2023-05-24_Complementary_Redundancy
00:00:00.000 | When you're in winter's favorite town,
00:00:04.000 | the snow-covered mountains surround you,
00:00:08.000 | a historic main street charms you,
00:00:12.000 | and every day brings a new adventure.
00:00:16.000 | Welcome to Park City, Utah. Naturally, winter's favorite town.
00:00:24.000 | [sigh]
00:00:28.000 | At visitparkcity.com
00:00:32.000 | [advertisement]
00:01:00.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight,
00:01:04.000 | and encouragement you need to live a rich and meaningful life now, while building a plan for financial
00:01:08.000 | freedom in 10 years or less. My name is Joshua Sheets. I'm your host, and
00:01:12.000 | today I want to share with you about a very
00:01:16.000 | useful planning concept. A heuristic
00:01:20.000 | that you can implement to not only get
00:01:24.000 | better outcomes, but more importantly, to make you a better
00:01:28.000 | planner in all parts of your life.
00:01:32.000 | That concept is
00:01:36.000 | complementary redundancy. Let me expand.
00:01:40.000 | We begin with a simple saying. That saying
00:01:44.000 | is this, "Two is one, and one
00:01:48.000 | is none." I'm not sure who originated this. I've heard it
00:01:52.000 | most in the world of physical prepping, preparedness, planning, etc.
00:01:56.000 | Perhaps it came from the military, I don't know. But the basic idea
00:02:00.000 | is two is one, and one is none. What it means
00:02:04.000 | is if you have one of something, and that something
00:02:08.000 | fails, then you have nothing.
00:02:12.000 | But if you have two of something, and something fails, then you have one.
00:02:16.000 | An example would be, let's say you're out on a hike, and you know of course
00:02:20.000 | that water is very important so that you can stay hydrated and stay alive,
00:02:24.000 | yet you shouldn't just kneel down and drink the water from the stream.
00:02:28.000 | So you need some form of a water filter or water purifier.
00:02:32.000 | So if you take on your hike a water filter,
00:02:36.000 | and that's all that you have. You have one water filter,
00:02:40.000 | and then that water filter gets a hole in the membrane and it stops functioning,
00:02:44.000 | well, you now have no way to filter water.
00:02:48.000 | Which can result in you being very sick, and potentially it's a life-threatening
00:02:52.000 | disease if you get very sick because you drank unfiltered water.
00:02:56.000 | So to implement two is one, and one is none,
00:03:00.000 | you would recognize that because this is a mission-critical piece of gear,
00:03:04.000 | I need to be able to filter water, you would bring some kind of
00:03:08.000 | backup. You would have a backup plan. And so you could carry
00:03:12.000 | two water filters, or you could have a water filter
00:03:16.000 | and an extra cartridge for your water filter. Or you could
00:03:20.000 | be hiking with a friend of yours that also carries a water filter.
00:03:24.000 | Or you could bring a backup of some water purification
00:03:28.000 | tablets, so that if your water filter fails, then at least
00:03:32.000 | you can purify the water by using some water purification tablets
00:03:36.000 | and you won't get so sick. So two is one, and one
00:03:40.000 | is none. If you always commit yourself to having two
00:03:44.000 | of mission-critical gear, then
00:03:48.000 | if one fails, you'll still have one left. Now bear with me,
00:03:52.000 | I'm going somewhere and I'm going to spend most of my time on financial planning, but this concept
00:03:56.000 | is easiest for me to articulate and teach about in the context of
00:04:00.000 | physical preparedness. Over the years, people have played
00:04:04.000 | with this saying a little bit, and they've added more numbers. Preppers
00:04:08.000 | especially want to collect huge amounts of
00:04:12.000 | gear, etc. And so you'll have a guy go through his backpack and he has 18
00:04:16.000 | flashlights in there and four knives, and you're like, "Dude, come on,
00:04:20.000 | this is really necessary." But people have played with it, and my favorite
00:04:24.000 | saying of this particular phrase is this,
00:04:28.000 | "Two is one, one is none, three is
00:04:32.000 | a guarantee." Two is one, one is none, three is a guarantee.
00:04:36.000 | And that's the one that I personally use in my own life.
00:04:40.000 | If there's something that's very important to me, there's something that I
00:04:44.000 | need to do that's very important, something I need to have, a capability,
00:04:48.000 | whatever the version of it is, if there's something that's very important to me,
00:04:52.000 | then I say, "Two is one, one is none, and three
00:04:56.000 | is a guarantee." I want to make sure that I always have three
00:05:00.000 | different ways to accomplish something. So back to the example
00:05:04.000 | of our hiker who's out wandering in the woods. That hiker
00:05:08.000 | might carry his water filter, he might carry some water purification
00:05:12.000 | tablets, and he might also carry a stainless steel cup
00:05:16.000 | or a single-walled stainless steel water bottle, as well as
00:05:20.000 | some fire-making equipment, so that if he runs out of
00:05:24.000 | water purification tablets, and if his filter is broken, at the very least
00:05:28.000 | he can gather wood, start a fire, and boil water, thus rendering
00:05:32.000 | it safe to drink. So two is one, one is none, three is a guarantee.
