RPF-0051-Friday_QA_Accrual_Accounting_Roth_and_Walmart

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00:00:31.000 | Radical Personal Finance, Episode 51.

00:00:34.000 | Today's show, Friday Q&A, we're going to cover a lot of ground.

00:00:39.000 | We're going to dig into accounting, accrual accounting, and cash method of accounting.

00:00:44.000 | We're going to dig into double entry accounting and single entry accounting.

00:00:48.000 | We're going to talk about using Roth IRAs as emergency funds, what to do and what not to do,

00:00:53.000 | how to do financial planning for elderly people.

00:00:56.000 | We're going to talk about business ideas and how to get started in business.

00:00:59.000 | And we're going to discuss some not so happy feedback about my recent Walmart show.

00:01:04.000 | Do I have any accurate understanding of what goes on with Walmart and am I a racist?

00:01:27.000 | Welcome to the Radical Personal Finance podcast. I appreciate you being here.

00:01:30.000 | Today is Episode 51 for Friday, August 29, 2014.

00:01:37.000 | I'm looking forward to today's show. We're going to cover a lot of ground.

00:01:40.000 | This is going to be an intense – it is going to be intense.

00:01:44.000 | It's going to be a show of intense variety.

00:01:47.000 | And I hope that you find it interesting.

00:01:50.000 | This is what I love to do is to mix everything up.

00:01:53.000 | [Music]

00:01:59.000 | It's been a great week on the show. I've really enjoyed the shows that I've produced for you.

00:02:03.000 | I hope that you have found them beneficial and helpful.

00:02:06.000 | I've gotten some good feedback from them.

00:02:08.000 | I want to lead off this morning just with mentioning I finally, finally, finally was able to get the audio feedback line set up for you.

00:02:18.000 | So if you go on the website now, you will see I set up SpeakPipe.

00:02:22.000 | It is evidently the best program to use if you ask all the techie people about that.

00:02:26.000 | So I set up SpeakPipe. So SpeakPipe.

00:02:29.000 | So if you go on the website, either on your computer or on your phone, you can see a little send voicemail button on the right-hand side.

00:02:36.000 | And if you just click that button, it will allow you to record right with your computer and with your phone.

00:02:42.000 | So it will use the onboard speaker for your computer or you can use the onboard speaker on your smartphone.

00:02:48.000 | It doesn't have a 1-800 line or anything like that associated with it.

00:02:52.000 | I hope that doesn't make a difference at this point.

00:02:56.000 | I thought you can set some of those kinds of things up, but it seems like this is a little bit simpler.

00:03:00.000 | And it seems simpler to me if you're going to -- just as simple if you're going to pull your phone out while you're driving and send me a voicemail,

00:03:06.000 | you might as well just do it using the Internet connection versus the 1-800 line.

00:03:11.000 | So if you feel differently, let me know.

00:03:14.000 | If I need to set up some kind of 1-800 line or something like that so you can leave me a voicemail, please do that.

00:03:19.000 | But my hope is that -- I want to keep doing these Friday Q&A shows.

00:03:22.000 | And today I'm covering questions that I've received via email and comments on the blog.

00:03:27.000 | But I want to open this up and start doing audio feedback questions as well.

00:03:31.000 | So you can ask a question. You'll have about three minutes to record it, although I'll try to keep it shorter than that.

00:03:35.000 | But let's figure out kind of what works and what doesn't when I see what kind of questions come in.

00:03:40.000 | So I'm going to record the question on the site and send it in.

00:03:44.000 | And I will play the audio on the show.

00:03:46.000 | So hopefully that will give a little bit of the phone situation and allow me to continue talking about a diverse set of topics on Fridays,

00:03:53.000 | which is something that I want to do.

00:03:57.000 | I really think that adds a lot.

00:03:59.000 | And I will enjoy hearing from many of you, and I'm sure that you will enjoy hearing from many of your fellow listeners.

00:04:05.000 | So I'm going to lead off this morning.

00:04:07.000 | So there's going to be a lot of topics, and I think it will be fun.

00:04:11.000 | I think it will be a good variety for you to enjoy.

00:04:17.000 | So I'm going to start off with a question, which was a question that came in on the cash flow episode, which was episode 26.

00:04:25.000 | And so that episode was an introduction to the cash flow statement.

00:04:28.000 | And if you're interested, if you haven't heard that show, it's at radicalpersonalfinance.com/26.

00:04:33.000 | But I want to answer a question from Big Dave, who commented on that episode.

00:04:37.000 | And here was his comment.

00:04:39.000 | He said, "I'm having trouble wrapping my head around the following.

00:04:42.000 | I put aside every month a one-twelfth portion of large annual expenses, like auto insurance.

00:04:47.000 | When I do the math on what my savings rate is for a given month, my savings rate would include this money that I set aside.

00:04:53.000 | Then the month rolls around where that large annual expense is due.

00:04:56.000 | It's great because I have that money and can pay the bill in cash.

00:04:59.000 | But when I do my savings rate calculation, the month that the large expense came due, couldn't it actually be negative?"

00:05:04.000 | And he goes on to give an example and says that in month one, example, assume he has $1,000 of gross income, $900 of expenses.

00:05:13.000 | So he has a surplus of $100, and so his savings rate is 10%.

00:05:16.000 | But technically that $100 is allocated towards the auto insurance payment, which is due 12 months from now.

00:05:22.000 | And then in month 12, he earns $1,000, has $900 of regular expenses, and then has $1,200 of auto insurance costs.

00:05:31.000 | And so it looks like he has a deficit of $1,100 and a messed up savings rate.

00:05:36.000 | So he says, "If I had a statement of cash flows over a one-year period, everything would equal out.

00:05:40.000 | But looking at some one-month period, it looks bad."

00:05:42.000 | Now, when I use this question, it's a good question, and I want to use this as an opportunity just to introduce you briefly to two important concepts from accounting.

00:05:51.000 | So I think in this question, Dave, you made the point at the end that if I do it over a one-year period, everything would equal out.

00:06:01.000 | But if I look at it in the same one-month period, it looks bad.

00:06:04.000 | And so this is an important concept for us to understand.

00:06:06.000 | Accounting is a science that has been developed to help us understand how the numbers are flowing a little bit better.

00:06:17.000 | And in some ways, it's somewhat arbitrary and it can be manipulated.

00:06:20.000 | That's why it's important to understand accounting.

00:06:23.000 | Otherwise, you could be manipulated.

00:06:26.000 | If you were an investor and you were looking at a company and you were trying to analyze what that company were worth,

00:06:32.000 | you need to understand what the numbers are on the page and what those numbers mean and what they signify.

00:06:37.000 | And this would be the same if you're running your own business or if you're analyzing publicly traded companies

00:06:42.000 | or you're looking at a private company that you may invest in.

00:06:45.000 | And so you need to understand the language of accounting.

00:06:49.000 | And unfortunately, in our society, the language of accounting is not commonly taught.

00:06:53.000 | I think personally, if I had my druthers, I would throw out trigonometry in high school and teach accounting instead

00:07:00.000 | because it's just far more useful than trigonometry for the majority of people.

00:07:05.000 | I think very few people will solve trigonometry.

00:07:08.000 | I don't remember anything that I studied in trigonometry, but I do remember the things I use accounting for,

00:07:13.000 | whether it's for personal accounting or not.

00:07:15.000 | So the problem that you've pointed out, Dave, is why something called accrual accounting was developed.

00:07:27.000 | There are two methods of accounting.

00:07:29.000 | Excuse me, there's actually three, but there's two primary methods of accounting,

00:07:32.000 | and the third one is a hybrid, some hybrid between these two methods of accounting.

00:07:37.000 | The first method of accounting is what's called a cash method of accounting.

00:07:41.000 | And this is the way that you're currently managing your personal financial accounting.

00:07:46.000 | This is how most people manage their personal financial accounting for their personal finances.

00:07:51.000 | Some businesses will also use this method of accounting, but the types of businesses are limited under the tax code.

00:07:59.000 | But in a cash method of accounting, you recognize an expense when you spend the money,

00:08:05.000 | and you recognize income when you receive the money.

00:08:08.000 | So in the example that you gave me in your question, you are recognizing the expense for auto insurance in month 12,

00:08:16.000 | and you're recognizing the income each month with your $1,000 of income.

00:08:22.000 | Now, that's different from what's called accrual accounting, and in accrual accounting,

00:08:28.000 | you recognize the expense when it is incurred, regardless of when the cash flows out of your checking account.

00:08:36.000 | And this is very important, and so the example would be if you were running a business.

00:08:40.000 | Let's say that you were -- well, let's use a job.

00:08:44.000 | It works exactly the same in a job.

00:08:46.000 | In a job, you provide services every day, and what happens is that let's say that you're paid once a month,

00:08:54.000 | for the ease of my own personal example.

00:08:58.000 | If you have a once-a-month paycheck, you provide those services every day,

00:09:03.000 | and then that income accrues, and then at the end of the month, you're provided with a paycheck.

00:09:09.000 | Now, it's not always like that.

00:09:12.000 | You could be paid every hour.

00:09:14.000 | You could be paid every day.

00:09:16.000 | A day laborer would be more likely to be paid every day, but we usually --

00:09:21.000 | it's more convenient for us to accrue the earnings and have them paid out under a regular period,

00:09:27.000 | every two weeks, bimonthly, monthly, whatever the situation is.

00:09:31.000 | But what if you were doing something under a contract relationship?

00:09:34.000 | So let's say that you provided consulting services,

00:09:37.000 | and you provided those consulting services in the first month and the second month and then the third month,

00:09:42.000 | and then you went ahead and billed your client in the fourth month,

00:09:45.000 | and then your client went ahead and paid you in the sixth month.

00:09:49.000 | So do you recognize the income in the sixth month,

00:09:53.000 | or do you recognize it in month one, two, and three when you did the work?

00:09:57.000 | Well, under a cash method of accounting, you would recognize it when you actually receive the income.

00:10:02.000 | So you would recognize it in month six.

00:10:04.000 | But under accrual income, you would recognize the income in month one, month two, and month three.

00:10:12.000 | So in accrual accounting, you would have an account for your auto insurance,

00:10:17.000 | and if you were keeping financial statements, personal financial statements,

00:10:21.000 | under a method of accrual accounting, then you would mark in January, or let's just say month one,

00:10:29.000 | you would mark auto insurance expense $100.

00:10:32.000 | And then in month two, auto insurance expense $200.

00:10:35.000 | And then in month three, auto insurance expense $300.

00:10:38.000 | And then if you performed your savings rate calculation in month one, two, and three,

00:10:42.000 | it would show a 0% savings rate because you're not actually saving any money.

00:10:47.000 | You're just accruing the expense, the money for the expense in a separate account,

00:10:52.000 | and then you'll actually send the money off in month 12.

00:10:55.000 | And that brings us to another accounting concept that has been developed called double-entry accounting.

00:11:02.000 | And I'm trying to use very plain language to explain this so that it's clear.

00:11:07.000 | I went through accounting in college, and I never understood it.

00:11:10.000 | I never got it, even though I went through the accounting classes,

00:11:13.000 | because no one's took the time to explain it to me clearly and explain why it should matter to me.

00:11:17.000 | So that's what I'm trying to do.

00:11:19.000 | If any of you are accounting wonks or gurus, please correct me.

00:11:22.000 | Come by the show notes and correct me if I get something wrong.

00:11:25.000 | But I'm just going to keep plain language and try to ignore some of the oddball examples.

00:11:31.000 | So in double-entry accounting, what you do with a double-entry accounting is that you have a series of accounts.

00:11:37.000 | So single-entry accounting would be--an example would be your checking account,

00:11:40.000 | where you have one check register.

00:11:43.000 | And as the cash goes in and the cash goes out, you're just simply tracking that.

00:11:47.000 | But in a double-entry system, you would have a series of accounts.

00:11:50.000 | So picture in your mind, for your auto insurance example, picture in your mind your checking account register,

00:11:55.000 | and then imagine that you had set up a second checking account register that was marked car insurance or auto insurance.

00:12:02.000 | Well, in month one, then what would happen is you would enter a transaction,

00:12:07.000 | and you would deduct an amount from the checking account,

00:12:11.000 | and you would add an amount to the car insurance register for the $100 expense.

00:12:16.000 | And you would accrue the money in the car insurance register each month.

00:12:20.000 | So for every transaction in a double-entry accounting system,

00:12:25.000 | you have a transaction on what's called either side of the accounting equation.

00:12:30.000 | And so let me give you the accounting equation.

00:12:32.000 | The way that I was taught it is this is the iron law of accounting equation.

00:12:37.000 | Assets equals liabilities plus shareholders' equity.

00:12:41.000 | So if you're going to deduct an amount from the assets, you have to also deduct an amount from the liabilities.

00:12:48.000 | If you're going to add an amount to the liabilities, you also have to add an amount to the assets

00:12:52.000 | or also to the shareholders' equity side.

00:12:56.000 | So endeavoring to keep this simple--and by the way, you could--if that doesn't make sense to you,

00:13:01.000 | sometimes it's easier for people to think about this--equity equals assets minus liabilities.

00:13:06.000 | So that's kind of how we're used to thinking of it because it lines up with net worth equals assets minus liabilities.

00:13:11.000 | So equity equals assets minus liabilities.

00:13:14.000 | You can just do an algebraic rearrangement of that formula in any way that you want.

00:13:19.000 | But the point of this is that you are always keeping multiple accounts.

00:13:24.000 | So you have in double-entry accounting system, you have various expense accounts.

00:13:29.000 | You would have an auto insurance expense account.

00:13:31.000 | And then when you made a deduction, when that money was accrued in the auto insurance account,

00:13:36.000 | and then when you were ready to pay that, then you would go ahead and make a deduction from that account,

00:13:42.000 | and that money would flow over and would go out in an expense category.

00:13:47.000 | So the answer to your question is you probably don't need to get that in depth with your personal financial statements.

00:13:55.000 | Most people don't.

00:13:56.000 | What I would encourage you is, A, if you're going to look at it over an account--

00:14:00.000 | if you're going to look at it at your finances over a one-month period,

00:14:04.000 | you would need to go ahead and establish an accrual account for something like a car insurance expense

00:14:13.000 | because you're not saving the money.

00:14:15.000 | And this is one of the things that happens.

00:14:17.000 | And I'll give you--many people automatically assume, "Okay, if I'm saving this money for car insurance,

00:14:23.000 | I know that that expense is going to come up and they're going to have to write the check."

00:14:26.000 | But what many people will do is they'll say, "I'm saving money in a savings account every month,

00:14:30.000 | so I have--every month I put $500 over into a savings account."

00:14:34.000 | But that savings account is actually going to be spent on something like a new couch or a vacation

00:14:40.000 | or a nice dinner out or a daughter's birthday party or something like that.

00:14:48.000 | So although we use the word "savings account," that money is not savings.

00:14:53.000 | It's just simply--what would be a better word?

00:14:57.000 | I'm kind of going over to where this technically isn't correct.

00:15:00.000 | It is savings.

00:15:01.000 | It's more like accruals.

00:15:03.000 | You're accruing money for a vacation fund.

00:15:05.000 | You're accruing money for a car fund, for a car repair, things like that.

00:15:09.000 | And so it's important that you understand it because unless--the only money that you're actually saving--

00:15:16.000 | saving, saving--is money that's not going to be spent.

00:15:21.000 | And you could modify that and say it's not going to be spent forever, which would--you know, most--

00:15:25.000 | it doesn't make a lot of sense to not spend money forever to me.

00:15:27.000 | I'd rather just spend all the money when I'm alive.

