\n<\/p>\n
Scott Galloway<\/strong>, NYU professor commonly known as \u201cProf G<\/strong>,\u201d thinks that America is adrift<\/strong>. Communities are dying, young people are feeling helpless, and wealth is slowly being sucked out of the system<\/strong> to give the ultra-rich even more comforts than before. The average American merely wants to make it\u2014having a house, a family, and maybe an ounce of peace. But with mainstream media<\/strong> violently pointing fingers at one another and the modern worker feeling desolate<\/strong> in the daily grind, what can we do to put this country on the correct course?<\/p>\n Scott knows that the game is rigged<\/strong>. He has strong feelings that real estate investors<\/a>, like many of us, are playing with \u201ccheat codes<\/strong>.\u201d But, that doesn\u2019t mean we\u2019re doing anything wrong. Scott dives into his personal philosophy on who has taken advantage of this country<\/strong>, who needs the most help, and how a young, aspiring entrepreneur or investor can build wealth<\/a>, without blindly buying into \u201csexy\u201d assets<\/strong>.<\/p>\n Although Scott likes real estate (and wishes he bought more of it), he cautions young investors<\/strong> to take a step back and be intelligent with their investments. A few right moves when Scott was young allowed him to live the life he has today\u2014but this was through hard work and taking the right action, not waiting for someone else to save him. No matter what age you are, what side of the political spectrum you fall on, or your feelings toward real estate\u2014Scott has words you\u2019ll want to hear.<\/p>\n David: Scott: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Scott: David: Scott: David: Scott: David: Scott: David: Scott: Dave: Scott: Dave: Scott: David: Scott: David: Scott: David: Scott: Dave: Scott: David: Scott: David: Scott: Dave: David: Dave: Scott: Dave: Scott: Dave: Scott: David: Scott: David: Scott: David: Scott: David: Scott: Dave: Scott: Dave: Scott: David: Scott: David: Scott: David: Scott: David: Scott: David: Scott: David: Scott: Dave: Scott: Dave: Scott: Dave: Scott: David: Scott: David: Scott: David: Scott: Dave: Scott: David: Scott: David: Scott: David: Scott: Dave: Scott: Dave: Scott: David: Dave: Scott: David: Scott: Dave: Scott: David: Scott: David: Dave: Scott: David: Scott: Dave: Scott: David: Scott: David: Dave: Scott: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast Show 688.<\/p>\n
What I would tell people, through no fault of your own, the lobbyists who have fomented this notion that buying a house is the American dream, and there\u2019s been such amazing regulatory capture that if I had it to do again from day one, I would probably be putting a disproportionate amount of my capital in real estate.<\/p>\n
What\u2019s going on, everyone? This is David Greene, your host of the BiggerPockets Podcast, the biggest, the best, the baddest real estate podcast in the world. Joined today by my co-host, Dave Meyer, as we interview Scott \u201cProf G\u201d Galloway. Scott is a very intelligent and very successful man who teaches other people how to build wealth, has a lot of experience in the tech sector, has started and sold companies, writes a book a year, has a lot to say about a lot of different things and brings a very well thought out and nuanced perspective to the podcast. Dave, what were some of your favorite parts of our interview with Scott today?<\/p>\n
Man, he is, like you said, really knowledgeable about a lot of different topics. I think it was just interesting to hear from someone who\u2019s an investor, a big investor, but not primarily a real estate investor, and just get their opinion and take on the economy, what\u2019s going on in the American society, what\u2019s going on in the American economy. He knew more about real estate than I thought he was going to, and I thought he had some really-<\/p>\n
Surprised us at the end there.<\/p>\n
Yeah, he was like, \u201cI don\u2019t invest in real estate,\u201d but then he was dropping some bombs right at the end. So I thought it was really insightful to learn from a different type of guest than we have a lot of times on these shows.<\/p>\n
Well, I think it\u2019s important to do that, right? You don\u2019t want to end up in an echo chamber of your own, especially when you criticize other people for ending up in their echo chamber. So we typically talk about real estate and, more specifically, real estate success stories. This person house-hacked a million houses, this person bought 27 units working as a janitor, and we\u2019re like, \u201cOh, this is so great.\u201d But you don\u2019t hear about the people that didn\u2019t make it.
