quarter because it is amazing. These little bills, these little tools that you try, they just add up. And the thing that happens that I think a lot of people don't realize, it's one thing if you're a company of one, if you're company one, and you want to try out some new tool and it's like 20, 30, 40, 50 bucks a month. Yeah. It's not that big a deal. And even if you're adding a new one every now and then, it can add up, but it's not going to add up that quickly. Well, when you go from one or two people to 20 to 30 to 50 to 100, and you've got 50 to 100 people signing up for a new $50 to $100 a month tool. Well, before too long, you turn around and you find that you're basically spending 10, 20, $30,000 a month on stuff that nobody's using. And what's amazing, and we've talked about this, I mean, we've had a fair bit of turnover lately and we talked about a lot of the reasons why in some of the previous episodes. I'm not going to go into all that, but a lot of these tools were purchased by people who aren't even at the company anymore.

My favorite one was I don't even know how you spend this on sales navigator, but LinkedIn sales navigator. We had two guys that had signed up for Enterprise accounts because I have it and it's like a hundred bucks a year or something. It's ridiculously inexpensive. But somehow these two guys managed, and I'm not criticizing them, just this expense managed to be $27,000 a year.

Yeah, $27,000 a year. And I'm sure at one point for.

An account that was not being used by anyone.

Yeah. And these guys are no longer even with the company.

Right.

And I'm sure when they signed up for it and the person who approved this was a higher level sales leader that again went on to bigger and better things. I still know and like this person a lot. There was nothing kind of malicious or egregious and probably at the time it made some sense, maybe not, but certainly there was nothing nefarious. But we didn't even realize that it had happened and we certainly didn't know to go back and to cancel it. So I think there's a couple of things at play here. Number one, every single quarter, okay, once a quarter you need to do a tools and subscription audit. So go back for the previous three months, whether you're billing these things to an AMEX card, whatever you're billing them, to go back and just export all of your expenses and then rank them based on what are the recurring expenses that are the most expensive to the least expensive. Now, we used to stop if it was like less than $500 a month, we wouldn't look at it. It was a huge mistake because it was that sub $500 a month category that really added up. And so we'd go through, there were a number of. And we do this by hand. We literally print it out and we'll just, you know, kind of yellow highlight if it's like, yes, this is a good one. Red highlight, I'm sorry, green highlight if it's a Good one red highlight if we know we can cancel it, yellow if we want to ask questions. And then we just get in Slack and we're like, hey, who's using this? If it's a yellow highlight, who's using this? And also we're going to be planning on canceling, you know, these following things. If you believe that you've got a strong business case for keeping it, let us know. And it's kind of this, speak now or forever hold your peace. That's kind of something we do every single quarter. And without fail, we'll save anywhere from 10 to $30,000 a month every quarter just by going through this. And again, it's not one of these things where we tried to put policies and procedures in place. It used to be a lot worse when everybody had a company credit card. We got rid of that. And yet still the credit card numbers get out there. Somebody goes to their manager who has a card, they're like, hey, can I get this? The manager's like, oh, yeah. If you're going to use it, it's only that much. It adds up. So if you have not done a tools and subscription audit, make sure that you go and do that. Number two, when somebody leaves the company as a part of the offboarding process, ask them what were some of the tools that you were using that you felt like were really critical to your, you know, to the, to the work that we should keep. What are some of the ones that we maybe had signed up for and you don't think you need, but try to find out from them what were those things there? Because especially if you're leaving on good terms, they'll tell you, they'll say, yeah, we signed up for this thing. We don't really use it as much as I thought we would. Okay, great. So a really good question to ask, but make sure that you go and look at it, because it really is. I mean, it is death by a thousand little expenses. And it adds up.

I was looking for this as you were talking because I wanted to share it with people. So this is from the email Richard sent to us. Adobe 22,700. These are annual Amazon Web Services Legacy $29,317 box, which is like Dropbox, only secure, which sometimes when we do an acquisition, we need it because they require it. And then I guess we forget that we subscribe to it for that minute. 20,144. Drift 10,800. Guru 12,672. Sales navigator shocking 27,000. Something called Pendo for 21,000 Rackspace because we had some legacy software that had all these calls. $76,000 a year. Just crazy, right, how that adds up. And then we started talking about because the company went remote during the pandemic, which was smart. And then we've decided to stay that way. And so our roughly million dollars a year of office space rental, which our lease ends I think in February.

Yeah, February.

Just a few months, six months or so from now, that's going away as an expense and then. And being replaced with about 240, I think. So it's going down by about 750. And then we started looking at all of the things that we were spending money on just to kind of see if there was anything else. And we identified another, let's see, 2, 3, 4, 5, 6, 7, 8. $900,000 in personnel that was basically not performing for us. And then, so it's $2 million a year, guys. $2 million a year, which we have rationalized as that now we can absolutely get planned.