00:05:36.000 | It's very difficult to describe a scenario
00:05:40.000 | that could happen in which our intrepid hiker would not be able
00:05:44.000 | with three methods of cleaning his water, would not be able to have
00:05:48.000 | clean water to drink. Two is one, one is none,
00:05:52.000 | and three is a guarantee. So if there's something that's important
00:05:56.000 | to you, always have triple redundancy, and in
00:06:00.000 | virtually all cases, you will not only have, you're going to be
00:06:04.000 | able to accomplish that task. Now, let's go a step further
00:06:08.000 | because I've actually accidentally already gotten to the topic
00:06:12.000 | of complementary redundancy. So far, I've been focusing
00:06:16.000 | on the number of redundant methods of accomplishing something.
00:06:20.000 | Two is one, one is none, three is a guarantee, three different ways of doing something.
00:06:24.000 | But where does the complementary come into the
00:06:28.000 | redundancy? And it has to do with thinking about ways
00:06:32.000 | that you can accomplish and have different methods and tactics
00:06:36.000 | that give you different benefits but still perform
00:06:40.000 | the same underlying core function. Let me use a
00:06:44.000 | flashlight example because where I first learned this
00:06:48.000 | particular concept, or first had it fleshed out the way that I
00:06:52.000 | like and have used it now for years, is from a YouTube channel called
00:06:56.000 | Urban Prepper. And on that YouTube channel, Cliff, the Urban Prepper, he
00:07:00.000 | talked about complementary redundancy and he gave a flashlight example.
00:07:04.000 | Many people understand that having a source of light
00:07:08.000 | and illumination is very useful and it's something that you want to
00:07:12.000 | have. And so we recognize that and we want to have a flashlight.
00:07:16.000 | So if you live in hurricane country and you're planning about hurricane preparedness,
00:07:20.000 | they say have a flashlight and batteries. If you live in snow country and you're planning for emergency preparedness,
00:07:24.000 | have a flashlight and batteries. So you can have a flashlight and batteries. And sometimes
00:07:28.000 | some preppers go out and they have a flashlight in every room, a flashlight in every drawer,
00:07:32.000 | but they're all flashlights. And you say, this seems a little wasteful.
00:07:36.000 | After all, what's the point of having three different flashlights that all do the same thing?
00:07:40.000 | Is there a way that I can get more benefit while also having redundancy?
00:07:44.000 | And the way that you do that is you analyze what you're trying to accomplish.
00:07:48.000 | In the flashlight example, you're trying to gain
00:07:52.000 | a source of illumination. And then you think about different types of
00:07:56.000 | illumination or different features or attributes of illumination
00:08:00.000 | that you might want to have. So flashlights, for example,
00:08:04.000 | are really great at throwing light, but sometimes they're hard to hold.
00:08:08.000 | And so a form of complementary redundancy would be to have one
00:08:12.000 | handheld flashlight that is in your pack or in your kit
00:08:16.000 | or on your person. And then to complement that with something like a headlamp.
00:08:20.000 | A small headlamp that has a little cord around it so that if you need to work on something
00:08:24.000 | hands-free, you're cooking over a fire or you're fixing something on your car,
00:08:28.000 | you need both of your hands to turn a wrench, then you can put on that headlamp.
00:08:32.000 | That gives you not only a redundant source of light, because of course
00:08:36.000 | you can use the headlamp to light your path or shine underneath a couch
00:08:40.000 | while you're looking for your child's lost toy or whatever it is. It works just
00:08:44.000 | fine in that perspective. And you can always hand-hold a headlamp,
00:08:48.000 | but it gives you a complementary redundancy because now
00:08:52.000 | you have your handheld source of light and you have your
00:08:56.000 | head-mounted source of light. So you have a backup source
00:09:00.000 | of illumination, but it gives you different benefits and features.
00:09:04.000 | And then what if we wanted to have three? What if two is one, one is none
00:09:08.000 | and three is for me? Three is a guarantee. Three is for me.
00:09:12.000 | Well, then we would say, "What other kinds of illumination
00:09:16.000 | would we like to have?" And so we might do something like have a lantern.
00:09:20.000 | Because a lantern gives a pleasant form of
00:09:24.000 | area lighting. And so if the power goes out and your family is gathered around the dinner
00:09:28.000 | table because you were in the middle of eating dinner when it happened, then a flashlight
00:09:32.000 | isn't great, a headlamp isn't great. Of course you can play with those and modify them. You can
00:09:36.000 | shine them through a bottle of water or something to turn them into a
00:09:40.000 | quasi-lantern. But it's nicer if you simply have a lantern.
