My-Biggest-Financial-Mistakes--Conservatism

00:00:00.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,

00:00:03.920 | skills, insight, and encouragement you need to live a rich and meaningful life now, while

00:00:08.040 | building a plan for financial freedom in 10 years or less.

00:00:11.280 | My name is Joshua Schietz.

00:00:12.280 | I'm your host.

00:00:13.280 | Today, I want to share with you what I think will be the beginning of a fairly lengthy

00:00:17.200 | series, or at least I've got lots of these.

00:00:20.220 | Some of my biggest mistakes, meaning financial mistakes, my biggest financial mistakes.

00:00:26.720 | And these are not going to be beautifully coordinated.

00:00:29.640 | They're going to be simply things that as I have reflected on my life, on my successes

00:00:35.400 | and failures, I have observed these things to be significant mistakes.

00:00:40.400 | Today, I'm going to begin with what I consider to be the number one most expensive mistake

00:00:48.480 | that I have made.

00:00:49.480 | It's quite simply this, I have lived, acted, and thought conservatively.

00:01:01.600 | Constantly I have lived, acted, and thought conservatively.

00:01:06.560 | I've been aware of this particular problem for a while, and I want to articulate a few

00:01:11.640 | of the examples that I can trace in my own life of how this has hurt me in hopes that

00:01:16.600 | you can consider your own life and see what is true or not true.

00:01:20.600 | And perhaps you're making this mistake.

00:01:23.080 | By the way, these mistakes, I'm working very diligently to note them and observe them so

00:01:29.720 | that I can change them.

00:01:30.840 | Some of them I have changed successfully.

00:01:32.460 | Some of them I am changing.

00:01:34.420 | Some of them I will change.

00:01:36.400 | But let's begin with conservative thinking.

00:01:39.520 | Now, in my life, this word conservative has a number of different meanings, a number of

00:01:47.720 | different expressions.

00:01:49.120 | For example, it's quite common that when you hear this word conservative, someone says,

00:01:54.000 | I'm a conservative.

00:01:55.800 | Often they're referring to that in a political sense.

00:01:58.520 | And when I think about being a conservative person, I don't think of it in a political

00:02:04.840 | sense, although that does apply.

00:02:07.160 | And I've spent quite a lot of time over the last few years thinking carefully about my

00:02:11.040 | own political conservatism.

00:02:14.280 | I have a hard time identifying with the political term conservative at the moment.

00:02:20.360 | While most people would analyze my political opinions and come to the conclusion, oh, Josh

00:02:26.520 | was a conservative, I've grown disillusioned with that term, especially when considering

00:02:33.080 | the broad scale failure of conservative political thought and conservative political movements

00:02:39.080 | in the United States.

00:02:40.080 | So I'm actually not that unhappy to no longer identify as a conservative, so to speak.

00:02:47.520 | But in this context, it has nothing to do with politics and it has more to do with,

00:02:52.320 | I should correct that.

00:02:53.420 | It has little to do with politics and it has more to do with an outlook on life.

00:02:59.120 | The basic idea is, hey, bad things can happen and so I should behave prudently.

00:03:04.520 | I should behave cautiously.

00:03:06.600 | This is what I think of as conservatism, or at least in the sense that I'm thinking about

00:03:10.440 | it right now.

00:03:12.600 | Is conservatism bad?

00:03:14.440 | Well, certainly I would say no.

00:03:18.220 | There are many things in which I think conservatism is quite warranted.

00:03:24.240 | I'm personally quite conservative when it comes to things that could kill me.

00:03:29.880 | And I think that that's smart.

00:03:31.080 | I think it's smart to be conservative when you're thinking about engaging in an activity

00:03:35.880 | that could kill you.

00:03:38.520 | I'm pretty conservative when I think about things that could lead me down a bad road

00:03:44.860 | when I recognize, hey, you know what, I might not be able to recover from that.

00:03:48.840 | I don't know.

00:03:49.840 | Best example I think of here is something like drug use.

00:03:52.120 | Right?

00:03:53.120 | I never use drugs.

00:03:54.120 | I try not to even use the least of the drugs.

00:03:58.760 | The drug that I use the most is simply caffeine.

00:04:01.960 | And I try really hard.

00:04:03.240 | That's not true.

00:04:04.440 | I do.

00:04:05.440 | It's not a matter of trying.

00:04:07.200 | Once a year or so, once every year or two, I regularly quit caffeine.

00:04:11.120 | And I take a couple of months with zero caffeine intake because I don't like the idea of being

00:04:18.200 | addicted to somebody or something or needing something.

00:04:21.520 | And so as a matter of personal self-discipline, I discipline myself every year or two to completely

00:04:27.040 | stop using any kind of caffeine.

00:04:29.840 | But I do like that particular drug.

00:04:31.360 | And so after usually a month or two of proving to myself that I'm not addicted, I'll reintroduce

00:04:35.640 | that drug.

00:04:36.720 | But beyond that, I worry about being the kind of person who uses drugs or uses addictive

00:04:41.360 | substances because I think I probably have a bit of addictive personality.

00:04:44.720 | I don't want to run down that danger.

00:04:47.360 | Again, I don't think that you have to wholesale reject conservatism.

00:04:51.800 | But what has hurt me the most financially has been financial conservatism.

00:04:57.400 | There have been many times in my life where I look back and reflect and there were opportunities

00:05:02.920 | in front of me.

00:05:03.920 | There were big opportunities.

00:05:06.160 | There were things that had big potential, but those things were risky.

00:05:10.920 | They were unproven.

00:05:12.020 | They were speculation.

00:05:14.240 | They were things that other people might not have been comfortable with.

00:05:17.360 | And I've often said, "Well, maybe not."

00:05:22.240 | But what's also true is when I look at my life and I analyze where my biggest successes

00:05:26.160 | have come from, it's almost always come from the times in which I rejected that conservative

00:05:31.840 | impulse.

00:05:32.840 | I rejected those conservative people who were encouraging me to be cautious, to be careful,

00:05:38.200 | to be conservative, and I acted.

00:05:41.880 | The single biggest decision that was not identified as a conservative decision that I'm so grateful

00:05:48.600 | for was the decision to become an entrepreneur.

00:05:50.480 | When I was 23 years old, I became an entrepreneur.

00:05:53.120 | I had gotten laid off from a job that was a safe, conservative, salaried job.

00:05:59.720 | And instead of going and finding another job, I went and found a business at that time,

00:06:04.800 | starting in the financial services business.

00:06:06.720 | I started with no salary.

00:06:08.880 | I started with no draw.

00:06:10.480 | I started with no promises, just simply the opportunity to work for straight commission.

00:06:18.200 | And that turned out to be one of the better decisions of my life because it opened up

00:06:21.640 | to me a profoundly freeing existence.

00:06:27.080 | And as I look back, I'm 36 now, as I reflect back over the last 13 years, it's been a dream.

00:06:33.080 | It's been an absolute dream.

00:06:35.360 | The next change, next phase in that was when I left that fairly safe work for commission

00:06:42.320 | environment, and I embarked upon the world of working on the internet.

00:06:46.840 | Again, very risky at the time.

00:06:50.680 | Literally I think my wife and my dad probably were about the only ones that understood why

00:06:55.240 | I was doing what I was doing.

00:06:57.760 | Almost to a man, every other person that I sought advice from said, "No, no, no.

00:07:02.040 | That's probably not a great solution."

00:07:04.400 | Which by the way, reflects more on the people that I was seeking advice from rather than

00:07:10.360 | the specific nature of the opportunity.

00:07:13.380 | Point was, I acted in the non-conservative way and I have reaped the joys and the benefits

00:07:21.140 | of that time and time again.

00:07:23.740 | Throughout my life, I can reflect on even smaller decisions.

00:07:26.960 | So many times I have made seemingly quick, rash, aggressive decisions.

00:07:35.400 | Although not all of them have paid off, I would guess that 80% probably have.

00:07:40.960 | As I've gotten older, I've come to trust myself much more.

00:07:44.360 | I've come to trust my impulses.

00:07:45.800 | I've come to trust my discernment and my judgment far more than I ever did when I was a younger

00:07:51.320 | man.

00:07:52.880 | But even with a track record of success, as I reflect back, I see the roads not taken.

00:07:59.040 | I see the things I could have done.

00:08:00.880 | I see the opportunities that I had that I skipped past because of a sense of conservatism,

00:08:08.360 | because of wanting to be conservative financially.

00:08:12.920 | And today this bothers me greatly.

00:08:15.560 | This annoys me.

00:08:17.520 | And I don't think it was the right decision.

00:08:19.760 | I don't think it was the right path.

00:08:22.520 | Thinking about it has helped me to analyze why I made those conservative decisions and

00:08:28.560 | then to figure out how, pressing forward, without being foolhardy, I can expose myself

00:08:34.240 | to more opportunity and to be truly willing to accept the concomitant risk of opportunity.

00:08:45.080 | The biggest insight that I have gained on this topic simply comes from recognizing that

00:08:49.600 | I need to be very careful where I accept advice from.

00:08:55.160 | When I reflect back on my early training and early education in the financial space, what

00:09:01.880 | I realize now is I chose the wrong training materials.

00:09:07.400 | And I didn't know the mistake I was making.

