RPF0658-The_Natural_Symbiosis_of_Prepping_and_Financial_Planning
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00:00:30.000 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:34.000 | skills, insight, and encouragement you need to live a rich and meaningful life now, while
00:00:38.280 | building a plan for financial freedom in 10 years or less. Today on the show, we're going
00:00:41.960 | to talk about the natural symbiosis between financial planning and prepping, or preparedness,
00:00:48.760 | or survivalism. Choose your word of choice. Because it's long been a theme and an opinion
00:00:54.120 | of mine that there is a perfect symbiosis between the mainstream approach of financial
00:00:59.880 | planning and the area of interest, the area of preparation, or the area of what's usually
00:01:10.640 | called prepping.
00:01:11.640 | Now, let me define these terms quickly for you so that you can understand how these things
00:01:17.140 | fit together. When I talk about financial planning, I'm basically talking about the
00:01:21.120 | material that I covered when I took the Certified Financial Planner exam. Mainstream Certified
00:01:27.920 | Financial Planner type stuff, which involves understanding the basics of insurance, such
00:01:32.640 | as life insurance, disability income insurance, home insurance, long-term care insurance,
00:01:37.120 | health insurance, understanding the basic concepts of savings and budgeting, understanding
00:01:42.600 | investments, understanding basic estate planning and basic tax planning. These are all the
00:01:47.280 | topics that are covered under what most modern mainstream financial planners study and the
00:01:53.800 | areas that most modern mainstream financial planners work in.
00:01:56.760 | Now, when I refer to the term prepping, I am specifically referring to preparing for
00:02:04.560 | potential future problems with an emphasis on the physical items needed for your safety,
00:02:11.720 | for your health and well-being, for your survival. That's usually the feeling of the use of
00:02:18.960 | that term prepping. It's preparing for potential future problems with an emphasis on physical
00:02:24.080 | items, physical preparedness, using strategies such as stockpiling, such as redundancy, etc.
00:02:31.400 | So these two things, in my opinion, are a perfect fit for one another, but yet they
00:02:36.800 | are often not talked about together. Long-time astute listeners of Radical Personal Finance
00:02:43.680 | will quickly understand and recognize that I refer to them both constantly. And I'm
00:02:50.480 | going to articulate in today's show just some of the specific reasons why, to help
00:02:54.720 | people who wonder about one versus the other. And I'm also going to articulate how even
00:03:00.920 | I've changed. I've changed a lot in the last weeks, and I'll describe that in a moment
00:03:08.000 | after I go through some of the more academic approach, more academic perspective.
00:03:13.560 | Now, the term prepping, which I just simply use because it's the most common term used
00:03:17.320 | today in prepping circles, the term prepping doesn't necessarily have to refer to preparing
00:03:23.680 | for potential future problems with an emphasis on physical items. For example, why do we
00:03:28.920 | want our children to graduate from high school or to go to college? Well, we want to prepare
00:03:33.520 | them for the future. And so you could use the term prepping or preparing our children
00:03:37.840 | for success to talk about really anything you want to, including going to school, going
00:03:42.560 | to college. Or why do we buy car insurance? Well, we want to be prepared in case we have
00:03:48.280 | a car accident. So that would come in under the category of prepping. So the term itself
00:03:52.920 | could be applied very, very broadly, but it's usually applied to physical items. And yet
00:04:00.800 | most people have a bias in one way or another. In my experience, in my reading, in my kind
00:04:06.040 | of talking to people, what I have learned is that people either have a bias that everything
00:04:11.080 | is guaranteed to be a catastrophe. And so the only thing to do is to stock up on your
00:04:16.760 | beans, bullets, and band-aids, stack them in deep and ignore all of the mainstream common
00:04:22.040 | financial planning discussions. Or everything is going to be great, the future is going
00:04:27.480 | to be better than the past, things are going to be rosy, stocks are going to go up. Why
00:04:30.880 | would you waste money on things that are unproductive? Why would you buy gold when it just doesn't
00:04:35.200 | make a dividend and it's unproductive? And why would you do these other things? So these
00:04:39.360 | are the types of, I guess, extremes that are perhaps common. Now I think there's a wide
00:04:49.200 | swath of thoughtful people who wouldn't necessarily fall into either of those extremes. There
00:04:55.000 | are a lot of people who have all their investments in modern mainstream mutual funds who also
00:05:01.680 | carry a pair of jumper cables in the trunk of their car. And yet there are also a lot
00:05:05.620 | of people who, although they may believe that in the long term the US dollar is going to
00:05:10.960 | be worthless and worth nothing more than being used for toilet paper, they still have US
00:05:16.480 | dollars, they still have savings, they still earn their money in dollars, they still spend
00:05:19.600 | dollars, they still save dollars and still invest dollars. And so most people are going
00:05:23.760 | to be in the middle between these positions. And it seems like at different times in life
00:05:28.680 | people want to emphasize one over the other. There are times in life where you want to
00:05:33.680 | emphasize your positivism and there are times in life where catastrophism seems more palatable.
00:05:40.200 | And we should all be careful to guard against our biases, we should all be careful to protect
00:05:45.360 | ourselves against extremism, unwarranted extremism, and try to imagine what if we are wrong. But
00:05:53.160 | these two things go perfectly together if you see how useful they can be. Now here is
00:05:59.040 | my working thesis. Disaster is possible. It's possible. And different kinds of disasters
00:06:11.800 | have varying levels of likelihood. Those levels of likelihood can change over time. For example,
00:06:21.600 | if you live in Florida, you know that hurricanes are possible. There's a hurricane season.
00:06:28.520 | But hurricane season, as it comes closer, increases the risk of disaster. You're much
00:06:34.040 | more likely to face disaster in the next six months if it's June than you are if it's January
00:06:40.080 | because hurricane season is of course from June and July onward. So you understand that
00:06:44.520 | hurricane season, hurricanes usually come towards the back end of summer. So you think
00:06:48.840 | more about hurricanes during that time of the year than you do during the middle of
00:06:52.800 | the winter. That's obvious. Now you can also look out and say, "Hey, if I start to see
00:06:57.720 | a couple of storms spinning up across the Atlantic, I can pay attention, but I'm not
00:07:01.840 | going to pay too much attention until they start to get closer, a couple thousand miles
00:07:04.840 | away, a thousand miles away, you start paying more attention." But you pay a whole lot of
00:07:08.320 | attention when the National Hurricane Center issues a hurricane watch and then a hurricane
00:07:14.080 | warning and you pay very, very careful attention during those times. That's the same thought
00:07:21.480 | process that could be applied to almost any kind of disaster. So for example, I've done
00:07:26.000 | a number of shows on things like the rising level of national debt, the massive deficit
00:07:33.040 | the United States is running. As I record this show, there was just an announcement
00:07:38.800 | from the US Treasury Department that the US national debt jumps today by $292 billion
00:07:48.560 | on the first day of the debt limit suspension. So now we've gone from a $22 trillion on budget
00:07:55.680 | national debt to a $22.022 trillion to $22.314 trillion. That's interesting. Now I have
00:08:06.520 | tried to be as farseeing as I could. I've tried to say, "I think this is a long-term
00:08:10.640 | problem." I've tried to say, "I don't see any real solutions to this other than default."
00:08:15.160 | Could be inflation, could be taxation, could be default. We should be prepared for all
00:08:18.480 | three of those things. But I'm not looking at this as any kind of short-term catastrophe.
00:08:23.960 | As far as I'm concerned, we're sitting in Florida watching hurricanes spin up across
00:08:27.920 | the Atlantic saying, "Hey, we're in hurricane season now and so we should watch these hurricanes."
00:08:33.360 | But when I watch and say, "You know what? Is there a way out? Is there a way that I
00:08:37.120 | could see that this could be solved? Is it?" It's not easy. There are a lot of arguments,
00:08:42.560 | a lot of things to process. But at the end of the day, I still look and I say, "It's
00:08:47.120 | good to be prepared. It's good to be prepared for this kind of thing." You sleep better
00:08:50.960 | at night being prepared. And that's, in essence, what I think we should do with most things.
