Latest / Success Story with Scott Clary / Andy Tanner - Educator, Investor & Author | The Four Pillars of Investing

Transcript

Andy Tanner - Educator, Investor & Author | The Four Pillars of Investing · Success Story with Scott Clary

• 0:00
  It is so hard for people to go from the advice mindset to the education mindset.
• 0:05
  And the reason is the advice mindset is lazy.
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  In a world where most people gamble with their money,
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  he teaches them how to take control of it.
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  Andy Tanner is an educator, investor, and the mind behind the cash flow academy.
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  A global platform that helps everyday people understand markets,
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  manage risk, and build real financial freedom.
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  Gambling is a process where money is moved from the uneducated to the educated.
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  It's just odds.
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  But investing is business ownership.
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  Investing is only an asset.
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  From stocks to cash flow systems, he's coached thousands through the strategies
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  the wealthy used, but rarely talk about.
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  He turns confusion into confidence and fear into financial literacy.
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  Where did your journey start in investing in education?
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  I got started in education as a student, it was by losing money.
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  In college, it's great for a lot of people.
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  A lot of people find a passion in that I never did.
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  And so it was really after college all that basketball stuff was over,
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  I found a love for teaching.
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  That's something I really enjoyed.
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  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
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  before I started looking for people.
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  When you go through your life, you're either a net producer or you're a net consumer.
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  You got all the freedom in the world to work your butt off,
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  enjoy that journey a little bit more and stress a little bit less
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  because it's going to be okay.
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  Andy, you talk about the difference between gambling and investing
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  being education.
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  So explain that thought to me.
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  Well, you know, gambling's an interesting thing.
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  If you go to Vegas, it's not just education.
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  I think it's also temperament to mean if you get on the other side of the
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  roulette table, the guy running that never exclaims.
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  They never shrug if they lose.
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  They never cheer when they win.
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  And they just know the math.
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  They know the probabilities.
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  They know the table limits.
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  Gambling is simply a process.
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  Gambling's a process where money's moved from the uneducated to the educated.
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  It's just odds.
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  But, you know, investing is business ownership.
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  You know, investing is owning an asset.
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  And that's a huge difference in gambling.
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  Gambling, you're placing a bet on something.
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  But with investing, you know, you're going to, you're going to own something,
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  you know, own an asset that serves people.
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  And that takes education.
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  That takes lots of risk management education.
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  It takes a fundamental analysis education.
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  So it's a, I get it.
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  You know, it's funny you'd ask that because in the election,
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  they've created these securities,
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  these vehicles where people can bet on the winner.
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  That's not owning anything.
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  You know, I understand the people like the entertainment of it.
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  But that's really the difference.
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  And as you said, requires education for sure.
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  But when did you start to go down this path of understanding that, listen,
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  if I'm going to be a successful investor,
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  I'd better get some education because again, common sense is in common.
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  And I think that a lot of people invest without the education component.
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  And that just ends up looking like gambling.
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  So where did your journey start in investing in education and helping you
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  and you understanding all these ex-factors that could lead to investment success?
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  A losing money.
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  That's, that's used to where a lot of us start.
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  Yeah, there's a, there's a huge culture of advice.
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  And education is, it's kind of an unsung hero.
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  It's not something people value as they should.
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  Education for most people is something they're trying to get out of the way of.
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  You know, you'll go to a college campus and someone will say,
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  you know, what are you?
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  I'm a junior, but I'm really trying to finish my education.
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  I'm trying to finish.
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  And to me, that's a very strange approach to it because education is actually fun.
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  It's, it's illumination.
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  It's discovery.
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  It's a great journey.
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  But how I got started in education.
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  Oh my gosh.
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  As a student, it was by losing money, not knowing what I was doing.
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  And that, you know, those are great little
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  classes you can take for yourself is through mistakes.
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  But the other thing for me personally, I'll bet it's true for listeners.
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  Have you ever found that you learned something better if you're forced to teach it?
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  I think that when, you know, the way my brain is worked is I didn't get into teaching
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  because I was beaten more in Buffett and investing contest.
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  You can do that.
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  I got into education because it was Kim Kiyosaki.
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  He once told me his size is Andy, I found out with some pretty cool teachers.
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  You have an ability to simplify.
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  And so that really put a feather in my cap.
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  I was grateful because I didn't feel I had a lot of talents.
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  But I got into education because I had a ability to simplify things that were complex.
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  And it's just fun to learn.
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  So as a student, I got into it because I had to.
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  I just learned losing too much money.
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  As a teacher, I got into it because, you know,
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  I'm a big guy.
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  I'm six foot eight.
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  So I can screw in your light bulb.
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  I can put a star in your tree or I can make stuff simple.
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  And, you know, that's about that's what I can offer.
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  I guess because when the basketball career doesn't work out,
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  then you got to figure out something else to do, right?
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  Boy, you got that right.
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  And that's an interesting comment too,
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  because that's the only reason why the college was to play hoop.
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  In college, it's great for a lot of people.
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  But, you know, that catalog starts with accounting, biology,
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  communications all the way down to geology.
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  And a lot of people find a passion in that alphabet somewhere.
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  I never did.
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  I never found something.
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  I was like, ah, chemistry.
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  Awesome.
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  You can't wait to go to that.
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  And so it was really after college all that basketball stuff was over
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  where you look around and I found a love for teaching.
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  And that's something I really enjoyed.
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  So that was great.
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  When people, and you can talk about your own experience too,
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  because I think that the best teachers are people
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  that recognize their own mistakes.
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  And then they stop people from making those mistakes as much as they can.
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  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.
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  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
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  when you first started investing.
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  One of the biggest mistakes that I made is I started looking for deals
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  before I started looking for people.
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  And if people have heard me share the story before I apologize,
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  but it's instructive, I'll give you an example.
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  So my wife and I, we read the book,
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  Rich Dad Poor Dad, we're newly married.
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  I'm not quite newlyweds, but pretty close.
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  And a friend of mine gives me his book, Rich Dad Poor Dad.
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  And I started reading it and immediately I knew I wanted to share this with my wife.
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  So I bought another copy.
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  And as my wife and I do, we do everything together.
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  And I said, hey, would you like to read this with me?
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  I'll read a paragraph.
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  You'd read a paragraph.
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  And let's go through this journey together.
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  So we finished the book and the mistakes that we made started
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  is we were going to be real estate investors.
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  And we failed miserably.
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  I'll bet we looked at 100 houses.
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  We didn't buy one, not one.
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  And it's because we just thought that book was about assets and liabilities.
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  We didn't understand what that book was.
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  My wife found it.
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  She said, let's read it again.
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  You always failed, didn't buy anything, no progress.
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  And she said, let's read it again.
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  See what we missed.
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  I go, we miss anything.
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  We read every page because let's just read it again.
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  And I'm not kidding.
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  We go to approach the book for the second time.
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  And she says, I got it.
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  I know what our first mistake was.
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  We haven't even opened it yet.
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  She goes, look at the cover.
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  She goes, this isn't a book on assets and liabilities.
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  It's a book on mentorship, Rich Dad Poor Dad.
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  We already have poor Dad.
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  So we're halfway there, man.
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  And we made a shift.
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  We made a shift where we stopped looking for deals.
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  In other words, we stopped looking to just do a deal or find a deal to do.
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  And we started looking for people that could teach us
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  how to get things done.
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  And that shift in focus from people just want to invest.
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  And what happened is we made a shift from the culture of advice
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  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
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  that I learned and if someone can learn it, I think it'll help them.
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  So Wall Street is this culture of advice.
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  And the question I get more than any other is,
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  Andy, if you only had $10,000, what would you buy?
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  Or Andy, what do you think of Bitcoin?
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  Or Andy, what do you think of real estate?
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  Or where do you think of this AI stock?
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  Or they're asking vice.
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  If you were to say Andy,
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  should I buy gold?
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  If I said yes, or if I said no,
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  would you know anything more about gold than just before?
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  And if the market changes,
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  then how do you know when to change?
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  So when people say, what do you think about gold?
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  I say, what do you know about gold?
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  If they say nothing, this is probably not your best asset.
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  So we shifted from this culture of advice of trying to figure out what to buy
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  to a real culture of education to learn how to buy it.
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  And it was amazing.
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  We, we, I said, a gathering within probably a month
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  in what you, what you focus on expands,
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  what you look for you will find.
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  Instead of looking for deals and looking for people,
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  and I'm at this party and an old basketball buddy of mine
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  from a few years ago named Greg hadn't seen him in a few years.
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  And I said, what are you up to?
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  He goes, well, I'm a real estate investor, really.
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  So now I became kind of a stalker.
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  And I said, you know, I want to come to your office
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  and watch you do this, what you, what you do is just what?
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  And he says, really not that issue.
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  He goes, interesting to me.
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  I go, I've been trying to buy real estate for six months.
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  I'm bought one.
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  I just want to see how it's done.
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  And with a little convincing and some bribery,
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  he said, okay, you and your wife, you'd be in my office nine am.
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  By Wednesday, we had our first property.
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  So that shift from just trying to find an asset
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  to really finding a person that could help me,
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  I think that's one lesson.
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  One mistake that you make is if you try to go it alone.
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  Very few people, I think, can stand and win entrepreneur the year.
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  And so, oh, yeah, I did this all by myself.
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  And, you know, this was easy to do.
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  So one mistake is trying to do things on your own.
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  It's a team sport.
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  I'm curious when you look at that first deal that you did,
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  what was the thing that shadowing Greg showed you
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  that you did not, that you were not able to figure out on your own?
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  Well, first of all, I would look at a deal with no education.
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  And there was a fog of concern that would come in.
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  We looked at a lot of deals.
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  But I'd say there were just details to it.
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  They say, well, why are they offering for this price?
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  It seems like a good price, but maybe it's not.
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  I didn't feel comfortable in pulling the trigger.
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  And what if the renters baked crystal meth in the basement?
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  And right now it's summer.
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  But what if there's a leak in the roof?
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  And I can't see it.
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  I don't know construction.
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  And, you know, all these questions that I didn't know,
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  the thing I learned from Greg is he had a system.
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  And he had a checklist that he would go through.
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  And he says, you know, here's how you check these things
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  from financing to he had people.
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  He had connections with mortgage brokers.
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  He had connections with agents.
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  He had money lenders.
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  Another thing I learned was, as he said,
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  you know, how to use the debt right.
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  And that you could use private money instead of you.
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  I mean, there's so many of those things.
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  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.
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  He had a very specific criteria.
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  And if it matched it, it was a deal.
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  If it didn't match it, it wasn't a deal.
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  And he just, it was actually quite simple from that point on.
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  Outside of having a checklist or a system,
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  we actually just spoke on another podcast a lot about mindset.
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  So I think checklist system is very important.
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  What are some fundamental mindset shifts
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  that you went through and you think other people
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  have to go through to be successful investors?
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  I'll revert back and maybe hit that nail one more time
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  at the risk of pounding it too far.
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  It is, I've taught for, you know, 30 years now.
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  It is so hard for people to go from the advice mindset
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  to the education mindset.
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  That is so tough.
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  And the reason is, is the advice mindset is lazy.
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  You think about, I have so many people say this.
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  Well, I don't want to learn anything.
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  Just tell me what to buy.
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  In other words, I don't want to do any work.
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  I don't want any growth.
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  I don't want any knowledge.
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  Just tell me, it's like they want free money.
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  Well, just, if you just tell me what to do,
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  I'll do this and I'll get free money.
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  And there's no after that.
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  And that's how Wall Street gets rich, by the way,
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  is they take that mindset and they charge fees
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  under the guys that they could do it better than you.
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  And they get rich because of it.
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  So I would say, above all, making that shift from the advice culture
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  and listening to other people telling you what to do
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  to the education culture where you don't need advice,
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  you know what to do.
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  So I would say that's a mindset that is really, really important.
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  And then you and I spoke about this one.
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  Is I have four main areas of study when people say,
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  all right, education boy, you know, what should I learn?
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  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.
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  You certainly have to have some tolerance.
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  But understanding risk, I would say mechanically, maybe,
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  might be a word to say it, to take that concept of risk
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  and make it measurable and understand what those metrics mean
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  and understand the relationship between risk and control
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  and sizing and all of the different tools we have for risk.
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  I think the mindset of understanding risk,
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  that's a huge one to have.
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  If a person can't deal with risk,
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  forget about it, it's over before it starts.
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  So those four pillars, you have fundamental analysis
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  where you understand the numbers, you have technical analysis
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  where you read trends and patterns, you have position management
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  for strategic placement of cash flow, then you have the risk management.
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  Talk to me about how these sort of four pillars they all work together
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  because you mentioned risk is sort of the first one
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  that you need people to understand.