00:09:09.240 | I was ignorant.

00:09:10.640 | But I chose to listen to the wrong voices.

00:09:12.800 | I chose to listen to the voices of people who were speaking to people who had different

00:09:17.200 | goals than I did.

00:09:20.160 | A few practical examples.

00:09:22.360 | One of the earliest financial books that made a big impression on me that I read when I

00:09:27.000 | was a teenager was David Bok's book called The Automatic Millionaire.

00:09:33.480 | Picked this up at a bookstore somewhere.

00:09:35.440 | I was intrigued by the title.

00:09:37.400 | Picked it up and I read it.

00:09:38.680 | And I was so impressed at the plan that Bok laid out in that book.

00:09:43.520 | The basic idea, for those who haven't absorbed that classic of personal finance, was simply

00:09:51.040 | the idea that if you will automate your finances and you will put aside money on a regular

00:09:59.160 | automatic basis, you almost can't help but become rich.

00:10:04.440 | And Bok was not wrong.

00:10:05.880 | The advice that he gave in that book was good.

00:10:08.960 | It was sound.

00:10:10.200 | He was the one who coined the well-known term, the "Latte Factor."

00:10:13.580 | The idea being that if you will forgo a daily $5 latte and instead save that money in the

00:10:21.480 | fullness of time with good investment returns, you can become a multi-millionaire.

00:10:28.920 | That latte factor idea has been much attacked over the years and has become almost a joke.

00:10:36.060 | But at its core, it's still fundamentally true.

00:10:37.900 | If you can find small regular expenses that you're willing to do without and instead invest

00:10:43.080 | the money that would otherwise be spent on that daily latte or whatever equivalent is

00:10:48.920 | in your life, you'll become a millionaire.

00:10:51.640 | Nothing wrong with that.

00:10:53.100 | But what I got wrong was where to focus my time and attention.

00:10:58.280 | What I got wrong was where to invest my money.

00:11:01.900 | In that same book, Bok presented a fairly mainstream approach to investing.

00:11:08.200 | The mainstream approach to investing of open a retirement account, put in that retirement

00:11:12.500 | account some mutual funds and do this over a period of time.

00:11:16.400 | Today, with the benefit of hindsight and professional insight, I can understand why Bok gave those

00:11:24.480 | examples.

00:11:25.480 | Number one, they're accessible to most people.

00:11:28.360 | But more importantly, it came out of Bok's own personal formation, out of his own personal

00:11:32.860 | professional training.

00:11:33.860 | I believe he worked for Merrill Lynch.

00:11:35.560 | And that's the classic model of professional US American finance.

00:11:39.360 | The idea is you work with people who have an income, who have a job, and you teach those

00:11:43.560 | people to put money aside using retirement accounts and to put the money into mutual

00:11:48.600 | funds.

00:11:49.600 | And the finance industry in the United States has done an incredible job of convincing people

00:11:55.680 | that really the only safe, successful way to invest money is to invest it into mutual

00:12:01.960 | funds.

00:12:04.400 | Bok's not wrong, but his advice was not right for me.

00:12:09.040 | And today, looking at it, you'll observe that often, for example, when I do a Q&A show and

00:12:13.460 | I speak to a young man who calls me, I'll talk to that young man about opportunity,

00:12:18.200 | not about safety and security.

00:12:20.360 | I'll talk to the man about going forward and building something big and taking risks and

00:12:25.500 | being aggressive, not about setting money aside.

00:12:28.880 | The basic error that I see is the modern US financial system is a system that is constructed

00:12:36.240 | meaning professional financial advice is a system that is constructed to help rich people

00:12:41.800 | stay rich.

00:12:43.640 | It's not a system that is effective at helping poor people become rich.

00:12:49.720 | It's not that it can't work.

00:12:51.240 | It can work if you'll simply insert 30 or 40 years.

00:12:55.280 | But most of us don't want to wait 30 or 40 years to become rich.

00:12:59.160 | Most of us want to get rich far quicker so that we can enjoy the benefits of wealth at

00:13:04.080 | an earlier age.

00:13:05.920 | Now when we outline this using clear words, it's obvious.

00:13:11.080 | If you ask most wealthy people if they would rather have a million dollars by age 30 or

00:13:17.080 | four million dollars by age 60, I think most people would choose the million dollars at

00:13:21.720 | age 30, knowing the lifestyle of freedom that can be purchased with a simple million dollar

00:13:27.080 | net worth.

00:13:28.080 | But at the time, I didn't understand that missing piece of data.

00:13:33.480 | And so I absorbed the idea that I need to be cautious.

00:13:36.480 | I need to be conservative.

00:13:37.520 | I need to invest my money properly so it doesn't lose money.

00:13:41.060 | After all, rule number one is don't lose money.

00:13:43.720 | And so I adopted a basic philosophy of conservatism.

00:13:48.000 | Similarly, when I learned about investing, one of the early books that talked to me about

00:13:54.720 | investing, and again, part of the basic error that I want you to understand very clearly

00:13:58.440 | is the error in not absorbing input from a variety of different perspectives, rather

00:14:04.560 | just latching onto a single idea from an early age.

00:14:09.840 | One of the early books that formed my thinking on investment was the Coffee House Portfolio.

00:14:13.880 | I think that was the name of the book.

00:14:15.200 | It was a book that I found at the bookstore, and it talked about the value of index fund

00:14:19.080 | investing.

00:14:20.080 | The basic idea was, "Hey, look, you could choose a simple one fund investment."

00:14:27.440 | I think at the time, the author was advocating for the S&P 500 Index Fund from Vanguard,

00:14:35.480 | and he offered a couple of alternative investments, a couple of two fund investments, the idea

00:14:39.760 | being a Vanguard S&P 500 Index Fund mixed with a bond index fund.

00:14:46.960 | And the idea was, "Hey, look, with index fund investing, you can become wealthy."

00:14:51.120 | And so I understood that.

00:14:52.120 | I said, "Hey, this is great.

00:14:53.200 | I'm going to do this."

00:14:54.520 | And so I thought I was being an effective investor because I knew how to buy index fund.

00:15:00.920 | I would go around and tell my friends, "Hey, listen, friends, if you just buy a Vanguard

00:15:04.920 | S&P 500 Index Fund, this famous coffeehouse portfolio, you'll be great."

00:15:10.720 | But what I didn't understand was all of the other opportunities that were available to

00:15:14.280 | me.

00:15:15.280 | So I chose the conservative investments that are not wrong, but that weren't going to get

00:15:19.400 | me on the path to being a multimillionaire by the age of 30.

00:15:24.600 | A few more examples.

00:15:26.120 | Let's talk about other examples of investing.

00:15:29.400 | A similar analysis would need to be made about even my own personal ideas on investing at

00:15:36.000 | the time.

00:15:37.160 | For example, through a lot of these books, another example.

00:15:41.480 | When I absorbed in my early 20s Dave Ramsey's books, and I heard Dave Ramsey say again and

00:15:47.400 | again and again to me as a guy working in a salaried job, "Don't buy single stocks,

00:15:54.040 | too risky.

00:15:55.040 | Buy mutual funds instead and buy mutual funds that are well diversified."

00:15:58.680 | I absorbed that.

00:16:00.040 | And then of course later I became a financial services professional and I would absorb all

00:16:03.800 | the literature from the wholesalers selling mutual funds.

00:16:06.520 | And I understood what performance in a mutual fund was driven and how unpredictable it was

00:16:13.120 | of single stocks.

00:16:14.120 | I would read the American funds.

00:16:16.120 | My favorite brochure that they made was, still make I think, was the Investment Company of

00:16:20.280 | America.

00:16:21.360 | And they always had this chart in there showing basically how difficult it was to predict

00:16:27.600 | the companies that were the biggest winners over the course of a long-term perspective

00:16:33.600 | if you went back 75 years.

00:16:35.240 | But then of course compare that to the performance of the Investment Company of America mutual

00:16:39.440 | fund and how much better it was.

00:16:41.280 | And so I absorbed the idea that, well, I can't beat the market and I'll just buy mutual funds

00:16:46.480 | instead of single stocks.

00:16:48.200 | So this developed for me this basic mindset of financial conservatism.

00:16:54.680 | So whether from an investment perspective, choosing mutual funds rather than single stocks,

00:17:01.480 | choosing conservative mutual funds such as index funds instead of more speculative, aggressive

00:17:07.400 | funds, or with regard to personal finance, staying out of debt, making sure that you

00:17:13.440 | always had rainy day funds, building safe streams of income, etc.

00:17:20.000 | I developed this concept, this mindset of financial conservatism.

00:17:27.200 | What I think is true though is this.

00:17:29.960 | First, that concept of financial conservatism may be the best approach for many people.

00:17:36.680 | I know many people and have worked with many clients for whom I would recommend the exact

00:17:42.440 | concepts that I've just listed that work really, really well.

00:17:47.500 | They work really, really well for people who have a career that is a good fit for them,

00:17:52.160 | where they enjoy the benefits of the career.

00:17:56.400 | If I'm working with somebody who enjoys working in a corporate job or professional capacity

00:18:02.960 | of some kind, they like their day-to-day existence, then my advice to them is going to be maximize

00:18:09.840 | your retirement accounts.

