RPF00145-Nick_OKelly

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00:00:30.000 | Happy Monday, Radicals. It's a brand new week. What do you say we make it a good one?

00:00:34.000 | Let's kick it off with an in-depth interview with Nick O'Kelley, author of Live on the Margin.

00:00:41.600 | And let's talk about how you can design and live a life of adventure.

00:00:47.200 | ♪

00:01:03.200 | Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets,

00:01:06.720 | and today is Monday, February 2, 2015. Welcome to the show.

00:01:13.120 | Today, let's talk about not living the deferred life plan, but rather how you can design and

00:01:20.640 | build a life where everything is integrated together and you can enjoy some pretty cool

00:01:25.200 | adventures long before 65.

00:01:27.600 | ♪

00:01:35.760 | Nick is a very cool dude, and this is a very cool interview. It's pretty hardcore. We talk a little

00:01:40.240 | bit about, well, a lot about financial planning. We talk a little bit about how to fund financial

00:01:45.440 | planning. We talk a little bit about trading. Nick and his co-author, Patrick Schulte, wrote in the

00:01:51.760 | book Live on the Margin and developed this very strange cocktail of personal life advice and

00:01:57.280 | trading advice. It's a really interesting book, and I recommend it. I definitely recommend it.

00:02:03.040 | It's a really fun book, but it's this very strange mixture of stock charts and options trades.

00:02:10.080 | Now they all work, combined with life advice, advising you to sell your house and sell all

00:02:16.640 | your junk and move to a tropical island somewhere. It's quite good. It's quite fun. I'll mention a

00:02:24.640 | little bit more on it at the end of the interview if you care to go and buy the book and check it

00:02:28.400 | out. I was really thankful that Nick came on the show. I first got in touch with him after I

00:02:33.200 | interviewed his co-author, Pat Schulte. If you haven't heard that episode, it's actually episode

00:02:37.680 | 50 of the show. It was entitled From an $8 an hour job after college to financial independence

00:02:46.240 | at the age of 30 to 10 plus years of global travel with family. You can find that at

00:02:52.080 | radicalpersonalfinance.com/50. This interview with Nick covers a number of different areas.

00:02:58.400 | What I was fascinated to hear is since I wasn't familiar with Nick's story prior to the interview,

00:03:03.040 | I was fascinated to pull out of him just some of the twists and turns of his life.

00:03:07.920 | As you'll hear in the interview, it's been a very interesting life. Nick is a sailor. He's a pilot.

00:03:12.880 | He's an entrepreneur. He's done all kinds of interesting things. You're going to enjoy

00:03:18.880 | his thoughts on how to integrate those with finance. We even get a little touchy-feely

00:03:24.000 | during the middle of the interview, touchy-feely in the sense of a little bit emotional, a little

00:03:28.800 | bit of self-help. Be forewarned. Enjoy the interview. I'll be back at the end to wrap

00:03:33.840 | things up. Here we go. Nick, welcome to the Radical Personal Finance Podcast. I appreciate

00:03:39.600 | you being with me today. Are you kidding me? Thank you for having me. This is an honor.

00:03:43.280 | I appreciate it. I'm looking forward to this conversation because we're going to talk a

00:03:48.480 | little bit about some of my favorite topics, which is in essence, some down to its own,

00:03:54.000 | to the essence of the subject, is how to create an ideal lifestyle at a reasonable age. Not

00:03:59.920 | necessarily pushing things off until the age of 80 to really live, but how do we create our ideal

00:04:05.280 | lifestyle at an earlier age? You and your family, you've been able to do a lot of that. I'd love

00:04:10.800 | for you to share as a beginning introduction, I'd love for you to share a little bit about your

00:04:16.000 | story and your progression from where you came from as a young person through till today.

00:04:22.720 | Wow. I feel like we're on a first date and it's the get to know you question.

00:04:28.960 | It is a little bit that way.

00:04:30.160 | I'll be back at all in just a couple minutes without boring people. I was a poor child,

00:04:36.240 | which came, no. I was raised by hippie parents in the forest in poor towns in Washington. We

00:04:44.960 | literally cut down a patch of trees and my dad built a house. I don't want to say we were poor,

00:04:53.040 | maybe financially we didn't have much money growing up. Money was never really a focus for

00:04:59.200 | me. I was much more of a free spirited child and really only started thinking about what money

00:05:06.800 | really meant for my lifestyle later in life. I was really free to pursue my passions.

00:05:12.800 | I originally wanted to be a pilot. Actually, I am a pilot. I went and got the licenses and

00:05:20.560 | was headed down a commercial track. I spent a summer up in Valdez, Alaska. I didn't have the

00:05:27.440 | hours to actually fly the bush plane. I was basically a glorified baggage boy and gas man.

00:05:34.560 | Getting to know those pilots, I came to realize that even the most exciting flying in the world

00:05:40.160 | still got really boring. I was maybe a little lost for a couple years getting into college.

00:05:49.680 | I found that I had become fascinated with meteorology, with weather. I got done with

00:05:58.640 | my undergraduate and went off and got my masters in atmospheric and oceanic sciences. This is where

00:06:04.400 | I really came into my own in terms of what took me into the trading world and what is, I guess,

00:06:13.600 | set the stage for some of my financial, I don't want to say success, but some of the skills that

00:06:19.360 | I learned that allowed me to head off traveling. In meteorology, atmospheric and oceanic sciences,

00:06:27.360 | I was interested in forecasting, which is predicting the future basically. It's about,

00:06:33.760 | well, it's about a couple of things. First of all, it's about pattern recognition.

00:06:37.840 | Then it's also about some fairly high-level mathematics, geophysical fluid dynamics,

00:06:43.440 | and statistical analysis, and that sort of thing. I just found that I had this talent for

00:06:48.000 | predicting the future. I worked as a meteorologist on television for,

00:06:55.920 | gosh, I think it came out to be 10, 12, 13 years in the San Francisco Bay Area.

00:07:07.200 | This was at the-- when I first came to the Bay Area, it was the height of the dot-com bubble.

00:07:14.000 | What I thought was a great salary, working on television, forecasting the weather,

00:07:20.000 | it turned out to be not so great because there was a lot of guys, a lot of people my age,

00:07:25.840 | relatively young, my mid to late 20s, that just seemed to be killing it. They had all these stock

00:07:32.720 | options. I basically came to trading as a retail investor, just a total noob, just watching CNBC

00:07:41.200 | and open up an E-Trade account. I just started trading. My trading was not sophisticated at all.

00:07:51.760 | I mean, it's laughable now. I would basically watch the hot stocks, buy them. As soon as people

00:08:01.040 | started bad-mouthing them, I'd sell. A year later, I don't remember the exact percentages, but I think

00:08:10.640 | I turned my, I don't know, a few thousand bucks, maybe it was eight, ten grand into like 20.

00:08:15.760 | I was like, "Wow, this is pretty easy, man." I wasn't trading options. I wasn't trading any

00:08:21.600 | derivatives or anything. I was just buying securities and selling them when they didn't

00:08:26.080 | look hot anymore. You were just doing straight long calls. You weren't selling short or anything?

00:08:30.960 | Oh, right. I didn't even know what that meant. There was a transition. Nothing in life is ever

00:08:43.600 | very simple. I finally had enough cash in the bank and got a promotion to work. I started thinking

00:08:51.440 | about, "Oh, I want to buy a house." We were living in a pool house in the Saratoga Hills,

00:08:56.400 | which was awesome. It was gorgeous. We were in a 400-square-foot pool house, and I still aspired

00:09:02.800 | to more. We sold out stock. That was coupled with this realization that all those people that I'd

00:09:15.760 | meet that had these crazy stock options, they were now on their second and third gig, and they were

00:09:21.600 | looking for the new thing. This is roundabout 2000. We're creeping up on it. I basically accidentally

00:09:30.960 | sold all my high-tech stock at the height of the bubble. We bought this crummy house. I'm trying

00:09:43.040 | not to use foul language. I appreciate it. Crummy house in a so-so part of San Francisco. We

00:09:52.320 | started pouring all of our money and blood, sweat, and tears into this junkie house. Everybody around

00:10:00.160 | us was doing the exact same thing. I started to notice a pattern. I was like, "Gosh, if you follow

00:10:07.120 | the herd a little bit, but you stay ahead of them, you can make some coin here." As my neighborhood

00:10:15.200 | was improving and everybody was sprucing up the yards and stuff, we finished all the renovations

00:10:22.560 | we wanted to do. Literally, somebody knocked on the door and said, "You want to sell?"

00:10:28.400 | We're like, "Okay." We happened to sell basically at the height of the first—people don't really

00:10:35.680 | remember this—but the first housing bubble, at least in the Bay Area, around about 2002.

00:10:41.360 | This is where we entered the world of travel. I come from a family of sailors, my aunts and uncles.

00:10:50.240 | I have a big family, big into sailing, big trans-oceanic sailors. I've always had that dream.

00:10:58.320 | My wife and I bought a big boat, turned out to be way too big, and moved on board and sold

00:11:07.920 | everything and headed out for an adventure. Hopefully, my phone's going off. Sorry about that.

00:11:16.400 | Hopefully, I'm not getting too boring here. When I headed off sailing, I initially thought, "Okay,

00:11:25.840 | not having an income, quitting my job would be fine," but I really felt this need to continue

00:11:31.840 | to generate income. Got back into trading and got a little bit more sophisticated about it,

00:11:37.680 | and slowly dipped my toes into options trading and learned along the way without any real formal

00:11:46.720 | training. That adventure lasted for a couple years. Then we came back, and I went back into

00:11:56.080 | television and then felt this need to try my hand at entrepreneurial pursuits. I have this fire.

00:12:06.480 | I think from listening to you, you have it as well, this need to build my own thing. I don't

00:12:12.880 | know. It's like an inner rebel or something like that. It's not that I am anti-authority,

00:12:19.920 | per se, but it's just I have this need to make this thing of my own.

00:12:23.040 | It's kind of an adventure. You feel like you can create something. I think many entrepreneurs,

00:12:28.800 | money is nice, freedom is nice, but many entrepreneurs, it's almost a creative

00:12:35.680 | outlet to be able to build something that does something that you feel is important

00:12:40.480 | and be able to stand back and look and say, "There's the work of my hands."

00:12:44.400 | I'm really glad you said that because having been through a couple entrepreneurial pursuits now,

00:12:50.000 | I feel that money is a barometer, it's a measuring stick. The successful entrepreneurs that I know,

00:12:59.760 | they don't go out and start buying a bunch of cool stuff. They are proud of what they've created,

00:13:09.120 | and they dig the fact that they created it. That's definitely what I came to realize.

00:13:13.040 | I started this company. It was difficult. I didn't make as much money as I had made in

00:13:21.200 | television, but I certainly learned a lot about myself and about business. I was

00:13:28.320 | lucky enough to sell the company in early 2009. This happened to coincide

00:13:38.720 | with basically some divestiture I had accomplished in 2008, which again,

00:13:47.520 | happened to time the market very well. You're like the golden boy of market timing.