00:09:44.000 | And a lantern can work as a reliable backup source of light.
00:09:48.000 | If you need to fix something hands-free, the lantern can work. If you need to shine a light
00:09:52.000 | around a room, the lantern can work. But it gives you a very pleasant form of
00:09:56.000 | complementary redundancy. That's the basic concept of
00:10:00.000 | complementary redundancy. Now, back to our hiker.
00:10:04.000 | I accidentally, when I started the example, I actually already accidentally
00:10:08.000 | did that because that's the way that my brain works. If you notice my
00:10:12.000 | three methods of purifying water that I discussed,
00:10:16.000 | they provide the hiker with complementary redundancy. What's the
00:10:20.000 | complement? Well, first, the water filter
00:10:24.000 | is his primary source or primary method of
00:10:28.000 | cleansing his water so that he can drink it. And the water filter is ideal
00:10:32.000 | because it's fast, it's easy, and it renders the water
00:10:36.000 | not only safe to drink, but nice tasting. He can get the impurities
00:10:40.000 | out and it can be a pleasant experience for him to have his drink of water. And so
00:10:44.000 | that's his primary method. But that water filter suffers from being
00:10:48.000 | silky and really only doing one thing, filtering water.
00:10:52.000 | The second method I talked about, that of water purification
00:10:56.000 | tablets, is not ideal for him to use on a
00:11:00.000 | regular basis. It's more appropriate as an emergency backup because
00:11:04.000 | the water purification tablets not only aren't going to remove turbidity
00:11:08.000 | from the water, not only are they not going to remove bad taste from the water,
00:11:12.000 | they're actually going to add an unpleasant taste to the water itself. They
00:11:16.000 | simply make the water safe to drink, but they're not pleasant.
00:11:20.000 | But what they are is small, compact, durable,
00:11:24.000 | and hard to destroy. Unlike the water filter, where the membrane itself
00:11:28.000 | might be delicate and cause problems, the
00:11:32.000 | water tablets are small, they're compact, they're durable,
00:11:36.000 | and they're not going to fail. If he's got them in a Ziploc bag and they're stuck in a safe place,
00:11:40.000 | they're not going to fail. They're going to be able to purify the water.
00:11:44.000 | Now that brings us to our third method, the third method of having a
00:11:48.000 | vessel in which he can boil the water. This is a good form
00:11:52.000 | of complementary redundancy because it not only complements the other methods,
00:11:56.000 | so for example, if our hiker had to use his water
00:12:00.000 | tablets, he would need to be able to put the water into a
00:12:04.000 | vessel that he can then put the tablets in and let them sit.
00:12:08.000 | And so what a hiker will usually do is will size his water
00:12:12.000 | bottle that he's going to boil water in, or his pot, to the proper size of
00:12:16.000 | how much water you can purify with one water purification tablet.
00:12:20.000 | And so the vessel that he would boil water in complements
00:12:24.000 | the other forms of purification. But it's redundant
00:12:28.000 | because he could use just that method alone to provide
00:12:32.000 | him with clean water. And again, it's not
00:12:36.000 | an ideal system because
00:12:40.000 | it's hard to make a fire, it's time consuming, the water's not going to taste
00:12:44.000 | great, but it provides him with another bit of capacity because now
00:12:48.000 | instead of just having a bottle that can be used to boil water in,
00:12:52.000 | he has a bottle that he can simply carry water in. And that water
00:12:56.000 | that he's carrying doesn't need to be purified because he brings it from home. He may
00:13:00.000 | not need to purify any or as much of his water from the streams.
00:13:04.000 | And the other aspect is simply the fire itself can be
00:13:08.000 | used on a daily basis to hydrate his hiking meals,
00:13:12.000 | etc. And so there's this virtuous circle among good gear and good
00:13:16.000 | planning. There's this virtuous circle where if you think in terms of
00:13:20.000 | complementary redundancy, you can implement different components
00:13:24.000 | that give you the same basic function, but that
00:13:28.000 | also give you various attributes that complement one another.
00:13:32.000 | I hope it's useful and I hope you think about that.
00:13:36.000 | And I like to use those preparedness examples, those physical examples, because
00:13:40.000 | if you grasp them, they're simple and straightforward. And all this is is a
00:13:44.000 | thinking tool. What you do is you apply this method of
00:13:48.000 | thinking to anything that is important for you.
00:13:52.000 | And you consider, what do I want to do? What is the
00:13:56.000 | capability that I want to have? And what methods can I
00:14:00.000 | put in place so that I have two is one, one is none, three is a guarantee?
00:14:04.000 | So I have three methods to do those basic capabilities.