00:18:11.480 | Put good quality, well-diversified investments in those retirement accounts.

00:18:16.200 | Use mutual funds rather than speculative single stocks.

00:18:19.920 | I'm going to recommend that plan for them because that seems to fit their overall approach

00:18:24.180 | to life.

00:18:25.820 | But that may not fit your approach to life, and it, in hindsight, didn't fit my approach

00:18:33.340 | to life.

00:18:34.340 | And when I reflected on many of my clients, I was often envious of my clients who, instead

00:18:41.080 | of starting a safe, secure job, went and started a business that had room to grow, and all

00:18:45.520 | of a sudden you turn around and a few years later, they could sell the business for a

00:18:50.380 | seven-figure sum.

00:18:52.260 | Or perhaps it was observing people who engaged in speculative stock trading, and it really

00:18:58.820 | played off and it worked well for them.

00:19:01.380 | I realized that I was on the wrong path.

00:19:06.060 | I was in the conservative path.

00:19:08.540 | And again, to state the matter very clearly, the conservative path is not bad.

00:19:13.460 | In fact, there can be a lot of good things about it.

00:19:16.980 | But nobody laid out for me the options of the aggressive path, and I was too ignorant

00:19:23.800 | in those early days to go and find the benefits of the aggressive path.

00:19:28.260 | By having that sense of conservatism drilled into me by the sources that I chose to engage

00:19:35.340 | with, I systematically discarded the opportunities that were in front of me, the speculative

00:19:42.100 | opportunities, the aggressive, the high risk, the high growth potentials that also came

00:19:46.680 | with high risk.

00:19:47.680 | I discarded those options and opportunities as not right for me because I didn't want

00:19:53.100 | to be stupid.

00:19:57.040 | I wish I'd done it differently.

00:20:00.220 | Now the great news is the past is the past.

00:20:02.140 | It literally doesn't exist.

00:20:03.260 | Today is a brand new day, and it's the first day of your life and my life.

00:20:06.580 | And so going forward, we can change things.

00:20:09.700 | And as I've reflected and realized the error of my ways, I've made a different decision.

00:20:16.180 | Going forward, I have decided that I'm going to pursue the aggressive opportunities.

00:20:21.700 | I'm going to pursue the risky opportunities.

00:20:24.420 | I'm going to pursue the speculation, not just the investment.

00:20:31.260 | Possibly 10 years from now, I'll record another podcast or who knows, maybe a virtual reality

00:20:39.620 | holographic chat telling you the errors of the speculative way, the errors of the aggressive

00:20:46.180 | way.

00:20:47.180 | And man, I should have just stayed conservative.

00:20:48.180 | Maybe, but I don't think that's true.

00:20:50.760 | What I have done along the way is I have realized if I will simply define the risks, then I

00:20:58.900 | can systematically put watertight compartments around the risk and lay out what success and

00:21:06.220 | failure would be like.

00:21:07.220 | And as long as I'm okay with failure and I'm willing to embrace complete and total failure,

00:21:12.740 | then there are better opportunities for me to experience far more success by avoiding

00:21:17.760 | and eschewing the conservative path in favor of the aggressive and risky path.

00:21:22.980 | Now here, I have two basic fears that I have identified.

00:21:29.380 | The first is practical.

00:21:30.380 | The second is emotional.

00:21:31.380 | Let's begin with the practical fear.

00:21:33.700 | What I have learned is all risk is not equal.

00:21:39.220 | For example, we all know that flying on airplanes, for example, is statistically quite safe.

00:21:48.900 | We also know that airplanes sometimes fall apart.

00:21:51.100 | I have a minor hobby of watching disaster videos on YouTube from all the aviation channels

00:21:57.040 | that go through airplane crashes.

00:21:59.100 | And why did such and such an airplane crash?

00:22:01.020 | I listen to the black box recordings of the pilots after the fact.

00:22:05.340 | And I watch the reconstructed flight paths where people take a flight simulator, pretty

00:22:09.260 | cool genre of videos on YouTube.

00:22:12.500 | People take a flight simulator and they'll take a famous airplane crash and they'll show

00:22:16.560 | you exactly what happened and why it crashed.

00:22:19.240 | But at the end of the day, I know statistically that flying on an airplane is quite statistically

00:22:25.700 | safe.

00:22:26.700 | There are a lot of people who don't believe that flying on an airplane is statistically

00:22:30.160 | safe and have this irrational fear of flying on an airplane or just simply a fear of flying

00:22:37.820 | on an airplane.

00:22:38.820 | For me, I look at it and I say, because of the places that I want to go and because of

00:22:42.980 | the things that I want to do, I don't want to only drive a car across the country.

00:22:49.820 | And although, of course, we all know that statistically driving a car involves a significant

00:22:53.100 | amount of danger, we all on a day to day basis generally tend to ignore that because we're

00:22:57.740 | familiar with it.

00:22:59.460 | I don't want to accept the limitations of exclusively relying on my own wheels to get

00:23:04.600 | me from place A to place B. I want to travel the world.

00:23:06.980 | And so if I'm going to travel the world, I'm going to need to go on an airplane.

00:23:09.900 | And there are times on an airplane where I'm genuinely concerned.

00:23:12.740 | I'm genuinely scared.

00:23:15.100 | I don't think that certainly for pilots become pretty comfortable with turbulence, but I

00:23:19.980 | think most of us sitting in the back when the plane starts bouncing up and down, we

00:23:24.420 | tighten our seatbelts.

00:23:26.300 | And tightening our seatbelts is probably a good thing to do.

00:23:29.620 | But when I'm in that situation, I remind myself I'm trying to get where I want to go.

00:23:34.700 | I remind myself what turbulence is.

00:23:36.700 | I have things I teach my children.

00:23:38.540 | I teach my children that when the plane bounces up and down, it's just like being out on the

00:23:41.460 | water when the boat's bouncing up and down.

00:23:42.820 | It's just bouncing up and down on the air currents.

00:23:45.220 | I remind myself of the many redundancies.

00:23:47.260 | I remind myself of the fact that, again, bouncing up and down on an airplane is not per se dangerous.

00:23:56.780 | The airplane is made for it.

00:23:57.780 | Just like bouncing up and down on a boat is not dangerous.

00:23:59.660 | The boat is made for that.

00:24:02.580 | I remember my first intercontinental airplane flight.

00:24:07.100 | I was 12 years old and I was flying with my parents.

00:24:11.740 | I looked out the window.

00:24:12.740 | I saw the wing bouncing up and down.

00:24:15.260 | And it scared me because I thought that wing shouldn't be bouncing up and down.

00:24:17.940 | And my dad explained to me that if it's stronger, he being an engineer, he explained that the

00:24:23.740 | metal is flexible and thus it's stronger.

00:24:25.660 | If it were rigid, it would actually be weaker.

00:24:27.920 | And so it's designed to flex.

00:24:29.380 | That's the whole point of how the design works.

00:24:32.380 | So let's bring it back to finances.

00:24:34.180 | Now today, I can see very clearly the ability that I have as a financial engineer to segment

00:24:42.460 | and compartmentalize risk.

00:24:45.280 | So for example, if I want to make a speculative investment or speculate on a certain stock,

00:24:54.780 | something like that, I can look at that and I can understand what the maximum upside and

00:25:00.680 | downside risk is.

00:25:01.760 | I can look at it and I can say, "Hey, if I put X amount of dollars into this investment,

00:25:06.460 | the lowest my risk would be would be zero, assuming I'm not using leverage and trading

00:25:12.820 | options, which could wipe me out even more of that."

00:25:16.340 | But I can look at that and I can identify, "Here is the amount of risk and am I willing

00:25:20.100 | to take this?"

00:25:21.380 | And so instead of just simply saying, "Oh, I don't invest in single stocks," I can look

00:25:25.180 | at it and I say, "Well, should I invest in single stocks?

00:25:28.100 | Would that get me closer to where I want to go?

00:25:30.400 | And then how could I segment that amount of risk in my portfolio?"

00:25:33.940 | Similarly, with regard to business.

00:25:35.660 | I can look at it and I can say, "All right, if I'm going to embark upon a new business,

00:25:39.100 | perhaps I'm going to try something.

00:25:42.660 | What's the worst case scenario?"

00:25:43.780 | The worst case scenario is the business goes bankrupt.

00:25:46.300 | And so for me, once I actually learned how to do bankruptcy planning, then I realized

00:25:51.420 | this wasn't so scary.

00:25:54.580 | But the problem was nobody taught me that I could do bankruptcy planning.

00:25:57.940 | And so even if I went bankrupt, I would come out the other side able to start again.

00:26:03.480 | What was I scared of?

00:26:05.320 | Similar concepts of risk management.

00:26:07.340 | When I understood how to put in place an effective career insurance policy so that, hey, if a

00:26:14.460 | business fails and I go totally broke, what do I do?

00:26:17.020 | Well, I need a job.

00:26:18.260 | And so how can I put in place a strategy so I could quickly go out and get a job making

00:26:21.940 | a lot of money to make sure that I can pay my bills?

00:26:27.020 | And so I can segment the risks.

00:26:29.500 | I can isolate the risks.

00:26:32.780 | And I can understand and I can control the risks.

00:26:35.060 | I can insure against the things that I don't want to happen.