00:13:52.240 | I'm coming from the Mark Cuban school of thought. A lot of, especially fund managers, will say,

00:14:00.880 | "Stick your money with me. You can't time the market." I'm like, "No way, man. That's what

00:14:05.920 | it's all about." If you're paying attention, you absolutely can time the market. It's just

00:14:11.520 | realizing that the market means different things in different sectors. You can't just say, "The

00:14:17.920 | market's going up," or, "The market's going down." It's like some parts of the market are going up,

00:14:22.480 | some are coming down. It just so happened that in 2008, I saw a lot of indicators that told me,

00:14:29.760 | "It's time to absolutely pull the ripcord on real estate." We had a huge house at the time.

00:14:39.120 | I said, "We got to get out of this." My wife was in agreement. We initially listed for,

00:14:47.680 | I can't remember what it was. This was the realtors advising. He said, "I think we'll

00:14:55.680 | initially list it for 1.1." After 30 days, nada, nothing. I was like, "We got to get aggressive."

00:15:02.880 | We dropped it like 100K. I think we had two or three buyers come through. This is a fantastic

00:15:10.080 | house. It's gorgeous. I said, "No, we got to get more aggressive." I can't remember what the next

00:15:16.880 | cut was, but we bailed out of it. Still a huge profit. When you see that things have turned,

00:15:24.400 | don't get hesitant. When you see the writing on the wall, you've got to move.

00:15:29.760 | I was divesting partially because I wanted to put money into my business and partially because

00:15:36.480 | I could see the market was turning. I sold that business. We went off for another long sale,

00:15:46.400 | bought another boat, and headed off sailing. Since then, since 2009, we have been what I'd call

00:15:56.320 | part-time adventurers. We usually take two or three long, I wouldn't even say vacations,

00:16:05.040 | but trips per year, six, eight weeks. My wife and I are working.

00:16:16.080 | I'd say nine months a year, 10 months a year, sometimes eight months, other years.

00:16:20.400 | Then we're going off and seeing the world. That's how we do it. When we're traveling,

00:16:27.360 | I'm much more actively trading. I'm indeed living on the margin, making money while we're on the

00:16:34.320 | road. Are you primarily taking sailing trips? In the last year and a half, we have a dog.

00:16:45.040 | We don't have children. We have a dog that we love to death. She is getting older. A year ago,

00:16:52.640 | we realized that she was not liking the boat so much. We bought another small RV. We've had a

00:17:00.560 | couple RVs. The last few trips have been on the road. Again, I think we talked to OffAir about

00:17:08.880 | this. We're getting ready for a sailing adventure for this spring. We're going to head north from

00:17:15.440 | Portland and head up to southeast Alaska or almost to southeast Alaska. We're both going by boat and

00:17:24.240 | by land. That's neat. What was the timeline? How old are you now? I am 41. The timeline,

00:17:33.760 | if we go back, you're looking essentially at 10 to 13 years. Was your first major trip

00:17:40.880 | at about the age of 30 after you worked as a meteorologist? I think it was like 28.

00:17:47.200 | We took off at 28. I won't get specifically into dollar figures, but we were not wealthy. We

00:17:56.160 | weren't retirement wealthy. I think our net worth was probably $300, something like that. We had

00:18:06.160 | been fortunate with what we had made on the house. I had worked hard. I was making a great salary

00:18:14.080 | on television. My wife was working in high tech. That's what we initially took off with.

00:18:18.640 | Our free cash, though, was definitely less than $100. We put way too much into the boat.

00:18:23.600 | We bought a really expensive boat. You don't have to do that. You can go off and have sailing

00:18:28.720 | adventures on a $10,000 boat. You don't need these big luxuries. I thought we needed everything. The

00:18:35.680 | boat had a couple of refrigeration systems, scuba compressor, just absolutely everything.

00:18:41.280 | It had a washer and dryer. Wow. You thought you needed a washer and dryer,

00:18:46.640 | but the reality is you could probably wear a bathing suit depending on what ocean you're

00:18:52.000 | sailing, I guess. You don't need many other clothes. No, no, no. My heart was in the right

00:18:58.320 | place. I had my wife, and I talked about this at length in my first book, Get Her On Board.

00:19:03.280 | My wife was definitely resistant, as are many wives whose husbands want to go sail the great

00:19:08.880 | oceans. I wanted to recreate the lifestyle we had on land in a boat. I wanted extreme comfort. I

00:19:20.320 | wanted really big, at a 50-foot boat, 35,000 pounds, just loaded to the gills. I thought the

00:19:27.200 | more comfortable she was, the happier we would be. The irony is that a boat that's-- I can back up

00:19:37.040 | and say any lifestyle that you want to create, an alternative lifestyle, if you make it really big

00:19:42.480 | and complicated, it's going to wear you down in terms of how much time and energy and money that

00:19:47.200 | you have to put into maintaining it. This big boat that we had, and this complicated plan to sail

00:19:52.880 | around the world, man, I was working on this thing all the time. It was a heavy load. We came back to

00:20:02.720 | land-based life. I got an opportunity that I couldn't resist in Denver to come back to

00:20:08.400 | television, another fast salary and doing weather in a very exciting meteorological place. Denver,

00:20:16.080 | you have thunderstorms, big snows, big cold, it's hot in the summer, which it was fantastic.

00:20:21.200 | We came back to land-based life. We've been in and out of this adventure mode almost continuously

00:20:28.560 | since then. That's basically the lifestyle that we like. We're not full-time adventurers.

00:20:33.680 | So, I wish I'd interviewed your wife separately. Actually, the audience has asked me, they said,

00:20:40.320 | "You don't have enough women on the show." I've put out a call. I said, "Hey, bring it on. If you

00:20:45.280 | can help me find some guests, I'll do that." I want to talk about your book, Get Her On Board,

00:20:51.440 | in a few minutes and just see what you've learned. Probably what I should have done

00:20:54.720 | was talk to her first to see what you did well and what you didn't. I'm curious, was this part of

00:21:02.800 | a grand plan? You went off sailing around the world in your late 20s. Was this part of a grand

00:21:08.240 | plan for adventure or was this more of a, "This sounds fun. Let's do it," type of approach?

00:21:14.000 | I would say, to be honest, it was a mixture of the two. What got us out the door was a grand plan.

00:21:20.080 | What we realized right away was that doesn't work. Having a grand plan, you're just going to set

00:21:27.440 | yourself up for disappointment or hurry along too fast or whatever. Initially, it was this big grand

00:21:33.840 | plan to go sail around the world. We did not sail around the world. We sailed down to Mexico and

00:21:38.480 | spent a season down in the Sea of Cortez and then decided we'd take a break. Initially, it was like,

00:21:46.160 | "Okay, this is what we're going to do. This is year one. Then we're going to be in the South

00:21:49.280 | Pacific and then New Zealand." We came to realize, "Man, that's too much pressure." Our lifestyle now

00:21:57.440 | is we just take off and often on a whim without really—we'll know which direction we're going,

00:22:04.320 | like north or south, but we really find a lot more fun and opportunity when we're just open to who

00:22:13.280 | we might meet. We're always meeting the most fascinating people. Some of those, by the way,

00:22:18.800 | have turned into trading opportunities. I've met people who—they're not giving me insider

00:22:24.720 | information but have given me insights into industries I never would have thought of that

00:22:30.480 | turned into very profitable trades. We treat the whole thing with much more loosey-goosey attitude

00:22:38.560 | than we used to. It's kind of a shift. I wonder if it's something due to our U.S. American culture

00:22:46.800 | or whether it's due to—I don't know what the factor is, but it certainly seems, at least of

00:22:53.120 | the travel logs that I've read of people who have gone out for extended travel and my own personal

00:22:59.600 | observation, it seems that we're wired to pursue, at least as U.S. Americans, we're wired to build

00:23:05.440 | these grand plans and we're all about checking things off the list. Got to go to every country

00:23:10.240 | in the world, got to visit every continent, got to sail around the world, make a complete

00:23:13.040 | circle of navigation. We're prone to just checking these things off. You read the lifestyle and it's

00:23:19.760 | like we're just work, work, work, work, work. Got to go, got to go, got to go, got to go,

00:23:23.440 | got to get to the next thing. Whereas over time, it seems that travelers, especially if they're

00:23:29.360 | doing extended travel, seem to mellow a bit and not worry so much about getting to the next country,

00:23:34.960 | the next state, doing the next thousand miles, but checking the next box, but just simply slowing

00:23:40.160 | down and enjoying the day a little bit more. I think you're so right. That's the major benefit

00:23:48.240 | that I see in travel, period, is just taking yourself out of your surroundings and being open

00:23:56.480 | to what's around you and really noticing things. You come back and just everything seems so much

00:24:02.800 | more rich and you just see things that you never would have seen before. I've noticed the same

00:24:08.080 | thing. I was, I think, a big fan of the travel blogs, but in general, I don't really read them

00:24:14.720 | much anymore because I do get this feeling like we're just following a script. First, we went

00:24:22.560 | there and then we went to the next place. They all tend to read somewhat the same with the exception

00:24:29.680 | of a couple. My co-author, Pat Schulte, he's one of the few travel writers that I read often just

00:24:38.480 | because I don't get that sense of go, go, go. He's much more taking his time. His photography's

00:24:46.240 | beautiful. He makes observations about what he's seeing that helps to put me where he is. That's

00:24:53.520 | the sort of travel writing that I like to read. I most definitely don't try and do that myself.

00:25:00.720 | I've found that when I try and travelogue or write blogs about my travels that I end up

00:25:08.640 | experiencing less. I'm always thinking about, "Oh, this is a good photo opportunity," or,

00:25:13.360 | "This is something I could write down." It takes me out of being there in the moment,

00:25:16.960 | so I don't do that much. I've transitioned in that way myself,

00:25:20.880 | both from following the guidebook. It's useful to get a guidebook so you can have some general idea

00:25:29.200 | of what bus line you need to take and where you can find a hotel or a hostel to stay at if you

00:25:34.320 | need one. I prefer not to go out and see the list of sites in general. I prefer my favorite thing to

00:25:40.960 | do when I travel and I'm in another country is just simply walk out of the hotel or hostel and

00:25:47.200 | go and try to get lost and just see what happens. When you get lost, tuck a business card for your

00:25:53.440 | hostel or hotel in your pocket. If you can't figure out a way to get back, then hail a taxi

00:25:58.560 | and give them the card, and you'll usually wind up back there. It's so exhausting to try to check

00:26:03.760 | the list of all of the sites and the tours. It's tiring. Interestingly also, I've made a similar

00:26:11.520 | decision even with things like photography. It's so convenient now to have a beautiful

00:26:17.920 | cell phone camera in your pocket and take a few snapshots here and there.

00:26:21.920 | I marvel now, and I used to do it. I'm not one to tell other people how they should live their life

00:26:28.560 | or record their adventures, but I marvel sometimes when you're at a beautiful place, whether it's a

00:26:34.240 | beautiful natural view and vista or whether it's a famous monument or edifice of some kind.

00:26:41.440 | If you just stop and look, it's almost as though many of the tourists roll up and they just

00:26:48.800 | immediately are looking through the camera viewfinder or screen. The entire experience

00:26:53.760 | of the destination is through the camera, making sure that we document that we were here instead

00:26:58.960 | of soaking it in. I feel a little bit snobby. I feel a little bit like I've become a travel snob,

00:27:08.560 | and I don't mean to be. It's almost like I just don't understand how I used to do it or why I used

00:27:14.000 | to do it the way I did it. Yeah, I don't know. I don't know if it's conditioning, or maybe it's

00:27:19.440 | just the initial thrill when you're first traveling. You're just like, "Oh my goodness,

00:27:22.720 | I can't believe we're doing this. I need to get proof so that everybody can see."