00:15:29.000 | But it's at least going to be over maybe a 20-year period or a 30-year period or a 10-year period

00:15:33.000 | or a 5-year period, something like that.

00:15:35.000 | So I would encourage you do some studying about accrual accounting versus cash method of accounting

00:15:43.000 | and do some studying about double-entry bookkeeping versus single-entry bookkeeping.

00:15:47.000 | What I find is that the cash method of accounting and single-entry bookkeeping is limiting

00:15:53.000 | because once you understand the value of double-entry accounting and of accrual accounting,

00:15:58.000 | once you understand the value of that, it's hard to go back to the more simplified version.

00:16:03.000 | I find that frustrating.

00:16:05.000 | One of my personal frustrations--and this is not--I want to be clear.

00:16:09.000 | I would not give this recommendation to the majority of people.

00:16:12.000 | But I find single-entry accounting methods, which is what basically all personal finance accounting methods are,

00:16:19.000 | very frustrating.

00:16:21.000 | So I--for my personal accounts, for example, I use a double-entry accounting software that is--

00:16:28.000 | I use something called New Cash, G-N-U New Cash,

00:16:33.000 | which is a double-entry method of accounting that's developed for businesses.

00:16:36.000 | And I just have my accounts in there customized under personal accounts.

00:16:40.000 | I'm thinking about switching to QuickBooks because of the factor of being the QuickBooks online system,

00:16:46.000 | but--so that I can have access to their cloud-based services, which New Cash doesn't support.

00:16:56.000 | But that's far too complicated for most people.

00:16:59.000 | I remember I used to--years ago I tried using QuickBooks and I couldn't understand how it worked.

00:17:04.000 | Now I understand how it works and I get frustrated with Quicken

00:17:07.000 | because I want to establish more accounts and I want to establish better bookkeeping for myself.

00:17:12.000 | So make it a point of study for yourself.

00:17:14.000 | That's the technical answer to your question is you are right,

00:17:20.000 | and that's why you would need to accrue the expense each month.

00:17:23.000 | That would be the way that you would look at it.

00:17:25.000 | And what I forgot to say, as I was trying to drive at,

00:17:27.000 | is that you should probably keep using single-entry accounting just like you're doing now,

00:17:33.000 | but you should just probably look at it over a one-year period of time.

00:17:36.000 | Or if you pay your auto insurance every six months, just look at it over every six months period of time.

00:17:41.000 | That gives you enough of a perspective.

00:17:43.000 | I mean, you don't need to produce audited financial statements for your personal finances.

00:17:48.000 | You're just trying to get a general idea of where you're going.

00:17:51.000 | And frankly, looking back is only useful to give you information about where you're going to go.

00:17:55.000 | So it's not that big of a deal.

00:17:57.000 | You don't need an audited financial statement.

00:17:59.000 | So there is a technical answer, and then there's a practical answer to your question.

00:18:06.000 | Now, this mental model of accounting--I want to make one more comment on it.

00:18:10.000 | This mental model of accounting, using double-entry accounting

00:18:14.000 | and using the idea of different accounts and using the idea of the accounting equation,

00:18:19.000 | I find this to be very useful in every aspect of life.

00:18:23.000 | This is not--what I'm about to say is not technically correct.

00:18:27.000 | I've never heard anyone speak about this.

00:18:29.000 | I've never read anybody speak about this, but this is something that I think--one way that I think about it.

00:18:35.000 | I think of the accounting equation, which again, the one that's in my mind is equity equals assets minus liabilities.

00:18:46.000 | I think of this far beyond money because I think it's a powerful way to understand how life works.

00:18:54.000 | Accounting was developed--the science of accounting was developed to try to understand how money works

00:19:03.000 | and money flows within a business.

00:19:05.000 | So the development of the income statement, the development of the cash flow statement,

00:19:08.000 | the development of the retained earnings statement, the development of the balance sheet,

00:19:11.000 | the four basic financial statements of any business, the development of these statements was--

00:19:15.000 | these were developed to explain what's going on inside the business.

00:19:21.000 | And I like to use this model to understand what's going on in my mind and in my life

00:19:27.000 | because I think in life we have an iron accounting statement in many ways.

00:19:32.000 | We have a certain amount of time and we have a certain amount of energy that is here in our lifetime.

00:19:37.000 | Now again, this model will break down, but let me just tell you how I think about it.

00:19:42.000 | Let's use a very simple example of work versus family time.

00:19:47.000 | If I am--or let's use finance versus family.

00:19:51.000 | If I go and I work more hours, I will earn more money,

00:19:57.000 | but I will also have less of a time with my family--less time with my family or with people who are valuable to me.

00:20:04.000 | That is a tradeoff.

00:20:06.000 | And so I can't alter the fact that an additional amount of money is going to require a reduction in time.

00:20:14.000 | And so I need to be careful to make sure that I'm balancing the time and the money and the value of them.

00:20:20.000 | I think about how can I accumulate equity in life?

00:20:25.000 | How can I accumulate equity in every way?

00:20:27.000 | So how can I accumulate more love, more family relationships, more joy of life, more experiences, more fun,

00:20:38.000 | more things that matter, more things that are eternal?

00:20:41.000 | I think how can I accrue more of this equity into my life?

00:20:47.000 | Well, I have to do it by investing.

00:20:49.000 | And so what happens is I think the financial method of accounting--like when people talk about this person is successful,

00:20:55.000 | I cringe when I hear people say, "Well, that guy is really successful,"

00:20:58.000 | because my question would be on what standard, on what metric?

00:21:03.000 | I don't have any interest at all in being the richest man in the world.

00:21:07.000 | Now, the richest man in the world might be successful.

00:21:09.000 | The richest man in my town might be successful.

00:21:12.000 | But success is measured based upon our own internal values, and to me, money is merely a tool.

00:21:17.000 | It's a method to achieve freedom.

00:21:20.000 | And the freedom is what I count as success, and there are many ways to do that.

00:21:24.000 | So the number of zeros on my bank statement is not a major factor in my life

00:21:28.000 | because, in my opinion, it all stays behind me when I'm dead.

00:21:33.000 | But I can develop equity that continues past my lifetime.

00:21:36.000 | Now, some people try to--let me not be pejorative of them.

00:21:41.000 | Some people develop equity through the use of money that does continue past their death.

00:21:46.000 | So there are a variety of ways to do it, but the point that I'm trying to make is that I think of something like my health.

00:21:52.000 | That's an account that I need to put money into.

00:21:55.000 | So if I'm going to spend financially on better quality food for my family,

00:22:00.000 | that's going to be in the expense, in the financial expense category,

00:22:04.000 | but that's an investment into my other account in my double-entry accounting,

00:22:09.000 | internal mental double-entry accounting system.

00:22:11.000 | That's an investment into my health account, and I'm willing to make that decision if I have that account.

00:22:19.000 | Now, if I don't have a health account, then what happens is that everything is judged on the basis of finance, on money.

00:22:25.000 | And then in that situation, then why would you ever purchase higher quality food?

00:22:30.000 | Why would you ever purchase--I'll give you an example.

00:22:32.000 | Let's say that I choose to purchase food from a local producer instead of from a large, mainstream, mega producer.

00:22:41.000 | That aligns well with my values, but I may spend more money to do so.

00:22:48.000 | But I'm willing to do that if that's an investment into the social equity or into the moral equity account,

00:22:56.000 | that I think I would rather do business with a local producer and spend more money

00:23:02.000 | than to do business with a big producer that I believe is harming the environment,

00:23:07.000 | and I'm not willing to do that with my values.

00:23:11.000 | So for each one of us, the accounts that are in our head are going to be very--are going to be different,

00:23:18.000 | but that's how I think about it.

00:23:20.000 | Maybe at some point--I've thought about doing a show on this.

00:23:22.000 | I've never heard anybody talk about it, but it's a little hard because you do need some background in accounting

00:23:26.000 | to understand the different accounts.

00:23:28.000 | It's a little hard for me to communicate, but right off the cuff, that's just my answer to your question.

00:23:34.000 | Thank you for the question.

00:23:35.000 | I hope that you're developing your--I hope that in developing your own personal cash flow statements

00:23:42.000 | that it's helpful for you.

00:23:43.000 | Again, I feel it's an incredibly powerful place to start and grow from.

00:23:52.000 | A couple of quick questions that I received in an email.

00:23:54.000 | Moving on, an email from Micah, and Micah wrote me some very complimentary things,

00:23:59.000 | and thank you to all of you who have written.

00:24:01.000 | It's taken me some time to respond to everything just with how busy it is,

00:24:05.000 | but I want to tell you it warms my heart, and the comments that you make on the show,

00:24:11.000 | and the emails that you send, and the reviews, and those comments,

00:24:14.000 | that's my compensation for doing the show at this point, and it's really heartwarming.

00:24:18.000 | It encourages me to keep going, so thank you.

00:24:20.000 | He asked me a few questions.

00:24:22.000 | I answered these in an email back to him, but I thought they would be good questions to elaborate on the show.

00:24:28.000 | First question, "I recently saw the technique where you use your Roth IRA as an emergency fund

00:24:33.000 | since your contributions can be withdrawn without penalty, but I've not had the time to investigate it further.

00:24:38.000 | Is it a good general strategy, or is it only appropriate in some situations?

00:24:41.000 | And if you do use it, what type of assets are appropriate to invest in?"

00:24:45.000 | So I want to answer this question.

00:24:47.000 | I mentioned this, I think I mentioned it in passing, but the Roth IRA, I want to elaborate here.

00:24:51.000 | The Roth IRA is a very useful account.

00:24:53.000 | So fundamentally, as far as how the Roth IRA works from a tax perspective,

00:24:58.000 | you can establish a Roth IRA, you use after-tax money to go into the account,

00:25:05.000 | so you don't get any kind of current tax deduction.

00:25:08.000 | You fund the account with after-tax dollars.

00:25:11.000 | You put the money in. The money can grow over time, and you won't pay any tax on the growth of the money.

00:25:16.000 | And when you withdraw the money, you withdraw the money income tax-free.

00:25:23.000 | There are some other advantages and disadvantages of the account,

00:25:26.000 | and I have a show planned where I will talk through everything you've never wanted to know about the Roth IRA.

00:25:33.000 | But that's all we need to cover for today.

00:25:35.000 | Now, the unique part of a Roth IRA, unique to many other retirement accounts,

00:25:40.000 | is that you can always withdraw your original contribution to the account

00:25:45.000 | without paying the IRS penalty for early withdrawals from a retirement account.

00:25:50.000 | Across all retirement accounts, if you withdraw money before the age of 59 1/2,

00:25:56.000 | you will incur a 10% excise tax, a 10% penalty on your funds.

00:26:02.000 | That's not an income tax. It's a pure penalty.

00:26:05.000 | So if you withdraw $10,000, regardless of your income level, you're going to pay a $1,000 penalty.

00:26:11.000 | With the Roth IRA, you can always withdraw your contribution from the account without paying that penalty.

00:26:18.000 | Now, this is dramatic because, let's say that you put $5,000 in,

00:26:23.000 | and you need $5,000 in a month, you can take the $5,000 back out.

00:26:26.000 | Now, if the $5,000 bucks--assume you had a good month in your investments,

00:26:30.000 | and it grew from $5,000 to $5,500, if you tried to withdraw $5,500,

00:26:36.000 | you would pay the penalty on the $500 of growth.

00:26:40.000 | So if you withdrew the whole $5,500, you would pay a $50 penalty on the $500 of growth from the account.

00:26:49.000 | But the key is you can always get out your original contribution without paying penalties.

00:26:54.000 | So this is useful because if you are not so sure about whether or not you're going to need the money,

00:26:59.000 | it's nice to know that, "Okay, I can at least always get my contribution out.

00:27:03.000 | I can't get interest out, but I can get my contribution."

00:27:06.000 | So to me, starting from a young age, there is little reason not to use the Roth IRA

00:27:12.000 | as a primary account to accumulate some cash in.

00:27:15.000 | At the beginning of life, it's likely that income is going to be fairly low,

00:27:19.000 | so we don't need to worry too much about the higher tax deduction that we could get from an IRA versus a Roth IRA.

00:27:25.000 | And if we can always get our contributions out, this can be a very flexible account for us.

00:27:29.000 | Now, there are some problems.

00:27:31.000 | So number one is it's usually a little bit unwieldy to get money in and out of an account.

00:27:37.000 | Depending on who your custodian is--maybe it's a bank, maybe it's an online brokerage company--

00:27:42.000 | you can get money in and out, but it's not quite as easy as just, boom, write money right out of a savings account.

00:27:47.000 | So I wouldn't start here. I wouldn't accumulate all of my money in a Roth IRA.

00:27:51.000 | I would start with other savings. I would start with physical cash.

00:27:55.000 | Physical dollar bills are probably going to be more useful.

00:27:58.000 | I would do that before I would do money in a savings account because it's a good idea.

00:28:02.000 | Number one, you can always get deals to have physical cash.

00:28:06.000 | Number two is then I would start with some money in bank accounts and how much is very situationally dependent.

00:28:13.000 | For some people, $1,000 in a savings account is a big deal, and they're excited to get to that.

00:28:19.000 | For some people, $100,000 in a savings account--if they have less than $100,000 in a savings account,

00:28:24.000 | then they'd be nervous at night. So you've got to figure out what the right amount is.

00:28:28.000 | But if you were trying to accumulate additional money from there, even just getting started at relatively low dollar figures,

00:28:35.000 | then I would go ahead and use a Roth IRA. I don't see any reason not to.

00:28:39.000 | The trick that you would have to avoid is you would have to--if you were using it as a cash reserve,

00:28:44.000 | like an emergency fund or a cash reserve fund, you would have to avoid investing the money

00:28:49.000 | into something that had the possibility of short-term loss of principle.

00:28:54.000 | So it would be inappropriate--if this were your cash reserve fund, it would be inappropriate to buy stocks

00:28:59.000 | because you may, in any random month, have a 20% decline in the market value of your stocks.

00:29:05.000 | Well, if you put $5,000 in and you go and you can only get $4,000 out, that wasn't a good move.

00:29:09.000 | And if you anticipate needing the money, that wasn't a good move.

00:29:12.000 | So if you were using this, I would just keep it as a cash investment in the short term.

00:29:17.000 | And whether that's with a brokerage company and just use one of their cash accounts or money market accounts,

00:29:21.000 | or whether that were with the bank, you'd have to deal with that with your custodian.

00:29:25.000 | So I would steer away from using an investment account if you're just getting started and accumulating.

00:29:30.000 | Now, if you've done this for a few years--let's say you put $5,000 in, put $5,000 in, put $5,000 in,

00:29:35.000 | you've built up other cash, you have other sources, then yes, go ahead and start investing the money.

00:29:41.000 | And frankly, there's no reason not to if you can get to the money quickly.

00:29:45.000 | And if your situation looks like this, there's no reason not to keep some portion of that in cash

00:29:51.000 | as allocated for your emergency fund.

00:29:53.000 | And then if you need money, cover it with a credit card or something,

00:29:57.000 | take the distribution from the custodian, from the brokerage account, or however you have it structured,

00:30:03.000 | and move it over into your other accounts.

00:30:06.000 | So for each person, that answer is going to be different.

00:30:09.000 | And it's going to be different based upon your situation, based upon what you can save,

00:30:12.000 | based upon what you need the money for.

00:30:14.000 | It's going to be different to say, "How much money am I going to keep in my wallet?

00:30:19.000 | How much money am I going to keep in a checking account, in a savings account, in a brokerage account?"