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  But then there's three more that are also very important.
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  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,
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  it's the last thing you do before you pull the triggers,
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  you have a higher risk.
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  So I start with, impressive that you know those four,
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  we start with fundamental analysis.
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  The word fundamental, if you don't mind a long form podcast,
• 15:55
  this is nice because I get to talk about it a little bit.
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  You do, we have, we have no time limit.
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  And we can, we're in the schedule.
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  Yeah, we can edit.
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  We can always edit, you know.
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  You know, I'm the guy asked me a 10 cent question.
• 16:08
  I'll give you a $5 answer.
• 16:10
  So fundamentals is an important idea.
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  What is, what does, what does that jargon mean?
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  Well, everyone knows what fundamentals are.
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  They're the important things.
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  They're the things that are basic.
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  If you're going to be a basketball player,
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  you got to dribble past and shoot or you're going to struggle.
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  The fundamentals are marriage or listing,
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  communication, love, and selfishness, right?
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  There's just certain fundamental things.
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  Well, in every business, in every entity,
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  whether it's a household, a church,
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  a nonprofit, a school, a nation,
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  only Venezuela or the US,
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  everyone has a financial statement.
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  Everyone does.
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  They have income,
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  they have expenses, they have assets,
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  they have liabilities,
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  they have a statement of cash flow.
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  And a person can look at those as a start
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  and there's just certain things that should be there
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  fundamentally.
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  You should have cash flow.
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  You should have earnings and runners surplus,
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  not a deficit.
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  That's fundamental.
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  You should have value.
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  You give to other people.
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  You know, all of business is if it has earnings,
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  all that means is that there's some value
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  that they're giving to the world
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  and they're able to deliver that value
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  with certain efficiencies that allow for profit.
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  That's all it is to me.
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  So when you invest, you're really a business owner.
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  So if I, if it were a stock, for example,
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  or you're going to real estate deal, for example,
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  that we'd say, look,
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  are these fundamental boxes we mentioned criteria?
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  Can we check those boxes?
• 17:39
  Warren Buffett says, is there a moat?
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  You know,
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  Gita talks about Coca-Cola selling two billion drinks a day.
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  That's a castle that's,
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  you can have a Cola war in the 80s
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  and you're not going to win that thing.
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  I mean, their moat is solid
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  because the value they deliver on such a grand scale
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  and such efficiencies.
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  So the first two fundamentals and tentacles
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  are information gathering.
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  And the first fundamentals tells me
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  there's just art things running the way they should.
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  Are they checking the fundamental boxes of a business
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  that makes sense?
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  Generally, those are valuations.
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  It helps you know what you're buying.
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  If prices what I pay and values what I receive,
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  fundamentals gives me the lighting to know what I'm getting.
• 18:25
  So for example, you're in the VC world.
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  You've had a lot of experience in,
• 18:30
  you know, credit and investors.
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  So if I get a PPM from you,
• 18:34
  and you say here, invest in my deal,
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  you know, the longer the brochure, the worse the deal.
• 18:37
  Usually because they're having to flour this thing up
• 18:41
  and the lipstick on the pig with this big long brochure.
• 18:44
  Just show me the fundamentals.
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  And I'll know, show me the fundamental analysis.
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  You know, show me show me that those basic things
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  and that they're in order.
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  And then maybe we risk some capital.
• 18:56
  The second pillar you mentioned,
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  which is technical analysis,
• 19:00
  is studying markets and and sentiment.
• 19:05
  And that's important for more than stock investors.
• 19:08
  That's actually very important for options investors
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  because the difference is, you know,
• 19:13
  when you're buying a stock, you know,
• 19:14
  a company, there's no expiration date.
• 19:16
  So you're always going to invest in a stock,
• 19:19
  but you're always going to trade an option
• 19:21
  because they expire.
• 19:23
  And that expiration date has a lot to do with where the prices.
• 19:26
  So we need, if we're going to add the option element to that,
• 19:30
  we need to understand how to get metrics
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  and take emotions of market and put it into data
• 19:38
  that we can interpret.
• 19:40
  So once I have an understanding of the business
• 19:43
  and then I have an understanding of the emotions of the market,
• 19:46
  I can take those two things and it's just information gathering.
• 19:50
  I can't change fundamentals.
• 19:51
  I can't change market sentiment,
• 19:54
  but I can take that information.
• 19:56
  And then I go to the third when you mentioned,
• 19:57
  which is cash flow.
• 19:59
  How am I going to position myself
• 20:01
  to share and contribute and share in those profits?
• 20:05
  How am I going to put myself in the way of that success
• 20:08
  and share in that opportunity?
• 20:11
  And then, of course, the last one you mentioned is,
• 20:13
  okay, when that's all over, what's your plan B?
• 20:17
  And you mentioned earlier,
• 20:18
  what's interesting gambler and investor?
• 20:20
  Gamblers don't have a plan B.
• 20:22
  They bet on red.
• 20:24
  And once the wheel starts turning,
• 20:26
  what's your plan B if it misses?
• 20:28
  Yeah, you don't have one.
• 20:30
  But investors, they have exit strategies,
• 20:32
  they have hedges, they have insurance,
• 20:35
  they have sizing,
• 20:37
  they have lots of strategies for adjustment,
• 20:40
  they can pivot while the wheel's still spinning.
• 20:43
  You mentioned KPIs,
• 20:46
  key performance indicators.
• 20:48
  If those start to get ugly,
• 20:49
  you can pivot, move, and influence.
• 20:52
  So those are some of those with four pillars of investing.
• 20:56
  And that's usually where I start with a new investor
• 20:59
  is saying, let's learn those four.
• 21:02
  Because they transcend language,
• 21:05
  I mean, show me any company in the world,
• 21:08
  income expenses, asset liabilities.
• 21:11
  It doesn't matter where,
• 21:13
  which might be why Warren Buffett,
• 21:14
  he's investing in Japan a lot now.
• 21:17
  It's the same game.
• 21:18
  Same thing.
• 21:19
  You speak a lot about paper assets
• 21:23
  and focusing on cash flow from paper assets.
• 21:27
  So when we jumped on your pod,
• 21:30
  we were talking about VC and angel investment
• 21:33
  and startup and I've done some private equity as well,
• 21:36
  which is really just,
• 21:37
  you're taking a majority ownership of a company
• 21:39
  that has a little bit of historicals and a P&L
• 21:42
  as opposed to something that doesn't have any revenue at all.
• 21:44
  And that's sort of the world I know.
• 21:46
  Other investment opportunities,
• 21:48
  you have stocks, you have bonds,
• 21:50
  you have real estate.
• 21:51
  It talked me about paper assets
• 21:53
  because I don't think,
• 21:54
  I don't think I know as many people
• 21:56
  that know paper assets very, very well.
• 21:58
  I feel like if people jump into investing,
• 22:01
  they kind of look for the shiny things
• 22:03
  that all their friends
• 22:04
  and maybe they see on Twitter or online, right?
• 22:07
  I don't know if they understand
• 22:09
  how to use paper assets for cash flow.
• 22:11
  So maybe just give us a breakdown
• 22:12
  of why you emphasize those.
• 22:15
  We're talking about asking me a question
• 22:17
  that can't wait to answer.
• 22:18
  I mean, that one's like,
• 22:19
  that's a softball over the plate, man.
• 22:23
  And I enjoy it and I appreciate the question
• 22:25
  because I think it's an opportunity to clear up a lot.
• 22:28
  So a lot of people will say,
• 22:30
  well, a paper asset is like a stock
• 22:32
  or a contract or something on paper.
• 22:35
  And it's all papers.
• 22:36
  Like, similar to say,
• 22:38
  well, he's a millionaire on paper,
• 22:39
  but not from real.
• 22:41
  And they have this thing called real estate.
• 22:44
  And so it's really funny.
• 22:47
  We might be able to get two birds with one stone on this.
• 22:50
  A lot of people,
• 22:52
  you talked a little bit about the,
• 22:54
  you know, on our podcast,
• 22:56
  you talk about the locus of control.
• 23:01
  And what a lot of people feel is,
• 23:03
  well, I want something I can, you know, touch and feel.
• 23:06
  You know, something I can see, touch and feel.
• 23:08
  I can hold gold in my hand.
• 23:10
  If I can, you know, touch real estate,
• 23:12
  I can see the property and turn the door knob on the door.
• 23:15
  But boy, paper's just this sheet of paper.
• 23:18
  What's really behind it?
• 23:19
  And when you talk about the locus of control,
• 23:23
  what a lot of people will do is they'll put that,
• 23:25
  that focus on,
• 23:27
  they'll make their success a function of an asset class
• 23:32
  as opposed to a function of personal development.
• 23:35
  What I mean by that is they'll say,
• 23:37
  Andy, what's a better asset?
• 23:39
  Paper or real estate or business or Bitcoin or gold or oil?
• 23:45
  Tell me the best asset.
• 23:47
  And that advice gives me the key to success.
• 23:50
  That very discussion
• 23:52
  makes the success a function of the asset class.
• 23:58
  But what I think you'll find is whether it's Warren Buffett
• 24:01
  in stocks or, you know, someone in real estate,
• 24:05
  you know, T-Boom Pickens in energy,
• 24:07
  you know, whatever it is,
• 24:09
  you'll usually find a success of the investor.
• 24:11
  So I'm on this panel and there's all these people,
• 24:15
  and they have an open mic session where the audience can ask this panel.
• 24:19
  The panel was about which asset class was best.
• 24:23
  So I'm supposed to defend, you know, stocks and bonds and paper assets
• 24:27
  as being a superior asset class, which is silly.
• 24:30
  But it was a really interesting thing watching these guys fight
• 24:35
  as if their asset class was good and you're more on
• 24:38
  if you're Warren Buffett buying stocks, right?
• 24:41
  And whatever asset class you want to bash,
• 24:43
  you're going to look like an idiot.
• 24:44
  Because if I bash real estate,
• 24:47
  I got to go to a successful real estate investor,
• 24:50
  like, you know, maybe Kenny McAroy and knock on his door and say,
• 24:53
  yeah, this billion dollars, you have a real estate.
• 24:55
  What are more on you are?
• 24:56
  And if I say stocks are no good,
• 24:58
  I got a knock on Warren Buffett store and say,
• 25:00
  you ignore Amos.
• 25:01
  You know, what are you doing?
• 25:02
  You're way off Warren.
• 25:03
  You're way off.
• 25:05
  So what a paper asset is,
• 25:08
  is I'm sitting at a dinner later with the same guys as on this panel with.
• 25:13
  And it's a large table with many, many students.
• 25:19
  And this guy was selling gold.
• 25:22
  I said, well, how much gold should I buy?
• 25:25
  And he said much as you possibly can.
• 25:29
  It's the best asset.
• 25:30
  You know, it's historically held its value.
• 25:32
  And I was, you know, fungible.
• 25:34
  And I said, well, you know,
• 25:36
  a 10 million dollars in gold at my house doesn't seem very safe.
• 25:41
  He says, oh, no, I have a service.
• 25:42
  I've evolved.
• 25:43
  I'll even store it for you.
• 25:45
  I said, well, how do I know the money's mine?
• 25:47
  How do I know it's mine?
• 25:49
  He says, well, I, you know, I give you a receipt.
• 25:51
  And you have a thing that shows yours.
• 25:53
  I go, what do you write that on?
• 25:55
  And he knew he'd been had.
• 25:56
  He's like, paper funny.
• 25:58
  What's a deed?
• 26:00
  Paper.
• 26:01
  What's a, what's a claim check?
• 26:03
  What's a valley stub paper?
• 26:06
  So a paper asset
• 26:08
  in and of itself simply represents,
• 26:11
  and that's a long, I know it's a long one way to get to it.
• 26:13
  But a paper asset
• 26:16
  represents ownership of something, of value.
• 26:19
  And so a deed is a paper asset.
• 26:23
  A receipt for a gold store in a,
• 26:26
  and a vault somewhere's paper asset,
• 26:28
  a stock certifies.
• 26:30
  It's certain.
• 26:31
  It certifies.
• 26:34
  In the old days, money was backed by gold.
• 26:38
  Currency was, you had a silver certificate.
• 26:41
  It's certified.
• 26:42
  It literally set on it.
• 26:43
  This certifies that the bear of this note
• 26:47
  has an ounce of silver
• 26:49
  or whatever $100 and silver payable to the bear on demand.
• 26:53
  It was a certification.
• 26:55
  And so a stock is simply a certification
• 26:59
  of something that you can see touch and feel.
• 27:02
  One time I was at a similar debate
• 27:04
  and I was really tempted.
