Latest / Success Story with Scott Clary / Lessons - Building Wealth Through Cash Flow and Financial Intelligence | Andy Tanner - Investment Strategist

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Lessons - Building Wealth Through Cash Flow and Financial Intelligence | Andy Tanner - Investment Strategist · Success Story with Scott Clary

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  In this lessons episode, learn how the biggest mistake new investors make is chasing deals
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  before finding mentors, discover why shifting from a culture of advice to one of education transforms
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  your investing journey, how building a system with clear criteria leads to better decisions,
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  and why mastering four pillars, fundamental analysis, technical analysis, cash flow positioning,
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  and risk management is essential for long-term success.
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  When people, and you can talk about your own experience too, because I think that the best teachers
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  are people that recognize their own mistakes, and then they stop people from making those mistakes
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  as much as they can. And the question was actually going to be what are the biggest mistakes
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  that people make when they first start investing. But I'm going to change how I say that question
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  and ask you what were the biggest mistakes that you made when you first started investing.
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  One of the biggest mistakes that I made is I started looking for deals before I started looking
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  for people. And if people have heard me share the story before I apologize, but it's instructive.
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  I'll give you an example. So my wife and I, we read the book, Rich Dad Poor Dad, were
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  newly married, not quite newly wedged, but pretty close. And a friend of mine gives me this book,
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  Rich Dad Poor Dad. And I started reading it, and immediately I knew I wanted to share this with
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  my wife. So I bought another copy. And as my wife and I do, we do everything together, and I said,
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  hey, would you like to read this with me? I'll read a paragraph, you'd read a paragraph,
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  let's go through this journey together. So we finished the book and the mistakes that we made
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  started is we were going to be real estate investors. And we failed miserably. I'll bet we looked
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  at 100 houses. We didn't buy one, not one. And it's because we just thought that book was about
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  assets and liabilities. We didn't understand what that book was, my wife found it. She's in fact,
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  she said, let's read it again. You always failed, didn't buy anything, no, no progress. And she said,
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  let's read it again. See what we missed. I go, we miss anything. We read every page because let's
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  just read it again. And I'm not kidding. We go to approach the book for the second time. And she says,
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  I got it. I know what our first mistake was. I go, we haven't even opened it yet. She goes,
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  look at the cover. She goes, this isn't a book on assets and liabilities. This is a book on
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  mentorship, rich dad, poor dad. We already have poor dad. So we're halfway there, man. And we made a
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  shift. We made a shift where we stopped looking for deals. In other words, we stopped looking to just
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  do a deal or find a, find a deal to do. And we started looking for people that could teach us
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  how to get things done. And that, that shift, that, that shift in focus from people just want to
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  invest. And what happened is we made a shift from the culture of advice to the culture of education.
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  So let me talk about the mistake if I could because I think it's a great thing that I learned. And
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  if someone can learn it, I think it'll help them. So Wall Street is this culture of advice. And
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  the question I get more than any other is, Andy, if you only had $10,000, what would you buy? Or
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  Andy, what do you think of Bitcoin? Or Andy, what do you think of real estate? Or where do you think
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  of this AI stock? Or you know, they're asking vice, you know, if you were to say Andy,
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  uh, start by gold, if I said yes, or if I said no, uh, would you know anything more about gold
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  than just before? And if the market changes, then how do you know when to change? So when people say,
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  what do you think about gold, this is what do you know about gold? If they say nothing, this is
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  probably not your best asset. So we shifted from this culture of advice of trying to figure out
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  what to buy to a real culture of education to learn how to buy it. And it was amazing. We,
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  we, I was at a gathering within probably a month in what you, what you focus on expands,
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  what you look for you will find. Instead of looking for deals and looking for people and I'm at
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  this party, an old basketball buddy of mine from a few years ago named Greg hadn't seen him in a
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  few years. And I says, what are you up to? He goes, well, I'm a real estate investor really. So
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  now I became kind of a stalker. And I said, uh, you know, I want to come to your office and watch
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  you do this, what you, what you do is just what? And I, he says really now that issue goes interesting
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  with me. I go, I've been trying to buy real estate for six months. I'm bought one. I just want to see
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  how it's done. And with a little convincing and some bribery, uh, he said, okay, you and your wife,
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  you'd be in my office nine am by Wednesday. We had our first property. So that shift from just
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  trying to find an asset to really finding a person that could help me. I think that's one lesson.