00:26:38.020 | I can accept the worst case scenario.

00:26:40.420 | And so once I've solved that worst case scenario, right, the classic stoic philosophy of understanding

00:26:46.380 | the worst thing that could happen and resolving to be okay with it.

00:26:49.140 | If I can do that financially, then I can go up in the airplane, I can go out on the boat.

00:26:55.660 | And the reality about most financial risks is they're controllable in the circumstances,

00:27:04.060 | in the events.

00:27:06.100 | Example, is business risky?

00:27:09.820 | I don't think business is risky really at all.

00:27:14.060 | That's not to say that businesses don't fail.

00:27:15.980 | Certainly they do.

00:27:16.980 | But even when businesses fail, they're not risky.

00:27:20.060 | Today with my slightly more mature outlook on risk management, I look at employment as

00:27:25.140 | being fundamentally risky because employees generally tend to have all of their time absorbed

00:27:32.020 | with one particular employer.

00:27:34.780 | Thus, they don't have the mental energy usually or the time to be thinking about other opportunities.

00:27:41.140 | And so a lot of times when an employee gets let go, gets fired, gets laid off, is forced

00:27:48.140 | out, that employee often doesn't have a backup plan.

00:27:50.740 | Whereas as a business owner, I have a long list of opportunities, things that I can pursue

00:27:55.040 | on the side.

00:27:56.080 | And so if primary thing fails, I've got secondary option.

00:27:58.900 | If secondary option fails, I've got tertiary option.

00:28:01.060 | I've got all these options lined up.

00:28:04.420 | And in addition, in business, you often know when something is failing.

00:28:09.020 | It's not doesn't catch you unawares.

00:28:10.420 | You know when your revenue is falling below your expenses.

00:28:14.060 | You know when you're running out of money, you know when sales are down.

00:28:17.420 | And so you can respond and you can react to that.

00:28:21.320 | Many businesses fail largely due to the lack of skill and lack of education of those who

00:28:27.960 | are engaging upon them.

00:28:30.000 | And failure itself is not fundamentally a problem if you are resolved to accept it.

00:28:36.060 | Similarly, I think about why is it that we're so opposed to risk in the modern world?

00:28:41.700 | We often talk about bringing home the bacon.

00:28:45.380 | I have a significant amount of responsibility.

00:28:47.940 | I have a wife and four young children who depend upon me to provide for them.

00:28:52.920 | And so the idea that most people would understand is simply this.

00:28:57.540 | As you get older, then you should take less risk because there are more people depending

00:29:03.500 | upon you.

00:29:05.020 | That's not necessarily wrong.

00:29:07.420 | Certainly there are more mouths depending upon me.

00:29:10.340 | But we're not living in a world in which business failure means starvation.

00:29:17.340 | Imagine you or I were 150 years in the past and we said maybe we go to the West, right?

00:29:23.620 | Those of us who are US Americans, or at least I have always had a fondness, a sense of romantic

00:29:29.220 | nostalgia about the West.

00:29:31.620 | You grow up seeing Western movies.

00:29:34.180 | You appreciate the allure of the American cowboy.

00:29:37.580 | And so you think, "Man, that would be great."

00:29:39.340 | Let's say that I headed out across to go settle the West.

00:29:42.500 | Government makes me an offer, says, "Hey, we've got a whole bunch of land.

00:29:45.020 | We want you to come.

00:29:46.380 | If you can come out, we'll give you your 168 acres, sorry, 160 acres, and you need to settle

00:29:51.580 | it and homestead it for five years."

00:29:53.060 | And so I head out from Chicago and I load up my family in a covered wagon heading out

00:29:57.500 | on the Oregon Trail or heading out to the West to Oklahoma to stake my claim.

00:30:02.500 | That was a fundamentally risky endeavor.

00:30:05.900 | And failure oftentimes meant quite literal death.

00:30:13.780 | If you went out to stake your claim in Oklahoma, there was a very decent chance that if your

00:30:19.660 | business failed, your crops failed, your family would starve.

00:30:26.220 | If you've never read the classic Farmer, excuse me, Lower House on the Prairie series, I'd

00:30:31.980 | encourage you to read it.

00:30:33.980 | And what's interesting to me, I read the series to my children a couple of years ago.

00:30:37.980 | In reading that series, I hear things very differently as a father, right?

00:30:41.460 | There's the classic opportunity when Pa Ingalls, the father and patriarch of that family, his

00:30:47.900 | crops in Minnesota where he was settled at the time, he had a farm in Minnesota, excuse

00:30:53.060 | me.

00:30:54.060 | Yeah, his crops in Minnesota had failed and he wasn't able to feed his family, so he had

00:30:57.820 | to go for work.

00:30:58.820 | And he walked a hundred and, I forget now, but it was something like 150 miles until

00:31:03.380 | he could find work.

00:31:04.980 | Literally walked and had nothing.

00:31:06.800 | He walked 150 miles until he could find work, didn't have enough money to send home to feed

00:31:10.940 | his family.

00:31:12.280 | And so the consequences of failure in that time could be quite literal life and death.

00:31:19.720 | Fast forward to today's world, the world in which we live of 2021.

00:31:24.700 | It's virtually unimaginable to me to think of actually facing starvation in the world

00:31:31.160 | in which I live.

00:31:32.800 | I'm not blind to the fact that many people still today do face the prospect of literal

00:31:38.000 | starvation.

00:31:39.600 | I'm in contact with them more than you know, but it's almost unimaginable for me to consider

00:31:46.840 | the prospect of my children actually going hungry.

00:31:53.040 | And what's more important, it's easier than it has ever been for me to have a plan in

00:31:59.800 | place to make sure that my children would quite literally never go hungry.

00:32:05.000 | Why do I talk about food insurance and food storage?

00:32:08.400 | It's because it's the most effective way to release yourself from the fear of your family

00:32:14.720 | going hungry.

00:32:15.880 | Today, if you live in a rich society, like many of us do living in the wealthy West,

00:32:23.580 | you can go out and for three or four or five or $6,000, you can purchase a year or two

00:32:30.040 | worth of calories to feed your family.

00:32:33.580 | Add another thousand dollars of spices and add-ons and you can do it in quite phenomenal

00:32:39.360 | comfort.

00:32:40.580 | The costs of the staples of life to keep your family literally alive are lower than they

00:32:46.560 | have ever been in human history.

00:32:49.520 | As a US American, one of the first places that I always went in my budget to try to

00:32:53.700 | trim my budgetary expenses was food spending.

00:32:56.880 | We spend, and yet we spend a tinier percentage of our income on food than many people on

00:33:01.920 | the planet.

00:33:02.920 | There are people on the planet who 80% of their money goes to food and they're living

00:33:05.960 | day to day and they cannot figure out how to have enough food for next week.

00:33:10.440 | Whereas for you and I, no doubt our expenditure spent on food is perhaps 10 or 15% of our

00:33:17.080 | income if we're normal and it could be far lower, far, far lower and still be adequate

00:33:23.120 | nutritious food on which we could survive.

00:33:27.040 | This irrational fear that we have of going hungry is really silly.

00:33:35.080 | There's no reason for me to really even consider it.

00:33:37.760 | I do consider it, but it's so easy for me to put in place insurance to protect against

00:33:42.320 | it.

00:33:43.320 | Food storage, having family and friends that would help it, having the ability to go get

00:33:46.640 | a job so that I could go and pay for food if I needed to, having enough money set aside

00:33:53.040 | so I could buy food, having access to government welfare programs so they could provide us

00:33:57.800 | with food, having access to a food pantry where we could get free food if we were in

00:34:02.200 | need.

00:34:03.200 | All of these are very reasonable things.

00:34:04.320 | And so the idea that in 2021 I should be worrying about going literally hungry is really silly.

00:34:12.200 | It doesn't make sense when you logically analyze it.

00:34:14.360 | And yet we, I have used those, those phrases, "Oh, I got to feed my family."

00:34:19.040 | And I've convinced myself to take the conservative path called, "I got to feed my family," instead

00:34:24.200 | of taking the aggressive path.

00:34:27.080 | Other simple examples.

00:34:28.080 | What about going homeless, right?

00:34:29.400 | Being without a home?

00:34:30.400 | Certainly, there's no question that business failure today could mean that I might lose

00:34:35.920 | my house, right?

00:34:36.920 | I could have a house, I could have a mortgage, and I might lose my house.

00:34:41.300 | But really, is this that big of a deal?

00:34:44.160 | I think the biggest factor that most of us who are parents worry about if you lose your

00:34:48.160 | house is the disruption to your children's lives.

00:34:52.360 | I'm convinced that's unnecessary.

00:34:54.200 | I'm convinced that's only a big deal if you teach your children that they should be emotionally

00:34:58.720 | traumatized by the loss of a house.

00:35:01.840 | Throughout history, children have been taken from one place to another.

00:35:05.560 | Throughout history, children have slept on the ground and been fine.

00:35:08.840 | Throughout history, children have slept in tents.

00:35:10.960 | And yet in the modern world, we've babied our children to the point where we don't want

00:35:15.560 | them to move houses because all of their memories are here in this room and it would just be

00:35:19.360 | too upsetting to them.

00:35:22.800 | It's something that we make up ourselves.