00:27:25.840 | I'll tell you a couple of stories that maybe confirm what both you and I agree on. We were

00:27:36.320 | in Costa Rica last year, and we didn't know Costa Rica. I prefer not to read the guidebooks myself,

00:27:42.320 | and I just like to show up and see what happens. We didn't want to roll into San Jose and then just

00:27:50.080 | not know where we were going. You're going to be tired. It's a day-long trip. Anyway, we booked

00:27:56.240 | this place through Airbnb. It's gorgeous, Playa Flamingo. It's on the Nicoya Peninsula. It's

00:28:02.880 | beautiful, of course. It's gorgeous beaches, and we got a gorgeous place. It was fantastic and all.

00:28:10.320 | We really like to get to know a place through meeting the people who live there.

00:28:16.720 | We started talking with a couple who own this absolutely beautiful, I don't want to call it a

00:28:21.280 | resort. It's kind of like a castle perched on a cliff. You can kind of picture it looking out

00:28:26.720 | across the beach. These guys, they're Americans, husband and wife. We started talking to them, and

00:28:34.640 | they started slamming American politics and politicians and talking about Obamacare and

00:28:44.000 | all this stuff. We were like, "Gosh, are you guys even here? We don't want to talk about that. We're

00:28:50.240 | in Costa Rica. Let's hear about that." Then we take off. We had rented this car, and we purposely

00:28:56.320 | stayed off what they would call their highways. They don't really have highways in Costa Rica,

00:28:59.920 | but we stayed on the dirt roads, the washboard stuff that takes you 20 miles per hour and five

00:29:05.760 | hours to go 50 miles sort of thing. Rolled into Samara, I'm not sure how it's pronounced,

00:29:13.520 | and didn't have a place to stay. We stop off at the organic grocery, and they're just in line.

00:29:19.200 | Everybody's getting their orders. They've made orders, and stuff got shipped in, and people are

00:29:24.160 | picking stuff up. The guy next to me in line, I'm just like, "Hey, how you doing?" I just kind of

00:29:29.600 | introduced myself. Obviously, I didn't do the tourist thing like, "Where should we go? Where

00:29:35.280 | are the best sites? Where's the best beach?" I was more like, "Hey, we don't have any place to stay.

00:29:39.280 | Do you guys know any cool places to stay?" He's like, "Gosh, it's the holidays. Everything's

00:29:44.240 | booked up, but you guys can stay with us." We take this long road out of town, washboard,

00:29:54.320 | had to cross a couple rivers, which we later found out one was filled with crocodiles.

00:29:59.840 | We roll up to this gated house. They're Americans, and they're expats, and got their story, but got

00:30:11.280 | the total inside scoop on what it's like to move down to Costa Rica and keep a place down there.

00:30:17.920 | We learned so much about the place, the lifestyle, just from these people that were out there doing

00:30:24.320 | it. They were doing this off-the-grid lifestyle. It never would have happened if we had a place

00:30:30.080 | that was booked. I can give you a hundred examples of how that serendipity has led to adventures.

00:30:37.680 | That's the way we like to go now, without much of a plan.

00:30:42.400 | >> There's a concept. I haven't figured out what to name it. I've never really

00:30:46.080 | heard or read anyone else talk about it, but it's just an observation I've made in life.

00:30:52.960 | Again, maybe you and I can come up with a name for it. Basically, I think that if you're willing

00:30:58.400 | to accept some of the potentially poor outcomes, you get to experience more of the potentially

00:31:06.240 | amazing outcomes. I see this applied many times in life and travel. If you're willing to do

00:31:11.840 | something where you're not exactly sure where you're going to stay, but your standards are

00:31:16.800 | flexible. If worse comes to worse, all the hotels are booked, and I'm staying at some scuzzy,

00:31:24.880 | flea-bag place with uncomfortable beds, it's okay. I'm going to be okay with it. We'll have

00:31:30.960 | an adventure. We'll be able to tell something. The reality is, I might actually happen upon

00:31:38.080 | a beautiful, amazing place to stay that's at a rock-bottom price because it was a last-minute

00:31:43.920 | deal. I see this applied throughout life. For example, I often think about this with regard to

00:31:50.480 | financial planning. One of the biggest challenges as a formal technical financial planner,

00:31:55.840 | especially in a discipline such as retirement planning, is if a client is unwilling to accept

00:32:03.280 | a potential negative outcome, then you have to build a lot of safety into their financial plan.

00:32:09.040 | If they say, "I'm never willing to have my income dip below this amount," well,

00:32:13.200 | then that's a constraint that gets put onto the financial plan that I've got to account for. As

00:32:18.080 | such, I've got to adjust the portfolio to a more conservative, predictable portfolio.

00:32:23.760 | On the flip side, if a client were willing to accept a lower amount for a temporary period,

00:32:32.080 | and they'd be willing or able to restrict their spending for a period of a few years,

00:32:38.960 | then we can tilt the portfolio in a direction where there's potentially a much higher lifestyle

00:32:44.640 | throughout retirement and much higher residue of the portfolio at death. But the constraint

00:32:50.560 | that the client places of, "I'm not willing to go below this," just like if you're traveling and you

00:32:54.640 | say, "I'm never willing to go below a three-star," well, if I'm a tour guide, I'm going to book all

00:32:58.880 | those three-star, four-star hotels in advance. But if you're willing to go with a one-star,

00:33:05.200 | on the happenstance that we just can't find something else, you might have a five-star

00:33:09.760 | experience on a two-star price. Yeah. I think you're delving into deep waters here. There's

00:33:16.560 | so much to talk about with regard to what you just said. I think what I will attack it with

00:33:23.040 | is this idea of personal responsibility. I don't want to put words into your mouth or make

00:33:31.680 | criticisms about the financial planning industry. I have great respect for it. But I do think that

00:33:36.800 | one of the functions that a financial planner has is to assuage or help lessen anxiety about money.

00:33:50.320 | So your function is to decrease the anxiety through the tools that you have and the knowledge

00:33:57.520 | that you have. Well, they could also do that themselves by learning more about the financial

00:34:06.160 | markets or doing a better job of managing their own finances. That doesn't mean that your function

00:34:12.560 | is any less valuable. But the same thing happens with trading. The same thing happens with travel,

00:34:18.560 | is that people have perhaps a level of anxiety about these things that could probably be

00:34:26.800 | diminished by learning more or letting go of more. Of saying, "Okay, just like you said,

00:34:34.240 | I will forgo the guarantee of three stars for the potential of five stars or one star." And being okay

00:34:41.360 | with the fact that either one of those outcomes could happen. I'm going to use my resources and

00:34:46.480 | my knowledge to try and get the five stars as much as possible. But I'm going to take personal

00:34:54.400 | responsibility for it. I think a lot of people aren't willing to take personal responsibility.

00:34:58.240 | Even if they think they are, they make choices to allay their fears rather than diminish risks.

00:35:06.640 | Because fear and risk are completely different things.

00:35:09.440 | Right. You're absolutely correct. And it's certainly, you're absolutely correct.

00:35:16.640 | What's so challenging in how to negotiate these waters with regard to finance,

00:35:21.920 | because there's so many facets of the conversation. And there are so many,

00:35:26.240 | there's such a broad, diverse range of clients and potential clients. And it's difficult as a

00:35:32.800 | planner, having been in that position where I am responsible for another person's outcomes.

00:35:39.120 | It's very difficult, I find, for at least me in my personal character and moral code.

00:35:46.560 | It's very difficult to be personally responsible for somebody else's potential negative outcomes.

00:35:52.080 | Totally.

00:35:52.800 | And I remember probably the most pointed example of this was I read the story,

00:35:59.760 | I read the book called "The Big Short" and part of that profile, I forget the hedge fund trader's

00:36:05.680 | name. I'm not sure if you remember the guy in California. He was running a private fund and

00:36:10.640 | he has autism and he was running this investment fund. It was a stock fund. And then early in

00:36:16.480 | the mid 2000s, when he sniffed out the problems in the subprime market, he made just these massive

00:36:25.360 | bets against subprimes. And he wound up in profiting immensely for his fund. But what happened

00:36:36.480 | is it actually drove him out of the hedge fund business. He shuttered his hedge fund after the

00:36:41.840 | fact because he got into a battle with his investors where he knew what he was doing

00:36:47.120 | and he was willing. He didn't know the timing as to when his trade would come to fruition,

00:36:52.240 | but he had so much of a margin of safety and he'd put everything into this trade. And he had tilted

00:36:57.840 | the portfolio from being a relatively mainstream value stock investment perspective to being

00:37:06.800 | completely invested in buying insurance contracts. And he'd negotiated all these things. Just a

00:37:12.400 | brilliant move. But his investors were bailing on him when it looked like when he was paying

00:37:19.840 | billions of dollars of interest to keep his trade alive as he waited for it to come out.

00:37:25.600 | And he actually had put his fund into lockup and he refused to return any funds to his investors

00:37:36.240 | while he was waiting for his trade to come out. His trade came out, but he got out. And my point

00:37:42.000 | in telling the story, it's a fascinating story. I highly recommend the book if anyone is interested.

00:37:46.160 | But my point is he couldn't deal with the emotion of having to be accountable to other people for

00:37:52.400 | losing other people. And that's one of the things that I've experienced. I don't think I could ever

00:37:56.160 | manage an investment fund for other people because I may be willing to take the risk with myself. And

00:38:02.000 | I may be willing to live on beans and rice and live in a shack while I'm waiting for a trade to

00:38:06.720 | work out. Or if I screw something up big time, I may be willing to take that downside risk.

00:38:11.200 | But it would destroy me to see a client have to downsize their home or have to adjust their

00:38:19.600 | lifestyle because of decisions that I made. And there's all these weird psychological issues

00:38:25.680 | surrounding money and the money management business. There's ethical issues, there's

00:38:29.280 | psychological issues. It's just a maelstrom of arguments and debates.

00:38:35.200 | I don't want to say publicity, but this book that Pat and I wrote was pretty well received.

00:38:44.000 | We get good reviews on it. A lot of things have come of it for us. A lot of offers have come.

00:38:50.560 | And one was to start a hedge fund. This fund manager, actually, I can't remember his name,

00:38:58.480 | but he's published actually quite a few papers and he's pretty well respected. But he wanted us to

00:39:05.600 | start a fund. And initially, I was kind of tempted, but then I was like, I can't handle that kind of

00:39:13.280 | pressure. I can't take responsibility for other people's money. The trades I make, man, I'll take

00:39:18.800 | flyers a lot, you know, and those sometimes pay off big. Sometimes, well, most of the time they

00:39:24.240 | don't. And that's just the nature of how I trade. But I could never be responsible for somebody

00:39:29.760 | else's money. And frequently, when I'm talking with people about the book or just in casual

00:39:36.640 | conversation, people want a pick. What are you trading? What do you like? What are you in? What

00:39:44.480 | are you not like? And I just don't even answer those questions anymore. I can't do that. It's

00:39:52.320 | not because I don't feel confident in my own strategies. It's more that I feel like if they

00:40:00.960 | really want to help themselves, they'll learn how to trade for themselves. And our strategies are

00:40:06.160 | all about getting to know a core group of stocks, products, services, companies that you use,

00:40:14.080 | that you watch, that you understand, and not looking for the hot stock. Don't make small

00:40:22.000 | trades on things you don't know much about. Make big trades about things you're confident in.