That was really weird. No, I do think it's important though. $2 million a year net is a big deal. But if you figure, if you're operating at a 20% profit margin, let's just say hypothetically, and ours should be a lot higher than that, the type of business that we're in. But I mean, most businesses, you're going to be anywhere from 10, 15, 20, maybe up to 30% profit margin kind of at scale. You know, even if you're at a 10% profit margin, you'd have to, you know, you'd have to generate $20 million to net out the 2 million that we're saving just by going in and looking at the expenses that weren't roi.

But you know what the, you know what that real damage then is also is that that is coming straight off our ebitda. So all that goes to profit. So let's say that we were selling at a very conservative 10 times. It cost us $20 million in valuation. $20 million in valuation and probably 30, because that business is probably a 15 or so $30 million. $20 million in just valuation. Just because we didn't watch what we were spending well, and look at the.

Opportunity cost also, right? I mean, so let's say you don't just bank at all as profit. Let's say you take half of that and you put it into customer acquisition. And so now the profit is actually much higher because revenue is much higher. The multiple now is going to be much higher because you're a much larger company able to sell to larger institutions, things like that, and you're still generating that. At the end of the day, you're still locking in that 2 million just because everything is bigger. And it's amazing. I'll tell you, I am guilty of this. I am the worst. Roland, you know this. You're miserly, you're cheap. You want to. It's not true about cheap, by the way, but you are very, very cautious when it comes to expenses that don't roi. And you're very quick to say, let's cut it. I am. Way I am. My biggest flaw is sunk cost bias. My biggest flaw, if I were to look back at my entrepreneurial career, like management, leadership, everything, whether it's software, a project, a person, right. It's always, let's just give it another month, another quarter, let's just give it a little bit longer. I think we're going to be able to make this thing work because, look, we've already invested this, you know, so much into it. And yet when you just go ahead and say, hey, it's not working out, we're just going to cut our losses and you just let go, frankly, everything that's gone anyway. It's amazing. Just, it can be painful, especially if it's people. It can be really, really painful. But boy, the freedom.

It's interesting. If you look at the studies of success and how people make money, there's a billion different ways to do it, and so there isn't one that's right. So Buffet will say, never invest in tech stuff. And tech people say invest in tech stuff. They can both be right. Just depends on what you like. But if you're trying to figure out what's the common thread of all successful people, you're going to have a heck of a time looking at the success side. The real place to look is at the fail side. And the thing that from an investment standpoint, and this applies to operating companies as well, is exactly what Ryan's saying. There is a fallacy that says that the money that you've invested should be taken into consideration when deciding whether to invest more money. And the truth is they call that sunk cost. It's already cost that you have sunk into the thing. You're never going to get it back and it's irrelevant what you've spent. It's only relevant what is likely to come from more spending. And so we have to disregard that. It's really hard for us to do. And that's what Ryan said. He has a hard time with. But then we look over on the investor side and the one common thing that every successful investor has is that they cut their losses as soon as they can. As soon as they can, right? As soon as they can identify something isn't going as planned, they cut. Because we have a tendency as humans to want to give it a chance and root for the underdog and we'll ride things down the whole way. And if you look at wealthy, like some of the most wealthy people who we're going to talk about here in a minute, one of the big things that you do to stay wealthy is to cut your losses. And so that's something that you should all be thinking about or you all might want to consider as you are thinking about how can I be successful and grow this company and get more customers and things like that. Don't forget to look at the other side of the equation. Don't make your money by cutting costs. A lot of people try to do that. That's not going to ever work. But when you see something isn't working, the sooner you can, like once a quarter do it.

Otherwise you are going to get the flip side of that is, you know, you're, what is it, Pennywise, pound foolish. You know, you're the person saying, oh, I'm only ever going to stay in like a budget motel because I want to save this when, you know, now you're exhausted and you're cranky before that meeting or that whatever because you slept on a brick hard bed kind of thing. So, I mean, at the same time, spend in the places that matter over, invest, double down on the things that really move the needle and cut mercilessly, the things that don't, even if they're things that you've invested heavily into. But look, I think, look at it quarterly. I do. I think if you really say we're going to devote a quarter, then you're not going to get into this mindset of don't buy that, don't buy that. It's like, yeah, let's give it a try. But once a quarter and the email, our business partner, Richard Lindner, he sends out an email and the subject line is the same. It's this stops now. Which, believe me, you send that email out and it gets everybody's attention. So he'll send out an email to the company that says it starts off to the leadership. And he says, this stops now. And it's like, hey, we're spending too much money on tools that we aren't using. What I want to know from you. What are the tools and subscriptions that you absolutely, positively cannot live without? What are the ones that you're definitely not using that, you know, we can cancel? Let's see. Let's make a contest. How much can we save? And it sounds very kind of threatening and scary because it gets a good open rate, right? Even with your own internal team, you got to market to them, but it kind of turns into a game, right? How much can. How much can we save as a team? And it's amazing when you ask it those two way. What are the tools that you can't live without? What are the ones that you know you can lose? If you combine that with just looking at your credit card statements, you'll see a lot of those yellow ones are really actually red.