00:35:26.040 | So the worst case scenario of losing your house, so what?

00:35:29.480 | Big deal.

00:35:30.480 | Now, there are ways that I personally have tested overcoming this, right?

00:35:33.760 | I've talked about one of the reasons I went RVing.

00:35:36.000 | One of the reasons I went RVing, I want to see what it's like.

00:35:38.240 | And I'm convinced that RVing is a great way to cut your expenses to almost nothing.

00:35:43.040 | If you find an old trailer for a few thousand dollars and you can park that trailer somewhere

00:35:47.520 | where it can stay for a little while without the cops coming and banging on your door,

00:35:52.600 | and you can live in that trailer, then you can be fine.

00:35:56.720 | You can be fine.

00:35:57.720 | And so for me, it's always been kind of that last case, worst case scenario.

00:36:00.880 | If everything I did failed, what would I do?

00:36:03.440 | I'd buy an RV, I'd go and live in the trailer and we'd have an adventure.

00:36:06.700 | We would love it.

00:36:07.700 | There's, I mean, rich people all over the place.

00:36:12.100 | So many of financial planners' clients are millionaires and their dream is to become

00:36:19.000 | a millionaire, retire from their work and go and buy a car so they can live in it.

00:36:22.800 | Now their car is shiny.

00:36:23.800 | It has a lot of chrome, it has a lot of marble in it.

00:36:26.840 | Oftentimes it's pretty heavy and they buy a nice new pickup truck to tow it around and

00:36:30.600 | park it in a camp.

00:36:31.600 | At the end of the day though, you're living in a car and there's fundamentally very little

00:36:34.680 | difference between a million dollar new car and a $5,000 old junky travel trailer, a fifth

00:36:42.480 | wheel that you pick up somewhere.

00:36:44.700 | And so you can always have a solution or even just quite simply a tent.

00:36:49.660 | Over the years, I've gotten good enough at camping that I realized, you know what?

00:36:52.920 | I could live quite comfortably.

00:36:54.180 | I'd buy, I have a nice canvas wall tent, have a good cooking station set up, all of this.

00:36:59.220 | Today it's just, it's easy.

00:37:01.060 | It's easy and it's comfortable.

00:37:02.700 | Right?

00:37:03.700 | If you go to Africa on safari, you're going to go out to some bush camp and you could

00:37:06.420 | pay a guy tens of thousands of dollars to sleep in a tent.

00:37:10.620 | And it's adventurous and you got to be rich to do it.

00:37:12.820 | Well, I'm not going to be homeless.

00:37:15.700 | And so why am I worried about being homeless?

00:37:17.700 | Now add on to that all of the tools of negotiation that you have, right?

00:37:22.020 | There's people in the United States who haven't paid, they've had rent eviction, excuse me,

00:37:25.700 | eviction moratoriums.

00:37:26.700 | They've been living rent free in houses for months and months and months and months and

00:37:30.020 | months.

00:37:32.220 | And you get into a bad financial crisis.

00:37:33.940 | I had a new people back in 2007, 2008, 2009, who lived in houses without making a single

00:37:39.820 | mortgage payment for literally years, literally years.

00:37:45.460 | So why are we concerned about being homeless again?

00:37:49.780 | What's a worst case scenario?

00:37:50.780 | I call a friend of mine up and I say, listen, man, I need a place from, can, can, can you

00:37:54.940 | help us with a place to stay for a few weeks so I can get a job?

00:37:58.620 | I had to keep a credit card set aside and I say, and I call up Airbnb and I rent a house

00:38:06.020 | for a couple of months on a credit card with money I don't have so I can get a job.

00:38:11.740 | The worst case scenario of being homeless is just, it doesn't have the same trouble

00:38:18.020 | that it had centuries ago.

00:38:20.580 | And yet a lot of us are spending time worrying about being homeless.

00:38:25.140 | It makes no sense.

00:38:27.260 | What's worse is I worried about that stuff when I was single.

00:38:30.940 | Not worried, but I mean, I was, I was, I was making decisions when I was single as if it

00:38:35.620 | might actually be possible for me to be homeless and that might actually be a bad thing.

00:38:40.140 | It's silly.

00:38:41.180 | And you see a whole world and kind of counterculture of van liver, van dwellers all around the

00:38:47.300 | world.

00:38:48.300 | I've observed here in Europe, the van dwelling culture here in Europe is very strong.

00:38:53.580 | There's this whole culture of people living in vehicles as a primary opportunity.

00:39:00.420 | Years ago, I came across the story of, I think it was Bob Wells, the guy who started the

00:39:07.540 | cheap RV living story.

00:39:08.940 | But he told the story of his first vehicle when he went through a bad divorce, had no

00:39:12.780 | money, he bought a box van and he turned the box van into his first house.

00:39:17.340 | And it's a great house, right?

00:39:19.620 | I love to go on YouTube and find all these guys who, who turn an old box van or a van

00:39:24.100 | or a car or whatever into something very comfortable for them.

00:39:27.580 | And so when you know that you could, you could live on $500 a month of income, well now the

00:39:33.020 | worst case scenario, you're totally wiped out.

00:39:34.980 | You're totally bankrupt.

00:39:36.580 | It's not such a bad deal.

00:39:39.340 | It's not.

00:39:40.340 | There are people doing it by choice and living very well, many times with, with much greater

00:39:45.180 | freedom than a lot of us.

00:39:47.420 | And so what I wish I had connected when I was earlier was the fact that the worst case

00:39:53.460 | scenario, practically speaking, is not nearly as bad as you think it is.

00:39:59.940 | Now I use that kind of low end scenario to try to bring good examples that will appeal

00:40:06.380 | universally.

00:40:07.800 | But realistically, there's no reason why you or I really should ever or would ever be in

00:40:14.100 | that scenario.

00:40:15.100 | I mean, 10,000 bucks tucked aside, sitting and saving somewhere, a dozen ounces of gold

00:40:24.340 | tucked aside in a jar in your mother's backyard flowerbed.

00:40:30.700 | These are the kinds of things that you never have to be there.

00:40:34.100 | Although I would, I think I would be capable enough to be fine in those situations.

00:40:39.300 | It's just not, you know, I'll never, I don't think I'll ever be there.

00:40:42.700 | And if I am fine, I'll deal with it.

00:40:44.460 | But I don't think I'll ever be there.

00:40:46.420 | What's more important though, is to realize that risks can be segmented, even the biggest

00:40:51.140 | risks.

00:40:52.220 | And as I've become more thoughtful and educated on simple financial engineering, I've realized

00:40:56.940 | that even those worst case scenarios, they don't happen.

00:41:01.740 | They don't happen.

00:41:04.220 | Good example, right?

00:41:06.020 | I have, I have, and so many millions of people have deeply appreciated the work of well-known

00:41:13.060 | financial educator, Dave Ramsey.

00:41:16.900 | Dave Ramsey's origin story includes the fact that he went bankrupt.

00:41:22.580 | And I think it's a valuable and useful origin story to understand.

00:41:27.140 | Now what Dave has done from that is he has built onto that story, the principles of success

00:41:34.040 | that he has used to take him to where he is today.

00:41:39.460 | And I deeply appreciate Dave more than I ever did.

00:41:42.860 | I think he does a lot of good work.

00:41:44.380 | And at the end of his career, he'll be able to look back with tremendous satisfaction

00:41:48.860 | on quite literally millions of families that he has helped.

00:41:52.900 | However, there are a couple of things that I think are often unsaid that I absorbed as

00:42:00.060 | a disciple of Dave in those early days, that today I reject.

00:42:03.920 | For example, was Dave's use of debt the thing that brought his entire empire down?

00:42:13.120 | My answer is no.

00:42:15.000 | It was Dave's use of stupid debt that brought his empire down.

00:42:20.320 | He was engaging in short-term financing for his real estate investments.

00:42:25.500 | And as I understand the story, bank that he was working with got sold, looked down and

00:42:28.960 | said, "Why do we have all this money lent out to this 20-year-old kid?"

00:42:32.040 | And calling his loans and he was left scrambling.

00:42:34.520 | What's interesting though, when you listen to Dave tell the story is even with all of

00:42:38.200 | that stacked against him, he almost got out.

00:42:43.260 | He almost got out.

00:42:47.640 | He was so close to being able to avoid bankruptcy.

00:42:50.240 | He was selling buildings, he was renegotiating.

00:42:52.280 | He was so close to being able to avoid bankruptcy.

00:42:54.280 | Now ultimately, he did go through bankruptcy, came out the other side, rebuilt an empire.

00:43:01.180 | But just with a little bit of thoughtful risk management planning, Dave could have effectively

00:43:06.760 | used debt in his situation and have never gone through bankruptcy.

00:43:11.640 | With a little bit of thoughtful bankruptcy planning, Dave could have been much better

00:43:15.240 | positioned to go through bankruptcy and come out the other side.

00:43:19.660 | But even with all of that, I don't think Dave or his children ever went hungry.

00:43:26.760 | At the very least, he had a strong family network to draw upon, an exceedingly valuable

00:43:31.600 | resource.

00:43:33.480 | He had good marketable skills, and he was able to start over and rebuild an empire.

00:43:43.040 | And it was his risk that he took to build a business that resulted in his becoming today

00:43:49.480 | a very, very wealthy man.