The same is true about people that built wealth in other ways that were not specifically real estate investing and the perspective that they have on how wealth creating works, what principles work, what people should focus on, the right path to take as you are looking to improve yourself and build your wealth in the process. It applies to real estate, absolutely. I think it\u2019s healthy to get a perspective that\u2019s not just the same thing we\u2019ve had recycled by every single BiggerPockets guest that comes in. So, yeah, that\u2019s exactly what we\u2019re trying to do here-<\/p>\n
Totally.<\/p>\n
\u2026 is we\u2019re trying to bring a more mature and nuanced perspective to what we know works with building wealth, which is real estate, and see if there\u2019s ways we can accelerate the process, improve the process, or decrease our own risk in the process. That leads us to today\u2019s quick dip, which would be follow some of the best advice that I ever heard Robert Kiyosaki say.
So I was listening to Robert speak at a GoBundance event and he said, \u201cLook, most people are either a Republican or a Democrat. They see heads or they see tails, and they argue over if the coin is heads or if the coin\u2019s tails and they do not want to acknowledge what the other side also sees. Well, there\u2019s a third side of a coin that many people don\u2019t realize, and that is the edge.\u201d
Robert\u2019s advice to us was don\u2019t pick a side. Stand on the edge and you can look over each side and see what is happening on both sides, and then make your decision based on the information you\u2019re presented, not the ideal that you identify with. I thought that that was brilliant advice.
So as you listen to today\u2019s show, keep that in mind. It doesn\u2019t really matter if you\u2019re a heads person or a tails person. What matters is you see heads and tails. You know what\u2019s going on around you and you make the right financial decision to put you in the best position possible. Dave, any last words before we bring in Scott?<\/p>\n
No, well said. I think I believe strongly in objectivity and trying to develop your own understanding of issues.<\/p>\n
That is right, because you love data, and data doesn\u2019t lie.<\/p>\n
I sure do.<\/p>\n
Scott Galloway, welcome to the BiggerPockets Podcast. How are you today?<\/p>\n
I\u2019m doing great. Thanks, David.<\/p>\n
I\u2019m glad to hear that. I\u2019ve got to say, your hair is looking fantastic.<\/p>\n
That\u2019s right. Same barber.<\/p>\n
I\u2019m actually considering copying you.<\/p>\n
Yeah, no. If we had Dave\u2019s hair, we\u2019d be the junior senator from Pennsylvania.<\/p>\n
Well, anyways, Scott, thanks for being here with us today. For those of our audience that are not familiar with you, can you give us a rundown of your background, what you\u2019re known for, and then the contents of your new book?<\/p>\n
Sure. So good to be with you guys. I\u2019m a professor of marketing at NYU Stern School of Business. I\u2019m an entrepreneur turned academic. Born and raised in California. Brief stint in investment banking, then graduate school, and started several consulting eCommerce and business intelligence firms. Then started teaching at NYU about 20 years ago and now do a lot of media, write books, stuff like that.<\/p>\n
Awesome. If you had to say what you\u2019re most passionate about right now, what\u2019s on the front of your heart?<\/p>\n
I consider myself, at my core, a teacher, at least professionally. I think the only business card I think I\u2019ll have, and I don\u2019t have a business card, but metaphorically, will be that I think I\u2019ll always teach. I have an online edtech company. I\u2019m still on the faculty at NYU. But at the end of the day, I think of myself as a teacher.<\/p>\n
All right. Well, Scott, I\u2019d love to get into the book Adrift, which I read over the weekend. Really, really fascinating topic. After reading it, I was just curious why you called it Adrift and not something like We\u2019re (censored) or Everything is Terrible, because it paints a grim picture, right?<\/p>\n
Yeah. I force myself now in every presentation, and tried to do it in the book, to talk about solutions and silver linings. But Adrift was I don\u2019t think we\u2019re lost. I think all of these problems are of our own making, and that\u2019s the bad news.
The good news is they can be unmade. I think we can see land. I think all of our issues are fixable. There\u2019s nothing wrong with America that can\u2019t be fixed with what\u2019s right with America. I think we see land. I think we know what needs to be done. I think we have to row in unison, or whatever nautical metaphors I can come up with.