00:08:58.280 | Now here is the basic functional difference between mainstream financial planning and
00:09:03.720 | prepping. It has to do with the use of money. Money is one of the best tools to prepare
00:09:10.760 | for catastrophes. If a hurricane is coming into your town and you have a car and you
00:09:17.080 | have money to put gas in the car, you can go to the gas station, put gas in the car,
00:09:22.280 | and you can leave. And you can go to a hotel, you can pay money for a place to stay, and
00:09:27.800 | you can stay there until the hurricane blows through, and then you can go back home. So
00:09:32.080 | money solves the problem. You can buy a plane ticket, you can get in the car, you can get
00:09:36.680 | a taxi or an Uber out of town. You can get out if you have money. Now similarly, money
00:09:42.460 | solves most problems that happen if, for example, the hurricane comes through and blows your
00:09:47.760 | roof off. If you have insurance, the insurance company will send you a payment for that insurance,
00:09:54.040 | for that claim. And then you take that money and you hire a contractor to build a new roof
00:09:57.920 | and then eventually you move back into your house. Money solves the problem. Yes, you
00:10:02.440 | could stockpile supplies of 2x4s and plywood and new shingles and do the work yourself,
00:10:08.600 | but in general money solves the problem. And it would be very unwieldy to prepare for something
00:10:13.860 | like your roof blowing off with physical preparedness. Really, insurance is the best solution and
00:10:19.820 | money is the best way to get your roof repaired. But there's a line at which money stops
00:10:27.500 | working. And there could be various reasons why that line is crossed. For example, money
00:10:34.300 | could stop working simply because there's no time for money to work. I would guess that
00:10:40.660 | your heart, as is mine, might be heavy right now with just thinking about the shootings
00:10:46.260 | in the United States over the weekend. It's devastating to hear about dozens of people
00:10:52.820 | being killed for no reason whatsoever. Just the senselessness and stupidity of sin and
00:11:00.060 | murder. It just turns your stomach and all you want to do is sit down and cry and cry
00:11:06.220 | with the people who lost family. It's devastating. But it's a good example to show how money
00:11:12.260 | doesn't solve the problem of protecting yourself from somebody who's killing you in that instant.
00:11:19.340 | Now money solves the problem in the form of the traditional response of police, the fact
00:11:25.820 | that there's a whole system, a whole environment where police come and they interact with the
00:11:30.780 | shooter or they kill him or they arrest him, etc. And some incredible story of just the
00:11:35.100 | incredible efficacy of the police officers in the most recent round of killings. And
00:11:41.820 | yet for several dozen people, that wasn't enough. Thankfully for probably dozens if
00:11:47.340 | not hundreds of more people, that was. But that's a clumsy example to say that there
00:11:53.340 | are times at which you can't buy your way out of a situation like that. And so that's
00:11:57.940 | where we cross over into prepping. How do you prepare for something like that? And in
00:12:04.860 | almost any circumstance you could do it. So the first reason is, you could talk about
00:12:08.460 | this, so the first reason is money may not work simply because money can't work fast
00:12:11.700 | enough. Money may also not work because there is a complete destruction of an economy. So
00:12:21.300 | listen carefully. I want you to listen to something. I have just stacked eight bundles
00:12:46.860 | of cash on my desk right next to my microphone. If I stack all these up, we're looking
00:12:56.300 | at about, I guess about 18 inches of cash. Tightly wrapped banknotes, all wrapped up
00:13:05.220 | in tape, big thick bundles of banknotes. Now before you be too impressed with how rich
00:13:11.300 | I am and how I'm showing off and flaunting my wealth, you should of course know and you
00:13:15.580 | have likely guessed that these stacks of banknotes are not US dollars, they're not euros, they're
00:13:21.060 | not pounds, they're not francs. They are Venezuelan bolivars. Or to not butcher the Spanish quite
00:13:29.580 | so bad, they are bolivares as the Venezuelans would call them. And some of these numbers
00:13:33.900 | are pretty impressive. Here's one for, here's a big bundle of small ones of 10 bolivares.
00:13:40.140 | Here's one for quinientos bolivares. Here's one for veintimil bolivares, 20,000 bolivares.
00:13:46.620 | And here's one for five. Here's one for cinquenta, for 50. So some of these numbers are impressive.
00:13:52.420 | Now what's interesting is this mixture is some of the cash comes from before the currency
00:13:57.620 | revaluation where a couple of zeros were lopped off and some of it comes from after. But at
00:14:02.220 | any rate, this 18 inch tall stack of cash on my desk is worth the equivalent of four
00:14:11.300 | US dollars in today's market. And of course by the time you're hearing it, it could be
00:14:15.680 | half that. Because in the last three weeks, the Venezuelan currency exchange rate has
00:14:21.420 | gone from about 8,000 bolivares to 12,000, 8,000 to one, 8,000 bolivares for the dollar
00:14:28.220 | to 12,000 bolivares for the dollar in three weeks. So for all I know, that could happen
00:14:34.180 | again in the next three weeks. That's what happens when the cash becomes worthless. And
00:14:40.420 | what you see if you study an economy like what's actually happening today in Venezuela
00:14:45.940 | is financial planning doesn't work anymore because there is no money that is functional.
00:14:52.820 | I mean, I don't know if you understand. If you'd like to see a picture, by the way, go
00:14:55.500 | to my website, RadicalPersonalPlans.com, find the show notes for today's show. I'll put
00:14:58.900 | a picture with the show notes. Or go to twitter.com/JoshuaSheets and you'll see a photo of this stack of cash.
00:15:06.500 | But just consider a world in which, first of all, there's no counting of money. The
00:15:12.700 | way this stuff, the way this happens is you exchange bricks of money. The bills are all
00:15:17.180 | put together with similar colored bills, like bills, so that you can have a big stack of,
00:15:22.380 | hey, here's a big stack of 5,000 bolivars, or here's a big stack of 20,000 bolivars.
00:15:27.940 | And they're all, so they're all stacked to the same color. So you can see I've got a
00:15:30.940 | big thick sheaf of paper of all the same color. And then they're wrapped with packing tape.
00:15:36.220 | And the way you exchange money is you turn over a certain number of bundles to make an
00:15:41.540 | exchange. And so it's almost impossible to exchange even a measly $20 in today's world
00:15:47.580 | in Venezuela, because you can't carry the money physically in even a large backpack
00:15:53.580 | if you're exchanging $20. Forget about changing 50 bucks or 100 bucks. You could do $5 at
00:16:00.580 | a time, $10 at a time, and you receive such an awkward basket of currency that it immediately
00:16:06.700 | targets you as a risk of theft and other problems as well.
00:16:12.540 | That's a world in which prepping makes a lot of sense, because now all of a sudden those
00:16:18.020 | physical things that provide for you, now all of a sudden they have a much, much higher
00:16:26.540 | value. So that's another scenario in which financial planning doesn't hold up anymore,
00:16:34.580 | a situation like hyperinflation. Now, before you get too scared, I want to repeat, as I
00:16:39.780 | always do, the US dollar is not the Venezuelan bolivar. The Canadian dollar is not the Venezuelan
00:16:48.580 | bolivar. The euro is not the Venezuelan bolivar. But what I think people often fail to understand
00:16:56.180 | is Venezuela is not Zimbabwe. And what I mean is Venezuela is one of the richest, was, go
00:17:04.220 | back a decade, a decade and a half, was one of the richest countries in South America.
00:17:08.100 | Very high standard of living, very high level of development, functional, flourishing economy.