00:30:23.000 | And those answers are going to be extremely dependent on what your actual situation is.

00:30:28.000 | So I don't want to go any deeper than that, but the answer is yes, you can do it.

00:30:31.000 | I would be careful if you were using that as a buffer account.

00:30:34.000 | I would be careful about investing it.

00:30:37.000 | His question number two, "You mentioned that permaculture has really changed the way you think about other subjects.

00:30:43.000 | Do you have a recommended reading list of permaculture books?"

00:30:45.000 | No, I don't.

00:30:47.000 | Where I would start, if you're interested in permaculture, the video that I originally saw

00:30:51.000 | that got me completely intrigued is a video on YouTube called "Greening the Desert."

00:30:56.000 | I'll make sure to link it in the show notes.

00:31:00.000 | If you go online, go to YouTube, and search for "Greening the Desert,"

00:31:07.000 | that is a project that was designed and implemented by a man named Jeff Lawton.

00:31:12.000 | He was called in to the Dead Sea Valley in Jordan, and he was given, I think, ten acres to work with

00:31:18.000 | of horribly flat, arid, salted land.

00:31:21.000 | By applying some design techniques, he took the desert and he greened it.

00:31:27.000 | It's absolutely amazing to see.

00:31:30.000 | When I saw how quickly he had done that transformation with desert land,

00:31:35.000 | it shocked me because I had always assumed, "Well, desert, you can't do anything in the desert."

00:31:39.000 | That sent me off into a world of research on YouTube.

00:31:43.000 | That's the best place because you can see some of these transformations on YouTube, and it's very visual.

00:31:48.000 | Once you go through the visual aspects of permaculture,

00:31:53.000 | and you start to see some of the good design techniques and what can be done,

00:31:57.000 | then you can move into books.

00:32:00.000 | There's a bunch of books. I'm not an expert on the academic side of it.

00:32:03.000 | I don't know what's the best, what's not. I've read a bunch of books on it.

00:32:06.000 | Permaculture is basically fairly simple.

00:32:09.000 | There are three ethics. It's a design science based around three ethics.

00:32:14.000 | Then some--how many design principles are there?

00:32:19.000 | I'm not even going to mess up the numbers, but there's three ethics and some design principles.

00:32:25.000 | Once you understand them, then it's just basically a working framework

00:32:28.000 | towards which you can apply on any landscape.

00:32:33.000 | It can be applied in many other things.

00:32:36.000 | The best videos I have seen are done by Jeff Lawton.

00:32:41.000 | Go to his website at jefflawton.com.

00:32:47.000 | If you put in your name and email address--he has a name and email screen, but it's worth it--

00:32:53.000 | then on the right hand side and click enter,

00:32:56.000 | it'll take you to a bunch of videos that he's done on different aspects of permaculture design.

00:33:00.000 | His videos are really awesome.

00:33:02.000 | He uses that as a landing page to sell an occasional course.

00:33:06.000 | He does a permaculture design course, which is the basis of permaculture education.

00:33:10.000 | He does that about two to three times a year, but it's really good.

00:33:13.000 | He's got a lot of really great free emails, which are kind of the teaser to get you involved.

00:33:20.000 | Those are two questions from Micah.

00:33:22.000 | He asked a third question about doing planning for older people.

00:33:24.000 | I'm going to skip that for right now.

00:33:26.000 | I answered him in an email, but let's go on.

00:33:29.000 | Next question.

00:33:30.000 | I had a question from a listener named Nick.

00:33:35.000 | He said, "Joshua, you have me thinking about starting a business for myself,

00:33:38.000 | but I'm stuck on what to consider.

00:33:41.000 | I've tried various online businesses, but I'm not really interested.

00:33:44.000 | I'm thinking something more local like leasing out porta-potties or construction site dumpsters,

00:33:48.000 | maybe starting an insurance agency, something like that.

00:33:52.000 | We make about $300,000, but we want to build something bigger,

00:33:55.000 | maybe put down a few thousand bucks.

00:33:57.000 | Can you do a show on scalable small business ideas you can start while earning a great living already?

00:34:02.000 | I work about 20 to 30 hours a week, so I have time.

00:34:06.000 | Please help, especially for those who can fork over some cash to get started. Thanks."

00:34:12.000 | It's an interesting question, and the reason I bring it up here is because I have a few ideas,

00:34:16.000 | but frankly I don't know how to answer this question.

00:34:18.000 | That's what this show is about.

00:34:20.000 | So I'm going to do a lot of shows over time on great business ideas

00:34:24.000 | and try to interview as many entrepreneurs as I can find from different subjects and different backgrounds.

00:34:30.000 | But I don't have a list of great small businesses that can be started on the side.

00:34:37.000 | My conviction, my answer to this question, is probably just about any business might be able to be started on the side,

00:34:42.000 | but you need something more to go on than just, "I want to make money."

00:34:45.000 | It seems to me, from everything that I have read and learned from other entrepreneurs,

00:34:50.000 | it seems to me that you need some reason for doing a business that goes beyond making money.

00:34:57.000 | It seems to me that running a business and being an entrepreneur purely for the sake of money,

00:35:03.000 | it's too hard. It's too difficult.

00:35:07.000 | Now, I think there are probably exceptions to that, but if that were the only reason,

00:35:11.000 | I think it would be too difficult.

00:35:13.000 | I'm sure there's lots of scalable businesses that could be started on the side,

00:35:19.000 | but you kind of have a difference there between a little bit of time and a lot of money

00:35:23.000 | versus a lot of money and a little bit of time.

00:35:28.000 | I would start with, what are the other reasons why you would start a business?

00:35:34.000 | It would seem, and Nick in other comments on his question, he said that they're saving a good amount of money.

00:35:42.000 | So it would seem to me that if you already have a good income stream established with a minimum amount of time

00:35:48.000 | and you're able to save a lot of money, that's a pretty sweet setup.

00:35:52.000 | So then the question would be, well, what kind of business would you actually want to start?

00:35:55.000 | Are you starting a business for joy, for impact?

00:35:59.000 | I think you've got to give some thought to what are your natural inclinations.

00:36:03.000 | It seems to me that most people should be drawn to something.

00:36:06.000 | It's always been hard for me to answer career questions because I'm a little bit flummoxed

00:36:11.000 | when someone says, "What career do you think is a good career?"

00:36:13.000 | I've got a list of a hundred ideas, and I constantly am thinking, "Hey, this would be interesting.

00:36:18.000 | That would be fun. That would be a cool adventure. What if I did this? What if I did that?

00:36:21.000 | What if I did the other thing?"

00:36:22.000 | I think one of the big steps that you could start, Nick, is just start by being aware of what you're interested in.

00:36:28.000 | So keep a list. If you don't already have one, keep a list of anything you think would be cool.

00:36:33.000 | This show came out of that list.

00:36:38.000 | I've always loved listening to people that were--I've always loved listening to radio.

00:36:43.000 | I've always loved listening to speeches, and I thought, "There's a place for this, but how could I do it?"

00:36:48.000 | It integrates what I'm naturally gifted with, what I love to do, and what I love to consume,

00:36:54.000 | and it integrates with my knowledge base.

00:36:56.000 | So make a list of ideas, and then start to research that list and see what clicks for you.

00:37:04.000 | To this day, I have a file of ideas that, to me, I think there's at least 150 different ideas for jobs or businesses

00:37:13.000 | that I think would be fun, and they range all across the board.

00:37:16.000 | They range from as simple as the fact that I've always thought it would be fun to be a barista at Starbucks.

00:37:21.000 | I like coffee. I love the coffeehouse atmosphere. I always thought that would be really fun.

00:37:24.000 | Or Panera Bread. I always thought that would be really fun. I like the atmosphere.

00:37:28.000 | All the way to I've thought of building a real estate investment empire.

00:37:35.000 | I've thought about opening a school.

00:37:37.000 | I have some ideas for a more effective way to do school that I think would be better for students,

00:37:44.000 | better for teachers, and better for parents, and in a for-profit way.

00:37:48.000 | I've got some ideas about that.

00:37:50.000 | I've thought about opening a grass-fed cattle operation. I live in Florida.

00:37:55.000 | I'm really interested in agriculture, as you can tell by some of the guests that I've brought on.

00:38:00.000 | I've thought about doing an international tour guide company.

00:38:04.000 | I like to travel. I love to help people experience things, and there's a lot of people that can benefit from that.

00:38:09.000 | I've got a list. I've thought about working in a hotel.

00:38:11.000 | I think that it would be fun to work in the hotel industry.

00:38:13.000 | I've always been interested by that.

00:38:15.000 | I've thought about building out franchises.

00:38:18.000 | To me, every one of these things has good things and bad things about it.

00:38:24.000 | This show is just simply the thing that made the most sense on that list based upon things that I would like to do.

00:38:31.000 | But there are many other things on that list.

00:38:34.000 | I would encourage you to spend a lot of time getting to know yourself.

00:38:39.000 | Maybe you already do this, but to me, to ask a question in a general way—and I appreciate the question.

00:38:46.000 | It's good to ask a question. I'm not insulting the question.

00:38:48.000 | But to ask the question in a general way would imply that you don't exactly know what you want to do.

00:38:54.000 | Leasing out porta-potties or construction site dumpsters.

00:38:57.000 | Maybe that's a good, lucrative little business. I don't know.

00:39:00.000 | But again, I'm always a little bit bum-fuzzled by how people don't know what they want to do.

00:39:10.000 | So I would say start with just spending a lot of time thinking, "What do you want to do?"

00:39:13.000 | I personally—and again, I have not made millions in a large business that I've sold for $20 million.

00:39:20.000 | But I personally am turned off from the idea of, "What can I do that's going to make the most money?"

00:39:26.000 | And I'm turned on by the idea of, "How can I design my ideal lifestyle?"

00:39:31.000 | I think of two different kinds of businesses.

00:39:34.000 | And these are not mutually exclusive. I recognize the problems with this thinking.

00:39:38.000 | I'm just telling you how it works in my head.

00:39:40.000 | I think of lifestyle businesses and ego businesses.

00:39:43.000 | To me, a lifestyle business is a lot easier to create than anything else.

00:39:47.000 | And a lifestyle business is just simply, "How can I do something that perfectly integrates all of my own skills

00:39:52.000 | and abilities with something that the market needs, wants, and values?"

00:39:56.000 | And an ego business is, "How can I build a great big business, put my name on the side,

00:40:00.000 | and sell for a lot of money so everyone will be impressed with me?"

00:40:03.000 | I don't care to invest the 30 years that I would need to invest into building an ego business.

00:40:08.000 | I would rather spend that 30 years doing something else.

00:40:11.000 | So I'm very much attracted to lifestyle businesses.

00:40:14.000 | But there are a lot of people who go exactly the opposite.

00:40:16.000 | They just love the thrill of the ego business.

00:40:19.000 | And again, that's not a pejorative statement to say ego business.

00:40:22.000 | That's just how I think about it in my mind.

00:40:24.000 | So I would say spend a lot of time with a journal.

00:40:26.000 | What do you want to do? What makes you tick?

00:40:30.000 | And a lot of times, making a list and say, "What are 30 business ideas that I think are interesting?

00:40:35.000 | What are 30 different industries that I'm attracted to?

00:40:38.000 | What are 30 jobs that I would like to do?

00:40:40.000 | What are 30 ways that I could make a million bucks?"

00:40:43.000 | I remember, I've read various stories.

00:40:46.000 | What was the example? I read a story recently.

00:40:49.000 | And the guy said, "I need to make $100,000."

00:40:52.000 | And he was trying to--because he wanted to do something else--and he was trying to brainstorm that.

00:40:58.000 | And so he said, "How can I do it?"

00:41:00.000 | And he said, "Well, if I can write a book and I can sell 100,000 copies of it, then I can make my $100,000."

00:41:05.000 | Maybe this was--you know what?

00:41:07.000 | I think I'm thinking of the example of the lady who--or the lady or guy--

00:41:11.000 | who did Buns of Steel or Buns of Steel, something like that, workout videos, and a book.

00:41:17.000 | Oh, that's what it was. It was a book.

00:41:19.000 | It was a lady that wanted to make--I'm going to pause for a second.

00:41:22.000 | I'm going to go find the book I was reading. Just a moment.

00:41:25.000 | Okay, found it.

00:41:27.000 | It was--I read this, I don't know, a couple months ago, a month or two ago. I can't remember.

00:41:31.000 | I was reading Jack Canfield's book, The Success Principles,

00:41:35.000 | which, by the way, if you want one book that is the best place to start

00:41:38.000 | if you're interested in personal development literature, of all the books I've ever read,

00:41:44.000 | The Success Principles is probably in the top five as far as personal development literature.

00:41:48.000 | But it's a story in his chapter, and it's called Ask for What You Want,

00:41:52.000 | and it's used--no, excuse me, it's used feedback to your advantage.

00:41:56.000 | And it's one short story here, and there's a lady, not a guy.

00:42:00.000 | One of the best-selling weight loss books ever published was the book Thin Thighs in 30 Days.

00:42:05.000 | What's so interesting about it, though, is that it was developed solely using feedback.

00:42:09.000 | The author, Wendy Stelling, worked in an advertising agency but hated her job.

00:42:14.000 | She wanted to start her own agency but didn't have the money to do so.

00:42:18.000 | She knew she would need about $100,000, so she began asking,

00:42:22.000 | "What's the quickest way to raise $100,000?"

00:42:26.000 | "Sell a book," said the feedback.

00:42:28.000 | She decided if she wrote a book that could sell 100,000 copies in 90 days,

00:42:32.000 | and she made $1 per book, she would raise the $100,000 she needed.

00:42:38.000 | But what kind of book would 100,000 people want?

00:42:41.000 | "Well, what are the best-selling books in America?" she asked.

00:42:46.000 | "Weight loss books," said the feedback.

00:42:48.000 | "Yes, but how would I distinguish myself as an expert?" she asked.

00:42:52.000 | "Ask other women," said the feedback.

00:42:55.000 | So she went out to the marketplace and asked,

00:42:57.000 | "If you could lose weight in only one part of your body, what part would you choose?"

00:43:01.000 | The overwhelming response from women was, "My thighs."

00:43:05.000 | "When would you want to lose it?" she asked.

00:43:08.000 | "Around April or May, in time for swimsuit season," said the feedback.

00:43:12.000 | So what did she do?

00:43:14.000 | She wrote a book called Thin Thighs in 30 Days and released it April 15.

00:43:18.000 | By June, she had her $100,000, all because she asked people what they wanted

00:43:24.000 | and responded to the feedback by giving it to them.

00:43:27.000 | So I got a little distracted in the time it took me to go get the book.

00:43:32.000 | But the point was, I think the point I was trying to make is that there's got to be something.

00:43:36.000 | There are a lot of things that can be done, but there's got to be some reason for it.

00:43:40.000 | So starting a business, you need to have some specific reason.

00:43:44.000 | If you want to make more money, why do you want to make more money?

00:43:46.000 | And I think that this is where it's much more of a self, like get-to-know-yourself issue

00:43:51.000 | than it is "Here's the greatest business idea."

00:43:56.000 | There are lots of things you can do for money, but I think consider what you--

00:44:02.000 | consider what you--or what your natural inclinations are.

00:44:07.000 | I think you've got to be drawn to something for some reason.

00:44:10.000 | And it may be you want to own a McDonald's franchise because you believe in developing people.

00:44:15.000 | And you can start with entry-level fast food workers,

00:44:18.000 | and you can teach them how to develop themselves in the McDonald's system.

00:44:21.000 | I've worked with a number of clients who, within McDonald's,

00:44:23.000 | started as front-line minimum-level workers and make six-figure incomes plus now.