But I don\u2019t think we\u2019re lost. I don\u2019t think we\u2019re (censored). For lack of a better term, I just think we\u2019re a bit adrift. Like I said, I\u2019m actually quite hopeful because the incumbents and the what I\u2019ll call the entrenched want to create this illusion of complexity and that these problems are intractable.
I don\u2019t think there\u2019s a single problem that ails us that can\u2019t be fixed. We talk about teen depression at the hands of social media. They will claim it\u2019s multidimensional and difficult. It is difficult, but they\u2019re absolutely solvable.
There\u2019s no reason we can\u2019t age gate social media. There\u2019s no reason we can\u2019t hold these firms accountable when they are sending emails saying \u2026 Pinterest sends an email, saying to a 14-year-old girl, \u201cHere\u2019s a board with images on suicide you might be interested in.\u201d There\u2019s just no excuse for that. We can fix that. We can fix our tax structure. We can make investments in trade schools and junior colleges.
We\u2019ve accomplished much bigger things. We\u2019ve stared down much bigger problems before. So I don\u2019t think we\u2019re lost. I don\u2019t think we\u2019re (censored). I think we\u2019re adrift.<\/p>\n
It\u2019s a good way of saying it. Yeah, I\u2019m mostly kidding. But I agree that acknowledging what the problems are is probably the first step towards coming up with some of those practical solutions. So for those of our audience who haven\u2019t yet read your book, can you tell us just what are the big problems, some of the themes that you\u2019re seeing that are impacting American society?<\/p>\n
Sure. So there\u2019s several. I\u2019ll start with some major ones, and then what I think is the profound one or the biggest one. We talk a lot about income inequality. That gets a lot of warranted attention. What we don\u2019t talk about that I think needs more attention is what I\u2019ll call age inequality. That is a 75-year-old is 72% wealthier than he or she was 40 years ago. Someone under the age of 40 is 22% less wealthy.
The percentage of wealth controlled by people under the age of 40 in the last 40 years has gone from 19% of GDP to 9%. In some, we have, from a legislative standpoint and a fiscal standpoint, decided to transfer money from young people to old people.
Again, the entrenched, the old wealthy generation will say, and I\u2019m a part of that generation, is that these are big problems because of globalization and network effects, which is total (censored). These are concerted decisions.
Reagan taxed all income at the same rate and then we decided, \u201cI know. Let\u2019s have a lower tax rate for capital gains.\u201d Then the second biggest tax deduction is mortgage interest rate. So who makes money off of stocks and bonds? Old people. Who makes money off of current income and salary? Young people. They pay a higher tax rate. Who owns homes? People my age. Who\u2019s renting? People your age.
Social security is considered the third rail. I get attacked immediately when I say we should reconsider much harsher means testing for social security. The largest transfer of wealth that takes place every 12 months on the planet in history is young people transferring a trillion and a half dollars to the wealthiest cohort in the history of the planet, seniors, in the form of social security.
But because over a quarter of our elected representatives are over the age of 70, because the first two states that basically set the presidential primary are the oldest states in the Union, Iowa and Maine, we have massively overinvested in older people at the expense of younger people. Even if we get a chance with the bailouts from COVID to make rich people richer, we decide, okay, we\u2019re not only going to (censored) younger people, we\u2019re going to (censored) their kids and their grandkids with unsustainable levels of debt, so pop-pop and nana can upgrade from Carnival to Crystal Cruises.
So there\u2019s been massive age inequality. There is also massive \u2026 I think a huge issue we\u2019re going to talk more about is failing young men. The education system is highly biased against women, and people are afraid to talk about it. Richard Reeves from the Brookings Institute just wrote a wonderful book called Of Boys and Men. But the moment you start advocating for men, you\u2019re labeled a misogynist. People see it as a zero-sum game.
When we decided to advance the interest of women when it was 40, 60 women to men in college, when you were in favor of affirmative action, people of color, which I am, I\u2019m a huge advocate of affirmative action, you weren\u2019t seen as being anti-white. So we don\u2019t even want to have an open conversation around how young men are really struggling.