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  One mistake that you make is if you try to go it alone, very few people, I think can
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  stand and win entrepreneur the year. And so, oh, yeah, I did this all by myself. And you know,
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  this was easy to do. So one mistake is, is trying to do things on your own. It's a team sport.
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  I'm curious when you look at that first deal that you did, what was the thing that shadowing Greg
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  showed you that you did not, that you were not able to figure out on your own? Well, first of all,
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  I would look at a deal with no education. And there was a fog of concern that would come in. We
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  looked at a lot of deals, but I'd say there were just details to it and say, well, why are they offering
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  for this price? It seems like a good price, but, you know, maybe, maybe it's not. I didn't feel
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  comfortable in pulling the trigger. And what if the renters baked crystal meth in the basement? And
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  right now it's summer, but what if there's a leak in the roof? And I can't see it. I don't know
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  construction. And, you know, all these questions that I didn't know, the thing I learned from Greg is
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  he had a system. And he had a checklist that he would go through. And he says, you know, here's how
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  you check these things from financing to he had people, he had connections with mortgage brokers,
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  he had connections with agents, he had money lenders. Another thing I learned was to see said,
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  you know, but how to use the debt right and that you could use private money instead of your,
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  I mean, there's so many of those things. So the details, the biggest thing I learned from Greg is
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  there was a system and he invested based on criteria. He had a very specific criteria. And if it
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  matched it, it was a deal. If it didn't match it, it wasn't a deal. And he just, it was actually
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  quite simple from from that point on. Outside of having a checklist or a system, we actually
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  just spoke on another podcast a lot about mindset. So I think checklist system is very important.
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  What are some fundamental mindset shifts that you went through and you think other people have to go
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  through to be successful investors? I'll I'll revert back and maybe hit that nail one more time
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  at the risk of pounding it too far. It is I've I've taught for, you know, 30 years now. It is so
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  hard for people to go from the advice mindset to the education mindset. That is so tough.
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  And the reason is is the advice mindset is lazy. You think about I have so many people say this,
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  well, I don't want to learn anything. Just tell me what to buy. In other words, I don't want to do
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  any work. I don't want any growth. I don't want any knowledge. Just tell it. It's like they want free
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  money. Well, just if you just tell me what to do, I'll do this and I'll get free money. And there's
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  no after that. And that's how Wall Street gets rich, by the way, is they take that mindset and they
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  charge fees under the guys that they could do it better than you. And they get rich because of it.
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  So I would say above all, making that shift from the advice culture and listening to other people
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  telling you what to do to the education culture where you don't need advice, you know what to do.
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  So I would say that's a that's a mindset that is really, really important. And then you and I
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  spoke about this one is I have, you know, I have four four main areas of study when people say,
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  all right, education boy, you know, what should I learn? I say, well, you should learn four things.
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  And the most important of those four, by far, is risk management.
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  The mindset of understanding risk, not from a tolerance, you certainly have to have some tolerance.
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  But understanding risk, I would say mechanically, maybe might be a word to say it to to take that
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  concept of risk and make it measurable and and understand what those metrics mean and understand
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  the relationship between risk control and sizing and all of the different tools we have for risk.
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  I think the mindset of understanding risk, that's a huge one to have. If a person can't deal with
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  risk, forget about it. It's over before it starts. So those four pillars, you have fundamental
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  analysis where you understand the numbers, you have technical analysis where you retrends and
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  patterns, you have position management for strategic placement of cash, so then you have the risk
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  management. Talk to me about how these sort of four pillars, they all work together because you
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  mentioned risk is sort of the first one that you need people to understand. But then there's three
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  more that are also also very important. Yeah, I'd say risk is number one in terms of importance.
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  But it's really the last but not least, it's the last thing you do before you pull the triggers,
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  you have a higher risk. So I start with impressive that you know those four, we start with
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  fundamental analysis. And the word fundamental, if you don't mind a long form podcast, this is nice
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  because I get to talk about it a little bit. We have no time limit. We can edit. We can always edit,
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  you know, I'm the guy asked me a 10 cent question. I'll give you a five dollar answer.