00:14:08.000 | And then how can I create complementary redundancy
00:14:12.000 | among these capabilities? By the way, this is really
00:14:16.000 | only for very important items. This is really only
00:14:20.000 | important for mission critical items or mission critical skills
00:14:24.000 | or things that are very important to you. Having fresh,
00:14:28.000 | clean, safe water to drink is very important to me. And so
00:14:32.000 | I want to make sure that I have the three different options. On the other hand,
00:14:36.000 | if I have a shirt, I'm out hiking and the shirt doesn't smell
00:14:40.000 | very good, I'm not going to try to always make sure that I have two is one, one is none,
00:14:44.000 | three is a guarantee, and complementary redundancy among my shirts. I'm just
00:14:48.000 | going to be willing to deal with a stinky shirt on occasion. Now clearly, we'll bring in
00:14:52.000 | layers to keep me warm, but I'm not going to carry three extra shirts and weigh myself
00:14:56.000 | down just so I don't have a stinky shirt. There's a difference between things that are
00:15:00.000 | truly important that you are not willing to do without versus things that
00:15:04.000 | are nice to have and hey, a failure is okay.
00:15:08.000 | Let's turn now to financial examples. What are some
00:15:12.000 | ways of thinking and of applying this in the financial world?
00:15:16.000 | I'm repeating, but this is what I do. This is one of the thinking tools I
00:15:20.000 | use to try to give people good outcomes. If there's something that's important,
00:15:24.000 | then I want to have three different ways of accomplishing it. Let's start with the simplest
00:15:28.000 | example, that of buying something. The most basic
00:15:32.000 | use of money is the ability to go and purchase something
00:15:36.000 | when you need it. I want to make sure that I always have multiple
00:15:40.000 | ways of purchasing something. In my wallet, I always
00:15:44.000 | may have a primary, but I'll go through the three.
00:15:48.000 | In my wallet, I'll always have cash. I always have physical cash so that I can
00:15:52.000 | purchase something. I'll also always have a card, a credit card,
00:15:56.000 | debit card, etc. Something that I can use to purchase something with a card.
00:16:00.000 | Then I'll always have an Apple Pay or a Google Pay, some form
00:16:04.000 | of electronic redundancy that I can use to pay for something. Now you pick
00:16:08.000 | your pick of which of those you prefer to be your primary form
00:16:12.000 | of payment. Some people want cash as their primary form of payment. Some people their
00:16:16.000 | cards. Some people their watch. I find all of them useful in different
00:16:20.000 | contexts. I find that those three different methods of purchasing something
00:16:24.000 | complement one another really, really beautifully.
00:16:28.000 | The first thing, cash. Cash gives me certain features and attributes.
00:16:32.000 | Cash is
00:16:36.000 | to make sure that I don't go into debt. It allows me to purchase something. It's easy to budget
00:16:40.000 | because I can mentally account for it in a really reliable and consistent
00:16:44.000 | way. Cash is virtually always accepted.
00:16:48.000 | It makes things happen very, very quickly. Cash is anonymous. I don't create a big profile
00:16:52.000 | with all of my transactions. Cash is safe. Once I purchase
00:16:56.000 | something with my cash, then
00:17:00.000 | it's done. The seller is safe and I'm safe. The transaction is
00:17:04.000 | finished and concluded. There's no fraud, etc. It's a wonderful tool.
00:17:08.000 | Cash is great. On the other hand, cash has other attributes
00:17:12.000 | that make it difficult to happen. I might want to carry a few hundred
00:17:16.000 | dollars or a couple thousand dollars on me, but I for one am not carrying
00:17:20.000 | tens of thousands of dollars in my wallet or on my person on a daily basis.
00:17:24.000 | You say, "I might like to be able to make larger transactions
00:17:28.000 | than I would make with the money that I carry in my wallet."
00:17:32.000 | That's where a complementary form of payment, such as a credit card,
00:17:36.000 | can give you access to tens of thousands or hundreds of thousands of dollars of buying
00:17:40.000 | power in a single transaction. It gives you the ability to
00:17:44.000 | make large transactions. It is convenient
00:17:48.000 | in its own way and in a different way. It is very safe because
00:17:52.000 | now you have fraud protection, you have merchant protection on certain transactions,
00:17:56.000 | so it's convenient and safe. It's easy.
00:18:00.000 | It complements one another beautifully. You might always carry a few hundred dollars,
00:18:04.000 | but then your real spending money is on your credit card.
00:18:08.000 | You switch to something like Apple Pay on your watch. Now you have a whole different
00:18:12.000 | set of features and attributes. You have the ability to spend
00:18:16.000 | large amounts of money, but now you don't need to carry a wallet. You don't need to
00:18:20.000 | carry cash. You don't need to carry a card. All you need is the watch on your wrist.