00:17:15.580 | We're not talking here about the image that some people hold in their head that, oh, crazy
00:17:19.540 | hyperinflation only happens in some abandoned corner of the world where people ride goats
00:17:24.860 | around. That's not the world we're in. Venezuela is a very modern economy. And yet today, it's
00:17:33.660 | heartbreaking. It's heartbreaking. You look at lawyers scratching around in the dirt to
00:17:39.420 | try to grow something so that they can eat. Business people reduced to nothing. In many
00:17:46.980 | ways, the people who are the best off are the campesinos, the people out in the country
00:17:50.700 | who know, who are used to living at a low standard of living, who are used to making
00:17:54.980 | their living from the ground. It's all the big business and the high-flying society people
00:17:59.900 | who are hurting the most. In general, if things go as we all hope they go, there shouldn't
00:18:06.500 | be a lot of interface between physical preparedness, stockpiling, etc. and technical financial
00:18:14.780 | planning because hopefully the markets that we all live and work in, the money that we
00:18:21.320 | all use, etc. Hopefully these things will not collapse. Hopefully our societies will
00:18:26.700 | not collapse. That's the hope. But if they do, that's where the problem comes in. So
00:18:36.900 | now I want to talk about cost versus benefits and then financial independence. Cost versus
00:18:42.380 | benefits. The way that I personally approach many decisions, especially decisions that
00:18:49.660 | involve some ability to prognosticate the future, is with a cost versus benefit or impact
00:18:57.140 | of this happens or impact of this does not happen sort of analysis. I get really nervous
00:19:02.420 | being fairly conservative by nature. I get really nervous betting something significant
00:19:10.340 | on one certain outcome. Some people seem to thrive in that kind of environment. That's
00:19:16.100 | not me. I get nervous having to depend upon things going my way. So if my political candidate
00:19:22.260 | wins election, then I'm okay, but if not, I'm in a bad situation. Or if this company
00:19:28.040 | goes the way that I need it to go, but if not, I'm in a bad situation. I don't like
00:19:32.300 | that. I like to be prepared for any and all circumstances to the best of my ability. So
00:19:38.340 | I want to be prepared if my preferred political candidate wins or if my preferred political
00:19:42.860 | candidate loses. I want to be prepared if this particular investment goes up or if this
00:19:46.780 | particular investment goes down. I want to be prepared if this road is closed or if this
00:19:50.660 | road is open. I want to make sure that I have solutions in place for all of those things.
00:19:55.460 | So my tendency is to want to try to be in good shape for every eventuality. But of course
00:20:03.660 | that comes with a cost. There are costs to all of our actions. We have to weigh those
00:20:09.340 | costs. If I think that things are going to go in this direction, am I really willing
00:20:13.260 | to spend the money to go in that direction? So let's talk about something like prepping
00:20:18.340 | as compared to modern financial planning. I want you to pretend for a moment that you
00:20:24.260 | are absolutely convinced that on the first of next month there is going to be a global
00:20:33.700 | thermonuclear war. It will happen. You're going to have Russia and China and the United
00:20:40.460 | States all lobbing nukes at each other. Pretend that you were absolutely convinced that that
00:20:46.580 | were going to happen. What would you do? What would you do? Now, what you would do would
00:20:59.460 | of course depend on what you have done. But if you were convinced that that were going
00:21:05.540 | to happen, you would be very quickly turning all of your money, all of your resources,
00:21:13.420 | filling up all of your credit cards and turning all of that into physical preparations to
00:21:18.420 | help you and your family survive the nuclear holocaust. You would be building a bunker
00:21:24.260 | if you don't already have one. If you have one, you would be adding probably another
00:21:27.640 | layer of concrete just to make sure. You would be provisioning like crazy. You would be looking
00:21:31.900 | at plane tickets and saying, "Can I get to a place where there's not going to be nuclear
00:21:35.140 | bombs falling on my head?" You would be considering all your options and you would be doing everything
00:21:39.400 | you could to get out of the war zone or to be protected within the war zone. You would
00:21:43.500 | not be thinking about the value of the stock market at that moment. You would call your
00:21:47.100 | broker and say, "Sell all, turn everything to cash," and you would spend it all on your
00:21:50.900 | survival. But the problem is that there's no way that any of us could know on the first
00:21:57.480 | of next month global thermonuclear war is going to break out. So you are understandably
00:22:03.380 | concerned about taking all of your money, building a new bomb shelter in your backyard
00:22:09.420 | or better than that, under your house, building a new bomb shelter under your house, and then
00:22:14.660 | sitting there on the second of next month saying, "Oh, it didn't happen. I feel silly."
00:22:20.380 | And now your kids have no college fund and you have no retirement account, et cetera,
00:22:24.020 | because you bought giant stacks of food and you put more concrete on your bunker. So that's
00:22:30.760 | the problem that we all face is how do we reconcile the uncertainty of a bad thing happening
00:22:36.900 | with the cost of being prepared for it? And that's where I think these things are a natural
00:22:42.720 | ally, meaning mainstream financial planning and prepping, because the cost of good preparation
00:22:49.200 | is not that high. It's analogous to a mere insurance payment. And that applies for the
00:22:56.120 | vast majority of the things that most of us are concerned about to even the hardcore scenarios.
00:23:00.920 | Let me give you an example. When I talk about hurricane preparedness or tornado preparedness
00:23:07.200 | or earthquake preparedness, et cetera, for a few thousand dollars, you can assure your
00:23:12.240 | families if not survival, you can assure that you can make things go in some level of comfort
00:23:18.080 | until help arrives from outside of the disaster zone. But even if we go up to the hardcore
00:23:23.400 | worst case zombie apocalypse scenarios, the price tag, in my opinion, is still not all
00:23:30.960 | that high. Let me give you an example. In my opinion, there are three really bad catastrophes
00:23:38.760 | that could happen that all have historical precedents, that are all realistic things
00:23:43.800 | that could happen, and yet they're pretty hardcore. And I like to use them as the most
00:23:49.880 | extreme case of something to plan for, something to prepare for. Number one, perhaps most likely,
00:23:58.080 | would be some sort of global pandemic. A flu pandemic or some sort of major sickness, a
00:24:06.160 | global pandemic. Here, of course, your best historical, most recent historical event would
00:24:12.480 | be the Spanish flu of the early 20th century, where you go back and study how many tens
00:24:17.360 | of millions of people died from the Spanish flu. Whether you look at it and you study
00:24:21.600 | something like Ebola to see some kind of modern mutation. There's a great Tom Clancy novel
00:24:29.000 | that dealt with an Ebola infection. But some kind of global flu pandemic is a very realistic
00:24:35.240 | thing. It has happened before. It will probably happen again. And it's one of the worst case
00:24:39.920 | scenarios that you could come up with. How do you prepare for a global outbreak of disease?
00:24:45.920 | A second hardcore scenario would be something like an actually successful widespread electromagnetic
00:24:53.760 | pulse attack, something that wipes out the electricity for a continent. That would be
00:24:59.800 | unbelievably devastating. And that's the kind of hardcore scenario that it's hard to imagine,
00:25:08.600 | yet devastating in terms of its impact. Or something like an outbreak, an actual outbreak
00:25:13.280 | of a hot nuclear war. It's pretty sobering when you study history and you realize how
00:25:18.040 | narrowly nuclear war has been evaded in the past. Very, very narrowly. Now we hope, of
00:25:27.000 | course, that it continues to be evaded and yet it's a very distinct possibility. A number
00:25:33.280 | of years ago I was thinking about some of these issues and I went and studied nuclear
00:25:35.800 | war. Read a couple of books on it, kind of worked through all the scenarios. I came to
00:25:39.680 | be convinced that nuclear war, even one of those hardcore scenarios, is eminently survivable.
00:25:45.400 | Even if you live in the United States and Russia and China and the US start going at
00:25:49.200 | it, it's eminently survivable. And I also came to the conviction that it doesn't actually
00:25:54.840 | cost that much to prepare for. To be adequately prepared for nuclear war, depending on whether
00:26:00.880 | or not you need to move and change housing, etc. And depending on where you build your
00:26:06.640 | fallout shelter and how much, how grandiose your fallout shelter winds up being. I came
00:26:11.760 | to be convinced that for a budget of anywhere from a few tens of thousands of dollars on
00:26:17.560 | the low end to as much as a hundred thousand dollars to a couple hundred if you want a
00:26:21.920 | luxurious, luxuriant fallout shelter, you could be adequately prepared for a hot nuclear
00:26:29.560 | war for a few tens of thousands of dollars. Basically the price of a new car. You could
00:26:33.720 | be extremely well prepared for nuclear war. And that's the scenario that basically convinced
00:26:40.000 | me that prepping, even hardcore prepping, has a very low price tag when compared to
00:26:46.200 | the dollars that most of us spend. When compared to the situations that most of us are in.