• 27:06
  I didn't think I'd do it, but I,
• 27:07
  I wanted to grab the guy's phone
• 27:10
  and his iPhone and just dump it in his,
• 27:12
  in his glass of water
• 27:14
  and say, why are you upset?
• 27:15
  It's not real.
• 27:17
  It's not real.
• 27:18
  The fact quit paying your phone bill
• 27:20
  because it's not real.
• 27:21
  In fact, quit eating your cereal.
• 27:23
  Quit going to Costco because it's not real.
• 27:25
  Quit buying your, your ketchup
• 27:27
  because it's not real.
• 27:28
  Quit putting eggs on mobile gas in your car
• 27:30
  because it's not real.
• 27:31
  All these stocks I own
• 27:34
  represent real value and real dollars
• 27:36
  and real dividends that come.
• 27:37
  So paper asset is in terms of stocks
• 27:41
  is when you have a piece of paper
• 27:44
  that certifies ownership.
• 27:46
  And when you talk about the VC world
• 27:50
  or the entrepreneur world,
• 27:53
  the reason I'll point people
• 27:55
  sometimes towards paper assets
• 27:57
  is if you got a nine to five
• 28:00
  and you don't have
• 28:02
  the ability to raise capital
• 28:04
  and you don't have the ability to manage people
• 28:05
  and you don't have the skills
• 28:07
  or maybe you're later in life.
• 28:08
  You're not 20 anymore
• 28:10
  or even if you are 20,
• 28:12
  what paper assets allow you
• 28:13
  to do is leverage brands,
• 28:17
  leverage people,
• 28:18
  leverage systems
• 28:20
  that you never could have built on your own.
• 28:23
  The word share,
• 28:25
  I mean, you have to forgive me.
• 28:26
  I'm a capitalist through and through.
• 28:28
  Through and through.
• 28:29
  I don't think you're you're not talking
• 28:31
  to a Kendrick spirit here.
• 28:32
  So I might when people
• 28:37
  people talk about the elites
• 28:39
  and you know, the 1%
• 28:40
  and all this, you know,
• 28:42
  victim of I don't have an opportunity.
• 28:44
  My gosh, you know,
• 28:46
  if you put me in my garage
• 28:49
  and you say build an iPhone
• 28:52
  and you can't come out
• 28:53
  and tell it's built,
• 28:54
  you can order any parts you want
• 28:55
  but you got to build an iPhone.
• 28:57
  I'm going to die in that garage.
• 28:59
  I don't have the ability to do it.
• 29:01
  Steve Jobs, the late Steve Jobs
• 29:04
  is willing to share his genius with me,
• 29:06
  unbelievable
• 29:08
  that I he'll say, look, Andy,
• 29:10
  let's share and share like,
• 29:11
  if you'll share a little bit of your money with me,
• 29:14
  I'll share my business with you
• 29:18
  and you can have a share of my business.
• 29:19
  I'll share with you.
• 29:21
  What a beautiful word share.
• 29:23
  And so now as a non-techie,
• 29:26
  you know, I can stand next to Steve
• 29:28
  and say, this is our company.
• 29:30
  I own shares of this.
• 29:32
  And I taught my kids this,
• 29:35
  you know, they bought Disney first.
• 29:37
  Just, it didn't even matter,
• 29:39
  Disney's Disney.
• 29:40
  And where we went to Disneyland the next week
• 29:43
  as a business trip to see our businesses running,
• 29:46
  we're standing in line,
• 29:47
  bonding as a family, standing in line.
• 29:50
  My kids are like, this is incredible.
• 29:52
  We own this.
• 29:53
  They walked around like they own the place
• 29:55
  because they did.
• 29:57
  And that sense of ownership
• 29:58
  takes you beyond paper.
• 30:00
  You have management that's better than your brain.
• 30:03
  You have a brand that's something
• 30:05
  you could never build like Coca-Cola.
• 30:08
  And you have all these things.
• 30:09
  And what's ironic about Warren Buffett,
• 30:12
  who's the best at this,
• 30:13
  is he's never started a company.
• 30:16
  Ever, never.
• 30:19
  What he's had is a temperament
• 30:21
  and a discipline and a consistency
• 30:25
  to compound.
• 30:26
  He buys a goose that lays golden eggs.
• 30:29
  When the goose lays a golden egg,
• 30:31
  he buys another goose that lays golden eggs.
• 30:34
  When they both have two golden eggs,
• 30:36
  he buys two more geese that lay golden eggs.
• 30:38
  And he engages in that wealth
• 30:41
  principle of compounding
• 30:44
  by leveraging established businesses
• 30:48
  that already serve the masses.
• 30:50
  He doesn't have to reinvent the wheel.
• 30:53
  He buys it.
• 30:55
  And that's paper.
• 30:56
  And it's a beautiful way
• 30:58
  for someone to own powerful brands
• 31:02
  receive consistent dividends
• 31:05
  by into America.
• 31:07
  He's not a Wall Street guy.
• 31:08
  He lives in Nebraska.
• 31:10
  Same house.
• 31:11
  He's always lived in.
• 31:12
  Wall Street is for people
• 31:15
  that are managing your money and collecting fees.
• 31:18
  Wall Street is one I don't want to
• 31:20
  manage this.
• 31:21
  You manage it and collect fees.
• 31:23
  True paper assets investors
• 31:26
  really mess with Wall Street.
• 31:28
  We buy Coca-Cola.
• 31:29
  We buy Apple.
• 31:30
  We expose ourselves.
• 31:32
  And I will say this.
• 31:37
  Paper is really important right now
• 31:38
  because I love real estate.
• 31:40
  I won't bash real estate.
• 31:41
  I just you don't bash an asset class.
• 31:42
  There's money everywhere.
• 31:43
  Tax advantages leverage.
• 31:45
  But an A-class property
• 31:48
  will always be comparable
• 31:50
  to another A-class property.
• 31:52
  In other words, you never get
• 31:53
  to really hit the home run.
• 31:54
  It's a base hit business.
• 31:57
  But you buy an AI company.
• 32:01
  How big can how big can
• 32:03
  Nvidia go with selling shits?
• 32:04
  How big can you get your upside
• 32:07
  is crazy.
• 32:08
  So if I have a job and I'm white collar
• 32:11
  and now I realize man
• 32:13
  it's pretty tough to build a robot
• 32:15
  that can pick carrots the right way
• 32:17
  or pick strawberries.
• 32:19
  But my job
• 32:21
  AI is going to be doing it in five years.
• 32:25
  I have five years.
• 32:26
  My job's gone.
• 32:27
  Don't compete with AI.
• 32:29
  Buy it.
• 32:30
  Because AI is going to make
• 32:32
  exon mobile better.
• 32:34
  It's going to make craft hines better.
• 32:36
  It's going to make Amazon better.
• 32:37
  It's going to make Apple better.
• 32:38
  It doesn't even need to be a tech company.
• 32:40
  Every business is going to be more productive,
• 32:43
  more profitable therefore.
• 32:45
  So only AI
• 32:47
  don't compete with it.
• 32:49
  Two ways to get exposed to AI.
• 32:52
  Either learn coding
• 32:54
  and learn quantum computing
• 32:56
  and get a chandelier
• 32:58
  with a refrigerator to get
• 33:00
  cold enough to keep those
• 33:01
  qubits stable
• 33:04
  or go by IBM
• 33:07
  and own it.
• 33:08
  Go by Google and own it.
• 33:10
  So that's kind of a long
• 33:11
  winded answer.
• 33:12
  I'll apologize for.
• 33:13
  But
• 33:13
  no, don't apologize.
• 33:14
  It's a good answer.
• 33:16
  I didn't go that.
• 33:18
  So it's so interesting
• 33:19
  because that advice is the most sound advice
• 33:21
  and it's the most
• 33:22
  it's the most grounded advice.
• 33:25
  But people always want.
• 33:26
  People always want quick.
• 33:28
  People, people always want.
• 33:30
  And that's why I mean,
• 33:30
  this is why VC and Angel
• 33:32
  exist.
• 33:33
  This is why
• 33:34
  this is why binary options exist.
• 33:37
  This is people always want
• 33:38
  to gamble.
• 33:39
  People want to gamble.
• 33:41
  And I love
• 33:41
  I love the reposition of
• 33:45
  your success is not dependent
• 33:47
  on the asset class.
• 33:48
  Your success is dependent
• 33:49
  on your self-education
• 33:51
  and your upskilling
• 33:51
  as an individual
• 33:53
  in understanding that asset class.
• 33:56
  So you can be successful
• 33:58
  with gold
• 33:58
  and silver
• 33:59
  and real estate
• 34:01
  and crypto
• 34:02
  and stock
• 34:04
  and key bills
• 34:06
  and you can be successful
• 34:08
  anyone.
• 34:09
  Yeah, you just got to learn.
• 34:10
  You just got to learn
• 34:11
  that asset class
• 34:12
  better than anyone else
• 34:13
  and that's what Warren Buffet did.
• 34:15
  And he played the long games.
• 34:16
  Not only is he investing
• 34:17
  in the long game,
• 34:18
  he's also a lifelong learner.
• 34:21
  That's really that's
• 34:22
  that is the secret,
• 34:24
  which is not even a secret.
• 34:26
  But what Wall Street
• 34:28
  or what funds do is they say
• 34:30
  they play into that.
• 34:32
  They say, you don't have to learn.
• 34:34
  We learned for you
• 34:35
  and we're going to charge you
• 34:36
  for your for our expertise.
• 34:39
  And instead of spending
• 34:41
  a year on YouTube,
• 34:43
  just give us your money
• 34:44
  and we'll take
• 34:45
  X percentage of it.
• 34:46
  I mean, this is why private equity funds
• 34:47
  exist.
• 34:48
  We even spoke about VC.
• 34:49
  A lot of VC is our funds
• 34:52
  where you're just going in as an LP.
• 34:54
  Angel
• 34:55
  is angel is like direct investing.
• 34:58
  Angel is the most risk
• 34:59
  where you are just having
• 35:00
  a direct relationship
• 35:01
  with the founder.
• 35:03
  So
• 35:04
  again, the returns are
• 35:06
  are the returns
• 35:07
  that you're going to get
• 35:09
  are directly correlated
• 35:10
  the amount of work
• 35:11
  and education
• 35:11
  and upskilling
• 35:12
  that you're going to do as a person.
• 35:13
  And
• 35:15
  yeah, you
• 35:16
  you asked an interesting question
• 35:17
  earlier about mindset
• 35:19
  and you know,
• 35:20
  what what changes in mindset?
• 35:22
  I'll give you another one.
• 35:25
  Warren Buffett
• 35:26
  is brilliance is on question.
• 35:27
  He's probably got an IQ
• 35:28
  of 160 plus
• 35:31
  you know, whatever his IQ is,
• 35:32
  it's it's insane.
• 35:34
  But I've spent my life,
• 35:35
  a lot of my adult life studying him
• 35:37
  and I will tell you that often
• 35:40
  his brilliance overshadows
• 35:43
  and takes attention away
• 35:44
  from perhaps a
• 35:45
  even more important attribute
• 35:47
  that he has,
• 35:48
  which is temperament.
• 35:51
  And and he
• 35:52
  he makes it so simple,
• 35:54
  you know, he once said this,
• 35:55
  it's a famous quote,
• 35:56
  he said,
• 35:56
  I will show you how to become rich,
• 35:58
  close the doors,
• 36:00
  be greedy when people are fearful,
• 36:01
  be fearful and people are greedy.
• 36:04
  And what's really interesting
• 36:06
  is a consumer,
• 36:08
  you know,
• 36:08
  we're coming up on Black Friday soon,
• 36:10
  right?
• 36:10
  Day after Thanksgiving or whatever it is.
• 36:12
  And I'm blown away,
• 36:14
  that people stand in line
• 36:17
  waiting for these prices to go down,
• 36:19
  just can't wait to just
• 36:21
  get the money out of their pockets fast,
• 36:23
  that they can't.
• 36:24
  They're trying to get rid of their money,
• 36:25
  they're fighting
• 36:27
  for position in line
• 36:29
  to give their money away
• 36:30
  before the guy behind me.
• 36:32
  I can't wait to get rid of my money so fast
• 36:35
  and buy something that will ultimately be in a landfill.
• 36:39
  For sure,
• 36:40
  like whatever they're going to buy
• 36:42
  someday,
• 36:43
  it's in game,
• 36:44
  it's in the landfill.
• 36:46
  And and so people just cannot wait
• 36:48
  for a price to drop
• 36:50
  when it's a consumable.
• 36:52
  Well, if you read Warren Buffett's letter
• 36:56
  to his shareholders in 2021
• 36:58
  after the diving COVID,
• 37:00
  he said the beauty of this asset class
• 37:04
  is that on occasion,
• 37:07
  he calls it a shooting the fish
• 37:09
  in the barrel experience.