So the other thing that I think is really cool, I don't know who started it, maybe it was rich, but is that we have a payables card, so all of our tools go onto a credit card. So it's very easy to spot them and do this audit. And the team is really good because I'll sign up for something and then I'll get hounded for the month that it typically takes of hounding me to get it moved over to the other card because I don't have apparently the right card. But the accounting team watches that. And so then when they do decide to do a tools audit, they don't have to look at 47 different credit cards. They just basically go to the tools.

I don't want to turn this entire podcast into, like, finance and accounting stuff, although I do think it's incredibly important. But I've been dying to get your take on some of these new tax things that are coming out specifically kind of, you know, I don't. We can dive into the tax code and what might become down the road. I'd love to get your take on it, but there was this ProPublica report that came out and you told me about it. I didn't realize that what I saw was based on that ProPublica, but basically I saw it first on CNN. And what they did is they looked at Warren Buffett, Jeff Bezos, Michael Bloomberg, and Elon Musk, and they said, okay, this is how much income these wealthy individuals reported. So for Warren Buffett, for example, he had reported, I don't know exactly what year this was, probably 2019. He reported 125 million in income. Jeff Bezos, 4.22 billion in income. Not too bad. Michael Bloomberg, 10 billion. Elon Musk 1.5 billion. And then when they looked at total taxes paid, Warren Buffett paid 23.7 million on the 1.25 million. Jeff Bezos paid about a billion on his fourth 4ish billion. Right. So all what they're paying in terms of taxes are that, you know, between that kind of 20, 30, you know, 40ish percent. But what, what was funny about this is they then looked at what was the wealth growth that they saw, which by and large, it's like, how much did their stock, their company stock increase based on what they owned. And they came up with this new figure, this, this new concept that they call. And on one hand, as a marketer, I really love this, as an entrepreneur, I think it's one of the shadiest things I've ever heard in my entire life. But they came up with this concept of a true tax rate is what they're calling it now, just to be clear to my knowledge. And again, Roland, you know more about the tax care than I do, but there is no actual legal concept of a quote unquote, true tax rate. Right?

Totally, totally made up. Totally, totally made up. And also, I want to point out all of this comes from, I mean, the fact that it is what it is in terms of discussion, but in terms of an unethical publication, in my opinion, for ProPublica to take records that are personal confidential tax returns that they received through someone either leaking them from the IRS or someone hacking and getting this information is absolutely, unforgivably irresponsible to encourage this kind of thing to say, you can take this and profit from it however they profit. And to forward your agenda on inappropriately obtained personal information, it's gross.

But I think the worst I want to define, like, make sure everybody understands what I, what I mean. And again, this is a BS saying by the true tax rates, what they did is they said what was their wealth growth? And again, their wealth growth is essentially how much did the value of their stock, the value of their company increase over that period. And then they compared that to the total taxes paid based on their income. And so for Jeff Bezos, for example, his wealth growth was.

Well, they, what they did was they said wealth growth plus income. Oh my God, you're right into the tax. They did both. That shadier. Yeah, they did both. Yeah, it is even shadier. So they said basically, Warren Buffett paid pretty 0.1%. 0.1%.

Which if you're not watching this video, right. If you're listening on podcast, we're Throwing mass air quotes because this is horse crap. True tax rate, right? True tax rate was his wealth growth, meaning the growth of Berkshire Hathaway stock. His percentage of that, his shares in that stock, his wealth growth combined with the income he reported. They divided the total taxes paid into that and came up with a quote, unquote, true tax rate of 0.1%. And that's what it was saying, like Warren Buffett only paid 0.1% taxes because they're factoring it based on wealth growth.

So it's a lie. I mean, it's a lie. He didn't. It's. So why.

Why shouldn't they pay taxes on wealth growth? These wealthy people? Why shouldn't entrepreneurs. Why shouldn't we pay taxes on wealth growth? Because it just seems fair, Roland. I mean, look how much their wealth has grown. You know, Jeff Bezos, his wealth grew 99 billion. Shouldn't he have paid more than 4 billion in taxes if his wealth grew. I'm sorry. Than a billion in taxes if his wealth grew 99 billion. What's the difference between wealth and income? Wealth growth and income.