00:26:52.560 | Now if we back off the brink of nuclear war, which is of course pretty hardcore to talk
00:26:57.120 | about, and we go to something like making sure that you survive in case your town goes
00:27:03.000 | through a, has a tornado, things like that, and we go to the fairly mundane things like
00:27:08.680 | having extra food, the price tag is a mere few thousands of dollars. Today you can go
00:27:13.680 | to Costco.com, you can order up a pallet of long-term storage food that's supposed to
00:27:19.200 | have enough servings to last a family of four for a year for a couple thousand bucks. Put
00:27:23.520 | it on your credit card, have it delivered to your front door. Now, I don't know if that's
00:27:27.520 | the best way, it's certainly not the most frugal way, but it's better than nothing.
00:27:31.520 | And if that were all you did, was spend a couple thousand bucks and stack some food
00:27:34.960 | in your basement, you'd be pretty well ahead of most people. Make sure you've got some
00:27:39.760 | stockpile of water, make sure you've got some good water purification methodologies, but
00:27:44.040 | you'd be pretty well ahead. The price tag of this stuff is cheap. And so when you look
00:27:48.880 | at the cost of prepping, and you look at the cost of prepping for a dire scenario, all
00:27:54.240 | things considered is relatively low compared to the benefit of being prepared in a disaster
00:28:01.760 | scenario. Now, one of the things I've learned over the years is I have come to use the stockpiles
00:28:09.160 | and such that I've set aside far more than I ever thought I would. And there can be a
00:28:14.520 | variety of different reasons. I've used them when I've had bad months of income. I've used
00:28:21.120 | preparations to help people, give things away to people in need. I've used it when I needed
00:28:26.840 | to make major financial changes in my life. That what happens is when you can turn money
00:28:31.920 | from money into things, the things still have and maintain their value. Now, one more point
00:28:40.180 | on the natural symbiosis between prepping and financial planning. By definition, if
00:28:46.120 | one is prepared to live independent of systems of support, by definition, one is financially
00:28:54.580 | independent. So imagine this for a moment. Let's assume that you live on a nice homestead,
00:29:02.520 | little ways out of town. You've got maybe a few acres, two, three, four, five acres.
00:29:07.760 | You've got a nice milk cow, some goats, some chickens, a couple of pigs. You've got some
00:29:13.380 | fish in your fish tanks. You've got a nice garden. You've got some fruit trees. You have
00:29:17.880 | a house that you don't owe any money on, completely debt-free house. You have some sort of home
00:29:25.320 | business that can bring in income into the home with things that you have and do out
00:29:30.080 | of the home. You're basically in a situation, may need some stockpiles. Say you have some
00:29:36.420 | stockpiles of shoes. You've calculated that you wear out a pair of shoes every five years
00:29:41.160 | and you've calculated that you have another 50 years of life expectancy. So you've laid
00:29:44.360 | in 10 extra pairs of shoes and things like that. You are basically in a position where
00:29:51.240 | you are now financially independent. You are financially independent if you are prepared
00:30:00.180 | to live independent of systems of support. You can stockpile the things that you need.
00:30:06.360 | Again, use my shoe example. You can do that for many things in your life. And then if
00:30:11.220 | you have the ability to feed yourself, to house yourself, clothing yourself from the
00:30:15.880 | land would be a pretty big job for most of us, but hey, clothes are cheap at Goodwill.
00:30:20.280 | As long as you don't gain a lot of weight or lose a lot of weight, you can stockpile
00:30:23.080 | whatever clothes you need. You are financially independent. And that's one of the most powerful
00:30:28.360 | concepts behind prepping, is there's a natural symbiosis between financial planning for financial
00:30:35.280 | independence with the modern mainstream tools of investments and generating income from
00:30:40.040 | investments as well as the traditional tools of having a debt-free house, having a garden
00:30:45.960 | that provides some percentage of your needs, providing for your own meat, providing for
00:30:50.280 | your own energy, investing in solar panels, things like that. These things function really
00:30:55.280 | well together. And in fact, you can have far better results of one or the other if you
00:31:00.840 | have both of them. For example, let's say that you are that financially independent
00:31:05.520 | person who has a large portfolio of investments, who also has substantial physical preparations.
00:31:15.400 | Now assume that your portfolio of investments declines dramatically due to a change in market
00:31:21.160 | conditions. Well now, by choosing to stop taking money from your portfolio of investments
00:31:27.000 | and to start taking money from your stockpiles, sorry, taking things from your stockpiles
00:31:32.400 | to provide for yourself, you can actually enhance your long-term wealth by not selling
00:31:36.760 | when investments are cheap. So you can wait out the decline in the markets and then when
00:31:42.920 | the investments recoup their value, then you go ahead and start selling again. On the flip
00:31:47.600 | side, if you are that person who has some physical preparations but also has substantial
00:31:53.520 | investments, if physical preparations start to increase in value, you can turn around
00:31:58.040 | and fairly quickly turn your investments into physical items. And you'll be far ahead of
00:32:03.960 | the person who has no investments, who has no money. One of the unique things about Venezuela
00:32:11.280 | that I've learned is simply that if you have a source of funds from outside of the country,
00:32:17.280 | and especially if you have a source of funds that's not measured in Venezuelan bolivares,
00:32:23.280 | you can be far ahead of most people. Because this stack of currency that converts into
00:32:30.240 | $4 is still only worth $4. So if you have a paycheck of a couple thousand dollars from
00:32:36.220 | outside the country, you can live pretty decently. Because for the things that are available,
00:32:42.340 | you can get them.
00:32:43.340 | So now we get into the natural diversification that we talk about when we work in professional
00:32:47.780 | financial planning. How do we diversify an investment portfolio? How do we diversify
00:32:50.740 | across currency, risk, etc.? And if you did those things, you would be far ahead of one
00:32:56.500 | of your neighbors who did not have those things. And so they work together synchronistically.
00:33:01.620 | They're perfect complements for one another.
00:33:06.980 | So it's not that you should only engage in formal financial planning. It's not that you
00:33:11.900 | should only do prepping. It's that they work synergistically. They have their place. And
00:33:18.300 | if you're thoughtful and careful about how you approach it, you can set up what's best
00:33:22.580 | for you. Now there are costs for both things. For example, there's a cost to having too
00:33:30.180 | much stuff. If you have a whole lot of stuff stockpiled, that can make your life very unwieldy.
00:33:37.180 | It's hard to move. You need a big house, a big barn, etc. That can be hard. That could
00:33:41.500 | be a downside.
00:33:43.260 | There can be a cost of focusing too heavily on investment assets. Realistically, I think
00:33:51.220 | that if you were to compare somebody who took their first $15,000, $20,000 of their working
00:33:56.620 | life and put it all into investments to start that compound interest rolling versus somebody
00:34:00.900 | who took that $15,000, $20,000 and put it thoughtfully towards physical preparations,
00:34:05.780 | I think in many ways I'd make an argument that the physical preparations are going to
00:34:08.580 | be far more useful. I imagine the stability of the person who buys an inexpensive trailer,
00:34:15.540 | single wide trailer or something like that to live in, owns a little piece of land debt
00:34:19.340 | free, $15,000, $20,000 could build an incredible infrastructure on a piece of property with
00:34:25.140 | trees and gardens and some animals, etc. And that person can still be working and making
00:34:30.580 | money and saving money. But yet by investing it into physical preparations, they're probably
00:34:35.820 | far ahead of the person who just puts the first $20,000 in their Roth IRA. I think most
00:34:40.700 | of us have enough money where we could do both effectively. But if you had to choose,
00:34:45.540 | I think the argument is pretty strong in favor of physical preparations. So they work together
00:34:50.580 | really, really well.
00:34:52.380 | Now I want to talk briefly about my own opinions on this subject. Thus far, nothing I have
00:35:01.620 | said is, I think, all that surprising to any long-term listeners of the show. I've never
00:35:08.200 | hidden these opinions. I don't understand why a lot of preppers are so secret about
00:35:12.740 | how I just don't talk about prepping. The best thing that you can do if you want to
00:35:17.700 | ensure your long-term survival is to build a resilient community. It's far better for
00:35:22.660 | you to be a part of a community and a culture that is resilient and strong and prepared
00:35:27.220 | than for you to be the lone wolf who is well-prepared yourself but surrounded by lack and by all
00:35:33.820 | your neighbors. That's really hard. So the best thing that you can do is try to encourage
00:35:38.260 | other people to become debt-free, encourage other people to plant gardens, encourage other
00:35:42.700 | people to take control of their own energy needs for their house, etc. So you always
00:35:47.060 | want to encourage others and build communities of people who are resilient.