• 37:10
  That's what he calls it.
• 37:12
  Shooting a fish in the barrel
• 37:13
  denotes ease, not difficulty.
• 37:16
  An idiot can shoot.
• 37:17
  You don't have to be skilled.
• 37:19
  You just have to have your gun ready
• 37:20
  and nowhere to shoot.
• 37:22
  And he says that shooting the fish
• 37:23
  in the barrel is really interesting
• 37:25
  because there are certain times
• 37:27
  where the prices
• 37:29
  of these companies are so low
• 37:32
  that they're irresistible.
• 37:33
  And if you were to look at a stock chart
• 37:35
  of my lifetime,
• 37:37
  starting in 1987,
• 37:38
  you know, out of high school,
• 37:40
  that's this black,
• 37:41
  bright black Monday,
• 37:43
  then you had the dot com bust.
• 37:46
  And then you had the subprime meltdown
• 37:49
  and then more recently COVID.
• 37:52
  If you look to the chart,
• 37:53
  those would be the best times
• 37:54
  to ever buy your assets
• 37:55
  when everybody is selling.
• 37:56
  He's right.
• 37:57
  There's a temperament.
• 37:58
  So a black swan gets me
• 38:01
  stimulated.
• 38:02
  And black Friday makes me think,
• 38:04
  why would you get rid of your money so fast?
• 38:07
  And so I can't wait for the black swan.
• 38:09
  I can't wait
• 38:11
  because there's an obsession
• 38:13
  on CNBC with price instead of cash flow.
• 38:16
  That's why I'm the cash flow
• 38:17
  Academy, not the capital gain net worth academy.
• 38:20
  The reason why the cashless academy
• 38:21
  is said nobody ever in history
• 38:23
  said nobody.
• 38:25
  I think I want to buy that goose
• 38:26
  that lays the golden eggs
• 38:27
  because the price of the goose
• 38:29
  might go up next week
• 38:30
  and I can make a quick buck.
• 38:32
  Said nobody, I've had children
• 38:34
  on my show and I'll say,
• 38:35
  what you want to golden goose for golden egg?
• 38:37
  And I'll say golden goose every time.
• 38:39
  Why? Because it makes eggs.
• 38:40
  But if you turn on CNBC right now,
• 38:42
  the predominant conversation
• 38:45
  will be about prices moving
• 38:47
  rather than value being delivered.
• 38:50
  So if you go into paper assets
• 38:52
  with a sense of buying one and selling high,
• 38:54
  you'll have no control over that.
• 38:56
  Your risk goes up.
• 38:57
  You can't force Apple higher.
• 38:59
  But if you go and you buy that,
• 39:01
  shares a business owner saying,
• 39:02
  how does it cash flow?
• 39:04
  And how do I increase that cash flow?
• 39:06
  And how do I get more out of it?
• 39:08
  Regardless of price.
• 39:10
  Now you've got something.
• 39:11
  Now you're real business owner.
• 39:13
  So it's fun stuff, man.
• 39:16
  That temperament
• 39:18
  and change of mindset
• 39:20
  of looking at golden eggs
• 39:21
  rather than the price around the goose's neck.
• 39:24
  That's a mentality
• 39:26
  that very few people can have
• 39:29
  and it comes from the 401k culture
• 39:31
  when we went from a function of cash flow,
• 39:34
  a pension, which is an income statement idea
• 39:37
  to a 401k, which is a balance sheet idea of net worth.
• 39:41
  And people are worried about the value of their old money
• 39:44
  rather than the ability to generate new money,
• 39:46
  which is cash flow.
• 39:47
  Quick question.
• 39:48
  What's your go to
• 39:49
  when you got 10 minutes before a meeting or a workout?
• 39:52
  For me, it just used to be whatever I could grab,
• 39:54
  which usually meant skipping meals entirely
• 39:57
  or just grabbing something
• 39:58
  that left me crashing an hour later
• 40:00
  because it was just full of garbage.
• 40:01
  That's why I'm partnering with Hule.
• 40:02
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• 40:12
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• 40:14
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• 40:16
  I always keep a few of these in my fridge.
• 40:18
  And honestly,
• 40:18
  it solved the whole back-to-back meetings.
• 40:21
  Go, go, go, non-stop.
• 40:22
  No time to eat problem.
• 40:24
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• 40:24
  And this one's new for me.
• 40:25
  It's Hule's Daily Greens.
• 40:27
  I had the blueberry this morning.
• 40:28
  Honestly, first impression,
• 40:29
  it was way better than I expected.
• 40:30
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• 40:33
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• 40:36
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• 40:37
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• 40:38
  and just one gram of sugar.
• 40:40
  I throw one back first thing
• 40:41
  before my morning calls every single morning.
• 40:43
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• 40:45
  time is the most valuable asset.
• 40:47
  Hule makes healthy eating simple,
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• 41:16
  They really make healthy living tastes amazing.
• 41:18
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• 41:19
  healthy eating,
• 41:20
  healthy lifestyle,
• 41:21
  doesn't have to taste bad,
• 41:22
  it doesn't have to suck.
• 41:23
  NetSuite is a success story partner.
• 41:24
  Now, what is a future hold for business?
• 41:26
  If you ask nine experts,
• 41:27
  you'll get 10 answers,
• 41:28
  bull market,
• 41:29
  bear market, rates are up,
• 41:30
  rates are down.
• 41:31
  At the end of the day,
• 41:32
  it just be easier
• 41:33
  if somebody invented a crystal ball.
• 41:34
  But until then,
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• 41:37
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• 41:47
  Here's what I love about it.
• 41:48
  Instead of juggling multiple systems,
• 41:50
  you get one source of truth.
• 41:52
  Real-time insights and forecasting
• 41:54
  that actually let you peer into the future
• 41:55
  with actionable data.
• 41:56
  When you're closing your books in days,
• 41:58
  instead of weeks,
• 41:59
  you're spending less time looking backwards
• 42:00
  and more time focusing on what's next.
• 42:03
  Whether your company's earning millions
• 42:04
  or hundreds of millions,
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  That's NetSuite.com-scot-clary.
• 42:28
  NetSuite.com-scot-clary.
• 42:31
  I think it's a much needed shift
• 42:34
  because then you're not, again,
• 42:36
  looking at the capital gains or the percent increase.
• 42:39
  And that's, of course,
• 42:39
  that's a fueled all of crypto, too,
• 42:41
  because people were getting a thousand
• 42:43
  acts on their money in a very short period of time
• 42:46
  and then a lot of people lost a lot of money.
• 42:48
  So when you educate people on how to invest for cash flow,
• 42:51
  it's interesting that you do this
• 42:54
  through publicly held or probably,
• 42:57
  it would be publicly held companies.
• 42:59
  But either way, but I was looking at it,
• 43:04
  you don't know my whole story,
• 43:05
  but when I started to invest in venture and angel,
• 43:09
  I actually didn't like it,
• 43:10
  because my money was locked up for too long.
• 43:12
  And I was looking for some big exit event,
• 43:14
  which is why I started to gravitate
• 43:16
  more towards private equity.
• 43:17
  Private equity is just owning a company, the cash flows.
• 43:22
  You own majority share in a company, the cash flows.
• 43:24
  So then you can take money off the table
• 43:26
  if as long as you can still support the business growth.
• 43:29
  So when you look at investing in paper assets,
• 43:34
  the cash flow,
• 43:36
  what's the playbook for understanding how to invest?
• 43:39
  Because now you're looking at investing companies
• 43:42
  that pay dividends.
• 43:43
  Correct?
• 43:43
  Yeah.
• 43:45
  Yeah. In my brain,
• 43:46
  dividends are a foundation.
• 43:49
  I do cater towards dividend paying stocks
• 43:53
  because I want the cash flow.
• 43:54
  And you can pay a dividend.
• 43:56
  There's a book
• 44:00
  that Warren Buffett's Mentor Benchman
• 44:02
  Graham wrote called Securities Analysis.
• 44:05
  I don't recommend it.
• 44:07
  It's about this thick,
• 44:09
  and it's a doorstop book.
• 44:10
  If you want to stop a moving train,
• 44:12
  throw that book in front of it,
• 44:14
  it trains in trouble.
• 44:15
  And it's it's dry.
• 44:17
  And it's written in Benjamin Graham's youth.
• 44:22
  So I'm going to say great depression type of times, right?
• 44:26
  But it's really a book on bonds.
• 44:28
  And back then,
• 44:30
  people didn't, if you invested in equities,
• 44:32
  you were way too risky investing the debt,
• 44:33
  investing the bond.
• 44:34
  But he talked about how to analyze the security.
• 44:37
  And it's the same.
• 44:38
  If the security can pay interest,
• 44:41
  if a security can pay a dividend,
• 44:45
  that means that there's cash flow there.
• 44:46
  That means that there's some stability there.
• 44:49
  It means there's profit.
• 44:51
  And certainly speculators,
• 44:53
  you know, you bet on Elon Musk,
• 44:54
  you won't be big because there's growth.
• 44:56
  And I get that.
• 44:58
  And I wouldn't begrudge anyone doing that.
• 45:00
  But I can take a more conservative approach
• 45:03
  that if I start with a dividend,
• 45:06
  at least I know there,
• 45:08
  dividends tend to be much less volatile.
• 45:10
  They're certainly not risk-free.
• 45:12
  They can be changed.
• 45:13
  But take Exxon mobile for a moment.
• 45:17
  That's one of the stocks I picked up.
• 45:19
  I picked up a lot of shares of Exxon
• 45:21
  in the COVID crash.
• 45:23
  People weren't flying planes.
• 45:25
  People weren't driving cars.
• 45:27
  Price of oil went negative.
• 45:29
  You'd actually get paid to receive oil.
• 45:31
  Instead of having to buy it because of the futures market
• 45:34
  and how jacked up that got.
• 45:35
  You know, there's no place to put the oil.
• 45:37
  So if you had a future
• 45:39
  and you promised to take delivery of oil
• 45:41
  but you're a speculator
• 45:42
  and you don't have any tanks to put it in,
• 45:44
  you've got to pay someone to take the delivery for you.
• 45:47
  So oil was literally not just free.
• 45:50
  They would pay you to receive the oil.
• 45:52
  You got paid to take it.
• 45:54
  You don't have to pay for it.
• 45:55
  So people pick not only pick it up free oil.
• 45:58
  If you had a place to put it,
• 45:59
  people pay you to take it off the hands.
• 46:01
  Amazing, right?
• 46:03
  So Exxon mobile is in the 30s.
• 46:05
  You know, how do you miss?
• 46:08
  How do you miss when you can buy a bohemus energy company like that?
• 46:14
  You know, people need food, clothing, shelter, medicine, energy,
• 46:20
  communication, technology.
• 46:21
  They need it.
• 46:23
  You buy a stock anywhere in there.
• 46:24
  You are an important, you serve the public.
• 46:28
  So you start with a dividend
• 46:30
  but that's just the beginning
• 46:32
  because if you learn how to use options around that,
• 46:39
  you could do this in an IRA.
• 46:40
  Start with a very basic option strategy
• 46:43
  like a covered call strategy.
• 46:45
  We'll add a half percent a month to that in a conservative way.
• 46:49
  Learn to manage any additional risk.
• 46:51
  Okay, so maybe you get a 4% dividend on Verizon or Exxon mobile.
• 46:57
  Okay, go rise some covered calls between a half a percent,
• 47:00
  one percent a month.
• 47:01
  Now you got a double digit return.
• 47:03
  You start compounding.
• 47:04
  Okay, then add another option strategy
• 47:06
  and start stacking incomes.
• 47:08
  Start stacking that.
• 47:10
  It's a lot like real estate.
• 47:12
  What are ways to squeeze more money?
• 47:13
  Well, I got the rent.
• 47:15
  But let's put in a coin laundry.
• 47:17
  Okay, let's put in some vending.
• 47:18
  Okay, let's put in some covered parking.
• 47:20
  You know, let's put in a storage,
• 47:22
  storage unit for somebody.
• 47:23
  You just start stacking income
• 47:25
  and having more ways to get cash flow from that asset.
• 47:28
  And now you can take the goal and egg
• 47:32
  and reinvest and accelerate your compounding
• 47:36
  to where that hockey stick becomes meaningful
• 47:40
  in that shorter amount of time.
• 47:44
  So yeah, it's cash flow-based investing
• 47:47
  and it's different in speculation.
• 47:50
  But it's the one I prefer because I think for most people,
• 47:54
  if they really stick to it
• 47:56
  and they have a little bit of patience,
• 48:00
  I think the long game can be a safer bet
• 48:02
  than the overnight riches.