00:40:27.120 | That's where you win. So I think the personal responsibility thing is a huge one for me. And I

00:40:36.640 | think that it unlocks a lot of freedom for you in terms of your lifestyle or your entrepreneurial

00:40:41.840 | pursuits or your trading or whatever, if you can truly take the good with the bad, if you can take

00:40:47.200 | responsibility. And I think there's a lot of value in backing yourself into a corner, fighting your

00:40:51.440 | way out, not having a fallback. I was standing in that grocery line in Costa Rica. I didn't have

00:40:57.840 | any fallback. I didn't have a place to go. The entire town was booked. So it was like, I got to

00:41:05.440 | talk to this guy. I mean, I enjoy meeting new people. So that's a benny. But you know what?

00:41:10.400 | There was no other choice. I had to ask this guy next to me where I could stay.

00:41:14.480 | And it worked out fabulously. Are you aware of anything different in your background that has

00:41:24.080 | led you to be able to take that kind of approach that you do? Because that's not I don't know.

00:41:29.600 | I don't know what the what the percentages would be, but that's not a mainstream approach. You are

00:41:35.840 | more comfortable with risk than many people. Was it growing up and on an off the grid hippie back

00:41:42.000 | to the land movement environment or maybe was there something about your background that you've

00:41:47.760 | identified that has led you to be more comfortable with risk? I don't know. I mean, I guess I could

00:41:53.360 | go on and on and on and bore people to tears. But I think maybe partially, yeah, what you're saying.

00:41:59.840 | I mean, we moved to Portland, Oregon. My family did in the early 80s. And my we didn't have any

00:42:06.400 | money. I mean, we had to be really poor, like as in our church was giving us a box of food. So I

00:42:12.000 | know what it's like to be really poor. Well, maybe not really poor, they're much less fortunate people

00:42:18.320 | than we were really poor in the US American context. Yeah, yeah. I know what it's like to

00:42:24.320 | have holes in my jeans, you know, and have kids make fun of me because of it and that sort of

00:42:28.320 | thing. So maybe that's partially it. I think also I've throughout my professional career, you know,

00:42:36.640 | I'm not a particularly super duper outgoing person. But, you know, I started teaching in grad

00:42:42.640 | school and my first day teaching in front of 250 kids, college students, my fly was unzipped.

00:42:52.720 | You know, it was incredibly embarrassing, but I, you know, I, I made some sort of joke. I remember

00:43:01.680 | what I said and, you know, and they erupted with laughter and I zipped it up and it kept going.

00:43:06.400 | And, you know, I, as a not super outgoing person, I worked on television for years and years and

00:43:12.880 | years. And I've just seen over and over again, how much your psychology is moldable. I mean,

00:43:18.960 | your emotions are completely your decision. You can, you can change your outlook on the flip of a

00:43:26.480 | switch, you know, and who you think you are, the shy person or the non risk taker. That's completely

00:43:35.040 | in your head. I mean, just take a small risk, talk to the person in the grocery line next to you,

00:43:39.360 | you know, smile at a stranger, just the little itty bitty things, you know, build up to taking

00:43:47.120 | much bigger risks. You'll have a lot more confidence. So I don't know. I wouldn't say

00:43:53.440 | I'm the biggest risk taker in the world. I, as I've gotten older, I'm 41 now, I'd say that I've

00:43:58.880 | become more conservative over time financially in terms of my business decisions. But still,

00:44:06.640 | I'm astounded how people paint themselves into a little box, define themselves, and then they don't,

00:44:12.720 | they don't leave the prison of their own making. It's especially sad when they're unhappy about it.

00:44:16.720 | You know, they're unhappy with the life they've chosen. But it's, you know, it's all in your head.

00:44:22.160 | Right. Yeah, I'm interested in just personal development and have been for many years. And

00:44:29.280 | I've experienced two things, like two of those types of experiences. I'm, personally, I'm an

00:44:34.720 | introvert and by nature. And yet I learned in high school that I would, that it didn't seem like the

00:44:42.720 | introverts were getting the results that other people did. So I learned to pretend to be an

00:44:47.120 | extrovert until I became comfortable with it. And to this day, I'm more comfortable alone.

00:44:51.680 | But I can, you know, I've learned to turn it on. And it's powerful once you realize that you can

00:44:56.640 | change something about yourself. And then I think one of the most transformative experiences when I

00:45:01.600 | went into sales as a financial advisor, then, you know, I was, I had read people and said,

00:45:07.760 | if you learn to be an effective salesperson, that'll go with you for the rest of your life.

00:45:13.520 | And learning to, learning to deal with rejection, learning to deal with the challenges and learning

00:45:19.680 | to deal with people saying no to you and learning to build tenacity and dogged persistence,

00:45:25.120 | which are required for success, especially success in financial services,

00:45:29.520 | was one of the most valuable, transformative experiences I've ever been through. And it's,

00:45:36.640 | it seems like all the good stuff is after the tough stuff. And the most important thing is

00:45:41.040 | that you are able to become a different person through challenging processes.

00:45:45.520 | Well, yeah, I mean, I'm not even sure you become a different person, but it's just,

00:45:50.400 | you know, the way that you operate in your life, you see a lot less limits. I mean,

00:45:54.160 | going back to fear and risk, you know, as a salesperson, you know, what's the bigger risk,

00:46:00.000 | making the sales call or not making the sales call?

00:46:03.200 | Right.

00:46:04.160 | You know,

00:46:04.480 | Not making.

00:46:05.680 | Yeah, that's the bigger risk by far. I mean, businesses are made or broken on sales. And,

00:46:12.560 | you know, if you get so entwined with fear, you're going to, you know, you're going to

00:46:19.680 | take risks that you shouldn't take. Yeah, you know, I've become more interested in,

00:46:24.240 | in personal development in the last few years. When we sat down and wrote this book, Pat and

00:46:31.120 | I have been friends for a long time, and we basically just wanted to do a project together.

00:46:34.880 | And the question we asked ourselves was, what can we do? How can we help people go out and

00:46:40.160 | have adventures? What's the excuse that they give, you know, for why they can't go do what

00:46:45.360 | they really want to do? And we saw this money, you know, people think they don't have enough

00:46:48.640 | money. Well, we wrote a book about not only how to change your lifestyle to get you ready to go

00:46:53.200 | have that adventure, but to make money while you're having the adventure. But what I'm coming

00:46:58.640 | to realize, you know, after the fact, we wrote this book, what, two years ago, three years ago,

00:47:03.280 | something like that. You know, the, the psychology of change is maybe even more important than this

00:47:10.960 | question of dollars. What, what is it about people and the way that they think? Why are some people

00:47:16.960 | successful? Why are some people not successful? I'm not sure it comes down to whether you're

00:47:21.200 | outgoing or not, or would you say introverted or extroverted? I don't think it comes down to that.

00:47:26.720 | I think, I think it's much more complex. If, if you'll indulge some, some theorizing,

00:47:34.240 | this is not founded on anybody else's philosophy or anything, but I think that there are really

00:47:40.480 | three people that, that live within us, three personas. The first is, I think what I'll call

00:47:49.040 | like an effigy. It's like what we think we should be, and that can be influenced by culture,

00:47:56.480 | by our upbringing, by school, by parents. Of course, as we see on TV, there's this effigy,

00:48:02.240 | there's this standard that we hold ourselves to somewhere. There's this thing we think we should

00:48:06.720 | be. Then there's the person or persona that we think we are. We think that we're introverted

00:48:15.200 | or extroverted, rich or poor, smart, dumb. I don't know, choose your adjective. And then

00:48:23.280 | the third thing is who we really are. The third persona is who we really are. This is what we

00:48:30.000 | know to be true. And I think that people don't spend enough time getting to know who they really

00:48:36.640 | are, where their strengths really are, where their power comes from. And I think that the more time

00:48:45.280 | you can spend ruminating and deciding that you are an incredibly capable, powerful person,

00:48:53.280 | the more able you're going to be to take risks, to take responsibility, know that you can fight

00:49:00.720 | your way out of situations, and ultimately, the more successful you'll be. So don't spend so much

00:49:07.600 | time measuring up against other people, bloggers who travel around the world, or traders who say

00:49:14.320 | that they're making tens of thousands of dollars per day, or people who have washboard abs. Think

00:49:22.640 | more about what's inside. And I think that forms a foundation for success. It just does, because

00:49:29.360 | you'll go off and you'll have the confidence to know that your real self can't be bruised,

00:49:35.040 | can't be hurt by not finding that three-star hotel tonight. You know what I mean?

00:49:40.640 | Right. It takes time to learn that. I feel I'm almost 30, but I feel like I'm only just a child.

00:49:47.440 | The older I get, the more I feel of how little I know and how little I've experienced and how

00:49:55.760 | much I have yet to learn. And I'm thankful to be learning. But I guess maybe it was naive,

00:50:02.720 | but I always thought that as I got older, I would feel more and more confident. And what I knew

00:50:07.360 | I find is, I get older, I feel less and less confident in what I know.

00:50:11.520 | Can I tell you a little story about you? So I initially found out about you and your podcast

00:50:18.640 | from your interview with Pat Schulte, my co-author on the book. And of course, I thought to myself,

00:50:24.800 | "This is an earnest guy. This is a guy who is putting himself out there and doing something

00:50:29.760 | that I'm actually interested in doing, which is podcasting." And I listened to a few of the

00:50:35.120 | episodes. And I'm actually fairly busy, so I don't listen to podcasts all the time. And I got

00:50:40.720 | behind on your episodes. And it invited me to come on generously, and I had not scheduled anything.

00:50:52.880 | And I listened to a couple of your podcasts. And one, I can't remember which episode it was,

00:50:57.040 | but one in which you went to some sort of conference and you stayed in your car. You

00:51:03.760 | lived out of your car. And that touched a chord with me, because I think that people

00:51:11.840 | focus so much on this endgame, this result, this trip around the world,

00:51:16.880 | they don't pay attention to what they're willing to suffer for, what they're willing to put

00:51:22.000 | themselves through in order to learn something really true and genuine. Because you can read

00:51:30.320 | things in books. You can listen to podcasts and hear enlightening things or trading secrets or

00:51:35.440 | whatever. But learning about yourself is putting yourself in uncomfortable situations. And you

00:51:40.240 | stayed in your car. That's radical personal finance right there. That's going further than

00:51:47.600 | somebody else normally would. And hearing your thoughts on what you learned from doing that,

00:51:52.800 | I thought was really cool. And I think that resonated with me when I first decided I wanted

00:51:59.200 | to go sailing. Man, my financial world was so... I mean, I didn't know one thing from another.

00:52:07.280 | This is even when I started trading. I thought when I bought a boat, I could get a loan for

00:52:12.160 | 100 grand and pay off $1,000 a month, and it would be paid off in 100 months. That's how sad it was.