00:44:28.000 | Do you want to run hotels because you like working with travelers?

00:44:31.000 | Do you want to invest in horse farms? I don't know.

00:44:33.000 | Do you want to promote something that you're committed to?

00:44:36.000 | For example, I would be inclined to go work in agriculture

00:44:39.000 | because I want to promote those things that I think are important as far as agriculture

00:44:46.000 | and the types of values and the types of approaches that make sense to me.

00:44:50.000 | Where do you see opportunity?

00:44:51.000 | Looking for opportunity and trying to find it.

00:44:53.000 | That's what I'm doing with this podcast is I see opportunity.

00:44:56.000 | I see a burgeoning market.

00:44:57.000 | I see a number of market conditions that are going to be changing substantially

00:45:01.000 | within the next 12 to 24 months, and that this opportunity is increasing largely.

00:45:07.000 | So that's what I'm trying to focus on.

00:45:09.000 | What are the risks that you personally have that you're concerned about?

00:45:14.000 | Can you leverage your current career?

00:45:16.000 | Is there something--if you are in an area of expertise,

00:45:19.000 | can you leverage that career into making more money?

00:45:22.000 | The example of writing a book.

00:45:25.000 | If you're in a career where you can just take your knowledge and write a book,

00:45:31.000 | can you use that to make the million bucks that you need on top of the salary

00:45:34.000 | that you have right now?

00:45:37.000 | I would look for what are you interested in investing in?

00:45:40.000 | Do you want to be a venture capital investor?

00:45:42.000 | Do you want to be a trader?

00:45:43.000 | Do you want to do local real estate deals?

00:45:46.000 | Are you looking for passive income or active income?

00:45:49.000 | For example, if you've got money, you can invest that completely passively,

00:45:52.000 | buy securities, publicly traded companies, sit back and collect that money.

00:45:56.000 | You don't need to do a thing for it.

00:45:58.000 | Now, on the other hand, you can go very active, and you can go work in--

00:46:02.000 | venture as a--if you've got cash, you can go and build out a real estate portfolio

00:46:07.000 | and be very hands-on, flipping properties.

00:46:09.000 | That's a good place if you've got cash, and if you're drawn to that,

00:46:12.000 | it's very active, but you can make an excellent rate of return

00:46:14.000 | if you're skillful at that.

00:46:17.000 | What I would do is I would personally just simply focus on taking some money

00:46:23.000 | and investing it, and frankly, taking people to lunch

00:46:26.000 | and building out things and talking to people.

00:46:29.000 | For example, make it a target to take two business people in your town

00:46:33.000 | out to lunch, two independent entrepreneurs, whether you rate them in the newspaper

00:46:38.000 | or something, and take them out to lunch and find out--learn from their success

00:46:42.000 | and find out what opportunities they see locally.

00:46:45.000 | If you mention that you have capital to invest,

00:46:48.000 | you will have plenty of people pursue you.

00:46:52.000 | That's an example of--I don't know how to answer the question exactly,

00:46:57.000 | but that's how I would think it through.

00:47:01.000 | Then the last plea I would say for the audience,

00:47:03.000 | if you know of guests that would fill this listener's question,

00:47:06.000 | that would be a good point.

00:47:08.000 | Again, doing a show on scalable small business ideas

00:47:11.000 | that you can start while earning a great living,

00:47:13.000 | email me, joshua@radicalpersonalfinance.com, or comment on the blog,

00:47:17.000 | and let me know what those things would be.

00:47:22.000 | Let me know who you think would be good, and send them a note,

00:47:25.000 | and I'd love to have them on the show and interview them.

00:47:27.000 | That would be awesome.

00:47:29.000 | Next question.

00:47:31.000 | I want to get into a little bit of the feedback that I got on the Walmart show.

00:47:34.000 | Overall, the feedback has been really great.

00:47:36.000 | That show has been well received.

00:47:39.000 | But I did receive two comments on the show that I would like to address,

00:47:44.000 | and I think this will be useful to talk through.

00:47:47.000 | The first comment was a comment about--

00:47:51.000 | was what I said accurate about the reasons for success at Walmart,

00:47:54.000 | a fairly lengthy comment. I'm going to read that one.

00:47:56.000 | The second comment was directed towards my mentioning of dress code

00:48:02.000 | in a comment I made that is perceived as racist.

00:48:04.000 | So I'm going to address both of these,

00:48:06.000 | and I've got some thoughts that I want to use as a good example.

00:48:09.000 | Some thoughts I want to share with you on these comments.

00:48:15.000 | So I'm going to begin with a--I'm going to begin with--

00:48:22.000 | I'm going to begin with the comment here from John,

00:48:25.000 | which is a very thoughtful comment, and I replied to it,

00:48:28.000 | but with my issues with the commenting system,

00:48:30.000 | for some reason my replies don't seem to be showing up.

00:48:33.000 | But I did want to honor the comment.

00:48:35.000 | It's a very thoughtful and very lengthy comment,

00:48:37.000 | and so I'm going to read it.

00:48:38.000 | He said, "When you state, 'There's a reason minimum wage is what it is,'

00:48:42.000 | it sounds like you're implying that the worker just doesn't bring that much value,

00:48:46.000 | so the wage is naturally low.

00:48:48.000 | I think it has more to do with the weak bargaining position the worker has.

00:48:51.000 | Think of it this way.

00:48:52.000 | Walmart doesn't hire anyone unless the value they bring exceeds the cost of employing them.

00:48:56.000 | That's how capitalism works.

00:48:58.000 | Hire someone that brings value X, compensate them at a rate of X minus Y,

00:49:02.000 | and the difference Y is profit.

00:49:04.000 | Walmart is very profitable,

00:49:05.000 | so they are obviously hiring people for much less than the value they produce.

00:49:09.000 | That's how you make a profit."

00:49:10.000 | Pause for a second.

00:49:11.000 | If you haven't listened to the Walmart show,

00:49:13.000 | you may want to go back and listen to the Walmart show.

00:49:15.000 | It was entitled, "My Plan for How I Would Become a Millionaire

00:49:17.000 | with a Minimum Wage Job at Walmart."

00:49:20.000 | It was episode 43.

00:49:21.000 | It can be found at radicalpersonalfinance.com/43.

00:49:25.000 | The last two questions of the show are about that,

00:49:27.000 | so it will make more sense to you if you haven't heard that show

00:49:29.000 | to go and listen to that.

00:49:31.000 | How is Walmart able to do this, making such a large profit?

00:49:34.000 | "They are effective at preventing unionization.

00:49:37.000 | If people are organized and speak with one voice,

00:49:39.000 | they have a stronger bargaining position,

00:49:41.000 | and they naturally get better compensation.

00:49:43.000 | They take a larger share of the value they produce.

00:49:46.000 | This is why we have a middle class in the U.S.

00:49:48.000 | Unions did exactly this and produced a middle class with purchasing power.

00:49:53.000 | That purchasing power fueled further consumption and stronger economic growth."

00:49:57.000 | "The other thing Walmart does to reduce compensation is destroy local industry.

00:50:02.000 | You say that nobody chooses to work at Walmart.

00:50:05.000 | You are free to leave.

00:50:06.000 | But because the local hardware store and local grocer is now out of business,

00:50:10.000 | some people find themselves with fewer options.

00:50:12.000 | If you are free to choose, but one alternative brings a lot of suffering,

00:50:17.000 | no weekly paycheck means hunger pains,

00:50:19.000 | is staying really a free choice?"

00:50:22.000 | So his point, "If you're free to choose,

00:50:24.000 | but one alternative brings a lot of suffering,

00:50:26.000 | is staying really a free choice?"

00:50:28.000 | "Walmart management exploits this reality to squeeze further concessions from employees,

00:50:33.000 | driving profits further higher."

00:50:36.000 | "You say the CEO of Walmart makes what he does because of the value he brings.

00:50:40.000 | This once again ignores the bargaining position he is in with regards to his compensation.

00:50:45.000 | The board of directors of various companies typically follow a sort of incestuous pattern.

00:50:49.000 | They each serve on one another's board and ensure good compensation.

00:50:53.000 | It's not necessarily that they are bringing real value in terms of improving the world

00:50:57.000 | or providing a better quality product at a better price.

00:51:00.000 | In fact, often they cause a lot of harm.

00:51:02.000 | They can make choices that harm the long-term success of the company.

00:51:05.000 | This is a very typical phenomenon.

00:51:07.000 | Stockholders don't typically care about the long-term success of a company.

00:51:11.000 | If they can extract the value quickly and move on,

00:51:14.000 | then they can generate high returns on investment."

00:51:17.000 | "I thought your overall plan was good,

00:51:19.000 | but I believe you have come to accept a lot of assumptions

00:51:21.000 | that reflect beliefs preferred by the rich that are false.

00:51:25.000 | These are beliefs rich often use to justify in their own mind their riches."

00:51:30.000 | So I thought this was a thoughtful comment,

00:51:33.000 | and John, I appreciate you making the comment.

00:51:35.000 | And I'm going to respond to some of your points

00:51:39.000 | and just give you the audio version of what I responded,

00:51:41.000 | and use it as a good example for us to go and to go into to research things.

00:51:50.000 | Now, you could be right in all of your claims,

00:51:54.000 | and I could be completely wrong, or I could be wrong and you could be right.

00:51:58.000 | Chances are probably it's somewhere in the middle.

00:52:00.000 | I'm probably wrong about some things,

00:52:02.000 | and you're probably wrong about some things.

00:52:04.000 | We're both probably equally right about some things.

00:52:08.000 | But I'm just going to go through and just respond

00:52:10.000 | because I do want to thank you for the good comment.

00:52:12.000 | First of all, when you state there's a reason minimum wage is what it is,

00:52:16.000 | it sounds like you're implying that the worker just doesn't bring that much value

00:52:19.000 | so the wage is naturally low.

00:52:22.000 | I'm not only implying that, I'm saying that specifically.

00:52:25.000 | A minimum wage worker does not bring a lot of value.

00:52:28.000 | They're easily replaced, and that's why the wage is low.

00:52:31.000 | And so the key to escaping poverty is increasing the value

00:52:36.000 | so that you can earn higher wages.

00:52:41.000 | So I'm not only implying it, I'm specifically saying it.

00:52:43.000 | The key to escaping poverty is increasing the value delivered.

00:52:47.000 | Let's use a generic example.

00:52:49.000 | You can destroy this as a generic example.

00:52:51.000 | Let's use a generic example.

00:52:52.000 | Let's say that I hire somebody to sweep the floor.

00:52:56.000 | If all that's required for sweeping the floor

00:52:59.000 | is for me to give somebody a broom and say, "Sweep the floor,"

00:53:02.000 | and they know how to do that, and I can train them how to do that in about five minutes,

00:53:05.000 | it is impossible to command a very high wage for that.

00:53:08.000 | I think about this when I see sign spinners on the street.

00:53:13.000 | That's all the rage down here.

00:53:15.000 | I think it probably is where most people--

00:53:17.000 | how much do you have to pay somebody to stand on the street

00:53:19.000 | with an iPod, earphones in their ears so they have something to listen to

00:53:23.000 | or a book to read, and hold a sign on the street corner about minimum wage?

00:53:28.000 | And the reason you can pay them about minimum wage

00:53:30.000 | is because there's no value that they can't replace one with another.

00:53:35.000 | If I'm hiring a sign spinner, it doesn't matter to me what color you are,

00:53:38.000 | how big you are, how not big you are.

00:53:40.000 | All I need is someone at 8 a.m. to go out and sit on the side of the street with a sign.

00:53:44.000 | That's the whole point.

00:53:46.000 | Now, how can the sign spinner command a higher wage?

00:53:49.000 | I don't remember exactly where, but I read an article a few years ago,

00:53:52.000 | and it was talking about this guy who had built a sign-spinning company.

00:53:56.000 | But what he did was he built a company that trained people

00:53:59.000 | on how to spin signs for greater effect.

00:54:02.000 | So the entire reason that a business owner is hiring somebody

00:54:04.000 | to hold a sign on the side of the road is to get people to see that sign

00:54:08.000 | and to draw attention so that they know his business exists,

00:54:11.000 | so that they can come in, darken his door, and buy his products.

00:54:14.000 | This guy built, first of all, his own income source

00:54:18.000 | based upon being a sign spinner, throwing the sign up, spinning it around,

00:54:22.000 | doing it in a way that attracted a lot more attention,

00:54:25.000 | and he was able to command a higher wage from the business owners that hired him

00:54:31.000 | because of his extra antics that drew more attention.

00:54:35.000 | He went on and built it into a business where he was training other people

00:54:38.000 | on how to spin signs.

00:54:40.000 | And that's an ideal example of, yes, the minimum wage worker

00:54:43.000 | does not bring much value, and my proof for that is because the wage is low.

00:54:48.000 | The guy who was having sign spinners that worked, that stood there

00:54:51.000 | and spun the sign and danced and did all these extra things to bring attention,

00:54:56.000 | he was charging higher prices for his sign spinning

00:54:59.000 | than was the other person that spun the sign.

00:55:02.000 | Demanding that a business owner pays you more

00:55:05.000 | when you are in a weak position of not bringing up much value

00:55:08.000 | is a path to poverty.

00:55:11.000 | If all I do is stand there with an iPod in my ears--

00:55:14.000 | and that's what I would do.

00:55:15.000 | I would sit there and listen to my podcast every day and learn how to get rich.

00:55:18.000 | But if all I did was stand there with an iPod in my ear

00:55:22.000 | and demand a higher wage, guess what?

00:55:25.000 | I'm going to be fired, and the guy is going to replace me the next day

00:55:28.000 | with someone else who wants it.

00:55:31.000 | Now, if I work and I develop my value,

00:55:34.000 | and while I'm listening to my podcast all day long,

00:55:37.000 | I'm working on how can I design some technique of dancing

00:55:40.000 | and looking like a fool or wearing a costume or spinning the sign

00:55:43.000 | so that I'm helping the business owner in that direction,

00:55:47.000 | then that would actually drive business,

00:55:52.000 | and now I'm actually far more valuable.

00:55:54.000 | I'm not as easily replaced.

00:55:59.000 | Now, you're right.

00:56:00.000 | Walmart doesn't hire anyone unless the value they bring

00:56:02.000 | exceeds the cost of employing them.

00:56:04.000 | That's how capitalism works.

00:56:05.000 | Hire someone that brings value X, compensate them a rate of X minus Y,

00:56:08.000 | and the difference Y is profit.

00:56:10.000 | Walmart is very profitable,

00:56:12.000 | so they're obviously hiring people for much less than the value they produce.

00:56:15.000 | That's how you make a profit.

00:56:16.000 | That's your comment.

00:56:17.000 | That's exactly right.

00:56:19.000 | So the point is that if somebody brought a higher value,

00:56:23.000 | then they could pay a higher wage.

00:56:26.000 | Now, I'll go on and read because I want to fairly represent your argument.

00:56:30.000 | How is Walmart able to do this?

00:56:32.000 | They are effective at preventing unionization.

00:56:35.000 | If people are organized and speak with one voice,

00:56:38.000 | they have a stronger bargaining position,

00:56:40.000 | and they naturally get better compensation.

00:56:42.000 | They take a larger share of the value they produce.

00:56:45.000 | This is why we have a middle class in the U.S.

00:56:47.000 | Unions did exactly this and produced a middle class with purchasing power.

00:56:50.000 | That purchasing power fueled further consumption and stronger economic growth.

00:56:53.000 | Now, I actually would like to study more of union history,

00:56:59.000 | and if I can make the time to carve out,

00:57:01.000 | I would love to study this.