I think it\u2019s changing. I think people, mainstream media is becoming much more open and accepting of saying that. You\u2019re not immediately labeled a misogynist. But, look, three times more likely to commit suicide, four times more likely to be addicted, 12 times more likely to be incarcerated. Seven in 10 high school seniors are girls. In the next five years, for every one male graduate of college, we\u2019re going to have two females. It\u2019s going to be two to one. Two to one.
Then you have this war on what I\u2019d call masculinity, or we\u2019ve conflated toxicity with masculinity. We\u2019ve decided that masculine attributes \u2026 Female attributes should be celebrated and protected and honored and male attributes should be starched out, that there\u2019s something unhealthy or dangerous about them.
So I think failing young men is a huge one. Incredible age inequality. An emerging crisis, loneliness. People don\u2019t speak to their neighbors. Church attendance is down. People aren\u2019t joining the boy and the girl scouts. The number of kids that see their friends every day has been cut in half in the last 10 years.
We don\u2019t go to work. We don\u2019t go to the mall. We don\u2019t go to the movie theaters. When we don\u2019t touch and smell each other, we have less empathy from one another. We resent people. When there\u2019s immigrants in your neighborhood you interact with, you\u2019re pro-immigration. When there are no immigrants and you don\u2019t see them, you become very anti-immigrant. Too many people, especially young men, are spending way too much time alone in their parents\u2019 basement.
Then what I think is the biggest problem is if America\u2019s problems were a horror movie, the call is coming from inside of the house. Now what do I mean by that? Geopolitically or relatively speaking America, I would argue, has never been stronger. We\u2019re food independent. We\u2019re energy independent. Smartest, brightest people in the world all have one thing in common. They all want to come here.
We\u2019re the football team that gets every draft choice, the top hundred draft choices every year, but we don\u2019t like each other. A third of each party views the other party as their mortal enemy. 54% of Democrats are worried their kid is going to marry a Republican. We have 20% of Americans would be fine with an autocrat as long as it\u2019s his or her gal.
So it just strikes me there\u2019s this falsehood, this dangerous falsehood, or a lack of recognition that Americans\u2019 greatest allies will always be other Americans. We don\u2019t like each other. People dislike our leaders on the other party more than they dislike Putin or Xi. That\u2019s (censored) ridiculous.
Just to wrap up this word salad here, I\u2019m a huge fan of World War II history, and there\u2019s this wonderful photo generalist, I think her name\u2019s Maria Amolo, and she\u2019s been colorizing these World War II photos. I don\u2019t know if you guys have seen this, but my favorite is a landing craft, in the invasion of Normandy, dumps its front doors and you see these men wading through the water, really boys. Average age was 26, average salary was $800, these GIs.
The most unskilled, expendable men were sent first because they knew that most of them were getting killed. They\u2019re headed towards Omaha Beach, wading through this cold water. Two of three wouldn\u2019t make it off the beach.
I can\u2019t even imagine any of them at that idea, for the life of them, could have told you who was a Democrat and Republican wading towards that beach. Then I imagine them turning around and being able to suspend the time-space continuum, as we can looking at the past, and they could look and see us and go, okay, teen depression, election interference, polarization. They would go, \u201cYou can\u2019t fix that? Jesus Christ, look what I\u2019m facing. Look what I\u2019m running into. But you can\u2019t face that?\u201d
So I\u2019m motivated by history to believe that America can absolutely fix all of these issues. But I would say the biggest problem is Americans need more connective tissue and to start joining hands physically and metaphorically with other Americans and stop this nonsense and this polarization and just this vitriol towards each other.<\/p>\n
If I\u2019m hearing you right, Scott, I\u2019m picking up a pattern in what you\u2019re proposing here, and I just want to get verification that this is the point you\u2019re making. It\u2019s that a lot of this is due to policies enacted that affect incentives. So we created policies that would incentivize women to attend college and now it\u2019s out of whack. We\u2019ve created policies that have allowed a certain generation to be able to hold onto and attract wealth at a faster rate than others, and it\u2019s created something out of whack. Is that more or less your perspective?<\/p>\n
There\u2019s some nuance there. So when it comes to education, what we found is when we leveled the field in education, girls blew by boys. Boys, biologically, are at a disadvantage. An 18-year-old girl and an 18-year-old boy, essentially when they\u2019re competing for a college seat, the girl is competing against a 16-year-old. Boys\u2019 prefrontal cortex doesn\u2019t grow and mature as fast. The executive function that is gas, break, when to play FIFA, when to stop and study. Girls are one to two years ahead of boys, and school and college rewards that behavior, that discipline, that delaying of gratification.