• 48:04
  Are there any risks in adding options?
• 48:06
  Yeah, for sure.
• 48:07
  There's always risks involved.
• 48:11
  But those risks are a
• 48:14
  not nearly what people think they are
• 48:16
  and be their manageable.
• 48:18
  And the reason option,
• 48:21
  we mentioned technical analysis.
• 48:23
  The most people in stocks
• 48:28
  are forced to make predictions that are very difficult
• 48:33
  which is direction.
• 48:35
  So in the stock market, I might say,
• 48:38
  okay, let's set cash flow aside and let's buy Tesla.
• 48:43
  You know, it's Tesla going up or down.
• 48:44
  It's Nvidia going up or down.
• 48:46
  It's Apple going up or down.
• 48:48
  I couldn't tell you.
• 48:50
  I can't tell you where it's going tomorrow.
• 48:51
  I can't even tell you where it's going to go month from now.
• 48:54
  So positioning yourself as a technical analyst based on direction is very difficult.
• 49:00
  But what options investors do particularly on the sell side
• 49:05
  is we don't predict directions nearly
• 49:08
  as much as we'll predict a range.
• 49:11
  So shift your mind on that.
• 49:13
  So if I said this,
• 49:15
  I'm going to bet that tomorrow,
• 49:17
  Apple is going to be between zero and five hundred dollars.
• 49:23
  And all I had to do was be right on that range.
• 49:26
  That's pretty easy.
• 49:27
  I'll take that bet.
• 49:28
  Take it every time.
• 49:29
  Okay, well, let's say Apple,
• 49:31
  you know, let's say it's a 220 today or 230 or whatever it is.
• 49:34
  Let's say it isn't going to go up,
• 49:36
  you know, double, but let's say,
• 49:38
  is it going to go up $50 tomorrow?
• 49:40
  No, it's going to drop $50 tomorrow.
• 49:43
  Probably not.
• 49:44
  So that's a much safer bet for me.
• 49:46
  So if I can position myself in such a way
• 49:50
  that I get paid by being correct on my range,
• 49:53
  now I can start using standard deviations
• 49:56
  and start using technology to say,
• 49:58
  what is the behavior of this generally?
• 50:01
  So I'll give you an example.
• 50:02
  I bought some Dow chemical in COVID.
• 50:06
  So it's 4.3 years ago.
• 50:08
  I've owned it for, you know, a thousand plus however many days that is 1400 days or whatever it is.
• 50:14
  It's 4.1 or excuse me, 4.3 years.
• 50:17
  So that's entirely paid for the whole stocks paid for.
• 50:20
  I bought it at 4381 and they pay a 70 cent dividend.
• 50:25
  So over the past four years,
• 50:27
  my success rate in receiving that dividend has been 100%.
• 50:32
  They have not ever come out and said,
• 50:34
  oh, you know, we can't pay the dividend.
• 50:37
  You know, now people were like, oh sure,
• 50:39
  one Williams is going to replace us in the,
• 50:41
  you know, 30 index or whatever.
• 50:43
  But the truth is they just pay 70 cents all the time.
• 50:46
  So that's 280 a year I start with, right?
• 50:48
  280 a year, four times a year.
• 50:51
  Well, I'm 89% over that same four years success on my option writing.
• 51:00
  Picking a range.
• 51:01
  So there are times where it will go outside of a standard deviation.
• 51:04
  I have to adjust.
• 51:05
  That's risk management's going to happen.
• 51:07
  But, you know, you can have those probabilities.
• 51:10
  That's it's quite a track record because it's about
• 51:13
  the same every year.
• 51:14
  You know, eight, eight, nine percent success,
• 51:16
  nine percent success, nine percent success.
• 51:19
  So the high probabilities of picking ranges
• 51:23
  are much better than the coin flip.
• 51:25
  The 50, 50 of picking.
• 51:28
  If I pick a direction, I'm going to be about 50, 50.
• 51:30
  I'm right.
• 51:31
  I'm wrong.
• 51:32
  If I pick a range within a certain standard deviation
• 51:36
  or outside of that, I can be statistically right.
• 51:38
  Like a casino owner.
• 51:40
  Yeah, I can be statistically right, nine percent of the time.
• 51:44
  The table limit is what protects the casino
• 51:48
  from the anomalies outside of those probabilities.
• 51:53
  My position size protects me and also my ability to just
• 51:57
  and exit by something back.
• 51:59
  They are liquid, right?
• 52:00
  It's not like VC where I say, here's my money.
• 52:04
  Yeah.
• 52:04
  And I can't call them back and adjust tomorrow
• 52:06
  and say, I want to get this back and the options are liquid.
• 52:09
  So if I see it moving, I can adjust.
• 52:11
  So it's a fanned, I'm blown away
• 52:16
  as an educator.
• 52:17
  When I, you know, my son,
• 52:20
  he's kind of a bubble player.
• 52:24
  You know, he's got some D1 schools talking to him.
• 52:26
  He's had offers at the JC level.
• 52:29
  And he's got offers from Hacker breakfast at the D3 level.
• 52:33
  And one of the schools that, you know,
• 52:35
  we probably won't be able to make it academically and get him.
• 52:38
  But he got invited to MIT's camp because he's pretty smart.
• 52:41
  He's four or a kid and all this.
• 52:42
  But those kids are cyborgs, man.
• 52:44
  That's not normal.
• 52:45
  They're not normal.
• 52:46
  So yeah, so we go there and you know,
• 52:49
  basketball-wise, he's, you know, he hangs fine.
• 52:52
  But, you know, you got to have a perfect ACT
• 52:54
  and, you know, crazy stuff.
• 52:55
  You got to, you know, you've got to put your private school
• 52:57
  and you've been prepared for this your whole life.
• 53:00
  You know, my son is just a basketball player.
• 53:02
  But the point is really this.
• 53:04
  He got asked to go to this great coach, great program.
• 53:10
  And it was a very prestigious school, not quite MIT.
• 53:14
  But it didn't offer scholarship, you know.
• 53:16
  It gets you in, which their acceptance rate, like, you know,
• 53:19
  7% or whatever it is, gets you in.
• 53:22
  And so the price tag on that
• 53:26
  was over $300,000 to go to school for four years.
• 53:29
  Get that piece of paper.
• 53:31
  And at the end, you know, if you get a liberal arts degree or, you know,
• 53:35
  now you're a sociologist or whatever, great, $300,000.
• 53:40
  And I just said, son, you know, learn, learn, learn to invest.
• 53:48
  Take a couple classes on, on compounding and dividend investing.
• 53:54
  And hire all those people that are working for the company,
• 53:58
  you all can spend the $300,000 for their degree and put them to work for you.
• 54:02
  Because I, I just as a teacher and an educator, I just think your proposition
• 54:08
  to invest in yourself, to learn to be invest and have money work for you as far better
• 54:13
  and working for money.
• 54:14
  I agree.
• 54:15
  I mean, this is, I think we're very much on the same page as to why some traditional education is,
• 54:22
  is not just too expensive.
• 54:24
  I mean, they totally miss the mark in high school and early education when it comes to finance
• 54:28
  and investing and, I mean, I wasn't calling any of this stuff.
• 54:33
  It's pretty easy.
• 54:33
  Price is what you pay, values, what you get.
• 54:36
  Yeah.
• 54:36
  And so, you know, the bigger a price tag is, you better be getting a lot.
• 54:41
  Lines with $300 a lot for a...
• 54:44
  Sure, row at art, so agree.
• 54:45
  Yeah, I don't know what the row at is on that.
• 54:47
  You better be a damn good sociologist if you're going to make back that $300,000.
• 54:52
  That's like, there's some law schools that are less than that.
• 54:55
  That's a lot of money.
• 54:56
  It's crazy, right?
• 54:57
  It's crazy.
• 54:58
  That's a lot.
• 54:59
  When you, you mentioned like categories, just serve people as great things to look at when you're
• 55:05
  investing like dividend, dividend-paying companies.
• 55:08
  Are there any other factors that you consider?
• 55:11
  I know there's probably a lot, but is there anything else outside of this company?
• 55:16
  Is it good company?
• 55:17
  It serves a segment of the population that needs this product or services.
• 55:22
  Is that one of the more important
• 55:24
  just mental models to go through or thoughts to go through?
• 55:27
  Yeah, you know, when I taught this to my sons,
• 55:29
  you know, I appear we can't see it, but I have a little cash flow jack in the box up on my shelf.
• 55:34
  And if I brought it down, it's got three components.
• 55:37
  It's got a handle.
• 55:39
  It's got a lid that pops up with cash that comes out.
• 55:43
  And it's got a price tag.
• 55:44
  So three things, price tag, cash flow, and the handle.
• 55:48
  The most important part of that
• 55:52
  jack in the box is the handle.
• 55:54
  That's what you're really talking about.
• 55:56
  Is you turn the crank and you have what's called
• 55:59
  operation, like in real estate, you have net operating income.
• 56:03
  Operating.
• 56:04
  You have operational cash flow operating.
• 56:07
  You walk into Apple, if they're, well, you got quite an operation going here.
• 56:12
  You're doing work.
• 56:13
  You're operating.
• 56:15
  And your cash flows based on the quality and efficiency of that value being delivered of that work.
• 56:22
  So in Coca-Cola, they sell the sunny water.
• 56:25
  They sell beverages at IBM.
• 56:28
  You know, all these American Express financial services,
• 56:31
  Exxon mobile energy.
• 56:32
  So when you, when you go through your life,
• 56:36
  you're either a net producer or your net consumer.
• 56:40
  Very people, very few people are even on it.
• 56:43
  So when you talk about the work that a company does, that's the moat that Buffett talks about.
• 56:50
  It's the service that we can't live without.
• 56:54
  You know, people say, everyone needs shelter.
• 56:56
  No, not everyone needs shelter.
• 56:57
  Go to Los Angeles, go to Seattle,
• 57:01
  go to any of these cities.
• 57:02
  You'll find a lot of people are making it without a home.
• 57:04
  A lot of people every day they go out without a home.
• 57:07
  They all have cell phones.
• 57:09
  So you need a cell phone.
• 57:12
  You can't live without medicine.
• 57:13
  You can't live without technology.
• 57:14
  You can't live without food,
• 57:16
  clothing, shelter, and energy.
• 57:18
  And so when times get rough and money gets tight, those are the places
• 57:25
  that people go.
• 57:26
  Now, there's money in their payment, right?
• 57:28
  People want that.
• 57:29
  There's money in those types of things.
• 57:33
  But in those basic staples,
• 57:35
  that's where I like to be.
• 57:36
  Because I know that if I'm a producer that people need me,
• 57:42
  here's a way to think about it.
• 57:45
  So my son graduates from the eighth grade and it's COVID year, it's 2020.
• 57:53
  And we're looking at going into school, the fall of 2020.
• 57:58
  And we're like, I don't want to go to school right now,
• 58:00
  because there's no basketball to play.
• 58:03
  You really want to burn a year sitting, you know,
• 58:05
  no one's showing, you know, masks.
• 58:07
  Parents can't come to games.
• 58:09
  We're not doing that.
• 58:11
  So in my home state of Utah,
• 58:13
  they have very liberal home school laws,
• 58:18
  where you can sign a paper.
• 58:20
  And now you're the teacher, you're kidding.
• 58:22
  Teaching wherever you want.
• 58:22
  You have to teach physics.
• 58:23
  You don't have to teach.
• 58:24
  You can teach them how beekeeping if you want.
• 58:28
  So we took that year and we studied financial education.
• 58:32
  He and I, one on one, every day, learned business, learned taxes,
• 58:37
  learned real estate, learned stocks, learned options every day.
• 58:40
  And one of the first things I did in the fall is we drove down to the gas station.
• 58:46
  And you know, he's going to get his driver's license in a couple of years.
• 58:48
  And he and they'll have Philip the car.
• 58:50
  So we learned how to fill up the car with gas.
• 58:51
  You know, we already knew.
• 58:53
  And it was $100 or whatever it was to fill a tank.
• 58:57
  I said, that's consumption.
• 58:59
  We paid out $100 to consume fuel, to consume energy.
• 59:05
  We went home and I opened up my American Express statement for the year previous year.
• 59:11
  And we saw how much money we spent on fuel on energy,
• 59:15
  a particularly gasoline.
• 59:16
  And it was a pretty good size number.
• 59:18
  I said, see, all that, run around a basketball practice we do.
• 59:21
  And that's what it costs.
• 59:24
  Then I pulled out my statement for Maxon Mobile.
• 59:29
  And we looked at dividends and call writing.