00:18:24.000 | You have additional purchasing safety because now, instead of all of your
00:18:28.000 | personal information being spilled with your credit card, now it's a single
00:18:32.000 | transaction through Apple Pay, which gives you additional forms
00:18:36.000 | of protection on the purchase transaction. Now you have
00:18:40.000 | the features such that you're at an all-inclusive resort playing
00:18:44.000 | around in the pool, and for whatever reason you're not going to charge stuff directly to your
00:18:48.000 | room, but you want to pay, but you don't want to carry cash, which is going to get wet. You don't want to carry cards
00:18:52.000 | because it's annoying to have them in your pocket. Your watch is on your wrist. Tap, tap. Pay the bill.
00:18:56.000 | You're done. You have three different methods of paying things.
00:19:00.000 | What happens is that the three methods actually become more.
00:19:04.000 | You can have ten different credit cards and ten different currencies or ten different
00:19:08.000 | cards from different countries or different banks, etc. all lined up right there
00:19:12.000 | on your watch ready for you. At the simplest
00:19:16.000 | perspective of buying something and you want to plan that
00:19:20.000 | two is one, one is none, three is a guarantee, with those three methods that I've
00:19:24.000 | described, you're pretty much always going to be able to buy something.
00:19:28.000 | You could buy a car. Even if you have low credit limits, you just pull out your Apple Watch and go down
00:19:32.000 | six cards and make six transactions and buy your car, and you're on
00:19:36.000 | your way. Two is one, one is none, three is a guarantee,
00:19:40.000 | and I want complementary redundancy.
00:19:44.000 | Complementary redundancy. Now, you go through other
00:19:48.000 | areas. I think about this with regard to bank
00:19:52.000 | accounts. When I think about planning out my banking
00:19:56.000 | infrastructure, I know that two is one, one is none, three is a guarantee,
00:20:00.000 | so I want to have at least three different bank accounts.
00:20:04.000 | I don't want to just have three bank accounts all at the same kind of
00:20:08.000 | bank. I don't want to have a bank account with Chase and
00:20:12.000 | Wells Fargo and Bank of America. What's the point? They're all the same.
00:20:16.000 | I mean, yes, there is some point, meaning that I do have differentiation
00:20:20.000 | among them, but what I mean is they all basically offer the same set of
00:20:24.000 | products, and I want to build in complementary redundancy
00:20:28.000 | into my banking situation. So what can I do? Well, I'm going to
00:20:32.000 | try to have three banks, but I want to analyze the basic attributes
00:20:36.000 | and features of those banks and then incorporate
00:20:40.000 | them into my financial life. So I might want to have
00:20:44.000 | one bank account with a big monster mega bank in the United States because they have
00:20:48.000 | a national presence and a national footprint. So again, Wells Fargo,
00:20:52.000 | Chase, Bank of America, one of these is great,
00:20:56.000 | and they have good services, they've got good products, they've got ATMs
00:21:00.000 | and bank branches all around the country. I now have access to a national bank.
00:21:04.000 | But hopefully by my articulating the basic attributes
00:21:08.000 | of this bank, you can see that there are times when I might want to have
00:21:12.000 | the opposite of those attributes. So I want to follow that up perhaps with a small
00:21:16.000 | local credit union or a small local bank. Why?
00:21:20.000 | Well, the big bank can be useful because it gives me
00:21:24.000 | access to lots of services, but a little bank can be useful because
00:21:28.000 | I might get better personalized service, or I might get more privacy.
00:21:32.000 | Someone's doing an asset search on me. Well, they're certainly going to try to get the
00:21:36.000 | info out of the big monster mega banks, but are they really likely to find
00:21:40.000 | my account at the local credit union in upstate Maine when I myself
00:21:44.000 | live in Florida? That's unlikely. And so I'll have
00:21:48.000 | an account with a local credit union, a small local
00:21:52.000 | credit union that is going to give me access to their banking setups.
00:21:56.000 | In addition, these products can often complement one another. So the difference between
00:22:00.000 | a bank, which is a for-profit entity, and a credit union,
00:22:04.000 | which is a not-for-profit entity run for the benefit of its members,
00:22:08.000 | means that now I'm going to have access to a different set of products
00:22:12.000 | with a different set of features. At the big monster bank, I'm going to have access to all of their products,
00:22:16.000 | which are large, nationally advertised, etc. But at the local credit union,
00:22:20.000 | I'm going to have access to lower cost of financing, better rates
00:22:24.000 | and terms on certain financial products, more careful individualized
00:22:28.000 | underwriting where I'm not just a number. I have something to offset that.