00:52:19.200 | But I decided to minimize costs wherever I could, because I wanted to dedicate myself to this dream

00:52:28.080 | of sailing away. And so I started riding my bike. And I was doing morning weather at the time in San

00:52:33.840 | Francisco. So morning weather man gets to work at 3 a.m. So to ride my bicycle, even when I had the

00:52:43.280 | car that was paid off, just to save that extra $10 in gas money and to go out and freeze my tail off

00:52:52.640 | to do it, that was me proving to myself my dedication to a philosophy. And that philosophy

00:52:59.360 | was low economic impact. It was being green, not burning fossil fuels. I was committing myself to

00:53:09.680 | values that were as much a part of the sailing dream as actually hoisting those sails and taking

00:53:15.840 | off. And so when I heard that you had decided to, we'll just use the word, suffer or sacrifice in

00:53:24.320 | the name of something that truly is radical personal finance, i.e. living in a car instead

00:53:29.760 | of paying for a hotel, that really struck a chord with me. I appreciate that. It was hard for me to

00:53:36.560 | decide to talk about things like that on the show, because the way that it seems that everybody in

00:53:45.200 | our society operates is very much about, and I like your three people illustration, because what

00:53:55.360 | happens is most people we try to project the number two, the persona that we think we are,

00:54:00.000 | that we think that society wants us to be. Maybe a combination of the effigy and the persona.

00:54:05.840 | So in things like business or in things like finance especially, especially money,

00:54:13.760 | if you're not a guru, if you're not saying, "Look, I've got this all figured out. Here,

00:54:18.640 | I've made these millions. Let me tell you how to do it." It's almost like, "Well, what do I have

00:54:23.280 | to offer?" But I realized in time, when I was a financial advisor, I was committed to being

00:54:29.120 | frugal. I've been committed to trying to build my wealth. And so for the first few years of being

00:54:36.160 | actually a practicing financial advisor, I was driving the car that I had bought in college,

00:54:42.480 | a 1993 Honda Accord, and I sold it with over 300,000 miles on it. And the car was worth $2,000,

00:54:50.480 | and here I would be pulling up in people's driveways with my $2,000 car to go in and tell

00:54:56.320 | them what to do with their money. And people are asking about it. I said, "Listen, I know the

00:55:02.560 | financial situation of some other financial advisors, and I'm so sick and tired of the guy

00:55:07.920 | that walks in with an $800 a month BMW lease payment, and he can't even afford that, doesn't

00:55:13.600 | have a dime, but he's gonna tell you how to be rich. Don't you see through this? Don't you see

00:55:18.080 | that my entire industry is... It seems like the majority of the people in my industry are lying

00:55:23.680 | to you on a daily basis, and it's all about perception, trying to affect your perception

00:55:28.400 | bias. Wouldn't you rather work with somebody who actually does have some money versus somebody who

00:55:34.000 | looks like they have some money? And wouldn't you like it if someone were authentic?" And it took me,

00:55:38.320 | however, years to become comfortable... It's easy now for me to do that, to become comfortable with

00:55:43.840 | that. But it took a lot for me to be to the point where I wasn't ashamed. I wasn't ashamed to park

00:55:54.000 | my car around the side. And I feel as though that's one of the beautiful things about the

00:55:59.680 | internet is that it allows us... Or just about communications, it allows us to kind of pull some

00:56:04.320 | of those walls down. And what I realized that I appreciate is when people are transparent and

00:56:12.160 | authentic, because I spent a lot of time listening to people who were so-called gurus, and I always

00:56:18.640 | felt there was something wrong with me 'cause I couldn't do what they did. My to-do list is never

00:56:23.040 | done. My email inbox gets to zero messages about once every two months. I'm not perfect.

00:56:29.280 | I've made a lot of mistakes. Even starting this business, I was a dumb-dumb and I thought I needed

00:56:35.280 | to put all my money in retirement accounts. And then when I wanted to start a business and I bought

00:56:39.120 | an expensive house, then I didn't have as much money as I needed available 'cause I have it all

00:56:44.000 | in home equity and retirement accounts, which doesn't help me today. And so, I realized that

00:56:49.360 | if we can just deal with not having to stroke our ego... And for me, that was... Maybe for some people

00:56:57.280 | they can summon up the personal will of... Maybe some people can just do it on their own, but for

00:57:06.000 | me it was a real spiritual transformation in my life where I became a little bit more conscious

00:57:12.560 | of who I was on a spiritual level and realized that I didn't need to try to tell... I didn't

00:57:18.480 | need to try to portray anything. All I needed to do was simply be me and that's okay. It sounds

00:57:23.440 | like a self-help show here. But there are so many people that are trapped in ways of saying...

00:57:31.200 | Trapped in ways of living. And I think when you get to the point where you say, "No matter what

00:57:36.880 | I'm gonna do this," like with radical personal finance, I can't tell someone how necessarily

00:57:42.400 | to be a millionaire except for the academic theory. I'm not a millionaire yet. But I can

00:57:49.440 | teach how to apply financial planning concepts. I can't teach trading like you do. I'm not an

00:57:55.280 | effective trader. I don't have any knowledge so I purposefully avoid talking about that

00:57:59.760 | except from the academic side and send people off to learn their own. But what I can do is I can

00:58:06.240 | show a path to entrepreneurship because I came to the conclusion that if I need to rent out my house

00:58:12.080 | and I'm not planning on it, but if I need to cash out my IRA, I would rather do that

00:58:18.080 | and not waste a decade of my life hoping that someday I can fix this need. I'm tired of waiting

00:58:26.560 | and I feel like so much of my life I lived it under the impression that... Under that effigy,

00:58:34.080 | what we think we should be, the path that I think you should take. And I realized that,

00:58:38.640 | "You know what? That's simply not the case. There's only one person that I'm responsible to

00:58:44.160 | and that's God. And beyond that, I don't have to keep other people happy by following society's

00:58:49.920 | plan." And I know it is super self-introspective or whatever, but it's a reality that I think...

00:58:58.480 | Maybe it's a transforming into an adult and maybe I wasn't before, but you realize I had a

00:59:06.000 | conversation with my wife and with this I'll stop talking. And I've had conversations with some of

00:59:10.480 | my friends that society has laid out this script for you. And essentially the script is, "Go to high

00:59:16.800 | school, make sure you graduate from high school so that you can go to college. Go to college,

00:59:20.160 | make sure you graduate from college. In order to be successful, you need to have a job, you need to

00:59:24.640 | buy a house, you need to get married, you need to get a dog and you need to get a kid."

00:59:29.680 | And I've done all those things, not necessarily because society said so, but I've done all those

00:59:36.400 | things. And I always had operating in the back because I was always the responsible one. So,

00:59:41.200 | I always had that script running in the back of my head that I need to be responsible. People like me

00:59:45.760 | don't drop out of college. People like me don't get bad grades. People like me don't do this stuff.

00:59:50.320 | And you finally wake up and you say, "You know what? I like the house I live in. I love my wife.

00:59:55.920 | I'm thrilled with my kids. I love my dogs." But the reality is that stuff, at this point,

01:00:01.840 | I could give it all up and I could walk away without a college degree. Forget the high school

01:00:07.440 | diploma. Get rid of the house. Get rid of the car. Get rid of the job. Get rid of those things. Don't

01:00:12.800 | even matter to me. There's something different. And maybe it's just realizing that there's more

01:00:18.960 | than just checking the boxes. And I see that real passion with my generation. And people write about

01:00:25.520 | it. They write about the millennials. They talk about it. But it really is... I'm not sure where

01:00:32.320 | I'm going, so I'll shut up. But I appreciate the kind comments. It's been a growth process for me.

01:00:36.400 | Well, I think it comes to, for a word, for me, the word is earnestness. It's an honest, genuine

01:00:50.720 | pursuit. And I think it's a lifelong process. I think your 30s are a really important time where

01:00:57.520 | you do become centered. You do give up trying to impress... well, not everybody, but some people

01:01:03.280 | give up trying to impress others quite as much. And you get to know yourself a little bit more.

01:01:09.120 | So yeah, I think that's one of the benefits of aging. I mean, you get the aches and the pains.

01:01:15.440 | Those only get worse. But you do get to know yourself quite a bit more. I think that's what

01:01:20.800 | you're describing. And the more you do that introspection, the more you come to realize that

01:01:26.480 | there isn't a dollar figure. There isn't a particular job title. There isn't a particular

01:01:32.720 | situation even. There isn't a particular country to visit that will lead to the type of fulfillment

01:01:37.760 | that you're talking about. It's definitely an inner journey. And to bring it back to something

01:01:44.240 | else you said about authenticity and being honest, I'll tell you as a business person,

01:01:50.640 | I work with very large companies and I work with entrepreneurs.

01:01:56.080 | I will tell you that authenticity and honesty are in such low supply,

01:02:07.520 | often, that when you come across people who are authentic, who are honest, and you know what

01:02:15.360 | they're saying to be, not just a snow job, you hang on to those people. You do business with them.

01:02:21.280 | You go back to them. You pay more for their services than you would from somebody else.

01:02:25.280 | You have loyalty to those people. Being an honest person about whether your company is

01:02:33.440 | actually thriving or whether it's in turmoil, being honest with other business partners about

01:02:41.040 | your fears, I think that that will put you ahead in the long run. And if people that you're working

01:02:49.680 | with disrespect you because of that honesty, those aren't the types of people that you want

01:02:54.880 | to do business with. The business people that I've had experience with who are extremely successful

01:03:01.840 | have a talent for seeing the world as it really is. I don't know whether that's seeing themselves

01:03:06.720 | as they really are, but seeing the world as it really is, identifying opportunities that

01:03:10.480 | really are there that aren't just hyped up by some blog or some technical article or something

01:03:17.680 | like that. They see opportunities that are really there. Having that ability to cut through the,

01:03:22.000 | well, you don't have to use your bleeper, but the BS, having the ability to cut through that BS

01:03:27.840 | is what sets the top CEOs from the guys who end up pushing paper in some mid-levels.

01:03:35.040 | So I think the more that we can be honest with ourselves, the more that we can be honest with

01:03:39.600 | our business partners and I guess this online community that continues to develop these

01:03:46.080 | podcast communities, you can see the people who are thriving in these emerging arenas.

01:03:53.840 | And a lot of them have this ability to be honest, to be forthright. So I think that's

01:04:01.200 | really important. It comes back to responsibility. It comes back to being honest. It comes back to

01:04:06.480 | being transparent. So yeah, I think there's a lot of power in that. And I don't know if

01:04:11.680 | it's too much self-help woo-woo for one podcast or what, but that's definitely how I operate.

01:04:17.920 | When I'm doing business, I definitely hang on to those people who I feel are honest.

01:04:23.840 | I appreciate the encouragement. It is encouraging. I'd like to explore,

01:04:29.760 | and hopefully it's not too much self-help stuff, but that's the stuff that matters. It really does.