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So the reason that this exists is that the tax code and the people who started the whole tax thing in the United States said there should be a difference between realized gains and recognized gains. And so a gain is you might realize again, you might have your stock increase by that much. But keep in mind, stocks go up and down every single day. The market, the total market cap of any stock exchange can change by hundreds of billions of dollars. And the underlying value of those companies hasn't really changed. It's just the irrational market that during any particular day is saying AMC or GameStop is worth so much more than it could possibly, on its fundamentals, be said to be worth. And then on some days, people don't like Apple because they release some bad thing. Or Nike was up, I think 15% over the weekend because of earnings releases is like, do the values of companies change that much, really? No, they don't. It's because the stock market is an irrational creature. So the government has said that you really need to have the wherewithal to pay to have a gain that gets recognized and gets taxed and that you don't have the wherewithal to pay until you sell. And when you sell, you should get to decide whether you are going to sell when things are down or when things are up based on whatever you want. And so we give people the free will to choose that. And then when they sell, the government says, okay, well, now you need to recognize the gain that you've realized because you have the money to pay because you've sold it. And so that's the time that we make people pay, because otherwise every year, people would have to sell assets that, that had appreciated, that might not stay appreciated, and they might, or they might have to sell in a year when everything or during a time when everything was significantly down, like the beginning of 2020, when everything took a hit. And that's actually not fair to people who are investors. It's better to let them decide when they are going to turn their investment into a realized return. And so the wealth tax advocates say that that's not fair because during this time all this wealth is coming to them, but it's actually not real because it hasn't come to them, actually realized. And so also the money's not there to pay because they haven't sold. So what you have then would be Bezos would have to sell X million shares of Amazon. And that might sound good with billionaires because we're picking on billionaires these days. This whole wealth shaming thing is truly tragic to me because our whole country, the reason that it's such a great place to be is because we are a capitalistic society that attracts people from all over the world because of the opportunities that you have here. And we have this handful of people who are trying to turn us into a socialist government, which is truly challenging for me. But that's the bottom line, is that these guys aren't doing anything wrong. And the tax code isn't wrong either. To say, look, let's have people pay their taxes on gains that are actually turned into an actual gain or loss at that time when they actually have the cash to be able to pay the taxes. So we don't force people because here's what happens, guys, is we do this at the billionaire level and we pick on them because they can't defend themselves. Cause there's only a certain number of them. And then we go down. Everything trickles down ultimately to the middle class. The middle class is gonna have appreciated homes. Like right now, real estate is through the roof for no, for a supply and demand reason that's temporary. And so you would have people if they were being taxed on the wealth of their homes. You got people right now whose homes worth twice what they paid for it last year, but they don't have the cash to pay for that. So if they had to pay for that based on their wealth increasing, then they might have to sell their home or take out loans on their homes. And then you end up with people who can't afford to have the things that they've bought in the first place. It's really awful. We already have a way to tax people on. Keep in mind, all the money that they're putting into these things they've had to pay taxes on. Those were after tax dollars that they were investing. And then we're going to tax them again when they die, by the way, by reducing the estate tax down. So we're looking for a triple dip here. And I think, you know, whether that's right or wrong or we want to do that is all for discussion on tax policy. But the truth of the matter is to have these irresponsible ProPublica type reports that are based on at best inappropriately and at worst illegally obtained information that then they manipulate the numbers to say that there's something happening that isn't is sad and it's horrible journalism. I think it's really, really dangerous. Also. The other thing that's interesting is that you have, I think Bernie Sanders act that he introduced is called the make the, the. No, it's, it's, I think it's make the 0.5% pay act and then there's the Make Billionaires Pay act and all these other. Just the, the agendized propaganda names that they're giving these things.

I feel like we're, it's identity. I mean it's all identity. Let's go after these people, these identity. And what you don't realize is once that starts, you know, it doesn't stop. If you want to argue that there should be. If somebody wants to say, you know what, I actually think they're above a certain income level, you should pay some percentage of tax based on the growth of your wealth, whether you cash out or not. Right. If somebody wants to argue that that would be good tax policy, then that's fine. Like we can have that discussion. I might disagree. Obviously the people who have, you know, who designed the tax code to begin with, I have disagreed. You don't really see this kind of anywhere to my knowledge. So I mean it's a concept that doesn't exist probably for a reason. But if somebody wanted to make that argument, fine, like we can have that discussion. But to say that these people aren't, that they're true tax rate. To come up with a brand new term and not say that. This is not disclaim that, especially when you're calling it the true tax rate. It's actually a made up thing. It's false. It's a lie. Yeah, you're good. Right.