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  So fundamentals is an important idea. What is what does what does that jargon mean?
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  Well, everyone knows what fundamentals are. They're the important things. They're the things
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  they're basic. If you're going to be a basketball player, you got to dribble past and shoot or you're
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  going to struggle. The fundamentals of marriage or listing communication love and selfishness,
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  there's just certain fundamental things. Well, in every business, in every entity, whether it's a
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  household, a church, a nonprofit, a school, a nation, a Venezuelan or the US, everyone has a
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  financial statement. Everyone does. They have income, they have expenses, they have assets,
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  they have liabilities, they have a statement of cash flow. And a person can look at those as a start.
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  And there's just certain things that should be there. Fundamentally, you should have cash flow,
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  you should have earnings and runners surplus, not a deficit. That's fundamental. You should have
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  value, you give to other people. You know, all of business is if it has earnings, all that means
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  is that there's some value that they're giving to the world and they're able to deliver that value
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  with certain efficiencies that allow for profit. That's all it is to me. So when you invest,
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  you're really a business owner. So if I, if it were a stock, for example, or even a real estate
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  deal, for example, that we'd say, look, are these fundamental boxes we mentioned criteria?
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  Can we check those boxes? Warren Buffett says, is there a moat? You know, Geat talks about Coca-Cola
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  selling two billion drinks a day. That's a castle that's, you can have a Cola war in the 80s and
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  you're not going to win that thing. I mean, their moat is solid because the value they deliver
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  on such a grand scale and such efficiencies. So the first two fundamentals and tentacles are
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  information gathering. And the first fundamentals tells me there's just our things running the way
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  they should. Are they checking the fundamental boxes of a business that makes sense? And generally,
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  those are valuations. It helps you know what you're buying. If prices what I pay and values what
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  I receive, fundamentals gives me the lighting to know what I'm getting. So for example, you're in
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  the VC world. You've had a lot of experience in, you know, credit investors. So if I get a PPM
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  from you, you say here, invest in my deal, you know, the longer the brochure, the worse the deal,
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  usually because they're having to flower this thing up and put lipstick on the pig with this big
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  long brochure. Just show me the fundamentals. And I'll know, show me the fundamental analysis.
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  You know, show me show me that those basic things and that they're in order.
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  And then maybe we risk some capital. The second pillar you mentioned, which is technical analysis,
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  is studying markets and and sentiment. And that's important for more than stock investors. That's
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  actually very important for options investors because the difference is is, you know, when you buy
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  a stock, you know, a company, there's no expiration date. So you're always going to invest in a stock,
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  but you're always going to trade an option because they expire. And that expiration date has a
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  lot to do with where the prices. So we need, if we're going to add the option element to that,
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  we need to understand how to get metrics and take emotions of market and put it into data
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  that we can interpret. So once I have an understanding of the business and then I have an
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  understanding of the emotions of the market, I can take those two things and it's just information
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  gathered. I can't change fundamentals. I can't change market sentiment, but I can take that
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  information and then I go to the third when you mentioned, which is cash flow. How am I going to
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  position myself to share and contribute and and share in those profits? How am I going to put
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  myself in the way of that success and share in that opportunity? And then, of course, the last
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  one you mentioned is, okay, when that's all over, what's your plan B? Yeah. And you mentioned
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  earlier, what's interesting gambler and investor gamblers don't have a plan B. They bet on red
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  and once the wheel starts turning, what's your plan B? If it misses, you don't have one. But
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  investors, they have exit strategies. They have hedges. They have insurance. They have sizing.
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  They have lots of strategies for adjustment. They can pivot while the wheel's still spinning.
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  You mentioned KPIs, key performance indicators. If those start to get ugly, you can pivot, move
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  and influence. So those are some of those with four pillars of investing. And that's usually where
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  I start with a new investor is saying, let's learn those four because they transcend language.
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  They train, I mean, show me any company in the world income, income expenses, asset liabilities.
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  It doesn't matter where, which might be why Warren Buffett, you know, he's investing in Japan a
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  lot now. It's the same game, same thing. Thanks for tuning in. If you found this valuable,
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  don't forget to hit that subscribe button so you never miss an episode. And if you want to dive
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  deeper into this conversation, check out the links in the description to watch the full episode.
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  See you in the next one.