00:22:32.000 | Now, where does the third one come in? Well, the third one comes in
00:22:36.000 | where in my analysis, I try to think of what are features and attributes
00:22:40.000 | that I might desire to have in a bank that I'm not going to have
00:22:44.000 | with options one and two. And so in my mind, I immediately
00:22:48.000 | of course go to, well, we don't have to immediately go offshore. That's where my mind
00:22:52.000 | goes. But I would look then at different levels of banking. Maybe you're
00:22:56.000 | very wealthy. And so you want to go ahead and have a relationship with a
00:23:00.000 | private bank, someone that's going to give you a very high level of service
00:23:04.000 | and this can offset your other relationships. I quickly go offshore.
00:23:08.000 | So I say, I've got a good bank account in the United States with a big
00:23:12.000 | national bank. I've got a good bank account in the United States with
00:23:16.000 | a local credit union. The common feature of these though is the United States
00:23:20.000 | and the US dollar. So maybe now I open up one bank
00:23:24.000 | account outside of the United States so that not everything is
00:23:28.000 | governed by one country's laws and rules and not everything
00:23:32.000 | is in one currency. And I might diversify and have access
00:23:36.000 | to a second currency by features
00:23:40.000 | of my having this international bank account. Now, quickly
00:23:44.000 | you can see that you can go on this way forever and only you
00:23:48.000 | are going to be able to decide where the right place to stop is. So you might
00:23:52.000 | say, I want to have a bank account abroad but I don't want just one
00:23:56.000 | bank account abroad. I want three bank accounts abroad in three different countries with
00:24:00.000 | three different currencies. Okay, that's fine. There's just a sliding
00:24:04.000 | scale here with how important something is to you and what the
00:24:08.000 | cost is to maintain that setup. If it's very important
00:24:12.000 | to you to have a flashlight, then you'll carry a flashlight with
00:24:16.000 | you. But one person is going to say, two is one, one is none, three is a
00:24:20.000 | guarantee. And he's going to have a flashlight, a cell phone with a flashlight
00:24:24.000 | in it, and a watch with a flashlight in it and say that's good enough for me.
00:24:28.000 | Another person is going to have a flashlight,
00:24:32.000 | a headlamp, and a lantern, and a cell phone, and a watch
00:24:36.000 | because I'm going to have this and I want these features and I'm willing to carry this extra weight
00:24:40.000 | in my bag. One person is going to have three bank accounts
00:24:44.000 | that are all in the United States. Another person is going to have three bank accounts in the United States,
00:24:48.000 | three bank accounts outside the United States, and three more backups in
00:24:52.000 | wherever. So this is just a mental tool and you have
00:24:56.000 | to decide what you want and how important it is for you. But if you think about this
00:25:00.000 | in your various aspects of financial planning, you will
00:25:04.000 | be a better planner. Before I
00:25:08.000 | go on and give more examples, I want to explain to you one of the things I most value about this
00:25:12.000 | method of thinking. What it forces you to do, done properly, is
00:25:16.000 | it forces you to be a better planner and a better thinker
00:25:20.000 | because you have to examine and identify the fundamental attributes
00:25:24.000 | of a thing or of a solution. And you have
00:25:28.000 | to identify those attributes and how they compare
00:25:32.000 | to the attributes of another thing or another solution.
00:25:36.000 | So in terms of banking, very few people have ever thought much about
00:25:40.000 | what they desire in a bank account. They just saw an advertisement for a bank and they went
00:25:44.000 | and opened a bank account. But if you think about it and you recognize
00:25:48.000 | that there are certain attributes of each bank and these are
00:25:52.000 | kind of built-in, baked-in attributes, then you can say, "Do I want those
00:25:56.000 | attributes? Do I not want those attributes?" and you can incorporate them in a more self-conscious
00:26:00.000 | manner. This
00:26:04.000 | skill of not being caught up in emotionalism, not being caught
00:26:08.000 | up in dogmatic thinking, but rather in simply assessing
00:26:12.000 | something, identifying its basic attributes, and thinking about where those attributes
00:26:16.000 | might be useful to you is something that will make you
00:26:20.000 | a better thinker and a better planner. Let's use
00:26:24.000 | an example such as investing.
00:26:28.000 | If we go to the world of investing and we say
00:26:32.000 | two is one, one is none, three is a guarantee, and we think about
00:26:36.000 | complementary redundancy, then
00:26:40.000 | in this conversation we want to think about how
00:26:44.000 | can I get different features for my investments?
00:26:48.000 | One guy might go out and say, "Your business
00:26:52.000 | is your best investment." I would be that guy, by the way. "Your business is your best
00:26:56.000 | investment." And you might hear that and think that I'm saying, "You should
00:27:00.000 | only invest in your business." That would be false. Your business is your
00:27:04.000 | best investment. It has the most potential, the most opportunity
00:27:08.000 | to make you the highest return on your money, and that's the key metric
00:27:12.000 | for you to be shooting towards. It also has certain basic attributes, such as
00:27:16.000 | control. You can control the investment. Such as insider information.