00:35:52.420 | I'm going to pivot now and just briefly discuss some personal experiences that I've had that
00:35:56.020 | have caused me to decide to intentionally change my mind about some of my past opinions.
00:36:03.460 | See, although I have always been interested in these topics, I've always thought they're
00:36:07.140 | interesting to discuss, I've always generally been a moderate. I'm the kind of person that
00:36:13.580 | would be happy to give a preparation or a presentation at the local Red Cross meeting
00:36:20.180 | or something like that. I'm not the kind of person that you would see profiled on the
00:36:25.980 | doomsday preppers. I've never been an extremist and I've often really struggled with the people
00:36:33.460 | who are extremists and I've just thought, "I appreciate your intensity but I think you're
00:36:38.340 | missing some level of what I would have said, would say, would be reality." For example,
00:36:48.140 | I pay a lot of attention to economics and I repeat the statement I said, "The dollar
00:36:52.660 | and the United States are not the same as Venezuela and the boulevard." There are a
00:36:57.540 | lot of ways that you could prove that case but they're just very, very different. So
00:37:01.460 | although in many ways the US dollar has the same basic problems as the boulevard does,
00:37:06.980 | its fiat currency, its worthless paper, its value comes from the exchangeability, its
00:37:12.860 | value comes from the size of the economy and those things are very different. So I've often
00:37:17.660 | been a moderate but a number of experiences have convinced me to move a tick or two farther
00:37:23.620 | off the scale of moderate towards, sounds bad to say the word extreme but just give
00:37:29.220 | you an idea of the scale, towards more hardcore. Let's use a word other than extreme. And they
00:37:35.900 | are these. Number one, Venezuela. I've tried to bring you on the show some input into the
00:37:43.340 | work that I'm involved in and many of you have given money to that. But I don't know
00:37:50.260 | how to articulate more other than just to tell the stories of how impactful it is to
00:37:57.100 | see collapse in real time and not collapse of the old variety but collapse of the right
00:38:04.740 | now variety. To see people who wear all the same brand names that you and I wear, who
00:38:10.740 | know all the same international pop culture icons that you and I might know and yet to
00:38:15.780 | see that culture and economy and country implode. I mean it's a countrywide, a nationwide collapse.
00:38:24.180 | It's absolutely a collapse society. It's a level five collapse society and it's devastating.
00:38:30.720 | And what it's caused me to do is to recognize that a lot of the things that I was dismissive
00:38:35.300 | of in the past, actually there's more thought to them than I want to give credit. I'll give
00:38:41.540 | you an example. In the prepper world there is an idea that having an older vehicle is
00:38:50.020 | better. An older vehicle, especially a non-computerized vehicle, because it can be fixed without the
00:38:56.380 | need for modern diagnostic equipment. And then there's also a sub-argument of this position
00:39:02.100 | that relates to the threat of the vehicle failing during an electromagnetic pulse event
00:39:08.060 | which can wreak havoc with any kind of electronic or computer equipment, especially in the car.
00:39:12.660 | It can cause a car to stop functioning. Now I concede the risk for equipment failure during
00:39:20.580 | electromagnetic pulse events but from the research, the test research that I've been
00:39:25.900 | able to find, I think that risk is usually overstated. I think people who seem to be
00:39:30.820 | knowledgeable would not say that every car that has a computer would stop functioning
00:39:34.340 | but that a percentage of the cars would stop functioning. But it's a difficult debate because
00:39:37.860 | a lot of the data a few years ago, a US government panel was commissioned that studied it. But
00:39:42.940 | their methodology, the test methodology was not real life in any way. It just wasn't good.
00:39:47.140 | So it's still an unknown question. Nobody has devoted the money and the time to actually
00:39:51.020 | blasting a bunch of modern cars with an actual up-to-date current strength electromagnetic
00:39:57.100 | pulse weapon to see what actually happens. It's all test data that's then extrapolated.
00:40:01.900 | So I think the risk is lower. But I've always been a modern car guy. I mean, I don't know
00:40:06.380 | about you, but you think about starting a vehicle that has a carburetor, it's just a
00:40:09.460 | hassle. You have to pump the gas a bunch of times. It's much easier. Fuel injection is
00:40:13.020 | great. And I've always been to the conclusion that a modern car is so much better than the
00:40:17.340 | old cars in terms of reliability and efficiency. And I've generally thought of the position
00:40:22.660 | of saying, you know, yeah, a computer-controlled car might be a little harder to fix, might
00:40:26.820 | take some diagnostic equipment, but it's actually a lot more reliable than the old-fashioned
00:40:31.260 | car is. That's generally been where I have been on that particular debate in the past.
00:40:37.420 | But Venezuela has changed me. Because what you see happening right now, as you see a
00:40:42.620 | collapsed society, is first, of course, you see massive shortages of fuel and whatnot,
00:40:47.220 | which is horrific in a country that has incredible fuel reserves and oil reserves. But you see
00:40:53.300 | that old cars have become much more valuable than new cars. And new cars have lost a huge
00:41:00.500 | portion of their value. Because if something breaks, the parts are not available. The spare
00:41:05.580 | parts, you can't get them. They're just not available. So if you, yeah, the computer told
00:41:09.220 | you that you only need this one part, but you cannot get it. And then the computer diagnostic
00:41:14.460 | equipment, etc. doesn't work. The power's on an hour a day, two hours a day, if that.
00:41:18.800 | It's just a nightmare. And so if you have a 1965 Volkswagen Beetle, you've got a gold
00:41:23.540 | mine because it's fuel efficient. It's all manual. There's no computers involved. You
00:41:28.380 | can fix it on the side of the road. You can pull the whole engine out and rebuild the
00:41:31.360 | engine on the thing practically if you've got the manual on the side of the road. And
00:41:34.700 | so seeing something like that, it made me say, "Huh, well, maybe I was wrong. Maybe
00:41:39.780 | the hardcore people were right, that there is actually something to this." And there
00:41:45.100 | have been many other experiences like that. Simple things of protecting from theft. You
00:41:50.340 | know, okay, put solar panels on my roof, but yet how do I protect those panels from being
00:41:54.780 | stolen? The physical violence in Venezuela right now is horrific. And it's things like
00:42:02.300 | communication, laying in the ability to communicate outside and to be off-grid and to have off-grid
00:42:07.780 | communications. If you have that right now, you have a lifeline. Now, there are still
00:42:12.180 | somewhat sometimes functional cell phone systems. So the modern cell phones still work. When
00:42:16.500 | the network is on, you can go buy a SIM card. You can get data out and that's still really
00:42:20.060 | good. You know, it's a lot easier for you to just wait 24 hours for WhatsApp to start
00:42:26.540 | working than it is for you to necessarily sit down and start tapping out messages in
00:42:29.880 | Morse code. But still, there's value in some of those things. And then being able to have
00:42:39.020 | food. Being able to have a way to feed your neighbors. And then being able to have stockpiles
00:42:42.660 | of food. Because you can have a garden that can provide for you, but then how do you figure
00:42:47.700 | out how to get your community fed? You need some outside support a lot of times. But yet
00:42:52.460 | if somebody would think ahead, it's not that hard to be prepared for some of those things
00:42:56.300 | in advance. So Venezuela has really impacted me deeply. And seeing a lot of what's happening
00:43:01.620 | there has caused me to say, "I'm not going to be just on the moderate perspective. I'm
00:43:08.700 | going to crank things up a little bit." Because that was an economic collapse. And what worries
00:43:14.020 | me and what concerns me is when I look at the United States, I look at it and say, "You
00:43:19.740 | know what? A lot of the positions being discussed by many modern politicians echo the same arguments
00:43:29.540 | that were discussed 15 years ago in Venezuela. And a lot of the things that in the Venezuelan
00:43:36.420 | society... It's easy, for example, it's easy to dismiss Latin America and Latin American
00:43:41.460 | politics as being somewhat dysfunctional. Because they are. They're just not stable.