• 59:31
  We did not look at the capital gain because it's, you know, it's, it's more
• 59:35
  doubled since then.
• 59:36
  But I don't care about the price.
• 59:38
  Why sell my gold and goose, no matter how valuable it gets, I want the aches.
• 59:42
  And it wasn't close.
• 59:44
  And my son's looking at that and he had a real good moment.
• 59:48
  So here's how much energy we have in our life as a consumer.
• 59:53
  And here's how much energy that we have as a producer.
• 59:57
  So the money that goes out of consumption is a very small percentage
• 1:00:02
  of the money that comes in by production.
• 1:00:06
  That's what stock ownership is.
• 1:00:08
  That's what it is.
• 1:00:09
  Is how much money you bring in from producing as opposed to consuming.
• 1:00:14
  And if you become a net producer and you take that excess and keep investing
• 1:00:20
  and become a larger net producer, you compound into a pretty good situation,
• 1:00:25
  which anyone could do by the way.
• 1:00:29
  My son's, you know, since that eighth grade, he maintains his own account.
• 1:00:34
  He trades his own options.
• 1:00:36
  And that's where the capitalist in me gets a little irritated with people to say,
• 1:00:40
  well, no one can make it.
• 1:00:41
  No one can make it.
• 1:00:42
  It's not a millionaire.
• 1:00:43
  He's just learning how to pick away at his tiny little account.
• 1:00:46
  His account's small.
• 1:00:47
  It's not supposed to be big.
• 1:00:48
  He's 18 years old.
• 1:00:50
  But I'll tell you, by the time he's 30,
• 1:00:53
  and by the time he's 60 and, you know, Warren Buffett's 90,
• 1:00:56
  a compounding is a special, special principle.
• 1:01:00
  What are some of the, you mentioned 401K just briefly?
• 1:01:04
  What are some other potentially not, I don't want to say horrible,
• 1:01:09
  but not as useful as perceived financial instruments or frameworks or ideas
• 1:01:16
  that people say, well, what about this or what about that?
• 1:01:19
  Or my financial advisor told me to put money into this.
• 1:01:22
  What are some of the things biggest myths that you wish you could just dispel?
• 1:01:27
  Well, you're, you're kind, you're not to say that they're horrible.
• 1:01:32
  So I'll say it, they're horrible.
• 1:01:38
  A scam is an interesting word because it denotes that it's illegal, right?
• 1:01:44
  So it's not illegal, okay?
• 1:01:48
  It's not so bad that it should be outlawed.
• 1:01:50
  But gambling is outlawed in certain states.
• 1:01:54
  You got to go to Vegas to gamble.
• 1:01:56
  So if you were gambling outside of Vegas, it would be a scam
• 1:02:01
  because you're, you've created a mechanism.
• 1:02:04
  Why is gambling illegal outside of Vegas?
• 1:02:08
  Because if you set the entertainment value of dopamine,
• 1:02:12
  you know, of dopamine hits and then serotonin and crashes, you know,
• 1:02:16
  that crazy experience of gambling that people label entertainment, it's illegal.
• 1:02:23
  Because it's unfair.
• 1:02:24
  It transfers money from one pocket to another mathematically over time,
• 1:02:29
  regardless of what happens.
• 1:02:31
  It's a sure thing for the casino.
• 1:02:34
  So it's not a scam in Vegas because it's legalized outside of Vegas.
• 1:02:40
  So unfair, so egregious, so immorally, so such a bad thing that it's illegal.
• 1:02:47
  Well, 401Ks are simply legal everywhere.
• 1:02:51
  But they are, they are, if you set aside the legal, the legality of it,
• 1:02:59
  you just say, how does it work?
• 1:03:01
  It is a scam, for sure.
• 1:03:03
  And here's why I'll say that boldly.
• 1:03:05
  And it's not an opinion, it's just a freaking fact.
• 1:03:09
  Number one, if you, if your listeners can Google this, it's Spiva, right?
• 1:03:18
  S&P 500 versus actively manage funds.
• 1:03:21
  It's Spiva for short.
• 1:03:23
  So you Google S&P 500 versus actively manage funds.
• 1:03:26
  And there's an annual Spiva report.
• 1:03:29
  And they simply measure how well Wall Street funds do against the S&P, right?
• 1:03:37
  So in other words, how well does active management do compared to the S&P?
• 1:03:44
  And they're about 90% worse.
• 1:03:48
  They fail 90% of the time over 15 year period and it gets worse as you go back in time.
• 1:03:55
  They fail to beat the S&P.
• 1:03:57
  So right there, you start with what Warren Buffett said.
• 1:03:59
  He said, and I'll try to get the quote right.
• 1:04:02
  He said, the ultimate irony of the investment business is that there's no question
• 1:04:07
  that an obstetrician will deliver babies better than the husband or wife.
• 1:04:11
  If you take dentists as a whole, they'll fill teeth or, uh, gotta get the quote right.
• 1:04:16
  They'll fill teeth or remove teeth better if the patients tried to do themselves.
• 1:04:20
  But in the investment world, somebody who believes in American business, this is key,
• 1:04:27
  and seeks out the lowest way to participate in that business and is consistent,
• 1:04:34
  they will achieve results that exceed those of the Wall Street professionals.
• 1:04:39
  It is the only industry I can think of where the Wall Street professionals subtract value
• 1:04:46
  from what the layman could do himself.
• 1:04:48
  Two important points in that quote.
• 1:04:50
  Number one, what does it mean to participate in business at the lowest level?
• 1:04:57
  What the highest level would be owning it and showing it up every day and running it.
• 1:05:01
  You made the, you made the transition from medium participation as an employee
• 1:05:08
  to full participation as an operator to the lowest level of participation as an investor.
• 1:05:17
  So in Buffett says you participate at the lowest level, you buy a share of Coke,
• 1:05:22
  and that's all you're doing.
• 1:05:23
  That's the lowest way you can participate in American business.
• 1:05:27
  Well, you will exceed those results on Wall Street who subtract value.
• 1:05:31
  That's called fees.
• 1:05:33
  One percent fee over the life of an investor,
• 1:05:38
  Buffett's term is enormous.
• 1:05:40
  John Bogel, founder of Vanguard, his term is robbery and tyranny in compounding costs.
• 1:05:47
  So if you're to take a compounding calculator right now and you put, and you say,
• 1:05:52
  what is the earning power of a thousand dollars over a person's lifetime, 65 years,
• 1:05:57
  age 20, age 85, those are your, you know, your adult years, 65 years.
• 1:06:02
  That thousand dollars at 8% of the market turns into 148,000.
• 1:06:07
  If you take two and a half percent of that out for a fee, you'll make 30 grand and the other 110
• 1:06:15
  goes to Wall Street. It's a simple scam.
• 1:06:18
  80% of the money, look it up, John Bogel, battle for the sole capitalism.
• 1:06:22
  Founder of Vanguard does this math in the book, the battle for the sole capitalism.
• 1:06:26
  It's there. The math is there.
• 1:06:29
  So Wall Street takes the line share of the compounding power via fees,
• 1:06:34
  and people see one percent fee, half a percent fee, half a percent fee over the investor's life
• 1:06:39
  takes a quarter of the money, half percent fee, quarter the money over the investor's life.
• 1:06:44
  So it's an absolute scheme because they subtract value via fees.
• 1:06:53
  Anyone that understands comp, sorry, this is kind of my thing.
• 1:06:56
  Anyone that understands compounding knows that a subtraction of 1% or an addition of 1%,
• 1:07:05
  kind of like when you in sports where they throw a pick and instead of a touchdown,
• 1:07:10
  it's a 14 point swing really because you could add seven instead you lost seven.
• 1:07:16
  That giving up of a percent that you could have had over the life investors, millions of dollars,
• 1:07:25
  most of the time, millions of dollars, aggregate trillions of dollars.
• 1:07:31
  Why do people put money in a 401k bait, which is an employee match and it does not help the
• 1:07:40
  compounding. It's money upfront. What is bait? Bait is food. Real food smells like food,
• 1:07:48
  taste food looks like food smells like food. It's real food, but it conceals a hook.
• 1:07:53
  What is an employer match? It is real money. It looks like money, spends like money,
• 1:07:58
  it tastes like money, but it conceals a hook and it gets you in early and then now you're going
• 1:08:04
  to pay fees. Imagine a business where there was a mandate to sign up. That's how it is in the
• 1:08:12
  law now that Wall Street has gotten goods with the government and said it's going to be mandatory
• 1:08:17
  enrollment. You show up, people aren't saving up money. You have put in the 401k. Imagine being
• 1:08:22
  Wall Street and the champagne corks popping on that one because now every, you're going to slice
• 1:08:27
  off a piece of every single paycheck. You put in none of the money. You take none of the risk
• 1:08:31
  up down to sideways. You get a percentage that fee. You're going to get wealthy. So it is horrible
• 1:08:36
  and it's a horrible thing. The final reason, don't give me go on this, man. We will kill an hour.
• 1:08:42
  The reason 401ks are such a freaking scam is I've interviewed the guy who invented him twice.
• 1:08:49
  I've interviewed the guy that wrote the legislation. Richard Stanger wrote the legislation. He's still
• 1:08:54
  around. Ted Benna, father of the 401k. I know I'm not great, but I've interviewed him three times.
• 1:09:02
  He's the guy that came up with the employee match in the 401k 40 years ago. So we've had 40 years.
• 1:09:09
  Someone went from 20 to 60 now. For 25 to 65, we have the experiment now. 40 years. If you go to
• 1:09:17
  Vanguard right now and type in how America saves, you'll get their annual report.
• 1:09:23
  Somewhere a page between page 40 and 50, there's the demographics to show the median balance.
• 1:09:30
  And this is at a market that it's an all time high, all time high, the median balance of a 401k
• 1:09:38
  age of 55 to 64 is $80,000. Which is 300, which is about $300 a month
• 1:09:46
  to the 4% withdrawal. So the other reason it's terrible is it doesn't work. And think about that.
• 1:09:52
  They have, there's $11 trillion in 401k plans and Vanguard has about 2 trillion of that. That's
• 1:10:00
  a pretty good sampling, 2 trillion of it. And in those people, age 55 to 64, they have the most money.
• 1:10:10
  More than half of, or at least half of them have less than 80 grand at the end of the four-year
• 1:10:16
  experiment. So don't tell me that it works. That's not a debate of person when they are
• 1:10:21
  harrowable. They are terrible. And they make Wall Street rich and their ROI on Wall Street,
• 1:10:28
  their return on investment percentage is infinite because it's division by zero.
• 1:10:34
  They put in no money. They put in no risk. And that's the opposite of the risk reward rule
• 1:10:40
  that the more reward you get, the more risk you're supposed to take. They invert that,
• 1:10:44
  like the Starship Enterprise, some warp drive. They have infinite return and no risk.
• 1:10:50
  So yeah, I could go on, boy, we could have a five hour, you know, don't give me going on the
• 1:10:56
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  Well, you know what? So this is an interesting sort of inflection point in my life. So my dad worked
• 1:13:33
  for the government and he had the old type of pension where you get 70% of your best years.
• 1:13:38
  Yes. Yes. And I don't know how there was Wall Street pulled this move to get rid of that and
• 1:13:51
  say instead of just doing that where you can retire at 65 and if you made a hundred grand that
• 1:13:56
  company is going to be paying you about 70 grand until the day that you died, they said instead of
• 1:14:00
  that, we're going to get you to invest in this 401k or in Canada or RSP. All right. I don't
• 1:14:06
  mean can the super in superannuation in Australia. I don't understand how they how they got well
• 1:14:12
  it was lack of financial education that allowed them to sell it to people and then all the companies
• 1:14:18
  got on board because they're like, wow, this is going to be way less expensive for us.
• 1:14:22
  Now we don't have to worry about supporting employees until they die. And then that thought alone
• 1:14:26
  and the realization that I could not get that kind of pension at a very young age I started
• 1:14:31
  doing the math in my head. I'm like, listen, if I want to make that, if I want to make a hundred grand
• 1:14:35
  every year after our tire at 65 and this before I was entrepreneurial, how much money am I going to
• 1:14:40
  have to have saved? And actually, ironically enough, the best boss I ever worked for was a boss
• 1:14:48
  who was a company that was acquired by private equity and I was leading their sales and marketing
• 1:14:55
  and it wasn't a big enough company to have an RSP slash 401k contribution pension. But he's like,
• 1:15:03
  I'm going to do you one better. And I think it was once a quarter if I'm thinking back. And once a
• 1:15:08
  quarter, he'd basically just put the SMP 500 on a screen and be like, just invest in this.