00:27:20.000 | When you're investing in your own business, you have insider information, and it's
00:27:24.000 | entirely legal for you to invest according to that information.
00:27:28.000 | You have the ability to access capital, to borrow money safely.
00:27:32.000 | You have all kinds of basic features with your own business. But then you have a whole
00:27:36.000 | giant set of drawbacks. What if you get sick and can't run your business? The whole thing
00:27:40.000 | collapses. Your business is highly concentrated in a single industry
00:27:44.000 | or a single thing, and that may cause everything to fall apart.
00:27:48.000 | And so, by recognizing that, now you say, "You know what?
00:27:52.000 | I'd like to have some redundancy, but I want it to be complimentary."
00:27:56.000 | So if I have this business, and I want redundancy,
00:28:00.000 | I want another way of making a lot of money on my investing, but
00:28:04.000 | I want it to complement the business, then let me take all of the attributes
00:28:08.000 | of my business and flip them on their head and see if I can go and find
00:28:12.000 | those attributes. So my business is very
00:28:16.000 | highly concentrated into one industry or market segment.
00:28:20.000 | But now, let me go and find a way to invest into business that's not
00:28:24.000 | concentrated into one market segment. Oh, if I buy this mutual fund, I have access
00:28:28.000 | to lots of different segments. My business gives me insider information.
00:28:32.000 | But that means that I myself could make mistakes and screw things up.
00:28:36.000 | So let me buy businesses that are owned and managed by
00:28:40.000 | other professionals so that I'm not the only one that's there.
00:28:44.000 | And you say, "My business allows me to borrow a lot of money, but let me
00:28:48.000 | make sure that I have money that's safe from borrowing." So instead of going out and
00:28:52.000 | building a portfolio of risky, high-growth
00:28:56.000 | stocks with margin accounts and a stock portfolio, let me go and buy mutual
00:29:00.000 | funds and put them in a retirement account and never borrow against them. So at least if I go bankrupt
00:29:04.000 | in my primary business, I have these backup investment assets here that I can
00:29:08.000 | use to start over again. Well, two is one, one is none, three is a guarantee.
00:29:12.000 | Where's my third source of investing? Well, this is where we pivot often
00:29:16.000 | to another form of investing, such as real estate.
00:29:20.000 | What's the benefit of real estate? Well, it's physical, it's tangible, it's functional,
00:29:24.000 | it has a certain form of utility. And so you might say, "My
00:29:28.000 | three-pronged strategy is to invest primarily in my business, to
00:29:32.000 | then complement that with investments in my mutual funds, in
00:29:36.000 | retirement accounts, and then my complement to that is to invest
00:29:40.000 | into a large, nice, personal home for me to live in so that
00:29:44.000 | if point one and point two failed, I would at least have the money from my home
00:29:48.000 | and the equity there that's available for me." Some guys might go out and
00:29:52.000 | buy rental properties because now I have a source of income that's not
00:29:56.000 | connected to sources of income number one and number two.
00:30:00.000 | You might diversify in other ways, right? You might go international, you might go across industries,
00:30:04.000 | etc. You're the one who gets to choose. But along the way, this way of
00:30:08.000 | thinking, two is one, one is none, three is a guarantee, and looking for ways
00:30:12.000 | to get that guarantee and also get complementary
00:30:16.000 | redundancy is really, really powerful.
00:30:20.000 | Now, you can apply this in any area
00:30:24.000 | of your life, and I don't want to belabor the plan. I do this with
00:30:28.000 | my emergency fund. If I need money, where is it going to come from?
00:30:32.000 | My emergency fund, three different forms of complementary redundancy. I might
00:30:36.000 | have cash in my pocket or cash under my mattress. I might have a
00:30:40.000 | credit card, and I might have a savings account, or I might plan
00:30:44.000 | that I'm going to have cash, a savings account, and a loan against my
00:30:48.000 | 401(k) or a loan against my life insurance cash values, etc.
00:30:52.000 | And those are three different forms of access to capital
00:30:56.000 | that are going to allow you to solve the emergency, and they're different.
00:31:00.000 | They're unique in each one of them. You might have,
00:31:04.000 | I do this with international planning. I want to have three different countries that I can
00:31:08.000 | live in, and those countries I want access to different
00:31:12.000 | things. One country I want to make sure has access
00:31:16.000 | to a large job market so I can make a good living. The second
00:31:20.000 | country I want access to a low cost of living country. Job market
00:31:24.000 | might stink, but maybe I'm working online, but I want a low cost of living place.