00:43:46.500 | The United States is far more stable than most of the countries in Latin America. Of
00:43:50.580 | course I want to concede many people say, "Well that's because of the US intervention
00:43:53.940 | in Latin America." Shelve that for another day. The point is, the US is far more stable
00:43:58.260 | than the events in Latin America. But you see the increasing levels of instability in
00:44:06.900 | the US-American society. You see the increasing fracturing of society. So instead of having
00:44:11.920 | a homogenous society with a common cultural understanding, you see increasing fracturing.
00:44:16.980 | You see increasing hyperbole. You see increasing distrust. And in a society with low trust,
00:44:23.940 | where it's hard to trust your neighbors, it leads to problems. That's pretty sobering
00:44:29.420 | to me.
00:44:31.540 | Another event is of course the increasing financial... worsening financial situation
00:44:36.580 | in the United States. I'm trying to be very diligent to not be given over to hyperbolic
00:44:44.580 | rhetoric, to be very cautious and thoughtful. But it doesn't inspire confidence as I continue
00:44:50.060 | to watch politicians. For example, this last week we had the second round of democratic
00:44:54.580 | debates. I covered this in a Q&A show, about 20 minutes of commentary in the first round.
00:44:58.540 | But in the second round, not a single mention of the federal deficit, not a single mention
00:45:03.940 | of the US federal debt, not a single mention of lowering expenses save Tulsi Gabbard made
00:45:10.320 | one comment about lowering expenses by ending the war in Afghanistan. Not a single mention
00:45:15.240 | of these things.
00:45:17.660 | And yet, as I have profiled extensively here on the show, as we look forward in the coming
00:45:22.020 | years, this year, next year, the next few years are really, really crucial. And I don't
00:45:28.300 | see a way, from my current perspective, I don't see a way where politically spending
00:45:35.060 | changes in the next few years. Now I can see a way where the rate of spending increases
00:45:41.860 | could change. And let me just briefly discuss this, the problem. Right now, the US government
00:45:47.680 | is running in excess of a trillion dollar deficit, possibly far in excess of a trillion
00:45:51.140 | dollar deficit. And that's at a time of relatively low unemployment, high employment, low unemployment.
00:46:00.760 | That's at a time of pretty strong economy on all sides. By many measures, a pretty strong
00:46:06.700 | economy. You could talk about the forward-looking indicator softening, maybe. You know, Dow
00:46:10.680 | just took a big dump today, but whatever, that happens a lot. So is it a long-term trend?
00:46:16.140 | You'll know in terms of what happens in the coming days. I don't know today. But you have
00:46:20.940 | a relatively strong economy and massive deficits. But yet, President Trump and the Republican
00:46:26.980 | congressmen and senators and all of the Republican political leaders, generally, I don't see
00:46:35.660 | any loud, vigorous protesting against the level of spending. Now on the flip side, I
00:46:40.900 | watched the Democratic debates and most of the Democratic candidates have large priorities
00:46:46.360 | for increased spending. Now, the best solution I could come up with would be to have a Democ-
00:46:53.880 | financially, just speaking fiscally, the best solution I could come up with would be to
00:46:57.580 | have a Democratic president be elected in the next presidential election and to have
00:47:05.080 | a Republican senate and a Republican congress. Because that was what President Obama faced,
00:47:10.180 | which actually turned President Obama into one of the biggest budget hawks of any recent
00:47:14.380 | president. It seems to be very dangerous for one political party to control the executive
00:47:19.100 | branch and the legislative branch, at least when it comes to spending. President Obama,
00:47:23.960 | I don't think because he wanted to spend less, but because there was a Congress controlled
00:47:28.060 | by Republicans in opposition to him, that spending decreased significantly under his
00:47:34.380 | administration. And so the best I could come up with would be a, in terms of a fiscal perspective,
00:47:41.420 | would be a Democratic president and a Republican senate and a Republican congress. Now, will
00:47:45.700 | that happen? I don't see how it will happen, but maybe so. But even that is not great because
00:47:50.780 | the built-in increases in spending are too high. So unless something were to change in
00:47:55.140 | the next year or two, where you start to hear a vigorous national debate on these subjects
00:48:00.100 | that actually matter, I don't know what happens. And then I look at the current debate and
00:48:04.340 | I say, is there any way that this thing changes? Is there any way that what you see changes?
00:48:09.380 | And it's just, it's dangerous. The way that people are speaking to one another at this
00:48:12.600 | point in time is dangerous. Just this last weekend, we of course had a number of devastating
00:48:17.780 | shootings in the United States. I try whenever I think and talk about these subjects to put
00:48:23.140 | them into historical context that with regard to their actual impact and their actual meaning,
00:48:30.220 | their actual impact and actual meaning is relatively low on a numerical basis. Mass
00:48:35.980 | shootings are not particularly common, but what they are is they're widely reported and
00:48:40.860 | they're widely discussed in a huge country like the United States. But they're not particularly
00:48:45.380 | common and the numbers are not particularly large. When you look on a global basis and
00:48:50.060 | you look at places where the news is less focused, when you don't have the massive amount
00:48:53.780 | of the English world and you're outside of the place that we are, where the whole world
00:48:57.280 | media is focused on the United States, stuff is just, bigger things are less reported.
00:49:02.940 | For example, talking about Latin America, are you aware of what happened in Nicaragua
00:49:07.780 | in this past year and what's happening right now? Over about 300, I think 320, 325, something
00:49:13.140 | like that, over 325 people were killed by the government in Nicaragua in mass protests.
00:49:19.900 | When you start to look at things like that, a tiny little country like Nicaragua, some
00:49:23.380 | few millions of people and 325 people killed, anti-government protesters killed by the government,
00:49:30.980 | it starts to put things into context a little bit when you talk about a few dozens of people
00:49:34.460 | who die in shootings. However, when you look at the actual impact, especially this weekend,
00:49:43.980 | what seems to be from early reports, one person coming from kind of a right-wing perspective,
00:49:49.180 | the other person perhaps coming from a left-wing perspective, I think what you see is an expression
00:49:54.340 | of a very mild, quiet form of civil war. And what worries me is the basic conditions that
00:50:02.940 | lead to these things happening. And it's a complex subject, very, very difficult, very
00:50:08.020 | hard to talk about because there's so many contributing influences, depending on which
00:50:14.460 | way you look at it. And when you survey data broadly, there's a lot of things that go into
00:50:19.060 | it. But what also concerns me more, however, is what happens after the effect. How do people
00:50:25.040 | talk to each other? And what I see, and I'm talking from mainstream perspectives, when
00:50:31.380 | I look at the editorials written and published in newspapers, when I look at the commentary
00:50:37.500 | that's being produced on TV, I don't see a lot of responsible adults, all of us being
00:50:44.060 | willing to humble ourselves and say, "We've got serious problems. Let's talk about what
00:50:49.220 | we could do and let's see if there's some things that can improve things." It's just,
00:50:53.840 | it's like you'd have a violent, horrific event, and then it just gets cranked up. And that
00:50:58.700 | causes both sides or all sides, because there's more than two, to become more and more entrenched.
00:51:05.100 | And all the fuel is there for more and more chaos, more and more violence to come. A couple
00:51:12.260 | of years ago, I personally moved the scale, the likelihood scale, the matrix that is in
00:51:17.300 | my head on civil war in the United States from implausible to plausible. Kind of a mild
00:51:24.860 | move, but there's a big meaning in that. A listener recommended it to me, and I listened
00:51:27.920 | to a podcast, I'll share it with you, you may be interested. There's a podcast that
00:51:31.540 | a man did called "It Could Happen Here." He did a podcast on basically civil war, one
00:51:37.780 | scenario of how civil war in the United States could happen, could break out. That term is
00:51:43.100 | very fraught to use, because when we think civil war, we think of Civil War I, or we
00:51:47.540 | think of this neat geographic division, these big armies, these kind of state-sponsored
00:51:51.540 | actors. I don't know of any modern military theorist or person who thinks about these
00:51:55.880 | things who would predict any of that kind of thing. I think what you see more would
00:52:00.280 | be basically what you saw this last weekend. So you might be interested in the podcast.
00:52:05.660 | The guy's kind of a left-wing guy, so if you're a left-winger, you'll like it, if you're a
00:52:10.700 | right-winger, you won't. But I thought he did a really good job with kind of discussing
00:52:15.220 | the plausibility of the potential of civil war in the United States. Again, the podcast
00:52:21.660 | is called "It Could Happen Here." I have a number of significant disagreements with him,
00:52:27.320 | but I appreciated his analysis, and you may enjoy that podcast if you're thinking about
00:52:31.540 | things like this.