00:43:54.080 | I think I've given enough practical examples.

00:43:57.860 | What I've reflected upon and realized is simply this.

00:44:01.800 | We don't live in the world of 1800.

00:44:05.840 | We don't live in the world in which you and I are penniless migrants, right?

00:44:12.960 | The classic story, what they literally did was burning down our house in the east so

00:44:17.560 | that we could collect the nails to go load up in our covered wagon and go to the West.

00:44:22.680 | And we would take those nails with us because that was the most valuable thing of a house.

00:44:29.920 | Now the spirit, the indomitable spirit of those early pioneers and early settlers of

00:44:36.120 | the West, that spirit is what should inspire us.

00:44:42.200 | And when I think about Pa Ingalls, right, what did he do?

00:44:48.240 | At one point, his family literally lived in a house that was carved out of a riverbank,

00:44:52.880 | a cave in the side of a riverbank, and they were happy to have it.

00:45:00.480 | Now I need to keep working on my own family to make sure that if we lived in a house carved

00:45:06.240 | in the side of a riverbank, we would be happy.

00:45:08.400 | I think we could do it.

00:45:09.400 | I'm probably the one who wouldn't want to do it.

00:45:11.920 | My wife probably wouldn't complain.

00:45:13.360 | My children probably wouldn't complain.

00:45:14.560 | They'd think it'd be a grand adventure.

00:45:16.000 | Just to me, it's unthinkable.

00:45:17.920 | And I'm the radical guy, right, and it's still unthinkable.

00:45:21.360 | I think about going into a small house, I don't want to live in a small house.

00:45:24.920 | I'm beyond that.

00:45:26.340 | Which brings me quite nicely to that second big problem.

00:45:29.080 | So the first problem is practical, practical finances.

00:45:32.080 | And what I've tried to show is that as I've reflected on this, I've realized that these

00:45:35.680 | fears that I have are silly.

00:45:38.120 | They're totally unfounded and they're easily solved.

00:45:41.880 | A little bit of savings, right?

00:45:43.280 | If you start with nothing, go work at a job for a year, go get a job, making $40,000,

00:45:51.440 | $30,000, spend 20 or 25 and save 10 and then start and make sure that and say, I'm going

00:45:57.080 | to have $10,000 a part.

00:45:59.260 | And then the other thing is just in the world we live in, you can build something great

00:46:04.160 | with nothing, with relatively nothing.

00:46:07.480 | I have loved and been so inspired by the Bitcoin revolution in which we're living.

00:46:13.640 | One of my favorite things has been realizing how many Bitcoin millionaires have been minted

00:46:22.240 | because they were convinced of the opportunity they saw and they put within it, right?

00:46:26.440 | I like, what's her name, the crypto chick, Heidi, the crypto chick and her story, she

00:46:33.000 | and her boyfriend, husband, not sure, she was working as a waitress so that she could

00:46:39.600 | earn money to pay for Bitcoin.

00:46:41.720 | Well, fast forward now, she's built a massive business advising people on Bitcoin, has become

00:46:46.680 | quite wealthy, but she started working as a waitress, living on nothing, putting every

00:46:50.480 | dollar into Bitcoin.

00:46:52.160 | That's the spirit of those who win.

00:46:54.420 | They have an opportunity, they have something they want to go after and they go after it.

00:46:59.680 | I didn't do that.

00:47:00.680 | I could have done it.

00:47:01.680 | I could have made far more money than Heidi did, but I was hamstrung by this excessive

00:47:06.440 | sense of conservatism.

00:47:07.800 | I was hamstrung by not wanting to go broke.

00:47:10.400 | Now, I said there were two things.

00:47:12.280 | The first thing is the practical side.

00:47:15.240 | And what I've realized is the practical side is eminently solvable.

00:47:19.780 | It's eminently solvable just through a simple thinking process and putting in place the

00:47:25.560 | appropriate insurance policies, meaning quite literally, in some cases, insurance contracts

00:47:31.320 | with insurance companies, in other cases, simply an insurance policy of something like

00:47:34.680 | having savings, an insurance policy of having food stored, having a tent.

00:47:40.120 | Although I don't currently own it, if I moved back to the United States, one thing that

00:47:45.400 | I would do, disaster standpoint, is just I would buy a nice wall tent, spend my $3,000

00:47:51.600 | on a nice wall tent, put it aside in a trailer, have some other stuff in there, and then I

00:47:55.520 | would know, hey, if worse comes to worse, we got a tent.

00:47:58.320 | I can call up a friend of mine who's got a big backyard.

00:48:00.680 | I got a list of friends who've got multi-acres, and I could say, "Hey, man, can I set up a

00:48:04.000 | tent in your backyard?

00:48:05.000 | I need to get my feet under me for a couple of months.

00:48:06.880 | Can I just live in your backyard in a tent for a couple of months?"

00:48:09.800 | And it would be great.

00:48:10.800 | It'd be a little adventure.

00:48:12.160 | So like you could put in place all those things, and they're absurdly cheap.

00:48:16.920 | They're absurdly cheap to do.

00:48:22.880 | So what's the second thing that has often kept me acting conservatively when I wish

00:48:28.240 | I hadn't?

00:48:29.240 | The answer is pride.

00:48:32.720 | I think this is the bigger one for me.

00:48:34.560 | It's pride.

00:48:36.840 | The pride of wanting to be right and the pride of not wanting to be a failure.

00:48:41.000 | I think this is common to most of us, right?

00:48:43.920 | We gain, we have a self-image.

00:48:46.120 | We have a way that we view ourselves.

00:48:49.280 | And what often hurts more with failure is the hurt to our pride rather than the actual

00:48:56.960 | impact.

00:48:57.960 | There was one client I'm thinking of that I worked with years ago, and this was a client

00:49:02.200 | that really struck me.

00:49:03.800 | This was a client, he was a highly paid salesman, and he'd built a comfortable career.

00:49:10.360 | He was quite good at what he was.

00:49:11.760 | I met him in some charitable work that I was doing at the time.

00:49:15.160 | He unexpectedly got laid off from his job, and he thought it was totally unjust, but

00:49:18.640 | he was not in a place where he had the money set aside.

00:49:23.080 | He was not in a place where he, he wasn't in a good place at the time.

00:49:26.920 | He was living a high lifestyle because he was making a lot of money.

00:49:29.880 | Children were in private schools.

00:49:31.040 | They were in a nice house, etc.

00:49:32.720 | And he got laid off.

00:49:34.320 | And when I worked with him in the situation, what was obvious to me is his pride made it

00:49:41.640 | very hard for him to accept the reality of the circumstances that he was in.

00:49:49.360 | For him to have to pull his children out of the private school was going to be really

00:49:52.880 | difficult, and I understand that.

00:49:55.520 | But I always think of him, and I realize how much my own pride has often kept me from pulling

00:50:01.880 | back from, excuse me, my own pride has often kept me from pressing forward.

00:50:06.600 | It's caused me to pull back.

00:50:08.120 | All right, it's one thing to say, you know, Bitcoin, for example, what was, why didn't

00:50:12.440 | I see Bitcoin at an early age?

00:50:15.240 | Why didn't I speculate on it?

00:50:17.160 | I could have, I had money.

00:50:19.240 | I could have speculated on it.

00:50:21.400 | What was it?

00:50:22.400 | It was a pride.

00:50:23.800 | At its core, it was my pride of not wanting to do something stupid with money, because

00:50:29.440 | I saw myself as somebody who makes intelligent decisions with money.

00:50:32.920 | I saw myself as somebody who gives advice about money.

00:50:36.120 | I saw myself as the kind of guy who does things right.

00:50:40.840 | And because it was unproven, I didn't know if it was going to be right or wrong.

00:50:46.120 | I didn't know.

00:50:47.760 | And so because of that, I didn't get involved because I wanted to protect my pride.

00:50:52.200 | I wanted to be intellectually certain before investing my money into Bitcoin.

00:51:02.200 | Now, the specific use here of Bitcoin is unimportant, meaning for all I know, 10 years from now,

00:51:10.680 | Bitcoin could be utterly worthless.

00:51:13.560 | Could be.

00:51:17.340 | There are good arguments as to why it very well could be.

00:51:21.400 | Also, of course, good arguments as to why it could not.

00:51:25.540 | But would I rather have the intellectual certainty of 10 years from now being able to say to

00:51:33.240 | someone, "Ha ha, I knew it was coming," or would I rather have become a multimillionaire

00:51:37.580 | from investing early on in something that should have been a perfect fit for me?

00:51:44.100 | It's a fascinating thing for me to think about.

00:51:48.880 | It was my pride that stood in my position, in my way.

00:51:53.960 | It was the pride, the pride of not wanting to be wrong and especially not wanting to

00:51:58.360 | be wrong publicly.

00:52:01.020 | Similar things with other investments along the way.

00:52:04.200 | It was the pride of not wanting to fail.

00:52:05.660 | Why didn't I build when I was younger?

00:52:08.140 | Why didn't I build a very large real estate portfolio when my buddies were doing it?

00:52:13.980 | Well, first, there were those around me who were conservative, who were advising me not

00:52:18.420 | to take risk.

00:52:19.660 | Today, I appreciate that.