01:04:36.960 | I mean, if you really, really do want to change your situation, if you really,

01:04:42.160 | really do want to change your life, this is the stuff that matters, guys. It's not that trade,

01:04:46.400 | that single trade or that trip to Bali. That's not it. You're going to be the same person when

01:04:51.120 | you get there. I guarantee it. And even with business, even with trading,

01:04:56.160 | one of the things I did observe, which finally gave me the courage to say, "Forget it. I can

01:05:01.920 | figure it out as I go," is I recognize that I have a tendency to judge. I personally probably

01:05:10.480 | think that some things are not recoverable, but when you actually study the research,

01:05:14.240 | I can't remember the statistics on the top of my head, but a majority of millionaires have been

01:05:20.640 | bankrupt or close to bankrupt on more than one occasion. And you realize that it's a mental

01:05:27.760 | construct. It's a mental fabrication. And the idea, and I'm very much a planner. That's why

01:05:35.360 | I'm a financial planner. And so I think, "Well, I have to have it all figured out." And I realize,

01:05:38.960 | I don't. I can enjoy the journey. And I'll tell you, I love it. I am enjoying the journey that

01:05:44.640 | I'm doing, even though I'm working like a crazy man and I do these wacky ways of taking trips,

01:05:51.680 | like I did, and being able to save the money. I had savings. I could have spent the money,

01:05:58.720 | but it was part of test on the hotel rooms. But I just thought, "What a waste of money,"

01:06:04.880 | first of all. And it was part of me testing it. You know, am I willing? You can indeed,

01:06:11.040 | you don't have to have it all. I could indeed be happy and be in dire straits.

01:06:18.240 | Well, I think it comes down to, I don't want to get too deep or philosophical because I'm not.

01:06:26.560 | We've already gone to this point, so feel free. Go ahead.

01:06:30.000 | I think there's a part of us that are somewhat masochistic. I think that we do like to suffer

01:06:36.480 | for the things that we love or the things that we value. I think we're willing to suffer for

01:06:42.080 | the things, the people, the pursuits that we adore. And I think part of that is testing ourselves,

01:06:53.840 | seeing how far we can go. I ran a marathon this fall. I'm not a naturally gifted runner. I'm

01:07:00.800 | top heavy, and I'm just a big person. I'm not a good runner. But I wanted to see if I could do it.

01:07:09.840 | I wanted to try something that I thought was a good chance I could fail at, because I wanted

01:07:15.280 | to see how far I could go. It's that whole, who's quote, is it T.S. Eliot? You don't know.

01:07:23.120 | Only those who try to go too far know how far they can go or something like that.

01:07:26.800 | I think we have to know what we're willing to suffer for. I'm willing to suffer for things

01:07:33.920 | that teach me about myself. I don't know if that's masochism, but I feel like I learn new

01:07:41.120 | things about myself, and I'm able to push even further. That's what I'd like to tell people who

01:07:48.240 | have the passion to travel but don't feel like they can. Take that first step. Book an uncomfortable

01:07:54.800 | hotel room or sleep in your car. You don't have to go travel around the world. Go sleep in your car.

01:07:59.520 | Test those assumptions about whether or not you really will be so embarrassed because you're

01:08:04.560 | sleeping in your car and everybody else is in a four-star hotel. Test yourself. Test your assumptions.

01:08:11.680 | Figure out what you're willing to suffer for. Right. Absolutely. The reason is, even just when

01:08:18.320 | you curtail your spending, I always think about how far a dollar can go in other parts of the

01:08:25.040 | world. I say, "I'd rather not spend the 20 here because that 20 bucks on this expenditure at home,

01:08:30.560 | $30 thoughtlessly spent on a meal out because I was too lazy to plan ahead to have food available

01:08:39.840 | at home, that $30 can take me an extra day on the road. I'd rather be an extra day on the road

01:08:45.840 | than just have this trip down to TGI Fridays because we were too lazy to plan ahead."

01:08:50.080 | It's so funny. My wife and I were at the grocery store the other day,

01:08:54.640 | Whole Foods. Do you guys have Whole Foods out there?

01:08:56.560 | Yes. I'm in hippie, crunchy, affluent people who shop it. Within a mile of my house, I've got

01:09:08.880 | Whole Foods, Trader Joe's, and two local gourmet markets that are all-

01:09:13.280 | Yuppieville.

01:09:14.240 | Exactly. I'm in Yuppieville where I live.

01:09:15.840 | Yeah. We're in Food Nation here in Portland, Oregon. My wife and I are at Whole Foods. We

01:09:23.040 | want to get some fish. We're all up to the counter. Halibut is like, I love halibut. I love

01:09:31.600 | fish in general, but halibut's 30 bucks a pound. I'm like, "Holy smokes, 30 bucks a pound is going

01:09:38.080 | to cost us 50 bucks to get a good dinner." You forgo that expensive fish, but you're really

01:09:48.880 | willing to go out to the sushi restaurant and drop 70. You know what I mean?

01:09:52.400 | Right.

01:09:52.800 | It's like you could go have a fabulous, fabulous halibut steak dinner for less money than you're

01:09:59.840 | going to spend at a restaurant. I catch myself in those quandaries all the time. To drop

01:10:08.000 | back into living on the margin and traveling and spending less and financial independence,

01:10:14.320 | people are, I think, frequently amazed at how far a dollar will go outside of the U.S.

01:10:21.280 | Shopping at Whole Foods, Whole Paycheck, it's silly. It's a $100 bag of groceries, and you could

01:10:28.080 | live for a week or more eating out all the time in Mexico or Indonesia. It's incredible how much

01:10:41.840 | we waste just because of inattention.

01:10:44.960 | Absolutely is. I'd like to explore three topics, and we can hit these either quick hits or we can

01:10:53.120 | dive into them. We're not necessarily on a time limit, but there are three things that I've

01:10:58.160 | mentioned that are more connected to personal finance. I'm going to start with the concept of

01:11:04.800 | distributed retirement and the advantages and disadvantages of that. I want to talk a little

01:11:08.880 | bit about timing the market and then finish up with your ideas and thoughts. I know you've written

01:11:15.200 | the book, which I highly recommend, Live on the Margin, about it, but essentially how to learn

01:11:19.680 | trading in today's context. Let's start with distributed retirement. This is, or at least,

01:11:25.280 | the idea of don't wait until you're rich and can retire at 65, but be willing when you're 28 or

01:11:31.040 | 38 or whatever to take a year or three months, as the case may be, and go, even though you don't

01:11:38.000 | have enough money for the rest of your life to be financially independent. One of the big fears that

01:11:42.400 | people have is that if they do that, they'll be set back. They'll be set back in their career.

01:11:48.240 | They'll go backwards. Has your experience with your life so far with doing this, going, taking

01:11:57.600 | a trip, doing that, would you say it's been a net positive on your overall career and financial

01:12:02.160 | prospects, neutral or negative? Negative.

01:12:05.440 | Expand. How do you mean? Well, I mean, I made quite a bit of money doing television. If I

01:12:15.840 | dedicated myself to full-time trading, I would make quite a bit more money. I don't think we've

01:12:23.600 | talked about it, but my company, I do industrial voiceover. It's not glamorous, but it pays the

01:12:33.280 | bills. It's not necessarily convenient for my clients for me to disappear for two or three

01:12:40.240 | months. So I lose income from taking trips. So strictly from a financial perspective, I would

01:12:52.800 | have more in the bank if I spent more time just generating cash. So that's not even disputable.

01:13:02.480 | If I wanted to go back to television, I'd probably have to start off in a smaller market than I left.

01:13:07.680 | I left the fifth largest market and probably, I don't know, I'd probably be in South Bend,

01:13:12.720 | Indiana or I don't know, Charlotte or something like that. So there's no doubt that I would be

01:13:20.720 | further "ahead" if I dedicated all my time to making money. But those are not my priorities.

01:13:27.840 | I'm not putting all my eggs in one basket for something that may or may not happen, which is

01:13:34.640 | retirement at 65 or 58 and a half or whatever you want. Do you second guess yourself sometimes?

01:13:43.360 | To be perfectly honest, yes. It's hard not to. Even if you are traveling, you're still

01:13:51.280 | inundated with imagery and stories from other people who are either financially ahead of you

01:13:58.160 | or on par with you. It's hard not to be drawn towards that effigy we were talking about,

01:14:07.120 | this ideal of who you think you could be. But I would say that I am not consumed with it.

01:14:12.960 | The type of traveling lifestyle that we lead is traveling part of the year and so I'm never all

01:14:20.000 | the way off the grid. Do you know what I mean? So I never feel completely disconnected. And also,

01:14:26.960 | financially, we're in very good shape. Part of that has to do with the fact that we don't have

01:14:31.920 | children. Children are very expensive. Let's switch to timing the market.

01:14:38.560 | There's this major debate in finance circles around timing the market. And essentially people

01:14:49.120 | argue you can, you can't. The academic research, much of what's done will say, "Well, you can't

01:14:54.400 | predict in advance who's going to be able to time the market." So it's academically unsound.

01:14:58.640 | And yet there are many people who say, "You're a fool if you think you can't time the market. Look,

01:15:03.440 | I have. Look at these certain things." Have you developed a way to integrate, and maybe those are

01:15:09.920 | straw men, maybe they're real, but have you developed a philosophy that integrates the

01:15:15.680 | realities on either side of that issue? Well, first of all, let me preface this by

01:15:23.120 | saying that trying to time the market as a casual investor or somebody who works full-time at

01:15:28.880 | something else is pure folly. If you don't have the time to pay attention, you're going to be at

01:15:37.040 | the emotional whims of the media. I pulled up CNN this morning, and one of the stories was like,

01:15:43.600 | "The world's economy is in worse condition than we thought." You're going to try and make decisions

01:15:52.000 | based on limited information. If you're a much more involved investor, somebody who's selective

01:15:59.040 | about the securities that they buy, I think that there's -- well, the investments that you make,

01:16:03.840 | not just securities -- I think that you absolutely can time the market. I brought up the example of

01:16:12.800 | the house that we sold in Colorado before the subprime crisis hit. I could see that it was

01:16:23.040 | already starting to happen in some of the fastest-growing markets. In Florida, it had

01:16:28.480 | already become a disaster by, let's say, late 2007. By mid-2008, before anybody really understood

01:16:40.560 | what credit default swaps were, I could see that the economic engine that had been producing most

01:16:49.120 | of the income for households, which was the appreciation of their primary residents, was

01:16:55.120 | about to fall flat on its face. I didn't need to know all the mechanics ahead of time. I could see

01:16:59.840 | that it was happening. It was happening in some markets first. There was no doubt in my mind I

01:17:04.880 | needed a rapid exit. Did I time the market perfectly? No, I didn't. I didn't get back in

01:17:12.640 | in 2009 until after I had sold my company. I was late in the recovery. I missed out on some of that.

01:17:20.080 | But I did get in when the news was still really bad. I think a lot of this has to do with just

01:17:28.960 | paying attention to what's happening. A lot of my greatest investments have come from people that

01:17:38.000 | I've met in industries I haven't previously thought about or understood, but had told me

01:17:43.600 | things about what they were doing in their businesses that led me to believe that I could

01:17:47.600 | make a move. This is not insider information at all. This is just them talking about what's going

01:17:52.000 | on in their business. I sat next to a guy on a plane to San Diego. I was going down to visit

01:17:58.800 | Boat. He worked for a very well-known cloud computing software security company. "Hey,

01:18:10.480 | what are you doing? What are you going down here for?" He says, "Oh, we're having an all-hands

01:18:13.920 | meeting with the lead of our sales team." "Oh, really? What's going on?" He says, "Oh,

01:18:21.200 | it's just been a brutal quarter." "Oh, really? Okay. What's going on?" "Just, you know,

01:18:27.360 | companies aren't investing the way they should. There's new players on the field. Competition's

01:18:33.120 | steep." So I went back and I looked at this company, and I actually looked at their technical,

01:18:38.320 | their fundamental numbers. "Oh, okay. There hasn't been much movement here.