I don\u2019t know if you guys have kids or boys, but basically when you\u2019re a dad, all you really are is the prefrontal cortex for your boy until he develops his own, right? You\u2019re like, \u201cOkay.\u201d<\/p>\n
By proxy.<\/p>\n
Yeah. \u201cOkay, stop playing video games. You have homework tomorrow.\u201d \u201cNo, you can\u2019t yell in a restaurant.\u201d I mean you\u2019re just sitting there going, okay, I\u2019m the front part of your brain until it actually grows. Girls, theirs shows up sooner. It just shows up sooner.
Also just there are societal reasons. Two kids in the principal\u2019s office, a boy and a girl, exact same behavior, cheating on a test, exact same test, exact same cheating. The boy is twice as likely to be suspended. Black boys five times as likely to be suspended. Once a kid is suspended two to three times, he\u2019s not going to college.
80% of primary school teachers are women. Who are they going to champion? I don\u2019t resent them for this. Who do they see themselves in? In that little girl who has the same colored hair that comes from the same background. Two-thirds of high school teachers are women. So there\u2019s fewer male role models.
We also have 21% of US households are run by a single parent, which is Latin for mom. Girls actually have similar outcomes in single-parent homes. Boys come off the track. The moment there\u2019s no longer a male role model living with a male, he becomes twice as likely to be incarcerated.
So the system, the educational system, is biased against boys. Now having said that, the labor market, there\u2019s this moment of equality when men and women are young. They have about the same wage as girls, or women have closed the gap, which is a wonderful thing. Then the labor market turns against women about the time they have kids. Wages for women drops to $0.77 on the dollar once they start having kids. Anyway, so there\u2019s biases everywhere.
In terms of school, I think it wasn\u2019t policy as much. It was that we level the playing field and the behaviors that the educational systems value favors biologically women, both in terms of the norms of education and just straight biology.
Now on the age inequality stuff, or income inequality, this has been a concerted policy effort by a Congress and a Senate that increasingly looks like a mix between the Golden Girls and the Walking Dead. We\u2019re just too goddamn old. It\u2019s not surprising that one in five children are living in food-insecure households because none of these people have young kids at home. They just have trouble relating. And old people vote. So we effectively have a geriatric government that is supporting other old people.
That\u2019s not to say people can\u2019t represent people on like [inaudible 00:18:41]. We have the oldest leadership in the world. I mean think about the presidential race, the two leading candidates. If Biden or Trump win president in 2024, that means the last time Marine One leaves the West Lawn, we\u2019re either going to have an 86-year-old or an obese 82-year-old. That is (censored) ridiculous.
We are so worried about being called an -ist, specifically an ageist, that we don\u2019t want to acknowledge that you know who else is ageist? Biology. The majority of us have this uncomfortable conversation with one of our parents, taking their driver\u2019s license away. It usually happens in the \u201970s, but we\u2019re going to have an 82 and an 86-year-old running the biggest economy and in charge of 11,000 nuclear weapons.
There\u2019s a huge problem, I think, around a representative government that does not represent young people. And so, the policies you were talking about have been enacted that it just slant money, just the level the playing field that\u2019s just taking more and more money from young people and sliding it down to the entrenched incumbents.<\/p>\n
So looking at this from the perspective you have, what are some of your recommendations for how younger people can navigate through this environment to put the odds in their favor to build wealth?<\/p>\n
Well, one, I think we should have one \u2026 Just from an economic standpoint, we need to reform the tax code and make it progressive again. Basically at about 99%, your taxes go down.
So I\u2019m an entrepreneur. I sold my company, L2, for $160 million. The first $10 million is tax-free. That doesn\u2019t make any sense. Why am I not paying any taxes? Why is FedEx and Nike not paying any taxes?