• 1:15:13
  Don't put your money anywhere else. Just invest in this. And just by me telling you this,
• 1:15:17
  it's going to be worth more to you than any pension matching system we set up. And those two
• 1:15:26
  events really shaped my view of investing and how traditional financial instruments are a scam
• 1:15:33
  and people aren't financially educated. And yeah, I mean, I don't really get it either. But
• 1:15:39
  enough people subscribe to this idea. So obviously our views are not mainstream.
• 1:15:45
  You asked a question that I think is really important. How did it happen? I'll tell you exactly
• 1:15:50
  that happened. The best place to start with this idea is in 18 in 1875, the very first pension in
• 1:15:58
  the United States was the American Express company. Now they were not a credit card company then
• 1:16:04
  they were like federal Express. They were a career. They had a rail system. You could send parcels
• 1:16:08
  and packages. So you have to understand that the relationship between employees and the company
• 1:16:16
  is is a business relationship. And their goal is attraction and retention of employees. And so
• 1:16:26
  what they did is they offered the first pension and it was horrible. They said, look, a you don't
• 1:16:33
  get it until you're 60. Well, in 1875, guess what the average life inspecting was is a 20-year-old
• 1:16:39
  white male. It was 60. So the actuarial table said that more often than not on average, they wouldn't
• 1:16:46
  have to pay the pension. So it's an actuarial game. Number two is the pension was pretty minuscule.
• 1:16:55
  And number three, there was a committee at the end that it could approve and disapprove you.
• 1:16:59
  And what that effectively did is says, now you can't go on strike, now you can't quit,
• 1:17:03
  now you can't be mad at your boss and walk out. And we have you, right, with this pension.
• 1:17:08
  Well, it caught on like wildfire, but then the pendulum swung. And then there's a really
• 1:17:13
  interesting thing. In the 1950s, post-World War II, the auto industry exploded. And in the United
• 1:17:21
  States, the auto worker union just took control. And you know this, if you plot a 30-year
• 1:17:31
  of chart of a business's earnings, it doesn't just go like this. It's just good years, bad years,
• 1:17:37
  anomalies. Well, there's this huge boom in the auto industry and the employees of the
• 1:17:42
  Studebaker company, Chrysler, they had what was called a pension gold rush. And the unions went in
• 1:17:48
  and they said, look, you're making all this money, all these automobiles, we're going to retroactively
• 1:17:58
  pay these pensions up these agreements. And so they had no choice. They'd go on strike and the
• 1:18:04
  management said, okay, here's your great pension. So now instead of being bait with an actuarial hook
• 1:18:10
  of, you know, not paying the pension, now they wanted real food basically. Well, as business cycles
• 1:18:17
  changed, Studebaker, they failed to innovate. They failed to sell cars, the business cycle turns
• 1:18:24
  and pretty soon you have two types of liabilities on your balance sheet. You have money that's borrowed,
• 1:18:29
  bonds, right? Corporate bonds is made borrowed. You have money that's promised, which is pension.
• 1:18:34
  That's those are different risks. Because pensions don't have collateral, promised money is what's
• 1:18:39
  killing the US today, promising healthcare, promising money that isn't borrowed yet. So now they have
• 1:18:46
  this balance sheet of obligations. We call them unfunded liabilities. That's massive. And Studebaker
• 1:18:53
  goes to the unions and says, we can't pay this. And they even say, so what? Pay it. And they go out
• 1:18:59
  of business. So all these people lose their pension, all these people lose their retirement. There's a
• 1:19:04
  huge uproar. So what do people do when when they get screwed like this? There should be a law.
• 1:19:10
  The government's left fault. So they go to President Kennedy. He gets killed. They go to Lyndon
• 1:19:17
  Johnson. Nothing happens. They go to Nixon. He says he was a crook, but he was and finally get
• 1:19:22
  to present Ford in 1974, a hundred years after that first pension. And in 1974, President Ford
• 1:19:30
  signs a RISA, the employee income retirement security act and what it created was an insurance
• 1:19:37
  company to back pensions where now if you're a corporation offering a pension, you got to pay extra
• 1:19:43
  in this insurance company that made him fiduciaries. They the pendulum swung to the worker. And they
• 1:19:49
  hated this. They absolutely hated this. The corporations did. But what can you do? Well, in
• 1:19:57
  in 1978, there was a congressman in upstate New York named Barbara Conable in his constituents
• 1:20:06
  were Xerox and Kodak. And they said, we have bonuses. We're paying that are being taxed back
• 1:20:13
  then at a 70% marginal rate. So in other words, if you work there and you get a bonus, you know,
• 1:20:21
  70% of it's gone to the government right there. They said, we wanted to defer this. So he hired a
• 1:20:27
  young lawyer. This this Barbara Conable hired a young lawyer named Richard Stanger. He's right out
• 1:20:32
  Temple University is 20s and he becomes a staffer basically and he writes 800 words. And that 800
• 1:20:40
  words became something called a 401k, which would allow business owners to pack away money tax
• 1:20:45
  deferred as long as they offered it to the smaller employees too, which you know, didn't always work
• 1:20:51
  out. And so you think about 800 words. What do you think the affordable healthcare act is? You
• 1:20:58
  know, 5,000 page a lot. This a lot of 800 words. So it's on the books for two years and he does
• 1:21:04
  this little favor for his buddies at Kodak and Xerox and on the book of two years. And and in 1980,
• 1:21:10
  there's a bank called Shelton and Bank that wants to recruit people with bonuses or from other
• 1:21:17
  banks. And they have a consultant named Ted Bennett. And Ted Bennett is a, you know, benefits
• 1:21:24
  consultant. They say, look, the old banks pre-arris are grandfathered in to where they can
• 1:21:29
  defer their stuff. The new banks aren't grandfathered in. So we can't attract top talent because
• 1:21:34
  their bonuses are all taxable. So Ted Bennett is a very religious man and he prays about this.
• 1:21:42
  And he literally prays about this. He book, he says it's an answer. He had a revelation of sorts
• 1:21:47
  and inspiration, probably better word. He says, let's, let's get the lower level employees
• 1:21:54
  to buy into this 401k thing by giving them an employee match. We'll match them 25 cents on the
• 1:21:59
  dollar. So the pitch was tough. And this is the real key. What happened was is you go to a bank
• 1:22:09
  teller with a hundred dollar bonus and a 15% tax break. They say 15 bucks and they don't have
• 1:22:15
  any Christmas money. So they don't want to participate. You go to the exec who gets $10,000 in a
• 1:22:20
  70% tax bracket. Seven grounds gone. He wants to participate. So the 800 words had a discrimination
• 1:22:27
  language that says, look, if the, if the bottom third, two thirds is participating, the top third
• 1:22:34
  can't. So how do you get the bank teller to buy into this? Well, Bennett goes to and says, look,
• 1:22:40
  we'll give him 25 cents on the dollar. That's 15% tax savings, 25% there. That's a 40% on the
• 1:22:46
  dollar. Now they'll do it. And they said, okay, you know, okay, that sounds good. And he'll save
• 1:22:51
  you guys money because a lot of people won't participate enough. Will now you get your actual
• 1:22:55
  aerial stuff back, but we less than 1% of payroll. So the bank didn't want to do it. It sounded
• 1:23:00
  screwy and like they were messing with the law pioneering. So Bennett did it at his own firm and then
• 1:23:06
  January 1st, 1981, the 401k was born. Now here's the big thing everyone missed on the education
• 1:23:11
  side. You made a great point, Scott, when you said, here I have this $70,000, your pension.
• 1:23:18
  That if you look on a financial statement, none of that money touches the balance sheet.
• 1:23:24
  It is income that pays expenses. And if you have some left over, you have a surplus,
• 1:23:29
  if you don't have a deficit. So as a function of cash flow, as a function of the income statement,
• 1:23:34
  pensions never touch the balance sheet. Now you have an hourglass, because now it's in the asset
• 1:23:42
  column. And your pension is a function of net worth rather than cash flow. And in that asset column,
• 1:23:49
  the company now wipes their hands of all the risk and all the management, a lifetime liability,
• 1:23:55
  a lifetime liability. They get a wipe that off when you quit and you're left with a nest egg,
• 1:24:01
  which is really an hourglass. And it's a race against time is, will my money run out
• 1:24:07
  before I die? So that switch from being a function of income to a function of balance sheet
• 1:24:14
  was insane. And that's why I say these 401ks are freaking awful because if you go up to Canada,
• 1:24:20
  people are more afraid of living and dying because they're afraid they'll outlive their money.
• 1:24:25
  Yeah. And they look at their RSP and they say, I'm not going to make it because now it's not
• 1:24:30
  the net worth academy is the cash flow academy. Cash flow is the holy grail of retirement and
• 1:24:36
  financial freedom that you and I've talked about before. It's a function of cash flow. It's not a
• 1:24:41
  function of net worth. And you traded a river of money for a reservoir of money and the reservoir
• 1:24:46
  gets small and dries up and has risk. You're susceptible to all the whims of the market plus the
• 1:24:52
  fees on Wall Street. And that's how it happened. It happened with the Studebaker company going bankrupt,
• 1:24:58
  complaining of the government, little tiny law. Last little part of the story I think is interesting.
• 1:25:04
  I mentioned this Barbara Conable guy, right? He was the congressman the putter and he was the chairman
• 1:25:10
  of the House Ways and Means Committee. And I was interviewing Richard Stanger. I said, when you
• 1:25:17
  were writing this 800 word legislation, you know, what you think? He said, Andy, one of the most
• 1:25:21
  interesting things about that legislation is if you're going to mess with the tax law,
• 1:25:27
  you have to go to the treasuring, you have to go because it's going to affect their income,
• 1:25:32
  have to go to the IRS and you have to go to the Congressional Budget Office and see how much of an
• 1:25:37
  impact, in other words, if people start deferring taxes, how much does the government lose in revenue
• 1:25:43
  if this were enacted? They did their research. And they came back and they said,
• 1:25:48
  this 800 words will impact the federal tax collection by less than a million dollars.
• 1:25:56
  In other words, it was a favor. It was a favor and they thought it'd be buried in a bunch of
• 1:26:00
  pork and in Carter's tax reform. They said 800 words will throw it in there. There's 11 trillion
• 1:26:07
  dollars in 401k now in just the United States and they thought it'd be less than a million.
• 1:26:12
  And Carnival Barber goes from 1980 to 2020 years and now these have blown up. I mean, there's
• 1:26:19
  you know, trillion dollars in them. And Carnival gets nominated by an investments
• 1:26:26
  pension magazine as man of the century. He gets nominated as man of the century because he invented
• 1:26:31
  the 401k legislatively. And he had no idea what the 401k had done from there. He goes to a party
• 1:26:37
  and his colleagues start congratulating him on being nominated for man of the century. He goes,
• 1:26:42
  they got it wrong. I don't even know what you're talking about.
• 1:26:45
  Calls up the ways and means committee. You know, that he's no longer there. He calls up his
• 1:26:50
  buddies in Washington to say, do I have anything to do with the 401k? I'm getting nominated for man
• 1:26:54
  of the century and all this. I mean, is this right? And they said, sir, you put the legislation.
• 1:27:00
  And remember Xerox and Codac? And what was crazy is, is he was interviewed in his home before
• 1:27:07
  he died by a biographer in 2004, whatever it was. And he said, I had absolutely no idea.
• 1:27:17
  He said, I had forgotten about it completely. And the crazy thing is that's the most resultant
• 1:27:24
  legislation that he ever had. He wrote a book on, on called Congress and the tax law on all his
• 1:27:30
  speeches. He gave 401k's not even mentioned once in his life, Magnum Opus. This was an accident.
• 1:27:36
  The 401k was not a machine that was designed by an Elon Musk mind. It is more akin to the
• 1:27:43
  evolution of an organism that just haphazardly came with butterfly effect. And now Canada has an RSP
• 1:27:52
  Australia has a superannuation and you can't believe this in Japan. You know what it's called in
• 1:27:57
  Japan? What? It's called the 401k. They copied it because they didn't know what else to call it.
• 1:28:04
  It's a 401k in Japan. So don't give me going. I wrote a book on this called 401k. So I'm actually,
• 1:28:10
  they've asked the publishers 10 years later, asked me to write a second edition.
• 1:28:15
  So you have to do is you have to write a second edition. But you have to, I think bringing light to
• 1:28:23
  the origin story is important because then people start to realize, wow, we shouldn't be putting
• 1:28:28
  as much trust in it as we are. Yeah, I mean Wall Street came in with their fangs showing because
• 1:28:34
  what they do is they blame people. They blame the victim. They say, oh, you've only got 80 grand.