It's propaganda. Propaganda at its worst. They just released, the one that they just released, I think yesterday was called Lord of the Roths. And they're talking about how Peter Thiel has built a $5 billion value in his Roth IRA. And Roth IRAs are available to people that are under a certain age. And you put after tax dollars in and the Congress has said that you can have that continue to increase in value up to a certain percent. You can have that increase in value without paying taxes on it. Again, you either choose to pay taxes now or later. And it helps them, it helps accelerate the receipt of taxes. By Congress. And so ProPublica is picking on Peter Thiel, saying, yeah, but you did it and got to 5 billion, so that's not okay. But it's okay for everybody else. It's really good at that. Disproportionate.

Right? It's somebody running a race, and it's like, yeah, Usain Bolt. It's not fair that you're so much faster than everyone else. You should run slower. That would be a lot more fair.

Which gets. Which gets to the point of. There is no fair. Life is not fair. We are not created equal in every aspect. And so to artificially say that we need to tie weights around Usain Bolt because he can run faster, or we need to tie weights around Jeff Bezos or Peter Thiel because they know how to make money is absurd, because they have created huge value for us. We are entertained and amazed and inspired by Usain Bolt, and we are entertained and amazed and inspired by Peter Thiel and Jeff Bezos and Warren Buffett. And we're not equal. We're just not. So we might be created equal and we might want equal treatment, but what's going on right now is equal opportunities. Yes. Let's not.

Equal opportunities.

Treat everybody equal.

If somebody is doing something, it doesn't, but we should. That's something that I do think we should strive for. Equality of opportunity, but equality of results.

Amen.

That ain't it. That ain't it, dog.

I love that distinction. I really do. And I agree with you. It's probably never going to be possible to equalize opportunity. You and I have white privilege to the Nth degree, because we are. We were born a certain way and we had certain opportunities that other people don't. And so should we focus some significant effort on trying to create equal opportunities for everyone? Absolutely, 100%. Should we then, though, hold people back who are successful saying that we're going to retroactively equalize? I think that's. And when it's been tried astronomy, they're.

Going to have a great track record. We'll just say every time it's been universally applied.

Well, I mean, communism has worked in every.

What was the other. We were gonna also. Oh, you're giving me a hard time because I invested in NFTs. Basically, you were making fun of me.

Alternative investment. I didn't give you a hard time. I actually was impressed that we're fans of investing in art, as you can see on the back wall. And my wife is an artist, and you're a big investor in art. And Supporter of the arts. And one of the things that I kind of the way I wanted to explore it was that everyone is told that they need to invest X dollars and they should invest in the stock market. And wealth managers will say, you should buy an index fund. And that sounds awfully boring to me. So first, you and I share some very common alternative investments. One that is really responsible for most of our collective net worths is investing in businesses. Not investing in stocks, but investing in businesses that we have an impact in and an ability to control and that build our other businesses. And that's to me, a fantastic place to invest. We also invest in art and wine and other things. One of the things that we learned when my wife was talking with you is that you were investing pretty heavily in digital art. And those things are a lot more fun. So I just thought maybe we could talk about what are some of the alternative investments and the returns that you could expect. And are they investments or are they, as I mentioned to Ryan when we came, when we were talking before this episode started that I was reading one of the newsletters I subscribed to and they said, and when you invest in art or wine or crypto, and then it was parentheses, haha. And because that's not really an investment, it's a gamble. But let's talk about is, do you invest in NFTs? Yes or no?

Here's what I think is important. I think that there is investments that you make that are completely passive and utterly devoid of any sort of emotional attachment to the asset itself. So if you're investing in, you know, in an index fund, for example, you probably don't have a strong emotional attachment to an index fund because frankly it's a basket of a lot of things. If you do, that's just kind of weird, right? Because it's just indexing to whatever vehicle. Maybe it's a, you know, S&P 500 index fund. So how are you passionate about that? Similarly, I know that there are people who they've invested in. I've known people who've invested in Tesla since the earliest days because they were just super passionate about it. And for them it was a passion based investment. I see it as a continuum, right? It's not this binary thing where you've got something, you've got basically investing and you've got gambling and you've got entertainment, right? Because I would argue that if I go to, if we go to, we talked about this. If I go to Las Vegas and I put $500 down to play Craps for a little bit and if I lose it, whatever. That's not an investment. It's not a passion thing. That is purely entertainment. So let's say I'm one end of the spectrum. You, you have entertainment on the other end of the spectrum, you have just unemotional, just pure capitalistic intent investment. I don't care at all about the underlying thing. I just believe in the return. So let's say that's our spectrum. I think a lot of the investments that we make are going to fall somewhere in between. And I think it's good in your own investing that you're doing to have a mix. I think it's appropriate to have some mix of your investments. Like so I have some target date funds that I invest in. Right. That are targeting things that mature would expect to do well at 65 or whatever. Like sometime in the future, they're kind of moving forward to that investing in. I do have some money in index funds. Not a ton, not as much as the experts would say you should have. And that definitely checks the box of that end of the spectrum. But then I've also got some things that are, you know, maybe more in the middle. And I would think our own companies, there's a lot of emotional investment there, but we can also be a little bit pragmatic, right? Hey, we got to cut this thing, we got to do this stuff. And then there are things like art and wine where, if I'm being honest, it is way more towards the, you know, entertainment side. But it is nice every now and then to have one of them pay off. So I mean, there is art that I have bought that has 10x in value and that can be a little bit tough because if it's the passion thing, if it's more that entertainment, I don't want to sell it because I love it. So that's the danger to only doing that. I sold a piece not that long ago because I wasn't just super.