00:57:02.000 | If you've studied this and you have some books that you would recommend on it, great.

00:57:05.000 | I personally struggle with what I was taught about unionization,

00:57:09.000 | so that's my caveat to say that I could be completely wrong on this,

00:57:14.000 | but I'm not quite sure.

00:57:17.000 | So, A, I disagree with your point that says that the middle class--

00:57:22.000 | so this is why we have a middle class in the U.S.

00:57:25.000 | because unions did this and produced a middle class with purchasing power.

00:57:28.000 | That does not jive with my understanding of the economic history of this country.

00:57:32.000 | I would say that the time at which the middle class was destroyed

00:57:35.000 | was at the time of mass unionization in industrial America.

00:57:38.000 | Prior to that point in time, everybody was farmers.

00:57:41.000 | The vision of the founders of this company was to have a society that was built up of independent people.

00:57:48.000 | I'll give you two pieces of proof for this.

00:57:51.000 | Go back and study what the early founding fathers did

00:57:54.000 | and who they came from as a class,

00:57:57.000 | and go and look at what Abraham Lincoln said about Google mudsill theory.

00:58:03.000 | Let me pause and let me find his quote. Just a moment.

00:58:06.000 | Okay, I'm going to read--at the risk of losing listeners to my reading--

00:58:11.000 | what's going to be challenging to listen to,

00:58:14.000 | just due to the fact that we have a difficult time with language that--

00:58:18.000 | with intricate language because we're so--we struggle with English language.

00:58:22.000 | I'm going to read the last third of a speech of Abraham Lincoln,

00:58:25.000 | and this speech was delivered September 30, 1859,

00:58:29.000 | an address by Abraham Lincoln before the Wisconsin State Agricultural Society in Milwaukee, Wisconsin.

00:58:34.000 | I'm going to use this as proof of my point.

00:58:37.000 | I'm going to read through this.

00:58:40.000 | Try to stay listened. I'm going to read it somewhat slowly because the language is complex.

00:58:44.000 | By the way, if you think that we're getting smarter and smarter as a society,

00:58:47.000 | consider that this was common--compare this speech and what he was actually saying

00:58:52.000 | with the speech of any presidential address that you've heard from any recent politician.

00:58:56.000 | I'm only going to read the last about third of it.

00:58:59.000 | It's about seven paragraphs--no, about nine, excuse me.

00:59:03.000 | "The world has agreed that labor is the source from which human wants are mainly supplied.

00:59:09.000 | There is no dispute upon this point.

00:59:12.000 | From this point, however, men immediately diverge.

00:59:15.000 | Much disputation is maintained as to the best way of applying and controlling the labor element.

00:59:21.000 | By some, it is assumed that labor is available only in connection with capital,

00:59:26.000 | that nobody labors unless somebody else owning capital somehow, by the use of it, induces him to do it.

00:59:33.000 | Having assumed this, they proceed to consider whether it is best that capital shall hire laborers

00:59:39.000 | and thus induce them to work by their own consent or by them--slavery--

00:59:44.000 | and drive them to it without their consent.

00:59:47.000 | Having proceeded so far, they naturally conclude that all laborers are necessarily either hired laborers or slaves.

00:59:54.000 | They further assume that whoever is once a hired laborer is fatally fixed in that condition for life

01:00:01.000 | and thence again that his condition is as bad as or worse than that of a slave.

01:00:08.000 | This is the mudsill theory.

01:00:11.000 | But another class of reasoners hold the opinion that there is no such relation between capital and labor, as assumed,

01:00:18.000 | and that there is no such thing as a free man being fatally fixed for life on the condition of a hired laborer,

01:00:25.000 | that both these assumptions are false and all inferences from them groundless.

01:00:31.000 | They hold that labor is prior to and independent of capital,

01:00:36.000 | and that, in fact, capital is the fruit of labor and could never have existed if labor had not first existed,

01:00:45.000 | that labor can exist without capital, but that capital could never have existed without labor.

01:00:51.000 | Hence they hold that labor is the superior, greatly the superior, of capital.

01:00:57.000 | They do not deny that there is and probably always will be a relation between labor and capital.

01:01:03.000 | The error, as they hold, is in assuming that the whole labor of the world exists within that relation.

01:01:09.000 | A few men own capital, and that few avoid labor themselves,

01:01:14.000 | and with their capital hire or buy another few to labor for them.

01:01:19.000 | A large majority belong to neither class, neither work for others nor have others working for them.

01:01:26.000 | Even in all our slave states, except South Carolina, a majority of the whole people of all colors are neither slaves nor masters.

01:01:37.000 | In these free states, a large majority are neither hirers or hired.

01:01:43.000 | Men with their families, wives, sons, and daughters work for themselves on their farms, in their houses, and in their shops,

01:01:52.000 | taking the whole product to themselves and asking no favors of capital on the one hand, nor of hirelings or slaves on the other.

01:02:01.000 | It is not forgotten that a considerable number of persons mingle their own labor with capital,

01:02:06.000 | that is, labor with their own hands and also buy slaves or hire free men to labor for them.

01:02:12.000 | But this is only a mixed and not a distinct class.

01:02:16.000 | No principle stated is disturbed by the existence of this mixed class.

01:02:21.000 | Again, as has already been said, the opponents of the "mud-sill theory" insist that there is not, of necessity,

01:02:27.000 | any such thing as the free hired laborer being fixed to that condition for life.

01:02:33.000 | There is demonstration for saying this.

01:02:35.000 | Many independent men in this assembly, doubtless a few years ago, were hired laborers,

01:02:41.000 | and their case is almost, if not quite, the general rule.

01:02:46.000 | The prudent, penniless beginner in the world labors for wages a while.

01:02:50.000 | Saves a surplus with which to buy tools or land for himself.

01:02:55.000 | Then labors on his own account another while, and at length hires another new beginner to help him.

01:03:02.000 | I'm going to read that sentence again because to me that's the crux of my point.

01:03:07.000 | This is the American dream.

01:03:09.000 | The prudent, penniless beginner in the world labors for wages a while.

01:03:14.000 | Saves a surplus with which to buy tools or land for himself.

01:03:19.000 | Then labors on his own account another while, and at length hires another new beginner to help him.

01:03:26.000 | This, say its advocates, is free labor.

01:03:29.000 | The just and generous and prosperous system which opens the way for all,

01:03:34.000 | gives hope to all, and energy and progress and improvement of condition to all.

01:03:40.000 | If any continue through life in the condition of the hired laborer, it is not the fault of the system,

01:03:45.000 | but because of either a dependent nature which prefers it, or improvidence, folly, or singular misfortune.

01:03:53.000 | I have said this much about the elements of labor generally,

01:03:56.000 | as introductory to the consideration of a new phase which that element is in process of assuming.

01:04:03.000 | The old general rule was that educated people did not perform manual labor.

01:04:08.000 | They managed to eat their bread, leaving the toil of producing it to the uneducated.

01:04:13.000 | This was not an insupportable evil to the working bees, so long as the class of drones remained very small.

01:04:19.000 | But now, especially in these free states, nearly all are educated,

01:04:24.000 | quite too nearly all, to leave the labor of the uneducated, in any wise adequate to the support of the whole.

01:04:31.000 | It follows from this that henceforth educated people must labor.

01:04:36.000 | Otherwise, education itself would become a positive and intolerable evil.

01:04:41.000 | No country can sustain in idleness more than a small percentage of its numbers.

01:04:46.000 | The great majority must labor at something productive.

01:04:50.000 | From these premises the problem springs.

01:04:52.000 | How can labor and education be the most satisfactorily combined?

01:04:57.000 | By the mud-silt theory, it is assumed that labor and education are incompatible,

01:05:03.000 | and any practical combination of them impossible.

01:05:06.000 | According to that theory, a blind horse upon a treadmill is a perfect illustration of what a laborer should be.

01:05:12.000 | All the better for being blind, that he could not kick understandingly.

01:05:16.000 | According to that theory, the education of laborers is not only useless, but pernicious and dangerous.

01:05:22.000 | In fact, it is, in some sort, deemed a misfortune that laborers should have heads at all.

01:05:29.000 | Those same heads are regarded as explosive materials, only to be safely kept in damp places,

01:05:35.000 | as far as possible from that peculiar sort of fire which ignites them.

01:05:39.000 | A Yankee who could invent strong-handed man without a head would receive the everlasting gratitude of the mud-silt advocates.

01:05:47.000 | But free labor says no.

01:05:49.000 | Free labor argues that, as the author of man makes every individual with one head and one pair of hands,

01:05:56.000 | it was probably intended that heads and hands should cooperate as friends,

01:06:01.000 | and that that particular head should direct and control that particular pair of hands.

01:06:07.000 | As each man has one mouth to be fed and one pair of hands to furnish food,

01:06:11.000 | it was probably intended that that particular pair of hands should feed that particular mouth,

01:06:17.000 | that each head is the natural guardian, director, and protector of the hands and mouth inseparably connected with it,

01:06:24.000 | and that, being so, every head should be cultivated and improved by whatever will add to its capacity for performing its charge.

01:06:33.000 | In one word, free labor insists on universal education.

01:06:38.000 | I have so far stated the opposite theories of mud-silt and free labor without declaring any preference of my own between them.

01:06:46.000 | On an occasion like this, I ought not to declare any.

01:06:49.000 | I suppose, however, I shall not be mistaken in assuming as a fact that the people of Wisconsin prefer free labor with its natural companion, education.

01:06:59.000 | This leads to the further reflection that no other human occupation opens so wide a field

01:07:05.000 | for the profitable and agreeable combination of labor with cultivated thought as agriculture.

01:07:12.000 | I know nothing so pleasant to the mind as the discovery of anything which is at once new and valuable,

01:07:18.000 | nothing that so lightens and sweetens toil as the hopeful pursuit of such discovery.

01:07:25.000 | And how vast and how varied a field is agriculture for such discovery!

01:07:30.000 | The mind, already trained to the thought, in the country school or higher school,

01:07:35.000 | cannot fail to find there an exhaustless source of enjoyment.

01:07:40.000 | Every blade of grass is a study, and to produce two where there was but one is both a profit and a pleasure.

01:07:47.000 | And not grass alone, but soils, seeds, and seasons, hedges, ditches, and fences,

01:07:52.000 | draining, droughts, and irrigation, plowing, hoeing, and harrowing, reaping, mowing, and threshing,

01:07:58.000 | saving crops, pests of crops, diseases of crops, and what will prevent or cure them,

01:08:04.000 | implements, utensils and machines, their relative merits, and to improve them,

01:08:09.000 | hogs, horses, and cattle, sheep, goats, and poultry, trees, shrubs, fruits, plants, and flowers,

01:08:15.000 | the thousand things of which these are specimens, each a world of study within itself.

01:08:22.000 | In all this, book learning is available.

01:08:25.000 | A capacity and taste for reading gives access to whatever has already been discovered by others.

01:08:30.000 | It is the key, or one of the keys, to the already solved problems.

01:08:36.000 | And not only so, it gives a relish and facility for successfully pursuing the unsolved ones.

01:08:44.000 | The rudiments of science are available and highly valuable.

01:08:48.000 | Some knowledge of botany insists in dealing with the vegetable world with all growing crops.

01:08:53.000 | Chemistry assists in the analysis of soils, selection, and application of manures, and in numerous other ways.

01:09:00.000 | The mechanical branches of natural philosophy already help in almost everything,

01:09:04.000 | but especially in reference to implements and machinery.

01:09:08.000 | The thought recurs that education, cultivated thought, can best be combined with agricultural labor,

01:09:15.000 | or any labor, on the principle of thorough work.

01:09:18.000 | That careless, half-performed, slovenly work makes no place for such combination.

01:09:24.000 | And thorough work, again, renders sufficient the smallest quantity of ground to each man.

01:09:31.000 | And this again conforms to what must occur in a world less inclined to wars,

01:09:36.000 | and more devoted to the arts of peace than heretofore.

01:09:39.000 | Population must increase rapidly, more rapidly than in former times,

01:09:44.000 | and ere long the most valuable of all arts will be the art of deriving a comfortable subsistence from the smallest area of soil.

01:09:52.000 | No community whose every member possesses this art can ever be the victim of oppression of any of its forms.

01:09:59.000 | Such community will be alike independent of crowned kings, money kings, and land kings.

01:10:06.000 | But, according to your program, the awarding of premiums awaits the closing of this address.

01:10:11.000 | Consider the deep interest necessarily pertaining to that performance.

01:10:15.000 | It would be no wonder if I am already heard with some impatience.

01:10:19.000 | I will detain you, but a moment longer.

01:10:22.000 | Some of you will be successful, and such will need but little philosophy to take them home in cheerful spirits.

01:10:29.000 | Others will be disappointed, and will be in a less happy mood.

01:10:34.000 | To such, let it be said, lay it not too much to heart.

01:10:39.000 | Let them adopt the maxim, "Better luck next time," and then, by renewed exertion, make that better luck for themselves.

01:10:48.000 | And by the successful and unsuccessful, let it be remembered that, while all occasions like the present bring their sober and durable benefits,

01:10:56.000 | the exultations and mortifications of them are but temporary,

01:11:00.000 | that the victor shall soon be the vanquished if he relax in his exertion,

01:11:04.000 | and that the vanquished this year may be victor the next, in spite of all competition.

01:11:13.000 | It is said an Eastern monarch once charged his wise men to invent him a sentence, to be ever in view,

01:11:21.000 | and which should be true and appropriate in all times and situations.

01:11:26.000 | They presented him the words, "And this too shall pass away."

01:11:30.000 | How much it expresses! How chastening in the hour of pride!

01:11:34.000 | How consoling in the depths of affliction! "And this too shall pass away."

01:11:39.000 | And yet, let us hope, it is not quite true.

01:11:43.000 | Let us hope, rather, that by the best cultivation of the physical world beneath and around us,

01:11:48.000 | and the intellectual and moral world within us,

01:11:51.000 | we shall secure an individual, social, and political prosperity and happiness,

01:11:57.000 | whose course shall be onward and upward, and which, while the earth endures, shall not pass away.

01:12:06.000 | [laughs]

01:12:09.000 | That was only the second half of the speech, and hopefully I did that justice.

01:12:14.000 | It's a little bit humbling to try to read the words of Abraham Lincoln in a way that would be appropriate,

01:12:22.000 | and yet inspire a little bit of thought.

01:12:25.000 | And it makes me feel rather ineloquent when I come to try to figure out how to talk when I read.

01:12:34.000 | Speech is as eloquent as that.

01:12:38.000 | But the point that I was drawing from it, and the major point,

01:12:43.000 | is that this is what the United States...

01:12:48.000 | This is why the United States was so powerful in the past.

01:12:52.000 | It was built upon production, and upon the fact that the American dream was not to go get a job

01:12:57.000 | and buy a house with a white picket fence.

01:12:59.000 | The American dream was that sentence I emphasized.

01:13:04.000 | I'll find it again here.

01:13:06.000 | "The prudent, penniless beginner in the world labors for wages a while,

01:13:10.000 | saves a surplus with which to buy tools or land for himself,

01:13:15.000 | then labors on his own account another while,

01:13:18.000 | and at length hires another new beginner to help him."

01:13:22.000 | That was the American dream.

01:13:24.000 | That was why people were prosperous.

01:13:27.000 | Now, I think there were legitimate problems that were solved.

01:13:30.000 | I think there were legitimate abuses by the "robber barons," so-called.

01:13:36.000 | It's on my reading list.