00:52:21.340 | In fact, I think that in many cases I was held back from making mistakes.

00:52:26.620 | What I now realize is that many of those people didn't have a proper concept of risk.

00:52:32.160 | They didn't actually understand what the true risks were.

00:52:36.040 | They were saying the things that they thought were true by lack of experience.

00:52:41.020 | Here would be a metaphor.

00:52:43.700 | Imagine that you're on your way to the airport, but you have just met somebody who is an unintelligent

00:52:50.700 | an uneducated, illiterate, I don't know, indigenous Indian from the middle of nowhere.

00:52:57.860 | You're in Ecuador or you're in Australia or somewhere and you've just met someone who

00:53:04.980 | has seen, who's never even seen an airplane.

00:53:08.380 | And you tell them, "I'm going to go up in this airplane here."

00:53:10.300 | And they look at you and they say, "What?

00:53:12.660 | You're going to go up in that airplane?

00:53:14.180 | You can't do that.

00:53:15.180 | The airplane is going to fall out of the sky."

00:53:16.540 | Well, you try to explain to them how airplanes fly and air pressures and aerodynamics and

00:53:21.100 | blah, blah, blah, blah, blah.

00:53:22.100 | You try to explain to them, "Hey, there's a good indication of, you know, where there's

00:53:27.380 | decades of experience and safety and there's some risk, but it's risk is pretty well managed."

00:53:32.880 | Their minds would not be able to conceive of it, right?

00:53:35.740 | Because they've never been on an airplane.

00:53:37.180 | They can't conceive of it.

00:53:40.240 | It takes time and experience for that person to understand what an airplane is, how it

00:53:44.620 | works and to understand, yes, there are risks in flying in an airplane.

00:53:50.260 | Here's what those risks are and here's how those risks can be avoided.

00:53:54.800 | And by extension, if we think about that metaphor, a lot of times the people that we ask advice

00:53:58.900 | from are well-meaning, ignorant people who have no understanding of what we're actually

00:54:08.540 | getting involved in.

00:54:09.540 | They're well-meaning, ignorant people who have no understanding of what the actual risks

00:54:16.100 | are.

00:54:22.740 | So we have to be careful.

00:54:23.740 | But at the end of the day, your pride gets in your way and you start to think, "You know

00:54:28.980 | what?

00:54:29.980 | I've done pretty well.

00:54:30.980 | I've done pretty well."

00:54:31.980 | And it gets in your way.

00:54:32.980 | One of the characteristics that I see of people who have become successful is that they've

00:54:39.900 | made enough mistakes to be able and be willing to admit those mistakes and to the point where

00:54:47.540 | a mistake doesn't bother them so much.

00:54:51.360 | Think about somebody who is skillful.

00:54:53.860 | Few examples come to mind.

00:54:55.540 | First, I'll just give a personal one.

00:54:58.800 | When I was a novice, brand new financial advisor, I was scared of ever saying, "I don't know,"

00:55:07.020 | because I thought, "Well, I should know."

00:55:08.220 | Someone's going to ask me a question and I should know.

00:55:10.900 | Today, I frequently don't know.

00:55:13.640 | But I'm not scared of it because I know, number one, I do know a lot.

00:55:17.340 | Number two, there's more out there than I could ever learn in a dozen lifetimes of studying.

00:55:23.440 | So "I don't know" is the only acceptable response.

00:55:26.540 | And my pride is not engaged anymore in fear of saying, "I don't know something."

00:55:32.180 | Similarly, let's say you're out with an athlete or maybe you're shooting.

00:55:39.180 | You go out and I enjoy shooting guns.

00:55:41.100 | You go out with somebody who's a great shot.

00:55:42.420 | They know they're a great shot.

00:55:44.020 | And they'll pull a shot and they'll miss completely and they'll laugh because their pride is not

00:55:48.780 | involved in it.

00:55:49.780 | They know they're a good shot.

00:55:50.780 | They know how to shoot and they've missed so many targets over the years.

00:55:53.500 | They know to laugh when they miss one.

00:55:55.780 | Whereas a novice will pick a big deal about missing, or perhaps an athlete is a good example.

00:56:01.720 | Somebody who is a skillful athlete who puts up a shot and they miss the basket, they don't

00:56:07.780 | worry about it.

00:56:08.780 | They just go and hustle down the court, get the ball and try again.

00:56:11.660 | Whereas somebody who's not that way will be worried about missing the shot.

00:56:18.460 | Would seem appropriate to insert the classic Wayne Gretzky quote, I think it was, "You

00:56:23.780 | miss 100% of the shots you don't take."

00:56:28.700 | You miss 100% of the shots you don't take.

00:56:32.140 | And so do I want to be the guy sitting on the sidelines proud of the fact that I don't

00:56:38.620 | miss shots while watching the game from the sidelines?

00:56:42.660 | Or do I want to be the guy out there who went for it, took the game-winning, potentially

00:56:47.220 | game-winning shot and missed, but knows that that's just one shot out of a career of thousands,

00:56:53.460 | thousands of shots?

00:56:56.300 | That's the way I now look at business and investment.

00:56:59.820 | If I can solve that pride issue, and I can force myself to come against my pride, and

00:57:05.580 | I can force myself to be humble and not to worry about it, but to simply systematically

00:57:10.900 | take shots, take thoughtful shots, take careful shots, but systematically take shots, then

00:57:19.620 | that in and of itself can transform everything.

00:57:25.740 | I've got to be the kind of guy who takes shots.

00:57:31.420 | And though some will miss, many will not.

00:57:37.900 | And as long as the odds of, you know, the penalties for the missed shots is not completely

00:57:44.580 | catastrophic and I, what would be catastrophic, right?

00:57:47.380 | I think for me, catastrophic would be loss of life, pretty much.

00:57:53.100 | I used to say divorce and I still believe that, but at the end of the day, I've talked

00:57:57.300 | – meaning that I would say divorce is catastrophic for me, because I care very deeply about marriage.

00:58:03.580 | Even over the last few years, I've spoken to enough people who, from my perspective,

00:58:09.780 | have been completely faithful and everything is still ended in divorce that I've even taken

00:58:14.620 | that off of my list, meaning that I intend to stay married, but even that, sometimes

00:58:19.980 | divorce is out of your hands.

00:58:22.340 | There are many men and women who've done literally nothing wrong and had everything changed in

00:58:27.500 | their lives, but divorce is not catastrophic.

00:58:30.060 | Life is not over after divorce.

00:58:32.780 | Really the only thing that ends life is death.

00:58:35.420 | Life is over after death.

00:58:37.500 | Well, at least this mortal life is over after death.

00:58:42.700 | And even that, as long as you've lived well and you've lived properly, you've lived righteously,

00:58:49.060 | you've lived a life that was befitting your capacity, that's not the end of the deal.

00:58:55.340 | It's not the end of anything.

00:58:57.460 | It's just the beginning.

00:59:02.140 | I don't have all of my strategies worked out perfectly on how to avoid the pride issue.

00:59:12.380 | I've worked on some of them.

00:59:14.540 | I'm quite literally working on one right now.

00:59:17.180 | I've recorded this show over past months several times, but it's always felt like it wasn't

00:59:21.900 | quite smooth enough.

00:59:22.900 | It wasn't quite polished enough.

00:59:24.180 | It wasn't quite accurate enough.

00:59:27.460 | It wasn't quite the best.

00:59:31.400 | And so I've canned it, deleted it, canned it, deleted it.

00:59:35.500 | That's always a good sign, I think, of a difficult topic that really is a matter of my pride

00:59:40.140 | more than it is my willingness to serve.

00:59:45.660 | Because if I've found this mistake in my own past and I've analyzed it to realize why I

00:59:51.060 | have made this mistake many times, and then if I found ways of overcoming that mistake,

00:59:56.820 | even if my ability to overcome it is not perfect, then I do a disservice if I don't share it.

01:00:02.340 | I do a disservice if I don't go after it.

01:00:07.660 | And so you're listening to this now as an expression of that, an imperfectly created,

01:00:14.900 | not quite as beautiful of a presentation as I would like, but get it out there.

01:00:19.060 | Ignore the pride, get it out there and press on.

01:00:23.180 | The most important thing is taking shots.

01:00:28.200 | If you desire to build wealth, if you desire to build financial freedom, you have to take

01:00:32.140 | shots, you have to go, you have to try.

01:00:37.700 | And it's okay if you miss some.

01:00:40.420 | It's okay if you miss a lot of them.

01:00:43.660 | What's not okay is sitting on the sidelines wishing that you took more shots.

01:00:50.900 | It's not the critics who count.

01:00:53.620 | It's the man who's in the arena, right?

01:00:56.380 | That's the one who counts.

01:00:59.180 | In closing out today's show, what I want to emphasize is the regrets that I have on this

01:01:05.880 | particular topic could really only have been avoided if I had been more open and more thoughtful

01:01:15.180 | as I see it.

01:01:16.180 | They could only have been avoided if I had been diligent to expose myself to a more diverse

01:01:24.940 | realm of opinion.

01:01:28.560 | From a financial perspective, I followed frequently the advice of those that, of the people that

01:01:38.940 | I articulated and others as well.