Are you selling any of it?

I loved it, but I didn't love, love, love it. And it had appreciated. It had 10x'd. But what am I doing? I'm putting all that money right back in to other pieces that I would also like to buy, you know, and acquire within that same space. Exactly.

Yeah, that's.

Yeah, let's go buy. Let's go buy some Lamborghini or just.

Liquidate an investment and then go spend the money.

But it's going back into that same category. I'm not necessarily, you know, reallocating Balancing my portfolio and taking some of it and putting it over here, it's more that. So that's how I approach it. And then really, I'm looking for, you know, some things where, you know, because we talked a lot about bitcoin and crypto, you know, I've checked that box, thankfully got in pretty early on a lot of stuff. And so, like, it's there. And mentally, I've checked the FOMO box because I'm in. So, you know, it was cool when it went up to like, 60 something, when Bitcoin went up to, like, 60 something. Thousand dollars, you know, and it's now been cut in half, and everybody's like, oh, you're such an idiot. It's like 750 or $800. You don't really care. It's still, you know, it's still way, way, way up. So I would just caution somebody. If you don't know anything at all about it and you have no way to add value, you're gambling. I think that's the thing. If you don't know anything about it and you have no way to add value, meaning no way to affect the end result, that, to me, sounds a lot like gambling. If you know something about it but you don't have a way to add value, you're not particularly passionate about it, then just make sure that you're appropriately, you know, you're on the. You know, we're investing. Just make sure that you're investing in something that you would expect. You have a reason to believe because of your knowledge and the research and the time that you put into it, that you believe that's a good place for that to go. And then in other cases, if you're like, this is fun. I love it. It's entertaining. And you know what? It just might pay off and give me the opportunity to fund this passion. Then just don't put more in that than you can afford to lose. I mean, you've done well on wine, right? My problem with wine is I drink it before. I've had stuff go up, and it's like, yeah, but I just want to drink it. Have you sold. Have you sold wine and then flipped it?

Well, yeah, we probably sell a couple hundred bottles a year. And then I drink, basically, the wine that I sell pays for the wine that I drink, which is kind of cool. And then we have a pretty significant portfolio of that. But, you know, wine not too different from art, tends overall to appreciate around 18% or so a year. And so that's kind of Fun, because I can walk in my wine cellar and I have. Most of our wine is off site in a. In a cold storage facility, and it just sits there and I forget about it. But when I get, like, if I was to buy a case of wine, I might take three of the bottles and. And put them in the current drinking cellar and then put the other stuff away. And that stuff just ages. And as it ages, it goes up. And you and I are both on allocation with a whole lot of the wineries where you have to wait years and years to get that. So a lot of those releases that we get are worth significantly more the day that we get them, just because they can't be got. And so that's kind of fun because I'm passionate as you are about wine and the stories behind it. And we go to the places where they make it and talk to the people that make it, and we drink it and know the stories. And that makes that investment so much more appealing. And I think that's what my pitch to you, the listeners and watchers, is that investing can be fun. I think one of the reasons that a lot of people never invest is when they have the money that they could is that they spend money on things now because they want that immediate gratification, and they don't want to defer that to have some stodgy portfolio of stocks in an index fund or something like that. So rather than doing that, maybe reframe, if you would, that you can invest in cool things. I invest in vintage synthesizers that go up in value. I invest in wine that goes up in value. I invest in art that goes up in value. You can pick things like that that aren't entertainment and that aren't wild bets like crypto, because that's still a wild bet right now. But that have fundamentals and track records and real underlying demand and value. And that's way more exciting to compel you to think about. Maybe I allocate 10% of my income or 20% of my income to do those things. And then if you drink a bottle of the wine or you sell one of the art pieces or whatever, it's still fun. It's still fun. So that's, to me, it's kind of just a reframe of thinking. You don't have to, like, if you're having a hard time investing or if you're bored with investing or you just can't stomach putting. You want that thing that you want to do right now that maybe you're going to spend the Money on, it's going to go away forever. And instead you can invest it in something that you can also derive great pleasure out of. Don't forget alternative investments. Because whether it's cars or boats or planes or music equipment or art or wine or any number of other things, there's always a market for.