01:13:38.000 | I'm reading a...I don't know if I'm going to be able to get through it.

01:13:41.000 | I need more time to read.

01:13:43.000 | But right now I have a biography of John D. Rockefeller that I'm looking through,

01:13:47.000 | and it's a thick one and a good one.

01:13:49.000 | But the point is that there's a lot that I don't understand about that period of history.

01:13:53.000 | And maybe unions in that day and age did solve a lot of problems for people.

01:14:00.000 | But it was the shift from that egalitarian agricultural society

01:14:06.000 | to the industrialized society that allowed people to be exploited.

01:14:09.000 | Now, were people exploited? Absolutely.

01:14:11.000 | But just going based upon your comments,

01:14:13.000 | unions did not produce a middle class with purchasing power.

01:14:17.000 | They may have helped--maybe they helped people to recover something of that,

01:14:22.000 | but they didn't produce it.

01:14:24.000 | You can't get rich by demanding.

01:14:28.000 | If I were running a company and I had people try to unionize--

01:14:33.000 | I mean, I'm from Florida.

01:14:35.000 | I don't understand.

01:14:38.000 | Some of you guys are from the states and the countries where unions are a big thing.

01:14:42.000 | I can't imagine myself not firing anybody who tried to unionize

01:14:46.000 | just because you're trying to take control away from my business.

01:14:49.000 | But I don't understand how some of these publicly traded companies,

01:14:52.000 | what they have to deal with and the labor issues and all of that.

01:14:55.000 | It doesn't make any sense to me.

01:14:57.000 | So I don't want to pollute the words of Abraham Lincoln

01:15:00.000 | except just simply to point out that that was the American dream,

01:15:06.000 | was that through education, you worked for somebody else for a while

01:15:13.000 | to save a stake, to build a stake that you could then use to buy tools and land.

01:15:18.000 | Now today I think that's exactly as applicable as it was back then,

01:15:21.000 | except tools and land are different.

01:15:24.000 | There is--back to my interview with Curtis Stone--

01:15:28.000 | there's an opportunity for people to make an amazing living in agriculture today.

01:15:32.000 | There are people all over the world doing it.

01:15:34.000 | But yet maybe that's not what you mean by tools and land.

01:15:36.000 | Maybe there's something else.

01:15:38.000 | But that's what I'm trying to promote.

01:15:47.000 | A couple of other things on your comments here.

01:15:49.000 | The other thing Walmart does to reduce compensation is destroy local industry.

01:15:54.000 | You say that nobody--that comment--Walmart has not destroyed local industry.

01:15:59.000 | Walmart has competed with local industry.

01:16:02.000 | Sam Walton was local industry.

01:16:07.000 | He ran five and dime stores.

01:16:09.000 | Go back and read the history.

01:16:11.000 | And he had the idea that, hey, if I could lower my prices

01:16:14.000 | and sell more money and sell more prices at a lower profit margin,

01:16:18.000 | I would make more absolute profit.

01:16:20.000 | That's what his idea was.

01:16:22.000 | He had no cost advantages.

01:16:24.000 | He had only a little bit of money, and he had no special relationships with anybody.

01:16:27.000 | He was the little dog.

01:16:28.000 | Kmart and Sears were much bigger than his was.

01:16:31.000 | He had an idea.

01:16:32.000 | He had a business model.

01:16:34.000 | And he went out and he focused on serving underserved and non-served rural towns

01:16:39.000 | that the Kmart and the Sears didn't want to do.

01:16:42.000 | So he went and competed.

01:16:44.000 | Competition is how all of us survive.

01:16:47.000 | Walmart didn't destroy local industry.

01:16:50.000 | It brought a new model and competed, and the local industry failed.

01:16:54.000 | And that was unquestionably--it was difficult for the local merchants.

01:16:59.000 | But on the whole, it clearly shows the value is there.

01:17:03.000 | It is a lot easier today to get in a rural area

01:17:06.000 | to get more goods for cheaper than it ever was in the past.

01:17:11.000 | Not a huge fan of Walmart.

01:17:12.000 | Again, like I said in another show, I don't enjoy shopping there.

01:17:14.000 | I think they've done some stuff I'm not happy with.

01:17:16.000 | That's what happens, but I think those allegations are unfair.

01:17:19.000 | You say no one chooses to work at Walmart.

01:17:21.000 | You're free to leave.

01:17:23.000 | But because the local hardware store and local grocer is out of business,

01:17:25.000 | some people find themselves with fewer options.

01:17:28.000 | If you are free to choose, but one alternative brings a lot of suffering,

01:17:31.000 | is staying really a free choice?

01:17:32.000 | Yes.

01:17:34.000 | That was the whole point of the Matt Walsh essay.

01:17:36.000 | Yes.

01:17:37.000 | Guess what?

01:17:38.000 | You can still go.

01:17:39.000 | You say Walmart management exploits this reality

01:17:41.000 | to squeeze further concessions from employees,

01:17:43.000 | driving profits further higher?

01:17:45.000 | Prove it to me.

01:17:47.000 | Give me some proof.

01:17:49.000 | I guarantee you that somebody could start off at minimum wage with Walmart

01:17:52.000 | and make $100,000 as a store manager in less than 5 years

01:17:56.000 | if they applied themselves using the plan that I sketched out.

01:17:59.000 | There's not a doubt in my mind that it could be done.

01:18:02.000 | All right, there's a doubt in my mind that it could be done in 5 years.

01:18:05.000 | 10 years, go from minimum wage to $100,000.

01:18:10.000 | Show me the exploitation.

01:18:16.000 | I'm going to skip the stockholder stuff.

01:18:18.000 | I think it's just one point, and I want to go on

01:18:21.000 | because I want to address the other show.

01:18:23.000 | By the way, John, I know I'm using this as an example.

01:18:26.000 | It's probably going to feel like a personal attack on you.

01:18:28.000 | I appreciate the comment.

01:18:29.000 | I think that we need to be able to debate this stuff,

01:18:32.000 | and you can judge whether or not I make any sense or not,

01:18:35.000 | and it's fine either way.

01:18:36.000 | If I don't make any sense, I've got to learn,

01:18:38.000 | and I'll learn just by people saying, "That doesn't make any sense."

01:18:41.000 | But if I do, then we need to be able to debate this stuff in our society.

01:18:44.000 | We've lost the ability to intelligently debate without getting upset at each other.

01:18:49.000 | I just want to make one point.

01:18:51.000 | Stockholders don't typically care about the long-term success of a company.

01:18:57.000 | The Walton Foundation is controlled by Walton's kids.

01:19:01.000 | They own almost 50% of the stock.

01:19:05.000 | That means that more than anything else, the Walton Family Enterprise--

01:19:09.000 | it's not the Walton Foundation.

01:19:11.000 | What was it called? Their business name, I can't remember.

01:19:14.000 | I think it was the--it was like the Walton Enterprises Holding Company,

01:19:19.000 | I think is what it's called, the Walton Enterprises LLC.

01:19:22.000 | Yeah, Walton Enterprises LLC.

01:19:24.000 | They own a lot, almost 50% of the firm.

01:19:32.000 | In the past few years, Walmart has been buying back stocks,

01:19:35.000 | substantial amounts of stock.

01:19:37.000 | So their industry, their stake has grown

01:19:44.000 | as the stock buybacks have occurred over the last few years.

01:19:47.000 | Are you telling me that the Walton kids who control the majority of--

01:19:51.000 | almost the majority of Walmart shares don't care about the long-term success

01:19:55.000 | of a company?

01:19:57.000 | That they're just interested in extracting the value quickly and moving on

01:20:00.000 | that can generate high returns on investment?

01:20:02.000 | Now, undoubtedly, there are many people trading the stock

01:20:05.000 | that are just simply saying, "Hey, I'm going to profit on the move."

01:20:08.000 | You've got everything in the market.

01:20:11.000 | You've got everything from flash traders owning the stock for a few microseconds.

01:20:15.000 | You've got day traders. You've got swing traders.

01:20:17.000 | You've got fade traders. You've got long-term investors.

01:20:20.000 | And you've got the Walton enterprises.

01:20:23.000 | But I agree that--and this is where these conversations are nuanced.

01:20:28.000 | I agree with you that it seems to me, like many times,

01:20:31.000 | Fortune 500 CEOs and Fortune 500 boards of directors

01:20:35.000 | are often short-sighted because of the short-term focus.

01:20:40.000 | But I don't for an instant believe that that's the case

01:20:42.000 | when you have the Walton family controlling almost 50%.

01:20:47.000 | So hopefully that was a good feedback.

01:20:51.000 | I spent a long time--I didn't plan to read Lincoln's speech,

01:20:54.000 | but it's linked in the show notes. It's worth reading the whole thing.

01:20:57.000 | I find it inspiring to read some of the stuff from back then

01:21:00.000 | and just to see how different it was from today.

01:21:02.000 | If you ever want to have a question about--

01:21:05.000 | Remember, Lincoln was making a speech at an agricultural fair in Wisconsin.

01:21:13.000 | An agricultural fair. It was the farmers.

01:21:16.000 | Can you imagine today--that was the average person at that time.

01:21:20.000 | Can you imagine today the average person sitting down and saying--

01:21:27.000 | sitting down and listening to a speech that's that involved?

01:21:32.000 | I guarantee I lost probably 20% of you guys.

01:21:34.000 | You're like, "I can't take this audio."

01:21:36.000 | If you've made it to this point, you made it through that speech.

01:21:39.000 | But that was the average at that point in time.

01:21:42.000 | I want to address one other comment that somebody made on that show.

01:21:47.000 | The name here is Mindful Riot.

01:21:50.000 | And this person's comment was, "Hey, could you just not say things like,

01:21:54.000 | 'Let's leave Civil War history behind and dress for success.'

01:21:57.000 | I want to be able to recommend your podcast to people

01:21:59.000 | because I think you have a lot of good things to say about personal finance.

01:22:02.000 | But I'm not sure I can do that when you casually drop racist ideas like that one.

01:22:06.000 | You do realize you are incredibly privileged as a white man, right?

01:22:10.000 | I actually agreed with much of that episode,

01:22:12.000 | but that one comment has me thinking about unsubscribing.

01:22:15.000 | Blacks don't have a hard time today because they are choosing to hold on to the Civil War."

01:22:20.000 | That was the comment.

01:22:21.000 | I went back and I didn't remember making the comment about leaving the Civil War behind.

01:22:27.000 | And I asked this commenter, I said, "Did I say anything about race?"

01:22:31.000 | And I knew what I had said.

01:22:35.000 | And I went back and listened to it.

01:22:36.000 | And I found out I did say, "Let's leave Civil War history behind."

01:22:39.000 | And in the context, I was saying something as simple as smiling

01:22:43.000 | or something as simple as pulling your pants up

01:22:45.000 | can make all the difference in the world.

01:22:47.000 | And in the context, it was a little bit surprising to me

01:22:52.000 | because I was trying to make a point as like,

01:22:55.000 | "Stop this whole stupid race crap.

01:22:57.000 | You've got to get beyond this argument."

01:23:01.000 | I went back, I don't know what I was thinking with this,

01:23:03.000 | "Let's leave Civil War history behind."

01:23:04.000 | It didn't come out right.

01:23:06.000 | So I actually edited the audio file and removed that.

01:23:08.000 | And I just said, "Let's dress for success," because that was my point.

01:23:11.000 | And it was a good reminder to me that--

01:23:15.000 | it was a good reminder to me that just sometimes what's in my head doesn't come out clearly.

01:23:21.000 | My entire point was an anti-racist point.

01:23:26.000 | The whole point that I was trying to make was get over the racist stuff

01:23:29.000 | and get over race stuff and think past that.

01:23:34.000 | And it came out in a way that evidently ticked off this person.

01:23:38.000 | And I get that. That's fine.

01:23:39.000 | And I went back and again, it was a poorly worded comment.

01:23:43.000 | So I actually--again, I edited the file and I pulled out,

01:23:45.000 | "Let's leave Civil War history behind,"

01:23:47.000 | because it didn't make any sense in context.

01:23:49.000 | And I just said, "Let's dress for success."

01:23:51.000 | But I do want to talk about that.

01:23:53.000 | Because--so I did that because I don't want to unnecessarily offend people.

01:23:57.000 | But the point I was making is that people judge you by the way you look.

01:24:02.000 | It doesn't matter whether they should or shouldn't.

01:24:05.000 | They do.

01:24:07.000 | People judge you by the way you look.

01:24:09.000 | And I'm going to come back and I'm going to address this.

01:24:11.000 | You realize you're incredibly privileged as a white man, right?

01:24:13.000 | That comment really annoys me.

01:24:15.000 | But I get why this person says it.

01:24:17.000 | I'm going to address that in a minute.

01:24:18.000 | But that wasn't my major point.

01:24:19.000 | The major point was that people judge you based upon the way you look.

01:24:24.000 | It's 100% irrelevant whether you think they should or whether you think they shouldn't.

01:24:29.000 | They do.

01:24:30.000 | And the whole point I was making with "Dress for Success"

01:24:33.000 | was go back and research how people judge you based upon the way you look.

01:24:37.000 | There's a story in "Dress for Success."

01:24:38.000 | If you've never read it, it's worth reading.

01:24:40.000 | You can't implement many of the recommendations from the book in today's world.

01:24:45.000 | Maybe somebody's modernized it. I don't know.

01:24:47.000 | But you can't implement the recommendations because we're in a different culture now.

01:24:51.000 | But the author of that book, whoever the author was,

01:24:54.000 | went out and did surveys--did studies on the streets

01:24:57.000 | to see how different people responded to the way that people dressed.

01:25:01.000 | And the one that I always remember--I think it was the first chapter--

01:25:03.000 | he talked about the color of someone's raincoat.

01:25:05.000 | So the author--I think it was a guy--he set up this story--excuse me, this scenario.

01:25:12.000 | And it was a busy street going into a busy office building where you had to open the door.

01:25:17.000 | And he wanted to see whether the color of the raincoat that you chose mattered.

01:25:22.000 | And so he tested--and his whole point was he said that people perceive you

01:25:26.000 | based upon the way that you look.

01:25:28.000 | And there is a look of power that you can cultivate

01:25:32.000 | that will enhance the way that you look, and that will help you to be successful.

01:25:36.000 | And so he identifies in very granular detail in that book

01:25:40.000 | how to dress to cultivate that look of power,

01:25:43.000 | to cultivate that upper-middle-class look,

01:25:46.000 | without looking high upper-class and without looking lower-middle-class,

01:25:50.000 | the upper-middle-class look.

01:25:51.000 | So he had set up this experiment with raincoats.

01:25:55.000 | And he had an actor walk along the street,

01:25:58.000 | and this person would arrange to arrive at the door of this office building

01:26:03.000 | at exactly the same time as someone else,

01:26:05.000 | where they each reached for the handle at the same time.

01:26:08.000 | And then what he tracked--he stood up back and observed and tabulated the results--

01:26:13.000 | he tracked the number of times that the person would step back and defer to his actor

01:26:19.000 | and say, "Oh, sorry, excuse me," and let his actor through first and defer to them,

01:26:24.000 | or how many number of times the person would look at the actor and give him a dirty look

01:26:29.000 | and say, "Yeah, I'll go through first."

01:26:31.000 | Now, is that imperfect? I think it is.

01:26:33.000 | I'm more inclined to let people go, and I don't care whether they're lower-class

01:26:36.000 | or middle-class or upper-middle-class or anything,

01:26:38.000 | but that was the test, as I remember it off the top of my head.

01:26:41.000 | I learned the book 10 or 15 years ago, so forgive me if I'm wrong, but I'm pretty close.