01:18:43.440 | Earnings, two weeks away. What's going on? News looks pretty good."

01:18:49.120 | Earnings came out. It was horrendous. It was terrible. I had bought puts way out of the money.

01:18:57.040 | I don't know if we talked much about options trading, but I basically shorted this company,

01:19:03.920 | this issue. It was one of my best trades of the year. It just happened to be something that I

01:19:11.520 | wasn't necessarily watching. It's not like I had some sort of insider trading information.

01:19:18.160 | It's just asking somebody about how their business was doing, asking why.

01:19:24.720 | Asking why is a huge, huge tool for figuring out whether or not you can time something.

01:19:32.160 | So when there isn't enough information, don't make a trade. Don't make a move. But when there

01:19:44.400 | is information that piques your interest, ask why. Ask if it's reasonable. Ask if you can lead

01:19:52.160 | the pack. Get ahead of the game. Don't invest in the hot thing. Invest in the thing that's not so

01:19:57.040 | hot. Or when it's super hot, you think there might be a reason why it's going to crash,

01:20:00.560 | really delve into that. Figure out if there's some evidence for what you think may be happening.

01:20:06.480 | So I don't know if that really answers your timing the market question. Can you always

01:20:10.720 | time the market? No. But you can certainly time it here and there. I can bring up another example

01:20:17.200 | from real estate. In the book, we actually talked about how you probably shouldn't invest in real

01:20:25.280 | estate. Returns aren't high enough. We wrote this in 2011, 2012. I didn't see much movement in

01:20:32.240 | prices. But by the time we were publishing, we were living in Del Mar, California. I was looking

01:20:39.120 | around. Gosh, interest rates sure are low. And there's nothing on the market. There's nothing

01:20:44.400 | to buy down here. The inventory is really, really low. I started looking around San Diego in general.

01:20:50.720 | Not much inventory. Interest rates super low. Why isn't there much movement? And I thought,

01:20:57.840 | well, it's because banks haven't eased their guidelines yet. You can't get a mortgage without

01:21:03.920 | your 20% down. Lending standards have, for good reason, gotten very, very tight.

01:21:11.200 | So when I looked at what part of the real estate market might grow fastest, so I'd become certain

01:21:18.720 | that we were going to see a recovery in housing. I looked at what sectors might be fastest to

01:21:25.040 | recover and appreciate the most. I initially thought, well, we'll go low end. We'll buy

01:21:31.600 | something on the lower end of the market, something cheap. Well, lending standards

01:21:35.200 | aren't easing that much. I think they're going to stay pretty tight for a while.

01:21:39.200 | So I thought, what are the fastest appreciating markets? Portland, Oregon was already appreciating

01:21:46.800 | fastest on the West Coast, aside from San Francisco, which I didn't want to get into.

01:21:50.800 | Let's look for something that's not at the low end of the market in Portland. There's a lot of

01:21:56.960 | press, a lot of buzz about Portland. This is two years ago. Bought something at the high end of

01:22:04.400 | a middle class neighborhood. Found a good opportunity where the people who move to this

01:22:10.400 | neighborhood don't necessarily have super tight finances. They can move into a $600,000, $700,000,

01:22:15.920 | $800,000 house without a bust to the bank. So we bought an ugly duckling and have seen,

01:22:23.520 | if you look at just the return on our down, if we cashed out today, very conservative numbers,

01:22:30.800 | an annualized return of about 45%, 50%. So is that time in the market? I think it is.

01:22:38.320 | Will I call this a home and stay here forever? Probably not. And I don't want to prognosticate,

01:22:46.400 | but I won't be in real estate forever, I'll tell you that.

01:22:50.240 | I could do hour and two hour shows on this. And maybe it's on my list of things, maybe I'll

01:22:59.760 | explore more. But for me, there were some major breakthroughs for me on the timing the market

01:23:06.080 | question when I understood that there were multiple versions of the efficient market hypothesis.

01:23:10.720 | When I understood, when somebody finally taught me that the efficient market hypothesis wasn't

01:23:17.200 | simply that all markets are always efficient all the time, but that there was the strong form,

01:23:21.840 | the weak form, and the semi-strong form. And I realized that, then it made all the sense in the

01:23:27.040 | world and helped me to understand that, yes, most markets are going to be fairly efficient.

01:23:35.040 | There's a reason why, if you go down a street, most of the gasoline prices on most of the gas

01:23:41.360 | stations on the street are about in the same. So you can't expect a lot of variation on if there

01:23:47.120 | were four gas stations within a mile, you can't expect a ton of variation. That's an efficiently

01:23:52.640 | priced market. There are exceptions, but that doesn't mean that there aren't macro trends that

01:23:57.360 | anybody can smell. And that doesn't mean that the herd, when people are simply following the herd,

01:24:02.080 | that you can't just simply find it. That you can't smell those things out. And I realized

01:24:06.960 | that all of us actually make bets and take trade positions based upon our outlooks on a market.

01:24:15.840 | And some ones that I've used come from personal finance side, not from the trading side,

01:24:21.840 | but from the personal finance side, of doing something like selecting a career or choosing

01:24:27.280 | to make a choice to go into college. If we make a choice to go to college or not go to college,

01:24:32.560 | or to send our children to college and pay the bill or to not, we're doing that based upon a bet

01:24:37.760 | that the market is going to pay off for that exchange. Now you see that changing. And you

01:24:45.360 | see people that made foolish bets and their $300,000 in debt for a humanities degree that's

01:24:50.080 | not a marketable commodity. And you say, "Huh, that trade didn't work out very well."

01:24:54.720 | Is that surprising to you, by the way?

01:24:58.320 | Right. Or you look at it with regard to the careers that we choose. The reason that people

01:25:03.360 | choose careers often has to do with their personal proclivity in one direction or another,

01:25:09.280 | but also based upon this is an industry that is growing. There are more people choosing to go

01:25:13.920 | into computer science now than there are choosing to go into, my mind fails me for a suitable

01:25:20.720 | metaphor, but into industries that are in decline. And so we're always looking at these things on a

01:25:25.680 | macro basis. And then if you actually look at real life, you can drive through a neighborhood

01:25:30.640 | and you can get an idea, is this a neighborhood that's in decline or in advance?

01:25:35.120 | It's not even like you have to really ruminate.

01:25:39.280 | Right.

01:25:39.680 | I mean, it's so obvious.

01:25:40.080 | You can drive through.

01:25:42.400 | And you can tell what's happening with an industry. You can get an indication of what's

01:25:47.680 | going on with a company if you actually sit down and read their annual reports. And if you actually

01:25:52.720 | sit down and follow the news of a company, you can tell, is this company in general doing well?

01:25:58.960 | But markets have become so abstract to most of us. And because it's not something that we follow,

01:26:09.040 | I have no idea what the Dow Jones Industrial Average is going to do on any random day. I don't.

01:26:14.080 | But I do know what's happening in my industry. And I take bets on the things that are close to me.

01:26:18.800 | So I don't find it easy to explain. But a lot of the academic research that you look at,

01:26:25.280 | you look at it and say, man, there's holes in this a mile wide. And yes, I get that when

01:26:29.360 | you're comparing mutual fund managers of a public open-ended mutual fund based upon these criteria,

01:26:36.400 | yeah, I understand that. But that doesn't necessarily mean that I as an individual

01:26:40.720 | can't identify a trend. After all, there's a reason why I started this podcast at the time

01:26:45.280 | that I did. I said, I can't sit by for another two years to get all of my ducks in a row,

01:26:50.240 | to be sitting fat and happy on $150,000 in my checking account to cash flow me for four years.

01:26:56.240 | Like this is the time. And I need to be in front of this trend. And I need to build the skills that

01:27:02.480 | I need so that as this grows and grows and grows, that my offering is there able to compete in the

01:27:08.400 | open market. Like we can't, you can time things if you know the industry, you can get the idea

01:27:14.000 | is, you know, are the, is Detroit growing or falling? Anyone who lives in Detroit should

01:27:19.840 | have been able to smell that one a long time ago. Yeah. Yeah. I think what we didn't anticipate,

01:27:25.200 | and I certainly didn't, were the bankruptcies. So, you know, in American Automotive,

01:27:30.720 | I never thought that they would let GM, you know, fail. You know what I mean? It's like,

01:27:36.560 | what's going on here? So I think in certain sectors, you can, you can still underestimate

01:27:45.040 | the downside. But then again, I've never been, you know, invested in auto. I think stick to what,

01:27:53.760 | you know, is, is a good, good way to go, but also don't limit yourself to what you know,

01:27:59.360 | get to know the things, you know, but, but remember what you know, and remember that there's

01:28:04.240 | so much hype out there. There's so, you know, so-and-so, you know, there's an upgrade or downgrade.

01:28:11.840 | It's now a B minus. It was a C plus, you know, our price target is 45 instead of 50. You know,

01:28:19.760 | that's all just BS. You know, that's just a guy, you know, saying, okay, well, we, we have to say

01:28:26.080 | something here. What are we going to say? Okay, let's say, and then you see the market react.

01:28:30.800 | And if you know that company, you know, what's going on with them. You can look at that with,

01:28:36.960 | you know, some distance. Oh my goodness. That's such BS. You see an upgrade, you see a big spike

01:28:42.880 | for two or three days and you go, is that really warranted? You can short it, man. You can make

01:28:48.800 | some, no, I mean, you, you can just trust yourself. I've, I've seen it happen over and over

01:28:53.200 | again. You can fade things. You know, you see, you see a security go down, you know, a couple percent,

01:28:58.480 | couple, 3%. And you're like, why, what was there just some bulk sale, bulk selling today? What's

01:29:05.120 | the deal? You can buy these little dips and, and, you know, don't necessarily have to rely on

01:29:11.840 | making all your income off one trade, but you can make some. So yeah, get to know, get to know

01:29:20.080 | small pieces of the market and, and leave the rest to the fools because most of them are fools.

01:29:26.880 | Do you have any formal way of tracking your returns in an academically rigorous way? Or do

01:29:34.160 | you have a gut instinct on years that you've, that you've done well, years that you haven't done well?

01:29:40.000 | Do you have any personal data that you're willing to share?

01:29:42.480 | Yes, I do track everything. No, I'm not willing to share everything. I would say that

01:29:49.680 | I outperform, how, how you want to slice and dice my portfolio is, you know, you know,

01:29:56.480 | changes those numbers. Right now I I'm invested in real estate. And so those numbers are just

01:30:04.080 | estimates, you know, based on a return. If I liquidate, you know, next month, but that to me,

01:30:09.440 | because I don't just see the home as, or the house as a home, I see it as an investment.