Well, so when. So let me ask you this because somebody says, all right, cool, so I've got a business. Yeah, maybe somebody's listening. They got a business, been doing it for a few years. It's making enough. They're not necessarily crushing life yet. They got a solid mid six figure kind of income, feeling pretty good about it, building some value. When is it appropriate to begin looking at these kind of things? Should you be thinking about it from day one? Like in the same way that they'd say start investing, start putting Money in your 401k from day one. When do you look at this? What are the other boxes you should check before you start saying, now I'll do some alternative investing. In your opinion, realizing this is not individual investment advice, your results may marry.

Yeah. To me, the only box to check is that you have your emergency fund. I think, you know, 12 months ideally, but not less than six. You should have that in cash as a reserve before you think about doing anything else. And if you can, it's nice to build up some pool of cash so that you have the ability to invest opportunistically. Because you and I talked about this when we first met. It's, you know, I like to have a certain amount of money in cash that's available to take advantage of an opportunity that comes along. And I've been very happy that I have because those returns are usually crazy high, very, very fast. But to me, you can buy a piece of art or a bottle of wine or any of the things that we've talked about right off the bat. And I think that that could be your only investment if you want it to be. To me, that doesn't matter because as long as it can be turned into cash and it's going up in value and there's some fundamental history that indicates that that supports the things that it willing.

Yeah, I love what you said. So, emergency fund in the six to.

12 months you have, your emergency fund.

Totally agree. Opportunity fund is kind of the second bucket that we would have. And that's just kind of a like how much that is for you is a function of what are the size opportunities that frankly come your way. You know, we're fortunate now that we've got a lot of good size opportunities that come our way also. How much would you want to put into them? Right, because just because let's say you got a million dollars cash in an opportunity fund as cash or cash equivalent, something that's readily accessible doesn't actually have to be cash. But if you're thinking, yeah, but I don't think I would ever put a million dollars into something, think about that because maybe you would want to go in with other people. That's where it's nice to know people, to be a part of a group of folks where you're sharing these different ideas because maybe we see opportunities and if somebody's kind of in our co investing group, it's not like a formalized kind of thing, but when an opportunity comes along that's a really big thing, we'll call up our buddies, other people that we know and say, hey, we saw this cool opportunity. We're going to put a couple hundred in it. Do you Want to put 50? Do you want to put 100 in it? Looks like we're going to need about a million. Even if we could fund the whole thing. One, we might want to de risk a bit, share some of the risks. But also it's fun to do things with friends, right? So I think building that kind of a group is something to do so that your opportunity fund doesn't have to be as big as your opportunities. But yeah, once you've got those, I think at some point you need to add in something that you just like. That just makes life worth living. And if it can have a positive return and if it can be turned into cash, then great. But the reason I love art is if it goes up in value, great. If it doesn't but it's something I love, then it has value to me even if it doesn't go up. And if there's something that I find that like, you know what? I'm just not loving that anymore. I'm not feeling anymore. And I take it down from my wall and it sits somewhere long enough like, you know what? I should really sell that because it might have value to somebody else and I can use it to buy some other things. So wine is the same way. If worse comes to worse, you can always just drink the dang thing. Right? And as long as you buy good stuff. Yeah. The mistake that I see people making when they get into alternative investing is they'll try to find that's what's cool about that. The kind of the quote unquote up and comer thing, like the B and C level thing that nobody else has heard about. And the reality is if you're kind of new to this and nobody has heard about it, there's a slim chance that you found it, right. Maybe you did. But in the beginning, especially when you're still developing your taste, I found it's always best to buy the best because the best has a way of going up, the second best has a way of going to zero. And so.

It's funny you say that. There was a thing that somebody mentioned, I think it was maybe in one of the newsletters I read. And so I went and checked it out and from a marketing standpoint, a thing, I think it's called underground wines. They pitch it based on investing and then there's a gambling element to it too. So they've got testimonials that you get upgrades when you buy a basket of wines. So if you buy the nicest wines, I think it's like a hundred bucks or 150 bucks a piece and you'll get upgraded to wines that sell for more. And then they have the occasional upgrade because they have a number of bottles for these upgrades and the occasional upgrade is a very expensive bottle like a Screaming Eagle or a Petrus or something like that. And they've got the testimonials from those people. I spent $120 and I got this $4,000 bottle of Petrus. And so I tried it just to kind of go through the process. Brilliant marketing. Absolutely brilliant. Which you and I should talk about. And I think which actually might be an interesting thing for us to talk about on here would be kind of like a, a marketing model breakdown of cool things that we see. That might be a fun, a fun segment. But anyway, so I bought my wine. I don't care if I ever get it. I got like Alta Gracia and these kind of mid level wines, which by the way are not investments. So to call them investments is absolutely shameful because there's no way you're going to sell these mid level wines. Like if you're investing in wine, investing in wine, it's gotta be high end, hard to get, supply, demand, proven, cult classic kind of status. Those are the wines that go up in value. All those other wines ever getting anything close to half of what you paid for them a few years from now, there's just not the demand for it. But. Right, yeah. And so be careful when you do choose those alternative investments to really focus on the things. I loved your analysis, which probably speaks to Again, the stuff you got to.