00:31:28.000 | And then the third country might be a country that grows a lot of food
00:31:32.000 | so I can be confident that I'm always going to have food to eat. The third
00:31:36.000 | country might be a country that offers me access to a great healthcare system
00:31:40.000 | so that if I'm dying of cancer I can get appropriate healthcare. I've used that
00:31:44.000 | principle in setting up residencies, which was what I was talking about there. We could switch to
00:31:48.000 | citizenships and passports. I want to have one
00:31:52.000 | passport from a country that gives me access to
00:31:56.000 | good travel access around the world. It allows me to travel to many
00:32:00.000 | different countries without having to spend all my time in international embassies and consulates
00:32:04.000 | applying for visas. So one factor in my passport
00:32:08.000 | selection and the citizenships that I'm pursuing is going to be a powerful
00:32:12.000 | travel document. Now on the flip side, that powerful travel document
00:32:16.000 | often comes with a country that is going to impose high taxes,
00:32:20.000 | is going to be large, search for a lot of information, etc.
00:32:24.000 | And so the second passport or citizenship that I pursue, I might
00:32:28.000 | look for a small country. A small country that doesn't have a giant government spying
00:32:32.000 | budget. They're not going to follow me around the world, and I just want to make sure that it's good enough, but it gives
00:32:36.000 | me access to travel, but it's
00:32:40.000 | from a small country that's fairly neutral. And then for the third
00:32:44.000 | one, maybe I'll choose a country that has a totally different
00:32:48.000 | profile than the one that I was, than either
00:32:52.000 | country number one and country number two. So if country number one is the United
00:32:56.000 | States, and the United States is the world's superpower, but it's going up
00:33:00.000 | against China or Russia, then maybe there's a way that I can get
00:33:04.000 | a citizenship from a country that is more friendly towards China and Russia and less
00:33:08.000 | friendly to the United States. So that way, if my home country
00:33:12.000 | is messing everything up and I want a balance and I want to be identified with
00:33:16.000 | a different profile, then now I have the option to do that. So
00:33:20.000 | you can apply this thinking in everything, in every aspect
00:33:24.000 | of your life and every aspect of your life and planning. You identify
00:33:28.000 | the goal that you have, the thing that you're trying to accomplish, the basic
00:33:32.000 | features that you want. You think about how you can develop three different
00:33:36.000 | ways to accomplish it, and then you look to make sure that those three different
00:33:40.000 | methods or tools complement one another. So you don't
00:33:44.000 | only have redundancy, but you have complementary
00:33:48.000 | redundancy. I'm going to stop the examples there. I think you can fill them in. I had some other
00:33:52.000 | things planned on credit cards and insurance, etc., but you've got the idea.
00:33:56.000 | You take it and go from here. As I wind down the show, though, I want to take a moment and promote
00:34:00.000 | one of my classes that will give you good, solid application
00:34:04.000 | of this principle to real life. And that class is called
00:34:08.000 | International Escape Plan. You can buy it at
00:34:12.000 | internationalescapeplan.com. I spent years thinking about these problems,
00:34:16.000 | watching them, etc., and as I thought about ways of preparing in the past, I've taught
00:34:20.000 | classes on physical prepping, on preparedness, I've done all kinds of things on this.
00:34:24.000 | I realized that there were a whole suite of solutions to problems
00:34:28.000 | that most people weren't thinking of. And I realized that one of the best ways
00:34:32.000 | to survive and thrive in any kind of crisis
00:34:36.000 | was by not being where the crisis is happening, by simply going somewhere else.
00:34:40.000 | And in today's world, you can look around and you can see many reasons why there could
00:34:44.000 | be potential crisis in your town, in your neighborhood, in your country.
00:34:48.000 | And so I want to teach people how to have a backup plan to be able to
00:34:52.000 | escape to another country. So I created a course called
00:34:56.000 | internationalescapeplan.com. And in that course, I teach you
00:35:00.000 | how to put in place a system of complementary redundancy in
00:35:04.000 | every aspect of your life. And I teach it in a very careful way,
00:35:08.000 | a very phased, tiered approach. I don't believe that everybody should go and be
00:35:12.000 | immigrants to another country. Probably not going to solve your problems.
00:35:16.000 | I don't think that everybody should leave and set up five bunkers
00:35:20.000 | in five different countries around the world. Rather, I teach it in a very careful and
00:35:24.000 | thoughtful way, showing you how to implement a phased plan that puts in place
00:35:28.000 | a system of redundancy to protect you from some of the significant dangers
00:35:32.000 | that you can face in your life. If that sounds interesting to you, go to internationalescapeplan.com.
00:35:36.000 | Buy that course, internationalescapeplan.com. I have
00:35:40.000 | sold a lot of those courses and so far my running count for
00:35:44.000 | a refund is exactly one. So I have a lot of satisfied
00:35:48.000 | students and I think that you will like it as well. Go to internationalescapeplan.com
00:35:52.000 | today and buy that course.
00:35:56.000 | Winter's favorite town.
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