00:52:33.260 | Now before I close the show, I should hasten to add that with most of these things, it's
00:52:37.580 | very hard to know how to give an appropriate context or level of weight to any particular
00:52:43.840 | event or the risk of any particular event. I'll give you an example from my experience
00:52:47.460 | in financial planning. When I sold life insurance and disability insurance, I developed a much
00:52:57.480 | greater appreciation for the value of life insurance or disability insurance than I did
00:53:04.800 | if I had not been involved in that market. If you go and talk to somebody who sold insurance
00:53:09.580 | for maybe a decade or more, they will probably have at least one death claim or at least
00:53:15.740 | one disability claim. You go and talk to an older insurance agent, somebody who's been
00:53:20.100 | in the business 30, 40, 50 years, they'll have a long history of stories. And when you
00:53:25.480 | start listening to the stories of real people, the lives of real people, it changes your
00:53:31.340 | perspective. For me, something as simple as having insurance on the lives of your children,
00:53:38.620 | the only death that I ever had when I sold insurance actively, I don't know if anybody
00:53:42.900 | has died on the policies that I sold after I left the business, but the only death that
00:53:47.820 | I had ever had on an insured was of a parent whose child got murdered. I think about a
00:53:53.260 | five or six year old child got murdered on the front lawn of a relative's house. It was
00:53:58.580 | the most incredible story, and yet it was so devastating that it caused me to lose my
00:54:05.660 | perspective and to have this deep emotional attachment to something like insurance for
00:54:12.820 | children. The same thing I think happens with considering events, whether it's your political
00:54:21.100 | discussions with people online, it's hard to reconcile the furor that you see online
00:54:26.700 | or on TV or whatever with your conversation with your neighbors. Just like it's hard to
00:54:31.940 | reconcile what you see in your community around, which is most likely peaceful and people just
00:54:37.420 | going about their lives, with thinking about what happens if there's mass inflation or
00:54:42.340 | hyperinflation. It's hard to see those things. And so then when you start exposing yourself
00:54:47.780 | to something, you wind up putting your brain into a form of selection bias. I can't get
00:54:53.060 | away from Venezuela. I can't get away from it. But yet I have to look and acknowledge
00:54:59.500 | that Venezuela is, relatively speaking, a small corner of the world, and there are still
00:55:04.340 | hundreds of other countries that are doing okay, and that even if you look at something
00:55:08.820 | like Venezuela, as devastating it is, there are millions of people just going on about
00:55:12.500 | their lives, trying to figure it out as best they can. And so it's easy to wind up with
00:55:17.900 | a warped sense of reality. I don't want to have that warped sense of reality myself.
00:55:24.500 | That's why I always try to study whatever relevant data. That's why a few moments ago
00:55:29.820 | I was talking about shootings. I said, "They're pretty rare. School shootings are extremely
00:55:33.740 | rare. They're decreasing in popularity. There's not a big risk whatsoever when actually looked
00:55:39.220 | at the data." But that doesn't make the emotion of it any less significant. And so you can
00:55:44.640 | acknowledge with your mind that people are far, about, I don't know, what, 500 or thousands
00:55:50.080 | of times more likely to die from medical accidents, from medical errors, going to see the doctor
00:55:54.260 | and say, "Doctors are dangerous. You should stay out of doctor's offices." You can prove
00:55:58.260 | that with the data, but it doesn't feel that way when you're dealing with the distinct
00:56:03.420 | emotion of evil. So how do you deal with this stuff either in your own life or in public?
00:56:12.460 | I don't know. What you're hearing is me trying to figure out how do I communicate something
00:56:17.820 | that I believe is important, in some ways a warning tone that I believe is important.
00:56:25.380 | You heard me say that I've changed my own threat matrix. I've gone from, I can't remember
00:56:32.140 | how the DEFCON levels work. DEFCON 5 is higher, DEFCON 1. I've gone from, I don't know, DEFCON
00:56:36.900 | 2 to DEFCON 3. I think DEFCON 5 is high. So I've gone from DEFCON 2 to DEFCON 3. And I'm
00:56:42.380 | trying to encourage you to do the same thing, but also to, at the same time, try to stay
00:56:47.300 | very grounded in reality, try to stay very firmly aware of my biases, firmly aware of
00:56:54.060 | the filters that I have, that we all have, and try to stay grounded in financial stability.
00:56:59.380 | Don't go into debt, don't borrow a bunch of money to make preparations, things like that.
00:57:05.380 | But I guess my closing appeal to you would be, if you are the kind of person who puts
00:57:11.660 | all your planning in the traditional financial planning matrix, I would ask you to reconsider
00:57:20.100 | that because there are many things that traditional financial planning cannot account for. And
00:57:26.820 | the cost of buying some insurance is not much compared to the potential benefit of that
00:57:33.260 | insurance if you ever need it. I want to also finally broach one more subject which is difficult,
00:57:43.980 | but I think important as you consider how to put this into a common financial context.
00:57:50.460 | Over the years, since I left the financial advice industry, I've thought about a lot
00:57:54.380 | of the opinions that I once held, I've thought about the things I once advised, and I've
00:57:58.620 | tried to assess, especially with the perhaps perspective of time, I've tried to assess
00:58:05.100 | my own actions and if I was satisfied with the things I said, the things I did, my motivations,
00:58:11.820 | etc. And for the most part, I'm fairly happy with my involvement in that industry. I got
00:58:20.140 | some things wrong, I made some mistakes, some of them were just due to errors of inexperience,
00:58:27.580 | things I wouldn't say or do today, but for the most part, I'm fairly satisfied with my
00:58:31.660 | career in that business. But I've reflected a lot on the bias that is easy to have depending
00:58:41.300 | on your exposure to an industry. There's a saying that goes something like, "It's very
00:58:49.500 | hard to convince a man of something if his entire paycheck rests on his not recognizing
00:58:54.620 | it or not conceding the point." Something like that. And there's a real truth to that
00:58:58.660 | that I think is worth considering. That it's very hard to convince somebody of something
00:59:04.420 | if their paycheck depends upon them not conceding the point. Because none of us are immune to
00:59:13.140 | the pressures of our paychecks, none of us are immune to those outside influences and
00:59:19.540 | outside forces. We can try very hard to insulate ourselves, but at the end of the day, none
00:59:24.140 | of us are immune. I hate doing shows, in a sense, like this. Because it seems like, even
00:59:31.180 | though I don't think today's show is particularly divisive, any time I do a show that is hot
00:59:36.100 | or a little bit divisive or features some of my less popular opinions, I recognize the
00:59:41.180 | fact that it results in a lower paycheck. And that is hard to take. And so the point
00:59:47.020 | is none of us are immune from these things. But in the financial industry, I think I would
00:59:51.660 | divide a lot of times financial advisors and financial pundits largely into two camps.
00:59:57.700 | There are the mainstream financial advisors and financial pundits, and they largely necessarily
01:00:07.340 | thrive on and preach optimism in all regards. And then there's the other side of the financial
01:00:16.860 | advice industry that largely makes its living on fear, doomsday predictions, and largely
01:00:23.940 | thrives on catastrophism. And it seems to me that we should acknowledge and recognize
01:00:30.300 | that both of these segments in the modern financial advice industry depend on their
01:00:35.980 | particular viewpoint being right in order to generate their paycheck. For example, when
01:00:41.620 | I sold investments, one of the things I had to do to get people to invest money was to
01:00:47.580 | convince them of the long-term value of investing their money with me. Because why would anybody
01:00:55.060 | take their hard-earned money out of the bank or out of whatever it's invested in and invest
01:00:59.700 | it in what you're suggesting to them if they didn't believe that they were going to get
01:01:03.900 | a better return, if they didn't believe that they were going to get a better outcome? They
01:01:08.220 | have to believe that their situation is going to be improved in some way, and they have
01:01:12.140 | to believe that improvement is going to come financially. And so you talk about all the
01:01:17.300 | good things that highlight your perspective, your opinion. You talk about the glowing returns,
01:01:23.540 | you talk about the stability and the safety of your investments, you try to diffuse the
01:01:27.580 | objections and the concerns that the client has and find a way to make them comfortable.