01:26:45.000 | And then he had the actor do it maybe 100 times wearing a tan raincoat,

01:26:49.000 | and he had the actor do it--I don't remember--100 times wearing a black raincoat.

01:26:54.000 | And what he discovered was that there was a dramatic statistical difference

01:26:59.000 | between the tan raincoat and the black raincoat.

01:27:02.000 | And the person with the tan raincoat was allowed through a dramatically higher percentage

01:27:09.000 | of the time allowed to go through first, and people deferred to them

01:27:15.000 | based upon the fact that they were wearing a tan raincoat instead of a black raincoat.

01:27:20.000 | And the inference from that, the conclusion that he drew,

01:27:23.000 | was that you should wear a tan raincoat,

01:27:25.000 | because people assume a tan raincoat is a mark of wealthier people, upper-middle-class,

01:27:31.000 | and a black raincoat is a mark of the lower class, the working classes.

01:27:36.000 | And the whole book is filled with these little interesting examples.

01:27:39.000 | I had people go in for a job interview doing certain things.

01:27:42.000 | And the point was, if you don't know that something small that you do

01:27:46.000 | is going to affect the results that you get, that's cruel. You need to know.

01:27:54.000 | And the way that we dress is a big deal.

01:27:58.000 | People dress the way they do because they're trying to give off an image.

01:28:01.000 | So my point was that a rap star dresses the way that a rap star wants to dress

01:28:05.000 | because they're trying to portray an image of what they're into.

01:28:09.000 | People who wear camouflage baseball caps and camo t-shirts, or hunting t-shirts,

01:28:15.000 | are doing that because they're trying to portray the image that they want to portray.

01:28:20.000 | Rock stars have long hair and wear weird leather pants

01:28:23.000 | because they're trying to portray a rock star image.

01:28:26.000 | Lounge singers wear tuxedos. It's all costuming. And it works.

01:28:31.000 | People are usually perceived based upon the way that they dress.

01:28:34.000 | Now, when you're coming to something like job success,

01:28:37.000 | unless you're a rap star, unless you're working in the rap industry, that's a problem.

01:28:41.000 | Now, if you're working in the rap industry, I would wear baggy pants and whatever,

01:28:46.000 | big gold chains. I don't know. I'm not a rapper.

01:28:49.000 | I have a family member who's a rapper. He's white. He dresses like a thug.

01:28:54.000 | Now, I've learned over the years not to judge people so much by how they dress

01:29:00.000 | because he's a great guy. But he dresses like a thug.

01:29:03.000 | And he puts off this image because he's trying to cultivate the image of being a rapper,

01:29:10.000 | a hip-hop rapper, whatever it's called.

01:29:12.000 | And so, if you're not aware of that and if you're not doing it intentionally,

01:29:17.000 | you've got to think about who to give up.

01:29:19.000 | But if you're looking for success, especially with something with financial success,

01:29:24.000 | how big of a deal is that?

01:29:25.000 | My point was, look at who the leaders in the industry are.

01:29:29.000 | And that was the point I was trying to make with Russell Simmons.

01:29:31.000 | As I said, look at how Russell Simmons dresses.

01:29:36.000 | Or look at how--who's the other guy I looked up?

01:29:40.000 | Sean John. Look at how they dress. Look at how these people dress.

01:29:43.000 | They're not dressing in thug clothing. They're wearing a suit.

01:29:49.000 | They're taking themselves seriously.

01:29:52.000 | There's good academic statistical research that's done that based upon the way that you dress

01:29:57.000 | affects how you feel.

01:29:59.000 | So the way that you feel for work is affected--about your work is affected by how you dress.

01:30:05.000 | So it's a big deal to recognize those things.

01:30:13.000 | Now, I don't have a racist bone in my body.

01:30:17.000 | I don't care about the color that someone is.

01:30:20.000 | I do get uncomfortable with the way that certain people dress.

01:30:23.000 | There are certain people that I wouldn't be inclined to seek out based upon the way they're dressed.

01:30:27.000 | I've learned over the years to push past that, because some of the most interesting people that I've met

01:30:32.000 | and spoken with are some of the most unique.

01:30:35.000 | Whether it's the color of their hair, or the pink hair, or the number of tattoos, or the number of piercings,

01:30:40.000 | I enjoy talking to unique people.

01:30:44.000 | And I enjoy--fit me personally.

01:30:47.000 | I try to fit in no matter where I am.

01:30:50.000 | I can comfortably go into a black tie ball, and I can comfortably talk hunting around the back of a pickup truck.

01:30:56.000 | And there are some places that I fit in better than others.

01:30:59.000 | So I try to speak past that.

01:31:03.000 | But the thing is, the color of someone's skin doesn't matter.

01:31:07.000 | It's all about the way that they dress.

01:31:09.000 | And that does matter.

01:31:11.000 | There are people who dress in a way that makes other people uncomfortable.

01:31:20.000 | And that goes with every single color of skin.

01:31:27.000 | I am very interested in race stuff.

01:31:32.000 | What's the term for that in academics?

01:31:35.000 | Sociology? I don't know what it's called.

01:31:37.000 | But I'm interested in that.

01:31:39.000 | So two stories.

01:31:41.000 | I don't have a racist bone on my body, but I'm interested in how that interacts.

01:31:45.000 | I went to Egypt some years ago.

01:31:48.000 | And while I was in Egypt--I'm a big guy--and while I was in Egypt, I grew a beard.

01:31:52.000 | I grew a pretty decently thick beard.

01:31:54.000 | I grew a beard while I was there.

01:31:56.000 | And while I was there, I bought a--it's called a galabeya.

01:31:59.000 | That's the traditional Egyptian--I don't know--smock.

01:32:04.000 | Basically, it's like a knee-length robe type of thing that is traditional in the Muslim-Egyptian culture for men to wear.

01:32:14.000 | And I bought a turban.

01:32:16.000 | And I was interested to see what it would be like.

01:32:19.000 | And at this time, this was 2006, something like that, 2007?

01:32:24.000 | It would be 2007 or 2008 maybe, something like that.

01:32:27.000 | And I flew from Egypt to West Palm Beach via New York City.

01:32:32.000 | And I was interested to see what it would be like, how I would be treated if I--

01:32:36.000 | because at this time, racial profiling is all in the news.

01:32:39.000 | I wonder what it would be like to be perceived as a Muslim, as an Egyptian Muslim.

01:32:46.000 | So I had a thick beard.

01:32:48.000 | I wore the thick red beard. I'm a big guy.

01:32:50.000 | I wore the galabeya. I wore the turban.

01:32:53.000 | And I wore it the whole time from Cairo into New York City, got off the plane in New York City,

01:32:57.000 | and walked around the New York airport, got back on the plane, and flew to West Palm Beach.

01:33:04.000 | And I did the whole time wearing the turban and the galabeya.

01:33:07.000 | It was a fascinating experience.

01:33:09.000 | And undoubtedly, I was pretty uncomfortable getting on the airplane, especially in New York City.

01:33:14.000 | I was pretty uncomfortable getting on the airplane,

01:33:18.000 | walking from the front of the plane to the back of the plane without smiling,

01:33:22.000 | just trying to stay in character because I was just interested to see.

01:33:25.000 | It had a lot of eyes on me, and I felt very conspicuous.

01:33:28.000 | Now, how much of that was racial profiling by other people

01:33:31.000 | versus how much of that was just my own uncomfort of wearing a dress through the airport?

01:33:36.000 | I don't know.

01:33:37.000 | So I'm interested in that stuff.

01:33:39.000 | I went to--to cry out loud--I went to Haiti on my honeymoon

01:33:42.000 | because I was interested in seeing Haitian culture.

01:33:45.000 | I went to the Dominican Republic and stayed at a resort, and then we went and traveled around Haiti.

01:33:48.000 | So I don't care what color someone is, but I do care what you do.

01:33:52.000 | And regardless of what the color is, what good does it do to complain about this?

01:33:57.000 | I had an experience.

01:34:00.000 | As I was deciding to--and this is why I feel qualified to talk about this stuff

01:34:08.000 | because I've been through it.

01:34:09.000 | I've experienced it.

01:34:10.000 | And I'm not an expert on everything.

01:34:13.000 | I'm not an expert on every aspect of life or of finance.

01:34:18.000 | Of course not.

01:34:19.000 | There's a lot of things I haven't experienced.

01:34:20.000 | I don't know what it's like to grow up in Manhattan.

01:34:22.000 | I don't know what it's like to grow up in Spanish Harlem.

01:34:24.000 | I don't know what it's like to grow up in the Bronx in New York.

01:34:26.000 | I don't know what it's like to grow up in Montana.

01:34:27.000 | I grew up in West Palm Beach, Florida.

01:34:29.000 | But my point is that--I guess what offends--it offends me to be accused of making a racist comment,

01:34:35.000 | and that's why I'm spending time on this.

01:34:38.000 | I don't think race has much to do with it in today's world.

01:34:41.000 | I think that there are a lot of ways that--there are a lot of places maybe where race still does have something to do with it,

01:34:47.000 | but I don't think it has much to do with it.

01:34:49.000 | When I was thinking about closing down my financial planning firm and coming to and starting this podcast,

01:34:58.000 | I was brainstorming businesses that I could do part-time that would allow me to financially make the transition.

01:35:05.000 | I had some savings, but I made mistakes and put too much money into my house before I planned to leave my financial planning firm.

01:35:12.000 | When I walked away from my financial planning firm, I walked away from a lot of money

01:35:15.000 | and a lot of passive income that was providing a pretty nice lifestyle for myself.

01:35:20.000 | And I had some savings, but I needed to start a new business.

01:35:24.000 | And I was trying to say, "Well, I think I'd like to make this podcast into a business,

01:35:28.000 | and I'd like to figure out a way to get compensated for doing this,

01:35:31.000 | because I feel I can really help people. I feel I can bring value to the marketplace,

01:35:34.000 | and if I can bring value to the marketplace, then ultimately in time, the compensation will follow."

01:35:38.000 | It's the iron law of compensation.

01:35:40.000 | So I said, "What can I do? What kind of birdbrain thing can I do where I just earn some money?"

01:35:47.000 | And so I was trying different things, and I decided, "You know what? I'm going to go and deliver pizzas."

01:35:53.000 | Because I'd heard you could make a lot of money delivering pizzas.

01:35:55.000 | I live in a fairly affluent area, and I said, "Hey, I could deliver pizzas four nights a week."

01:35:59.000 | I've always wanted to do it, because I always heard Dave Ramsey say, "Go deliver pizzas to pay off your debt."

01:36:03.000 | And I was curious. I would read blogs of how much people were making.

01:36:07.000 | I said, "This could be a win-win-win. I could earn enough money to pay my bills.

01:36:10.000 | It's kind of a dead-end job, and I don't want to do it long term.

01:36:15.000 | This would be a fun thing to do for six months, three months, something like that, and I would learn a lot.

01:36:20.000 | And it would give me a chance." I've never worked in a minimum-wage job. I never have.

01:36:25.000 | I was always fortunate to work in more skilled job positions.

01:36:33.000 | So I went, and I got a job delivering pizzas, and I was being paid minimum wage.

01:36:37.000 | And I learned so much. I'm so glad I did it. I learned so much in that job.

01:36:43.000 | And I was working with a lot of minimum-wage people. We were all minimum-wage people.

01:36:51.000 | But you know what? We were there from every race.

01:36:53.000 | There were white people, there were black people, there were Spanish people.

01:36:56.000 | And I learned in the week. I got to be pretty good friends with some of the people that were there.

01:37:03.000 | And I learned a ton about life.

01:37:11.000 | And the thing is, I found a lot of people that were working there.

01:37:14.000 | They're actually doing very well financially. I won't betray anybody's anonymity.

01:37:19.000 | But there was a girl that was working there. She was a teacher during the day,

01:37:23.000 | and she worked managing the pizza restaurant at night.

01:37:27.000 | And she'd started at the ground level, and she was making a ton of money in her race, and she was black.

01:37:30.000 | Her race had nothing to do with it.

01:37:32.000 | But she had a remarkably different attitude, and she took herself remarkably differently

01:37:38.000 | than another black pizza delivery driver who didn't have the same attitude.

01:37:44.000 | And there were some white people there that had a horrible attitude.

01:37:47.000 | And there was a Pakistani guy that was awesome. He was just a hustler. He worked hard.

01:37:53.000 | So I had my own opportunity to get in for a week and have this insight into that environment.

01:38:05.000 | And I was convinced that anybody, anybody in that situation that took just a little bit of care,

01:38:10.000 | there's not a doubt in my mind that anybody who focused and learned, everything was being taught to you.

01:38:16.000 | There was a curriculum about every single thing that you could learn,

01:38:19.000 | and you could be manager of that restaurant in a year.

01:38:23.000 | Now, tip to the wise, I made no money. And I did it for a week, and I was done.

01:38:28.000 | You can't make $30 an hour. I figured if I made $30 an hour, I figured, "Eh, it'd be worth it.

01:38:33.000 | It's kind of a bird brain thing. I can just go and do it."

01:38:35.000 | You can't make $30 an hour, $20 an hour. I averaged it out. I think I made like $11 an hour.

01:38:40.000 | So I did it for a week, and then I quit.

01:38:42.000 | And now I have a far more lucrative deal that pays my bills while I make this business transition.

01:38:49.000 | But that's the point. So let me wrap up here.

01:38:53.000 | The point is you can't change other people. You can only control ourselves.

01:38:56.000 | So I can't change all the issues with race.

01:38:58.000 | I don't really care about someone's race, but I do care about who they are.

01:39:02.000 | And who they are is important.

01:39:05.000 | Martin Luther King said he had a dream that people would be judged by the content of their character

01:39:10.000 | rather than the color of their skin.

01:39:13.000 | You can change the content of your character. You can't change the color of your skin.

01:39:17.000 | But even if there is dramatic racism, adjust the way you look.

01:39:23.000 | I've got a ton of friends who are all different backgrounds.

01:39:27.000 | But I don't hang out with people who look sloppy.

01:39:33.000 | Because there's something about the inner character that reflects in that way.

01:39:38.000 | So change things.

01:39:40.000 | If you're black and you're worried about this being a racist thing in Civil War history,

01:39:44.000 | copy Sean John or Russell Simmons.

01:39:47.000 | Dress like Shaquille O'Neal or Ben Carson or Walter Williams or Thomas Sowell.

01:39:53.000 | These are guys. Look at the way they dress. Respect yourself.

01:39:56.000 | And this is for if you're white, don't dress like a thug.

01:39:59.000 | Dress like someone who takes themselves seriously.

01:40:03.000 | And is it a costume? Absolutely.

01:40:05.000 | And that's why I like Dress for Success.

01:40:07.000 | He says if you want to wear--I think this book was written in the '70s--

01:40:09.000 | if you want to wear shiny--I have the impression in my mind--disco suits, that's what they call it.

01:40:14.000 | Shiny disco suits on the weekend, fine.

01:40:16.000 | Just don't wear it during work hours.

01:40:19.000 | Racism is a tool that's used for dividing people. It really is.

01:40:24.000 | All these allegations and inferences of racism is used as a tool.

01:40:28.000 | Even slavery was a political tool.

01:40:30.000 | Slavery was on its way out before the Civil War just due to the economic forces.

01:40:37.000 | Slavery had already been banned in other countries.

01:40:39.000 | Human slavery that existed in the U.S.

01:40:42.000 | Abraham Lincoln himself said he didn't care about slavery.

01:40:45.000 | He wanted to keep the Union together.

01:40:47.000 | Go look up the speech.