If you look, I would like to see taxes coming down. Government requires 23% of GDP. We\u2019ve been deficit spending, so, arguably, tax rates should be, on average, 21%. If you had corporate taxes at 30% and you tax people making over a million dollars current income, just one income \u2026 There\u2019s just income. I believe in what Reagan did. There\u2019s just one income. And you tax people making over a million bucks 30%, that means everybody else would pay somewhere between 12% and 14% tax.
So you could cut taxes as long as you force everyone to pay taxes. As somebody who came into wealth later in life, you just see how the game is rigged. I have these incredibly intelligent people engaging in massive tax avoidance. It\u2019s all legal, but it\u2019s just striking. My tax rate is between 17% and 19%. When I was working my ass off making all my money in current income living in California, my tax rate was 46%.
So we\u2019ve decided, we\u2019ve made a concerted decision that if you get the gold medal, we\u2019re going to give you the silver and the bronze. We\u2019re not going to say, \u201cOkay, you\u2019re lucky you need to pay some tax and help get more people on the podium.\u201d We need to redo our tax policy. We need to provide double the number of freshmen seats at colleges.
Me and my colleagues are so drunk on exclusivity that we\u2019ve created artificial constriction of supply such that we can feel better and better about our degrees. We have a numbious rejectionist culture. Once I have a college degree, I want admission rates to go down. Once I have a house, I don\u2019t want any new projects or development projects approved. Once I have a successful tech company, I\u2019m going to weaponize government such that small companies can\u2019t get merged because I engage in monopoly abuse.
The result is the gale forces of disruption never really get to blow, and there\u2019s no churn. There\u2019s fewer and fewer younger people who have access. We artificially suppress interest rates \u2026 Unless you have rich parents, how do you buy a house if you\u2019re a young couple? How on earth do you buy a house?
Now that\u2019s changing, I think, for the better. I\u2019d love to see mortgage rates go to 9% and see housing prices crash, because I got to buy a house when I was young and I didn\u2019t have parents that could help me. How the hell does a young couple buy a house right now?
Anyway, I think simplification of tax code, massive increase in freshmen seats, big investment in our junior colleges and vocational programs and stop fetishizing the traditional four-year degree in elite colleges. There\u2019s a lot of job demand for cybersecurity, specialty construction, installation of solar panels. There\u2019s a variety of two-year certification degrees, vocational degrees that would give kids $60,000 to $120,000 day one. But instead we have this weirdness in the US where if my kid doesn\u2019t end up at MIT or Google or KKR, I failed as a parent.
33 out of every thousand workers in the UK and Germany have the term apprentice. In the US, it\u2019s three. 50% of Germans have some sort of vocational certification. In the US, it\u2019s five. So I\u2019d like to see national service. I\u2019d like to see similar to what they do in Israel and Northern Europe, mandatory conscription of one to two years. So you meet people from different backgrounds, different ethnicities, different income levels, different sexual orientations.
I think we need to establish connective tissue and have a generation of Americans that see themselves as Americans first, not as Republicans or Democrats, or college attendees or non-college attendees. So I think there\u2019s a variety of social and fiscal initiatives that we could do to start investing, again, in the middle class, and specifically investing in our younger Americans.<\/p>\n
Scott, a lot of this advice is this societal-wide, macro ideas, and it\u2019s really interesting, your thoughts there. What about some of the individuals \u2026 Because a lot of the people listening to this show are in the Gen Z or millennial age group. By the fact that they\u2019re listening to this show, I\u2019m going to presume that they\u2019re very interested in getting ahead financially. What are some of the ideas or paths that you recommend to people who, despite these headwinds that they\u2019re facing on the societal level, that they can take as individuals to try and improve their own financial position?<\/p>\n
Well, I mean there\u2019s a few best practices. So very basic peanut butter and chocolate is certification and geography, and that is we live in a LinkedIn economy. What is on your LinkedIn profile is very important in terms of access to middle-class economy. So if you can have the opportunity to get to college \u2026 We all like to say college sucks and people don\u2019t need college any longer. But that\u2019s mostly a gag reflex because it\u2019s become so unattainable for most people.
But if you have the opportunity to go to school, you should take it. I\u2019m not suggesting you go to a mediocre school and pay $100,000 or issued a ton of debt. You need to be smart about it and make sure it\u2019s worthwhile. But if you have access to a good certification at a reasonable price where you can afford it, it\u2019s a good plan B.