Go when you're willing to go whatever things are on the best, right? So if you want to go into art, like you have to, you know, look at, at what does it look like to invest in, you know, pieces that are selling for tens, hundreds, millions of dollars, right? That's kind of what it looks like. The thing that I liked about NFTs early on is I saw very in demand artists with the track record selling for an order of magnitude less. I saw a bit of an opportunity there and that paid off now. Then it skyrocketed, then it came back down. I've still done well on the things that I got in early, but again, that's because I've been investing in art for decades. So it wasn't like all the people who are like I want to buy NFTs, they lost their tails, right? I was like, I want to buy art. Oh, I can't help but notice that this digital art is undervalued because I know what that artist would normally go for and that is a very marketable, sellable artist. People collect as a collectible artist. So if you're going to do it, just make sure that there is enough liquidity. And look, stocks are the same way, you know, same reason why you probably don't want to go and go all in on penny stocks unless you really know what you're doing. Because most penny stocks go to zero. There's not enough liquidity, right? If you're buying the best stuff, there's a really good chance that you're going to make some money, right? No guarantee, but if you try to take some bets on the quote unquote up and comers, there's a really good, you know, better than, better than 50% chance that it's going to go to zero. So if you buy the best, much better chance of going up. Maybe you don't have the, you know, the 100x return, but great chance of it going up. And if nothing else, you could be proud that you bought something that's truly worth owning.

Awesome. Well, thank you guys for listening today. I hope that you enjoyed this edition. If you are interested in finding out more about some of the stuff that we talk about, you should subscribe to the Business Launch podcast. We would also appreciate a review, particularly if you really liked us. And in addition to that, if you're interested in growing your company, we've got a whole operating system on how to do that. You can find out about it@ scalable co s c a l a b l e not.com and also if you'd like to learn how to acquire businesses with little or no money out of pocket, we do a thing called the Epic Challenge. Usually once a month. It is at now just get it.

Like don't take this stuff too seriously. I know we talked a lot about, we talked about investing here, Brian, any parting costs, we talked about cutting back on your expenses. All that's important. But remember, this business stuff is fun. If you're in business, if you're an entrepreneur, if you're doing this stuff, then you got a pretty cool gig. And so just make sure that you're having fun with this stuff and that you have more good days than bad days.

You've been listening to Business Lunch with Roland Fraser. If you're enjoying the show, let us know by subscribing and leaving a review. And for more information go to businesslunchpodcast.com thank you for listening. Ever wondered how some people build real wealth through acquisitions while others just sit on the sidelines? Well, I'm here to tell you it's not about luck. It's about having the right system, the right deals and the right guidance. And that's exactly what we give you in the Epic Deal Fast Track. If you've been thinking about buying a business, but you keep getting stuck, whether it's finding the right deal, structuring the financing, or negotiating with sellers, you are not alone. Too many people waste months, even years just thinking about acquiring a business while the real opportunities pass them by. The Epic Deal Fast Track is not another course. It's actually an implementation program and it's designed to get you from the idea to the acquisition in just 16 weeks or less. We work with you one on one to help you find, fund and close your first or next deal. And once you do, we're going to plug you into our elite EPIC board community so that you can keep scaling through acquisitions. We install three powerful systems in your business. The first is the Deal Flow Engine so you always have high quality off market deals coming to you. Number two, we give you our offer and funding system so that you can structure offers that get accepted and fund them creatively many times with no money out of your own pocket. And number three, our closing and integration system so that you don't just buy a business, you actually successfully run and scale it once you have acquired it. Plus you'll have direct one on one support from an Epic Deal advisor every step of the way. And that's people that have actually come up through this system. And done these deals themselves. That's the only way to become an epic deal advisor. And if you're serious about acquiring a business this year, don't just sit on the sidelines. Just text I'm in to 334-45-89034 and we'll get you in six. So text I'm in to 334-4589-9034 will get you in. No fluff, no wasted time. Just real deal making from people that are actually out there doing deals right now. I'll see you there.