01:30:13.920 | Those matter to my overall portfolio. If you look at my total portfolio, I'm something on the order

01:30:19.920 | of, let's just say 18 to 25% annually. I have traded options, you know, very lightly in the

01:30:31.120 | last year because I've basically been invested. I've let the market do everything for me. I've

01:30:39.040 | been long. So if you look at the return on my options plays, it's meager, it's small, it's,

01:30:46.320 | you know, probably 8%, 10% last year. But in 2013, it was definitely double digits,

01:30:55.600 | maybe close to 20%. So it really depends how you slice and dice it. But I'm happy enough with my

01:31:03.200 | returns that I just don't stick everything into an index fund and let it ride. Although I recognize

01:31:10.480 | that, you know, I may be putting more work into this than needs to be, you know, I, you know,

01:31:17.760 | especially as the market's been in the last three plus years, you know, I could have been in any

01:31:24.080 | fund and done probably just about as well with my hands off approach. But I like the control.

01:31:30.960 | I like the responsibility. I like the ability to make moves, you know, on a whim.

01:31:38.000 | I think it's interesting in the field of advice, the people that I always say,

01:31:43.680 | here's the general advice. And if you're the kind of person who ignores the general advice,

01:31:47.840 | you're the kind of person who probably should ignore the general advice.

01:31:50.320 | So should most people probably go and put their money in an index fund and go and focus on

01:31:56.000 | something that's different, like making a lot of money in their career or going and doing something

01:31:59.600 | to do. Yes. But if you're the kind of person that ignores that advice, you're probably the

01:32:03.120 | kind of person that's willing to do what's necessary to actually, you know, to do something

01:32:08.160 | different. Yeah. Yeah. You know, and as we're getting ready for our first sailing trip,

01:32:13.200 | we had never met with a financial advisor before. And we had a really good idea of where our assets

01:32:18.960 | were, gave you an idea of what we're what our net worth was. But we still visited with

01:32:25.760 | a financial advisor, Brad Elman out of the Bay Area. He's a he's a great guy. And we just put

01:32:31.760 | everything down on paper and he gave us an idea of where we stood compared to other people at

01:32:36.880 | our stage of life. And it gave us some confidence. So. I don't think that just your average Joe

01:32:46.400 | should be out there managing their own money, I think, you know, if they're interested,

01:32:50.960 | they should certainly learn how to trade. I think most people probably should learn how to trade.

01:32:55.520 | But is it essential if you're focusing on other things? Now, if you want to go travel, you've got

01:33:01.440 | and you're not insanely wealthy. Can you make enough money to support travel habit?

01:33:06.960 | Depending on your initial trading night? I think so. So, again, I would direct them towards any of

01:33:15.200 | the introductory trading books like options, option volatility and pricing. That's by Nietenberg.

01:33:25.040 | Or, you know, pick up our book. Our book is definitely introductory material. If you're

01:33:30.640 | interested in trading options or just trading on the road. Another book that I would recommend.

01:33:37.040 | And this is somewhat newer ideas is something by Nassim Taleb. Are you familiar with him?

01:33:44.240 | I am. Yeah. Nicholas Taleb, Anti-Fragile. If you want to look at how non-linearity

01:33:51.520 | can be extremely profitable, I would pick that book up. Again, that's Anti-Fragile or Google

01:34:00.880 | Nassim Taleb on the Internet. You're going to find some really interesting stuff,

01:34:05.760 | new ways to look at old ideas. And I found it very enlightening. But yeah, I think, you know,

01:34:12.800 | you can you can manage your own money and probably outperform most of the active funds.

01:34:21.200 | But it does take time and education and experience and you can expect to lose along the way. So

01:34:27.440 | there's a huge, huge caveat there is, you know, if you've if you're really risk averse, man,

01:34:33.360 | just just to get the fund. Right. Right. Any other resources in addition to those four,

01:34:39.440 | or excuse me, those three that you mentioned, option, volatility and pricing?

01:34:43.200 | You're in your and Patrick's book Live on the Margin and then Anti-Fragile. Any other

01:34:47.680 | resources that would be useful to help somebody start to learn about trading?

01:34:51.760 | I would say, you know, I can't remember who wrote it, but there's a book called The Options

01:34:58.480 | Playbook. And I feel like it's a really good, simple playbook that shows you a bunch of

01:35:02.960 | strategies because, you know, there's buying and selling, writing calls, puts, covered options,

01:35:11.280 | naked options. But there's there's endless variations of iron this and condor that. And

01:35:19.360 | there's a lot of different ways to play with options. I think options are a great way to

01:35:25.680 | to make your money go further. They're certainly much more risky. But as soon as you understand

01:35:33.280 | what they are, you'll see that you're probably already using options in other parts of your

01:35:39.600 | life. Like a mortgage on your home is in a way an option. You don't actually own the house that

01:35:45.920 | you have a mortgage on. The bank does. And you have the option, really. And you pay them your

01:35:52.240 | interest rate for the option on your house. So I would definitely take a look at options if you're

01:35:58.800 | interested in upping your exposure to risk. I think one of the truest things in life is,

01:36:05.360 | you know, the higher the risk, the higher the reward. So, yeah, you can play it safe. But if

01:36:10.160 | you are hungry for more in your life, I'd say take the risks. You'll be fine no matter what.

01:36:15.440 | Do you have any last question? Do you have any,

01:36:20.480 | I guess, do you have a sniff test that you've developed over the years? Anything that because

01:36:28.960 | especially when you start into the option world, man, is there a lot of junk out there? Do you

01:36:34.560 | have any like a smell test that you develop that would help somebody to make wise choices and avoid

01:36:40.800 | being swindled out of their money? Specifically with regard to trading education is what I'm

01:36:46.400 | asking about. You know, to be perfectly honest with you, I don't have enough familiarity with

01:36:52.320 | other educators. I think that options look very complicated on the surface and there's a million

01:37:00.400 | different ways. I think there's even an options trading for dummies book out there. You can get

01:37:05.600 | mechanics down by reading any of these introductory books. I don't know who to trust in terms of

01:37:16.960 | trading advice. I generally don't give trading advice myself. So I don't know what to look out

01:37:26.080 | for. But I would say anybody who promises huge returns, if you follow this simple strategy or

01:37:33.360 | anybody who wants a lot of money up front for some sort of hand holding, I would be wary of that.

01:37:42.160 | So I don't know. Does that answer your question? No, well, it's good enough. It's just an

01:37:47.920 | interesting, I know it's a challenging jungle for people to navigate and it's always good to have a

01:37:53.360 | guide when you're going someplace unfamiliar for the first time. So yeah, I was looking for those

01:37:58.800 | resources for people. You know, Pat and I have, you know, we've had lots of requests to further

01:38:04.320 | develop Live on the Margin into a course or forum or a podcast or something like that. And I'm not

01:38:12.160 | sure exactly what form that will take. Pat Schulte, and people should definitely Google

01:38:18.800 | Pat Schulte or bumfuzzle.com to hear more about his story. Pat is really a master trader. And I

01:38:28.080 | think he has talked about actually mentoring some people. You'd want to contact him about that.

01:38:33.840 | But, you know, I don't think that you want to go out and look for somebody who's going to do

01:38:41.520 | everything for you. I think you want to learn how to do it for yourself. So again, anybody who's

01:38:46.320 | like pointing you towards a particular penny stock or something like that, just run. But somebody

01:38:52.640 | who's actually going to explain, you know, why should you buy out of the money in this particular

01:38:58.960 | case, out of the money being options trading term. You know, that's what you want. You want

01:39:03.680 | somebody who can answer your questions, not somebody who's going to point you in a particular

01:39:07.360 | direction. Right. Well, I'll look forward to seeing what you guys come up with. Nick, I thank

01:39:12.560 | you so much for taking your time to come on. I've really enjoyed this. And I think this will be a

01:39:16.160 | useful, useful resource for people with a little bit of inspiration, a little bit of education to

01:39:22.000 | go out and have fun with their own adventures. Yeah. Thanks so much, man. I really appreciate

01:39:27.120 | your time and I appreciate what you're doing and keep at it. And I think you're changing

01:39:32.080 | people's lives. I think that's just about all we can force people. I appreciate that.

01:39:39.280 | Pretty cool to think of all the things that you can accomplish. I just get so inspired talking

01:39:44.080 | with guys like Nick, talking like guys with guys like Patrick when I interviewed him, Pat,

01:39:49.120 | his co-author. I just I love having my own, I guess, vision expanded. Super fun just to hear

01:39:58.880 | of the things that are possible. I hope that was useful to you. If you'd like more, I'll put links

01:40:03.600 | to Nick's blog. He doesn't really write much online. Most of his thoughts, I know he wrote a

01:40:09.120 | book called Get Her On Board, which is all about how to get your spouse to go sailing with you. I

01:40:14.320 | meant in the interview to ask him more about that and I completely forgot. But he also wrote the

01:40:18.640 | book Live on the Margin and it's quite good. You can pick up the Kindle version. I'll post a link

01:40:22.960 | in the show notes. It's very good. It's really fun. And if you want to get just a hardcore slap

01:40:29.360 | in the face about spending too much money, about why you're spending too much money and why you're

01:40:34.240 | allowing yourself to live a crazy lifestyle and how you can quickly free yourself a little bit,

01:40:39.120 | then check it out. One of the things that I most enjoyed from Live on the Margin

01:40:43.600 | was actually Nick and Pat's discussion of risk. They talk a lot about that and risk is one of

01:40:51.440 | those things that we all have to think about. We all have to look at our own levels of what we're

01:40:55.840 | comfortable with. But coming from two traders, they apply essentially a trading mentality to

01:41:01.200 | the idea of risk, especially with other things, other aspects of life and life risk. And it's

01:41:06.160 | well worth reading for that alone. I'm not sure that you're going to pick it up. I am sure that

01:41:11.680 | you're not going to pick it up and be able to go out and make massive percentages, rates of return

01:41:17.760 | on your own trading plan from it. But I know they worked hard to get together and write a good

01:41:24.640 | intro to trading. So hopefully it could be useful to some of you, at least to wet your toes in the

01:41:30.480 | water. But like I said in the beginning, it's a very interesting mashup of stock trading and

01:41:36.080 | life advice. So check it out. I'll put a link in the notes. That's it for today. I thank you so

01:41:40.160 | much for listening. I will be back with you tomorrow. I might be back with you with an

01:41:45.680 | interview or if I can, if I can get everything done, I'll be back with you to tell you about

01:41:52.160 | the future of the financial support for the show and ask for your support even more. Talk to you

01:41:56.320 | tomorrow.

01:41:58.400 | Thank you for listening to today's show. If you'd like to contact me personally,

01:42:19.280 | my email address is joshua@radicalpersonalfinance.com. You can also connect with the show on

01:42:25.760 | Twitter @radicalpf and at facebook.com/radicalpersonalfinance. This show is intended to provide

01:42:33.760 | entertainment, education, and financial enlightenment. But your situation is unique,

01:42:40.480 | and I cannot deliver any actionable advice without knowing anything about you. Please,

01:42:47.520 | develop a team of professional advisors who you find to be caring, competent, and trustworthy,

01:42:55.280 | and consult them because they are the ones who can understand your specific needs, your specific

01:43:02.560 | goals, and provide specific answers to your questions. I've done my absolute best to be clear

01:43:09.440 | and accurate in today's show, but I'm one person and I make mistakes. If you spot a mistake in

01:43:15.280 | something I've said, please help me by coming to the show page and commenting so we can all learn

01:43:20.800 | together. Until tomorrow, thanks for being here. Unwrap the holiday savings at Citadel Outlets.

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RPF00145-Nick_OKelly_Interview