• 1:28:40
  You haven't been saving enough. That's, if you should be shame on you, shame on you for not saving
• 1:28:47
  enough. Here's an interesting thought. There's something called a put option. And I buy stocks
• 1:28:53
  like this all the time. A put option is basically promising to buy a stock at a price you want in
• 1:28:59
  advance. So Warren Buffett bought a whole railroad like this, bought British Northern Santa Fe this
• 1:29:05
  way. So he basically say, look, I think it's worth a hundred bucks to share. But, but I'll promise
• 1:29:13
  to buy it if it dips to 72. And you pay me a premium for that insurance. So on the price side,
• 1:29:19
  we talk to these people worrying about price. Some Wall Street hedge fund guy has, you know,
• 1:29:24
  Burlington, Northern Santa Fe, he bought it at, you know, 80. He scared of it goes below 70. He
• 1:29:29
  loses his job because they're all about the price movement. So he says, I'll give you six dollars
• 1:29:34
  to share Buffett if you'll insure me for two months. And if it falls below and I can hand this to you
• 1:29:40
  at 70, you have to take it. Well, Buffett owns guy code. He's in the insurance business. He says,
• 1:29:44
  give me the premium because Buffett doesn't care about the price. He wants the asset and he knows
• 1:29:49
  long terminal pay for himself. So think about this. You're making a promise in advance, right? To
• 1:29:55
  say, I promise to buy this stock low, give me the money for that promise. And it goes up. I keep
• 1:30:02
  the money down. I keep the money sideways. Keep the money. It goes down really far. I'll buy the
• 1:30:07
  asset from you. And I keep my premium. Okay. Now think about this. What's a 401k? It's a promise
• 1:30:15
  to buy equities in advance. True. I sign up. They're going to pull my head, promise to
• 1:30:20
  pay it. But instead of collecting a premium for that commitment in advance, because in the real
• 1:30:24
  market, that's worth a lot of money. A commitment in advance to pay money at a certain price,
• 1:30:29
  that's worth a lot. You should, you should get paid for that risk. Buffett does, I do. In a 401k,
• 1:30:36
  they don't pay you for that commitment. They charge you fees for that commitment. So think about
• 1:30:40
  that alone is if you just learn that one strategy, think about that. Do your cash flow pattern.
• 1:30:46
  Instead of fees leaving when you buy assets, you had getting paid in advance the buy assets.
• 1:30:52
  And most of the time, you can get per annum Buffett's average is between 20 and 50% per annum
• 1:31:00
  for that cash. Right now Buffett has $300 million in cash. I would bet my bottom dollar that he's
• 1:31:06
  selling puts for the next market crash to get paid to buy low at a high rate. People in the
• 1:31:12
  401k don't get it. And you can do the same thing. RSP is the same. So interesting, right? Do you
• 1:31:20
  know why it took off the way it did? Because it was not meant to take off the way it did. What happened?
• 1:31:26
  Two things. What happened was is the way I teach about my new book is there's like a snow globe
• 1:31:34
  you look in and you watch the players, right? Yeah. You watch the 401k players in this little
• 1:31:39
  crystal ball. You've got the worker, the government, Wall Street, and corporations. Those are the
• 1:31:45
  four players. So the reason this took off is this is if you look at companies are going bankrupt
• 1:31:52
  today, even that promised money is a millstone around their neck. Because you're promising you have
• 1:31:59
  time risk. For example, if you take a a field curve, a normal yield curve, right? And you buy a
• 1:32:06
  30 year bond, you're going to pay more to have your money tied up. You're going to need to get paid
• 1:32:12
  more to have your money tied up for 30 years. Look, if you and I watch the news tonight,
• 1:32:18
  we will not see another assassination attempt on on either president. We won't see a tsunami.
• 1:32:24
  We won't see an earthquake. We won't see an anaron. We won't see a new war breakout. If we watch
• 1:32:29
  the news tonight, if we watch the news together for the next three years, all of those things will
• 1:32:34
  happen every one of them. So that amount of time brings risk. So when a company says, I'm going to pay
• 1:32:41
  you a pension 30 years from now that'll start and then it'll and it'll keep going another 30 years.
• 1:32:48
  That's insane for business to do because business goes ups and downs and you have all these
• 1:32:54
  changes in your business. So if they can unload that liability and place it on the shoulders of
• 1:33:01
  the worker by saying, look, we'll give you a little money upfront with an employer match. But when
• 1:33:06
  you're done, you don't have any of this risk anymore and you have to deal with the volatility
• 1:33:12
  market now, they'll do that every time because it's less expensive. Right now, there's a huge fight
• 1:33:18
  at Boeing, the airlines, right? Yeah. And the workers are the workers are fighting management.
• 1:33:26
  And one of the things that the management is saying is we'll bump your 401k contribution.
• 1:33:33
  And the workers are saying, we want to go back to pension.
• 1:33:37
  The way that so if you have these agreements, what you do is you declare bankruptcy.
• 1:33:44
  Look at the bankruptcies. GM declared bankruptcy. Why? United Airlines declared bankruptcy. Why?
• 1:33:49
  Hosts has done it twice. Why? It's simply a way to break the promises to these employees,
• 1:33:55
  pension wise, they go to the government. They show them their financial statements. They look
• 1:33:59
  at our liabilities. We can't make it. So the government smacks the gavel, kills those promises.
• 1:34:04
  Now we got a 401k that you can fund. And so they legally break the promises to do it.
• 1:34:09
  So the reason they exploded initially was it saves the company's huge amount of money,
• 1:34:18
  not to have those long-term difficult to keep promises over 30 years. They can just pay as they go
• 1:34:24
  with the employer match. And that's a payment today. Now they can wipe their hands of this. They
• 1:34:31
  can shrink their workforce, expand it. It's just better for companies. The other reason it grew
• 1:34:37
  is Wall Street was showing their fangs because they're like, oh my gosh, are you kidding me? We can
• 1:34:43
  get a piece of every paycheck. Are you kidding me? And so the reason it grew is a benefits Wall Street,
• 1:34:51
  a benefits corporations at no time ever in this whole saga. Never was there a group of smart women
• 1:34:59
  and smart men that got together and said, let's figure out a better way to retire than pensions
• 1:35:05
  and implement it. It was an accident, a legislative, tiny little accident, some guy cook it,
• 1:35:12
  use an off-label use on it. If you want to use that term, off-label use of it. Bam, now we have
• 1:35:17
  a $11 trillion in the system. Crazy, right? This is why entrepreneurship, this is why investing
• 1:35:26
  financial education is so important. Because right now, you had the companies have the tools
• 1:35:32
  to screw you again and again and again if they want to. So you gotta remember, locus of control,
• 1:35:37
  right? That's it. Preach. Yeah. Yeah. Locust of control. I bet on myself, I bet on myself
• 1:35:48
  any day over those guys. Bet on myself any day. What would be, you know, people have been listening
• 1:35:55
  to this. I don't want them to be stressed out if they do have a 401k. But, you know, I think that
• 1:36:01
  that's a pretty natural reaction if they aren't entrepreneurial. A lot of entrepreneurs listen to
• 1:36:05
  this, a lot of investors listen to this, but there's people that definitely are in the situation of
• 1:36:09
  nine to five. I have a company matching my contribution right now. So let's sort of land this
• 1:36:18
  playing about 401k and financial education. Yeah. You want to talk to the audience and just give
• 1:36:24
  them some easy next steps on what they should do, what where they should go learn, what actions
• 1:36:30
  they should start to take so that they can really take a hold of their own future. Well,
• 1:36:34
  if you're a highly paid employee, you know, your six figures plus, I'd say you're going to put
• 1:36:40
  it enough there that's going to mass some. You're probably looking for a balance and say,
• 1:36:46
  I'm doing all right. I'm going to retire. It's going to work for me. If you're in the upper
• 1:36:51
  echelon of that, you're maybe the upper 80, 20 rule, the Pareto principle in the top 20. Maybe
• 1:36:56
  you're making it. You'd be freaking furious if you saw how much Wall Street made off it and what
• 1:37:02
  you could have had. You'd be freaking furious. But a lot of people going to struggle to show say,
• 1:37:07
  well, I don't want to learn anything. It seems you work and great. But everyone else is looking at
• 1:37:14
  that, you know, you say, well, I don't want to make anyone scared. Well, maybe we should.
• 1:37:20
  Because if it's out of sight, it's out of mind, and they're spending more time on the Christmas
• 1:37:24
  list than their financial education. So that's where I'd start. Learn the four pillars first.
• 1:37:30
  Learn how to evaluate a financial statement and see value and learn the prices what you pay
• 1:37:38
  and growth or earnings or sales or book values, what you receive and start to educate yourself.
• 1:37:44
  And you will be so surprised that this will be much more about the temperament and the
• 1:37:51
  consistency of investing than it is the financial education. The education you can just simply get
• 1:37:58
  by learning, you know, conversations like this. Hopefully someone learned something new by
• 1:38:02
  listening, right? That's all learning is is listening and practicing. The temperament will be
• 1:38:08
  the big key. Can you be consistent? You know, that's one thing a 401k does do. It is, you know,
• 1:38:13
  if it's going to pull it out of your paycheck, you are putting something away consistently.
• 1:38:18
  But if you say, hey, I could do that. If you say I could do that on my own, then do it on your own.
• 1:38:22
  So I would say the first step is, you know, do you want to have a locus of control? I love that phrase,
• 1:38:29
  do you want to move your locus of control from Wall Street, the corporation, or the
• 1:38:36
  the government and put it here? Okay, if that's going to be the locus control, I'm going to learn
• 1:38:41
  a little bit. So it starts with education. And you know, if they're fishing for employees and
• 1:38:47
  you're a fish and you want to have a happy life, swim in the lake, do you really want to consult
• 1:38:52
  the fisherman for your retirement plan? Do you really want them to build it because they're the ones
• 1:38:57
  that came up with it? Do you think they really built that for your benefit? Are they a
• 1:39:02
  philanthropic company, you know? Usually it's not. Usually not. Education's first. And it's not
• 1:39:13
  hard work. It's exciting to learn. It's fun to learn and have the discovery of, wow, I can really
• 1:39:18
  do it. It's fun. Where can people connect with you and then assume some more your content?
• 1:39:23
  See your next book that's coming out. You know, the book's done. It's with the publisher,
• 1:39:28
  but it won't come out for probably a year because you have to, you know, make a big
• 1:39:32
  campaign and launch it right. That's out of my hands now. I don't really care about that. I just
• 1:39:37
  care about writing it. I have an ebook, but a lot of people like that I call rat race escape plan.
• 1:39:45
  And it talks a little bit about those four pillars. It talks about the asset classes and it talks
• 1:39:51
  about how to plot a plan from A to Z. So if people want to get that, they could, you know,
• 1:39:57
  Google me or what have you. I mean, if people really want to know, they can find who we are and
• 1:40:02
  what we do. I had my team do a link. If you go to cashflowacademy.com forward slash success stories.
• 1:40:16
  I think I've got, we could put that in the notes or whatever. Yeah, I'll put your social in the notes.
• 1:40:20
  I'll put a link in the notes too. Yeah, they can get a free, they can get a free book,
• 1:40:25
  give it a read and see if it fits for what they want to do. But whatever, I mean, whatever
• 1:40:31
  people on the side, I wouldn't bash like VC. I wouldn't bash an angel investing because people
• 1:40:38
  that are smart are successful and all that stuff. So, you know, I love what you say about the
• 1:40:44
  looks to control that if it's about me, then I can make myself successful in whatever my passion
• 1:40:50
  might be. So, kind of dip your toe in the water, tell you find something you like and then jump in.
• 1:40:55
  And I mean, like that's the thing, like any asset class you invest in. I mean, the more time you
• 1:41:00
  spend in it, the more, the more you're going to be successful. If you jump from real estate to
• 1:41:04
  crypto to bonds to angel in the same week, you're going to lose a lot of money. But if you do it for
• 1:41:10
  10 years, then maybe you'd be successful. I think there's an opportunity to risk all of those
• 1:41:17
  avenues for people. They should explore all of them. Last question I like to ask everybody,
• 1:41:21
  you've had a great career. If you could look back and tell your 20 year old self one thing about
• 1:41:26
  life, success, wisdom, finance, whatever, what would that thing be? Oh, I would tell myself not to
• 1:41:32
  worry so much. And I look in my eyes and tell me the same thing today. And you know, after talking
• 1:41:40
  to you, it might be, hey, keep your locusts of control with you. You know, it might be what I've
• 1:41:45
  said. We, I don't know what it was said to myself. I'd probably said, don't worry so much. You got,
• 1:41:50
  you know, you got all the freedom in the world. Go work your butt off and enjoy that journey a
• 1:41:55
  little bit more and stress a little bit less because it's going to be okay.