01:01:41.660 | But what happened is I got into a feedback loop where I was only consuming advice from

01:01:48.260 | one segment of the marketplace.

01:01:52.900 | I was consuming advice at that time from largely mainstream people who were giving kind of

01:02:00.620 | the standard line.

01:02:04.340 | And my results didn't start to change until I started to absorb advice from a different

01:02:16.060 | cast of characters, from a different set of people.

01:02:20.900 | And then as I consumed advice from those people, then I started to realize things differently.

01:02:33.220 | I've told this story.

01:02:34.420 | I want to tell it again because I believe it's so important, and then I'll give the

01:02:38.640 | application that I have yet to fulfill in my own life.

01:02:44.960 | I for years believed that investing in gold was stupid.

01:02:51.200 | I had a long list of arguments as to why I thought investing in gold was stupid.

01:02:57.380 | Gold is unproductive.

01:02:58.380 | Anyway, I'm not going to go to the arguments.

01:03:01.920 | But then I changed the advice.

01:03:03.640 | I changed the people that I was accepting advice from, and I came across somebody who

01:03:06.680 | was strongly giving the advice to buy and own gold.

01:03:11.800 | And for a long time I listened to the arguments and I considered them.

01:03:16.440 | And I asked the man for advice one time, and he's like, "How much gold do you own?"

01:03:23.320 | I wrote back and I said, "None."

01:03:26.560 | And he's like, "Well, nothing's going to change until you go buy a gold coin.

01:03:29.960 | Go buy a gold coin."

01:03:30.960 | I still have that gold coin.

01:03:33.880 | It was a 1/10 ounce American Eagle.

01:03:36.280 | I went to the coin shop and I bought a 1/10 ounce American Eagle.

01:03:39.600 | I don't remember exactly the price of gold, something a couple hundred, maybe 200 or 300

01:03:44.120 | bucks for it, something like that.

01:03:46.200 | And that one gold coin changed everything.

01:03:51.880 | I remember I walked into the coin shop, I felt like I was doing a drug deal.

01:03:54.840 | I felt totally exposed.

01:03:57.400 | Here I am, a financial advisor, and financial advisors are supposed to tell people not to

01:04:00.560 | own gold.

01:04:01.560 | And if you are going to own gold, make sure you own it in ETF and it's 3% of your portfolio,

01:04:04.400 | blah, blah, blah.

01:04:05.400 | This is all the stuff.

01:04:06.400 | And I felt like I was betraying my profession by going to the coin shop and buying a gold

01:04:11.840 | coin.

01:04:12.840 | So I bought a gold coin.

01:04:13.840 | I went out in my car and I sat and I held the thing.

01:04:16.000 | And I looked at this little tiny thing, about the size of a dime, maybe a little bigger,

01:04:20.040 | and sitting there looking at it saying, "This thing is worth this much money."

01:04:26.480 | But over time, that single gold coin totally transformed my understanding of the gold market.

01:04:33.920 | Same thing, similar thing happened.

01:04:35.280 | Next time I bought Bitcoin.

01:04:36.800 | And all of a sudden it's like, "Oh, I understand.

01:04:40.560 | I started to change the world."

01:04:42.040 | The thing I haven't yet done, the current revolution of last few months is NFTs.

01:04:48.880 | I have not purchased any kind of digital ownership because I think it's dumb.

01:04:54.280 | I think it's really dumb.

01:04:55.960 | And I watch the market, watch the market, watch the market, and I'm like, "This is

01:04:58.280 | dumb."

01:05:00.580 | But then over time, this market can change.

01:05:04.760 | And so what I'm going to do is I'm going to find something and buy something and basically

01:05:10.160 | commit to throwing the money away because I know that when I do it, it will change my

01:05:14.120 | perspective.

01:05:15.120 | It'll change my opinion.

01:05:16.120 | And what I want to do going forward from a financial perspective, and I've tried to practice

01:05:20.480 | this, I'm just telling on myself to say that I don't do this perfectly, is I want to try

01:05:25.000 | to get involved in as many things as possible so that I have exposure to them.

01:05:29.820 | Because you understand the market very differently.

01:05:32.000 | Today, for example, on gold, or today, I look at the market very differently.

01:05:38.520 | I'm not a gold bug.

01:05:40.360 | I do very little content on gold.

01:05:43.200 | I don't talk about gold in the same way that I feared that I would talk about it.

01:05:47.720 | But I also see the hollowness of a lot of arguments.

01:05:50.200 | And I realize that a lot of people who are opposed to something like owning gold coins

01:05:56.800 | are in the same place that I was.

01:06:00.240 | They're repeating arguments against it, never having done it.

01:06:04.040 | And thus they don't understand the actual value of things like gold coins.

01:06:09.280 | In the same way, a lot of people who are against your starting a business are repeating the

01:06:13.440 | arguments never having done it.

01:06:17.040 | People who are against your buying a house, a rental house, are repeating the arguments

01:06:20.960 | because they haven't done it.

01:06:23.240 | Many people who are against your buying an NFT are repeating the arguments because they

01:06:27.480 | haven't done it.

01:06:30.420 | We can't know for certain where the future of the world is.

01:06:34.720 | The NFT marketplace, the Bitcoin marketplace, these new expansions of technology are rather

01:06:40.760 | fascinating.

01:06:41.760 | They're fundamentally new.

01:06:44.760 | There's no certainty of success.

01:06:48.000 | There are good arguments for and against many expressions of these things that I'm talking

01:06:54.120 | about and whatever else comes next year.

01:06:58.600 | But if you want to win, you've got to be in the game.

01:07:03.160 | You've got to be actually going for something and you've got to be taking the shots.

01:07:08.660 | Take thoughtful shots, take intelligent shots, take shots that have a high chance of going

01:07:12.360 | in.

01:07:13.360 | If you don't have any money, I don't think that it makes a lot of sense for you to, you

01:07:19.480 | know, to start by not saving cash, but going out and trading NFTs.

01:07:23.120 | I don't think it makes a lot of sense.

01:07:25.920 | I've seen some stories of some teenage boys and younger who made a lot of money trading

01:07:31.440 | NFTs.

01:07:33.160 | And what happens is that when someone takes an interest in something, there's always a

01:07:36.520 | market in something.

01:07:39.680 | I've never in my life been interested in Pokemon cards, but I went and did a bunch of research

01:07:45.440 | when Jake Paul did his fight with the big boxer, the anyway, the I can't remember his

01:07:54.280 | name, the really well-known boxer.

01:07:55.480 | And he came out and he wore this Pokemon card that everyone said was worth unbelievable

01:07:59.960 | money.

01:08:01.120 | There's people who've gotten super rich in that marketplace of trading and owning Pokemon

01:08:05.760 | cards, while most of us have no clue about it.

01:08:09.880 | You don't have to be involved in everything, but don't be like I have been.

01:08:15.160 | Don't repeat the mistakes that I have made of sitting back on the sidelines, ridiculing

01:08:23.520 | in some cases, or just being silent because of either number one, an irrational financial

01:08:30.080 | fear, a financial fear of catastrophe, or number two, a very intense need to protect

01:08:37.520 | your ego.

01:08:39.360 | That's not the winner's path.

01:08:42.600 | I regret thinking and behaving conservatively in the past.

01:08:49.880 | I regret it.

01:08:52.240 | And when I look at my life today, almost all of the things that I am most grateful for

01:08:59.920 | have come from taking a risk.

01:09:03.280 | Even if we get totally outside of the financial realm.

01:09:07.200 | Remember when I asked my wife to marry me?

01:09:12.120 | I was scared.

01:09:14.480 | I'm very grateful I did it.

01:09:16.120 | I wish I'd done it sooner.

01:09:18.120 | Remember when we had our first baby?

01:09:20.520 | I was scared.

01:09:22.520 | Grateful we had a baby.

01:09:23.680 | Wish we'd had one sooner.

01:09:26.880 | Life is full of risks.

01:09:28.860 | Life is full of things that can be scary.

01:09:33.120 | And yet, I think the pathway of those who go for it, really go for it, whatever that

01:09:42.080 | means to you, really go for it, that's the satisfying pathway.

01:09:46.760 | And here's what's amazing about life.

01:09:49.840 | As long as you're literally alive, you can always try again.

01:09:54.640 | You can always reinvent yourself.

01:09:56.120 | You can always adjust.

01:09:58.960 | You're not static.

01:09:59.960 | You're not stuck.

01:10:00.960 | I don't care if you're 13, 30, or 83.

01:10:04.840 | You can always reinvent yourself.

01:10:15.960 | That's a powerful thing to realize.

01:10:21.040 | I try not to regret the past.

01:10:23.040 | I really hate the concept of regret.

01:10:26.000 | Because the reality is, I made the best decisions that I could at every point in time.

01:10:31.880 | And so I don't like the concept of regret.

01:10:34.120 | We all do the best that we know.

01:10:35.840 | We do the best that we can.

01:10:37.400 | We do everything that we're capable of.

01:10:41.040 | We do our very best.

01:10:43.800 | So there's really no point in regretting the past.

01:10:47.480 | Rather, I want to press on.

01:10:52.440 | But still, we can learn from the past.

01:10:56.560 | And I hope that you've enjoyed learning from my lesson.

01:10:58.480 | Be back with you very soon.

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