01:01:31.460 | And that's fine, that's right. Hopefully you as an advisor have studied your issues and
01:01:36.100 | then you've come to your opinion and you're trying to share that with somebody. But it's
01:01:39.900 | not in your best interest if you are a person who's making their living on selling stocks,
01:01:44.980 | etc. It's just not in your financial best interest or even your psychological best interest
01:01:50.420 | to all of a sudden become a catastrophist. If your personal opinion is that the dollar
01:01:56.980 | is going to become worthless and the price of gold is going to shoot through the roof,
01:01:59.740 | it's a little hard then to, in good conscience, recommend to somebody that they buy your mutual
01:02:05.820 | fund. And so what tends to happen in that sphere of the business is you tend to feed
01:02:12.320 | your confirmation bias. You tend to fill your mind and your psyche with positive articles
01:02:18.660 | talking about why the catastrophists and the doomsdayers are wrong, talk about the long-term
01:02:23.860 | stability, talk about the case for optimism, talk about the incredible size and resiliency
01:02:27.700 | of the American economy, blah blah blah. You fill your mind with this. And if you're intelligent,
01:02:31.940 | you probably do it intentionally. I did. Because I needed to be, myself, psychologically strengthened
01:02:40.140 | in that position so that I could share that strength with other people. There's an old
01:02:46.300 | saying about selling that is, there is an old saying about selling which says that sales
01:02:54.180 | is the transfer of emotion or the transfer of enthusiasm. And so when you're selling
01:02:59.820 | something you are trying to transfer the enthusiasm that you have for something into another person.
01:03:07.260 | And so for you to be able to do that successfully, effectively, repeatedly, you need to have
01:03:13.820 | a high level of enthusiasm for what you are doing. So it's very hard for most of us who
01:03:20.700 | try to, and most financial advisors, try to come from a place of ethical integrity where
01:03:24.700 | they believe what they say. It's very hard to do that if you don't believe what you're
01:03:27.380 | saying. You can't do it and keep things going. So the mainstream financial advisor depends
01:03:33.340 | upon, for his livelihood, depends upon a presuppositional commitment to positivism, towards the positive
01:03:42.700 | story to help paint you into your retirement, to help you see yourself walking down the
01:03:48.620 | beach, etc. Now on the flip side, there's a whole market filled with catastrophists.
01:03:54.060 | And they usually sell products like investment newsletters, they sell books, they sell gold
01:04:00.380 | coins or they sell preparedness food or bunkers or things like that. And from the catastrophist
01:04:07.020 | perspective, the catastrophist has an intense investment into disaster, has an intense investment
01:04:14.620 | into everything going wrong. Because when you're trying to talk about all the problems
01:04:19.740 | and all the things that go wrong and you're trying to get somebody to get off their couch
01:04:23.580 | and write a check and buy a gold coin or write a check and buy a pallet full of preparedness
01:04:28.860 | food, you got to really believe what you see so that you can get that person to make that
01:04:35.540 | move. And so the catastrophist basically depends upon things, everything going bad. And so
01:04:44.260 | they can hardly admit when things don't always go bad or they can hardly admit when
01:04:48.180 | they've been wrong. And they can hardly admit when there's a case for optimism or
01:04:53.460 | reasons to believe that things could get better or reason to believe that things couldn't
01:04:56.940 | get worse than they were before. And I don't know how you untangle those two camps. I don't
01:05:04.620 | know how. Because there's so much invested in them. So here's what I would say to you.
01:05:11.700 | The only person ultimately that's going to matter is you. And I'll do my very best
01:05:18.300 | to try and tell you what I think and to be, if there's a link between the optimist and
01:05:23.540 | the catastrophist, maybe the realist. Right? Because the realist acknowledges that just
01:05:28.060 | because everything has gone well in the past doesn't mean that everything is going to
01:05:31.740 | go great in the future. And the realist should also acknowledge that just because we can't
01:05:35.020 | see a way out of this problem right now, that doesn't mean that we can't find a way
01:05:38.660 | out a year from now or two years from now, etc. Things are probably going to be a mixture.
01:05:43.300 | They're probably not going to be as bad as I think they could be. And they're probably
01:05:46.060 | not going to be as good as I hope they are. But if you come back and try to maintain your
01:05:51.780 | own realist perspective, and then you come back and start counting the cost. Okay, if
01:05:56.220 | this, then what? If this, then what? If things go well, then what happens? If things go poorly,
01:06:01.100 | then what happened? And then bring that down to your individual decisions, you can start
01:06:06.340 | to, in my opinion, make some intelligent decisions and put in place some plans, etc. That's
01:06:12.900 | what I try to do. That's what I try to teach you. I think it's sound. If you see any
01:06:16.460 | errors in my thinking or any flaws in my analysis, feel free to email me and let me know. Joshua@radicalpersonalfinance.com.
01:06:22.100 | I'd be happy to hear from you and consider where I may be getting something wrong. But
01:06:26.420 | you're the best judge of where you are. And you're the best judge of what makes sense
01:06:31.500 | for you. You know, I guess as I close, I'll just mark it. I have a whole course on how
01:06:36.940 | to survive and thrive during the coming economic crisis. I wrote it because I was concerned
01:06:40.640 | about the stuff. I started doing a lot of the stuff that I'm doing now because I've
01:06:43.420 | been concerned about these things. And I wrote the course to try to give you my best thinking
01:06:47.540 | on the subject. But let me give you just a simple example. As I looked at it, I said,
01:06:52.600 | you know, one valid solution to planning for catastrophe is move to a cabin in the woods.
01:06:59.740 | Right? That's a valid solution. But I don't want to live in the cabin of the woods in
01:07:04.860 | the middle of nowhere. And I would feel really dumb if I moved to a cabin in the middle of
01:07:10.180 | the woods in the middle of nowhere and live there for 20 years and then find out that
01:07:15.340 | things are more or less how they are today and that the catastrophe didn't happen. Now,
01:07:19.180 | if I were certain that there were thermonuclear war coming on the first of next month, the
01:07:22.260 | cabin in the woods would now take on a lot more appeal. But since I can't be certain
01:07:25.100 | about that, I have to weigh the cost of the cabin in the woods as compared to the risk
01:07:29.740 | of being wrong. And so that's why I've started, worked hard to try to come up with other solutions.
01:07:35.140 | Now, I don't think the cabin in the woods is a bad idea. I think it's a great idea,
01:07:39.740 | but not as a primary plan for me, at least. Maybe for you it will be. And so the solution
01:07:47.260 | that you come to has to be a solution that you're happy with if you're right in your
01:07:52.620 | analysis or if you're dead wrong in your analysis. And I think that if you get that way, if you
01:08:01.820 | can make that happen and you can build plans and solutions that you're happy with either
01:08:05.900 | way, then you have a really stable platform to build from. I know this was a fairly long
01:08:12.420 | show. I hope that I struck the right tone with you. I hope this was helpful to you.
01:08:16.860 | I hope that I'm succeeding in conveying how my concern is increasing and I think there's
01:08:22.480 | good reason behind that increasing concern, but yet not conveying, trying to sell fear
01:08:29.060 | or not conveying any sense of panic, et cetera, which those motions are unproductive and unhelpful,
01:08:35.820 | but just simply to try to convey a little bit of concern to get you to think about things
01:08:39.640 | that the mainstream financial planning industry doesn't usually think about. If you think
01:08:43.740 | that any of my ideas on solutions could be helpful for you, feel free to go to radicalpersonalfinance.com/store.
01:08:50.180 | Sign up for my How to Survive and Thrive During the Coming Economic Crisis. There's a money
01:08:55.140 | back guarantee on that. So if you buy it and you take my course and you find that at the
01:08:58.720 | end of the day, Joshua was just selling fear and being a catastrophist, you won't find
01:09:03.060 | that. But if you do, you can get a refund. But I think what you'll find is if any of
01:09:06.220 | this stuff concerns you and you're thinking about what to do, I do my best to give you
01:09:09.960 | some really useful solutions that can help. And then as we watch events unfold, I'll be
01:09:14.960 | adding more content to that course as well. RadicalPersonalFinance.com/store and I'll
01:09:19.160 | be back with you very soon.
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