01:40:48.000 | It says if I could keep the Union together and not do anything about slavery, I would.

01:40:52.000 | If I can keep the Union together and free some people and keep others enslaved, I would.

01:40:56.000 | If I can keep the Union together and free everybody, then I would do that.

01:40:59.000 | He cared about keeping the Union together.

01:41:00.000 | And slavery was a political tool that was used to give him the support.

01:41:05.000 | Slavery was already on its way out before the Civil War just simply due to the economics.

01:41:10.000 | The northern people, the northern factory owners, had discovered it was far cheaper

01:41:16.000 | to get somebody to come and work for you for eight or ten or twelve hours a day,

01:41:19.000 | pay them a wage for their hours, and force them to take care of their own housing,

01:41:23.000 | their own food, their own shelter, all that stuff,

01:41:27.000 | than it was for a southern slave owner to support the whole family.

01:41:32.000 | Now, I'm not for an instant--don't you dare misunderstand me--

01:41:36.000 | I'm not for an instant condoning enslaving people.

01:41:39.000 | I think it's horrific.

01:41:40.000 | I think it's horrific and it's horrific.

01:41:43.000 | But guess what? We're all slaves now.

01:41:45.000 | We're all wage slaves.

01:41:48.000 | And as far as the quality of life, for a lot of us, it's a lot worse as a wage slave

01:41:53.000 | than it may have been for some people as a human slave.

01:41:56.000 | Freedom is only good if you take advantage of it and free yourself completely.

01:42:03.000 | Take all that stuff out of context if you wanted to, but it's very much in context.

01:42:11.000 | We all have problems and we all have privilege.

01:42:14.000 | White privilege--I hate that crap.

01:42:19.000 | I can't do anything to change the fact that I'm a white male.

01:42:23.000 | Is there privilege? I don't care if there is.

01:42:25.000 | Guess what? If you can type on a computer, that's privilege.

01:42:28.000 | That means you're educated. You were born in America or wherever you were.

01:42:33.000 | The fact that you're listening to this right now indicates that we're privileged.

01:42:35.000 | We all have problems and we all have privilege.

01:42:38.000 | And it's to none of our good if we deny the talents and the abilities

01:42:41.000 | and the privilege that we have.

01:42:45.000 | We have to do something with it.

01:42:49.000 | I always go back to the parable of the talent. If you read Scripture,

01:42:52.000 | "To him who has given much, much is required."

01:42:56.000 | So if you have privilege--and I've got a lot of it.

01:42:58.000 | I've had a pretty good life.

01:43:01.000 | I was raised in a family that loved me.

01:43:03.000 | My parents are together, have lots of wonderful siblings.

01:43:06.000 | My parents worked hard and sacrificed to ensure my success.

01:43:14.000 | I'm blessed with a decent level of intellectual ability.

01:43:19.000 | I've been blessed with a decent level of academic ability.

01:43:22.000 | I've had a lot of opportunity.

01:43:23.000 | I've had a very privileged and very wonderful life.

01:43:28.000 | And I hope to do exactly the same thing for my son and hopefully future children--

01:43:33.000 | to give them as much privilege as possible.

01:43:38.000 | But there are people who have come from a far worse situation than I have,

01:43:42.000 | who have achieved greatly.

01:43:46.000 | Privilege is a gift.

01:43:48.000 | It's given to us so we can do something with it.

01:43:53.000 | If you're a white male and you have a lot of privilege, do something with it.

01:43:59.000 | If you're a black female or whatever--I don't even know.

01:44:03.000 | If you're a black female, you have the privilege of being healthy.

01:44:06.000 | If you're stuck in a wheelchair because you've got muscular dystrophy or ALS,

01:44:10.000 | do something.

01:44:12.000 | Do what you can.

01:44:14.000 | No matter where we're born, we've got to do something.

01:44:19.000 | They don't write history about people who sit around and complain about,

01:44:21.000 | "Yeah, we're full of--a lot of white privilege."

01:44:24.000 | Do something with what you have.

01:44:26.000 | I absolutely guarantee that I am privileged.

01:44:28.000 | And what's the point?

01:44:31.000 | I'm trying to do everything I can to help everyone I can

01:44:34.000 | because that adds value to the world.

01:44:37.000 | And that's the model--add value to the world.

01:44:40.000 | Take the privilege that you have.

01:44:42.000 | Take the abilities that you have.

01:44:43.000 | If you have money, use it.

01:44:45.000 | If you have physical talent, use it.

01:44:48.000 | If you have intellectual talent, use it.

01:44:50.000 | If you don't have any of those things and you have labor, use it.

01:44:53.000 | Go read a book.

01:44:55.000 | Go read the book "The Richest Man in Babylon."

01:44:57.000 | It's a fable.

01:44:58.000 | It's my favorite personal finance book.

01:45:01.000 | It's written as an allegory, I guess would be the right technical classification for it.

01:45:06.000 | But it's written as an allegory, and in this allegory,

01:45:10.000 | the greatest thing about it is a couple of the stories in it were people who were slaves.

01:45:15.000 | Slavery's been around since long before 1776,

01:45:20.000 | and black slavery in this country,

01:45:22.000 | it's been around since the beginning of history.

01:45:24.000 | And guess what? It still exists.

01:45:26.000 | Do something about it.

01:45:27.000 | There is sex slavery all over this world.

01:45:29.000 | Do something about it.

01:45:31.000 | Don't support it.

01:45:33.000 | Whether that's pornography, addiction, or whether that's supporting organizations,

01:45:39.000 | I won't get off on that tangent, but guess what?

01:45:41.000 | Slavery still exists in a lot of ways,

01:45:45.000 | and it's up to us to free ourselves and free other people.

01:45:49.000 | But get back on track, and I've got to wrap up,

01:45:51.000 | but go read "The Richest Man in Babylon."

01:45:53.000 | Two of the characters specifically that I can remember in that,

01:45:56.000 | in about the last half, were slaves.

01:45:59.000 | It talks about what their slavery was like.

01:46:02.000 | My favorite thing about it is that the author didn't go into a moral equivalence about slavery.

01:46:10.000 | I think there's a lot of stuff that's immoral.

01:46:12.000 | I am outraged by human slavery,

01:46:14.000 | human slavery as it has historically existed throughout history.

01:46:18.000 | I'm equally outraged by wage slavery as it exists today.

01:46:22.000 | I'm equally outraged by academic slavery and control and manipulation

01:46:27.000 | and the things that occur today.

01:46:28.000 | Why do you think I have this show?

01:46:31.000 | But the point was that you can't solve those things by sitting around and complaining.

01:46:35.000 | Go and read. I'm not going to spoil the story.

01:46:37.000 | Go read what those slaves did.

01:46:40.000 | Now, is it an allegory? Is it a fable? Is it fictional?

01:46:42.000 | Yes, it is, but I think the points are true.

01:46:46.000 | My show is all about manipulating and controlling everything that you can control.

01:46:52.000 | So you can go somewhere else.

01:46:54.000 | If you can go somewhere else because Wal-Mart took all the jobs,

01:46:57.000 | you don't want to work at Wal-Mart, go.

01:46:59.000 | If you can't, then make sure that you're doing the best job you can at Wal-Mart.

01:47:04.000 | If you need to learn a different language, learn a different language.

01:47:07.000 | If that means you came to the United States and you don't speak English, learn English.

01:47:11.000 | If that means that you need to learn Spanish because most of your co-workers are Spanish,

01:47:15.000 | learn Spanish.

01:47:16.000 | If that means you need to learn Mandarin so that you can take advantage of the growth in Asia

01:47:20.000 | and move to Singapore, do that.

01:47:22.000 | Control what you can and take responsibility for your life.

01:47:26.000 | If people are prejudiced against you, you can't do anything about that.

01:47:30.000 | But you can try really hard to put them at ease.

01:47:35.000 | I'm a big guy. I'm 6'6" and I weigh almost 300 pounds. I'm a big dude.

01:47:40.000 | Guess what? I'm aware of that. I try to make sure that I don't intimidate people.

01:47:45.000 | When I'm speaking to you, if you ever speak to me, one of the things you'll probably find--

01:47:49.000 | and now that I say it, I'm not going to do it and someone's going to catch me on it--

01:47:53.000 | but one of the things I've learned to do over time is I very rarely stand face-to-face with people

01:47:57.000 | and speak directly to them.

01:47:58.000 | Because of my size, I've learned that that's an intimidating way for people to speak to me

01:48:03.000 | because they kind of train their neck up and they don't feel like they have any kind of exit opportunity.

01:48:08.000 | What I've learned over the years, when I'm speaking with somebody and I'm standing,

01:48:12.000 | I usually will look for--I'll open up my body so they have an escape route

01:48:17.000 | and I'll stand at a slight angle to them.

01:48:19.000 | I usually will pull back and I give a little bit more personal space than most people do

01:48:23.000 | because of my size. It puts people at ease.

01:48:27.000 | Or I'll look to sit with someone. I'll sit directly and face you if I'm sitting there

01:48:32.000 | because then I'm not so intimidating.

01:48:34.000 | But the point is, who cares if people are prejudiced against me or not?

01:48:39.000 | I've got to deal with what I am.

01:48:43.000 | So if you're brown or black or white or whatever color you are--

01:48:48.000 | and if I'm white--for example, when I went to Haiti, I'm the only white guy around for miles.

01:48:54.000 | I do everything I can to fit in.

01:48:56.000 | If you're the only black guy and you're in a white community, do what you can to fit in.

01:49:02.000 | But, hey, if you want to stand out, that's fine. Go ahead. That's actually a good thing.

01:49:09.000 | So who am I to tell you what to do?

01:49:12.000 | My point was that sometimes you should adjust the results you get.

01:49:15.000 | When I've been in sales situations in the past, I learned to make people comfortable.

01:49:19.000 | That's how I've learned not to make people uncomfortable.

01:49:22.000 | I'm a big dude. I'm an intimidating guy. I can be an intimidating guy.

01:49:25.000 | So I don't shave my head. And I don't shave my head, grow a goatee,

01:49:29.000 | get covered with tattoos and wear white sleeveless T-shirts when I'm going on a sales presentation.

01:49:36.000 | That's a pretty stupid thing to do.

01:49:38.000 | I comb my hair and I wear low-key clothing, and I try to make people comfortable.

01:49:44.000 | So, ranting over.

01:49:47.000 | Last thing, and then I'm going to play one piece of audio and we're out of here. Long show.

01:49:52.000 | I met a guy a couple of weeks ago at the podcast conference.

01:49:55.000 | I was so inspired by this guy. He is from Venezuela.

01:49:57.000 | He came to the United States 10 years ago. I think he said 15 years ago, something like that.

01:50:02.000 | He came when he was a young man. He arrived here with literally $10 in his pocket.

01:50:07.000 | I think he told me it was $8 or $7 or something like that. Like $10 in his pocket.

01:50:12.000 | He did a lot of stupid stuff, but he worked hard.

01:50:14.000 | Guess what? This guy was telling me he and his wife together, he makes over $100,000 a year now in the U.S.,

01:50:21.000 | something like a decade or two later. I don't remember the exact details.

01:50:25.000 | He blew a ton of money and did some stupid stuff.

01:50:29.000 | But then he figured it out. He started listening to Dave Ramsey, and now he has a podcast.

01:50:33.000 | He's trying to encourage other people.

01:50:35.000 | If that guy can do it, he didn't speak a word of English. His English was still heavily accented.

01:50:39.000 | We actually spoke, his English was still heavily accented.

01:50:42.000 | If that guy can do it, there's no reason why a white kid from the slums or a Spanish guy just over the border

01:50:52.000 | from Venezuela or a black guy from the slums or whatever. Who cares?

01:50:59.000 | The point is that you've got one life. Don't sit around and deal with it.

01:51:02.000 | I know that's super popular, but hopefully this came out well.

01:51:08.000 | I hate the philosophy behind that, and I get it.

01:51:13.000 | Again, to be clear, I think it's dumb to make people upset unnecessarily.

01:51:20.000 | I try to be very inoffensive.

01:51:23.000 | But on the other hand, we can't walk around on tiptoes about this stuff.

01:51:26.000 | You've got to say what's actually true and say what works.

01:51:30.000 | That's everything that I wanted to finish up with today.

01:51:32.000 | I'm going to play one video, and this is from Darren Hardy's video series.

01:51:40.000 | This one was part of his a couple weeks ago.

01:51:42.000 | But I just thought this was amazing, and the video was entitled "This Time."

01:51:46.000 | Darren Hardy is the publisher of Success Magazine, and he publishes a show.

01:51:53.000 | He publishes this series that's every day with a tip for today.

01:51:59.000 | I'm going to skip the closing music, and I'm going to end with this

01:52:01.000 | because I think it's a good lesson to end with.

01:52:04.000 | I just want to thank you for listening.

01:52:06.000 | I hope that what I said came across.

01:52:08.000 | Frankly, it's uncomfortable to me to talk about some of this stuff

01:52:15.000 | because when you put yourself out there as a public figure, you bring the criticism.

01:52:20.000 | But I feel like it's one of those things I have to force myself to push myself out there

01:52:28.000 | and be courageous enough to share things that I think are true

01:52:31.000 | and trust that people will find the real message.

01:52:34.000 | I'm going to close with this video.

01:52:36.000 | Thank you for listening to today, and I wish each of you a lovely weekend.

01:52:41.000 | Go away from here with a message from this show,

01:52:43.000 | and I hope that this show was helpful.

01:52:47.000 | I'll be back with you on Monday for another exciting week

01:52:50.000 | of awesome, comprehensive financial planning knowledge.

01:52:54.000 | Thanks, everybody.

01:52:56.000 | [music]

01:53:03.000 | Someone related a story to me recently about a man in his late 80s

01:53:06.000 | who was asked if he could come back and live the life of anybody at any time in history

01:53:11.000 | who he'd wanted to be.

01:53:13.000 | His answer was, "I'd want to come back as the man I could have been but never was."

01:53:19.000 | He said, "This time I'd act with more courage.

01:53:21.000 | I wouldn't allow my fear to turn me away from opportunities that I didn't take.

01:53:26.000 | I'd risk more. I'd take the chances I wish I had.

01:53:30.000 | I'd allow myself to fail more, love more, and laugh more.

01:53:34.000 | This time I'd be sure to live more."

01:53:38.000 | Well, it may be too late for him, but not for you.

01:53:42.000 | But you have to stop the insanity.

01:53:45.000 | It's time to get serious.

01:53:47.000 | So here's your action for today.

01:53:49.000 | If you died today, what are the three things that you wish you would have done?

01:53:55.000 | Gone, become, tried, and risked.

01:53:59.000 | Just three thoughts. Jot them down.

01:54:01.000 | Then do something today to move on one of those ideas,

01:54:06.000 | even if only in a small way.

01:54:08.000 | No regrets.

01:54:10.000 | [music]

01:54:16.000 | The holidays start here at Ralph's with a variety of options to celebrate traditions old and new.

01:54:21.000 | Whether you're making a traditional roasted turkey or spicy turkey tacos,

01:54:26.000 | your go-to shrimp cocktail, or your first Cajun risotto,

01:54:29.000 | Ralph's has all the freshest ingredients to embrace your traditions.

01:54:33.000 | Ralph's. Fresh for everyone.

01:54:36.000 | Choose from a great selection of digital coupons and use them up to five times in one transaction.

01:54:41.000 | Check our app for details.

01:54:43.000 | Ralph's. Fresh for everyone.

RPF-0051-Friday_QA_Accrual_Accounting_Roth_and_Walmart_Reaction