Get to a city. Two-thirds of economic growth is going to happen in 20 super cities. It\u2019s like I\u2019m a mediocre surfer, but occasionally I get somewhere with a perfect offshore breeze and perfectly shaped waves and I believe that I\u2019m a good surfer. Then I go back and surf in real waves and realize I can\u2019t surf. You want to get to where the waves are great. In cities, the waves are just better.
It\u2019s like when you play tennis, you play against someone better than you, your game elevates. When you get to a big city, you\u2019re playing against the Federers of the world. You just have to be better, and you are better. You have to work harder. You have to get better skills. So the peanut butter and chocolate of early ascent is certification and getting to a city.
The algebra of wealth, and I think about this a lot, is, loosely speaking, focus on your talent, not your passion. So first thing is focus. Find something you think you\u2019re good at. This is what you need to do in your 20s. Don\u2019t try and figure out what your passion is. That\u2019s dangerous. I\u2019m super into sports and I like alcohol, so I should open a sports bar, or I love media. I would love to start a magazine. I would love to start a magazine.
You want to open a restaurant, go to work for Vogue, open a nightclub, or go to work in sports, you better get a ton of psychic income because it\u2019s going to be (censored) return on investment, because those fields are overinvested. Just as Miami real estate, no one wanted in 2010 and the returns were huge. Now everybody wants Florida real estate and the returns have been starched out. The same is true of your own human capital.
So your job isn\u2019t \u2026 Be a DJ on the weekends. Find something you\u2019re really good at. Like I\u2019m good at math, or I think I\u2019d be really good selling soft \u2026 What can you do that you think you could be amazing at, like you have some natural inclination? You can\u2019t hate it, but you don\u2019t have to \u2026 When people say passion, people immediately go to, well, I\u2019m really into art. Oh, okay, great. That\u2019s a tough way to make a living.
Anyway, find your talent, investor requisite 10,000 hours, and becoming great at it. Then get to a certain level of stoicism. It sounds basic. Try and figure out a way to make more than you spend. When you\u2019re young, before you have kids and dogs, live in a (censored) small apartment. Spend as little money as you can on your living situation because you don\u2019t need to. If you\u2019re young, you should be in your apartment max eight hours a day, and seven of that should be sleep, or six of that.
Try and start saving right away. Try and show a level of stoicism around being really disciplined. Try and work out five or six times a week. You should, before the age of 30, be able to walk into any room and know that if (censored) you got real, you could kill and eat everybody or outrun them.
I think being in great physical shape before the age of 30 makes you more confident, makes you more kind, gives you the stamina to work really hard. You bring very little to the workplace when you have no skills when you\u2019re young.
I joined Morgan Stanley out of UCLA. I wasn\u2019t as well-educated. I don\u2019t think I was as smart as the majority of my classmates or peer group, my analyst class. So I decided, every Tuesday morning, I was going to go to work and I was going to stay till Wednesday at 5:00.
I would work the night through Tuesday night. I would work for 36 hours straight. And I could do it. I was an athlete in college. I didn\u2019t have kids. I didn\u2019t have dogs. I could go sleep-deprived. No problem. It sent a signal that I came to play. They were like, \u201cOh, yeah, that\u2019s that kid that went to UCLA, who works through the night every Tuesday.\u201d I got opportunities. People like that. I could not do that now. I\u2019m not physically capable of it and I want to see my kids at night.
So go really hard. Be stoic. Try not to let emotions get in the way. Try to show real discipline around saving money. I\u2019d say focus very much on work. I think there\u2019s a lot of talk about balance. I get that a lot of people work to live. Good for you. You\u2019re going to need to move to a lower cost neighborhood and you\u2019re never going to get that economic security that most people want. I\u2019m not saying my way\u2019s the right way, but most of the people I talk to are very economically ambitious.
Then in terms of once you have a little bit of money, diversify. I think diversification is your Kevlar. It\u2019s easy to think, oh, Solana\u2019s going to the moon or Michael Saylor is a genius, and I think he is. He thinks Bitcoin\u2019s going to $400,000, so I\u2019m going to invest everything in Bitcoin. By the way, he might be right.
But diversification is your Kevlar and that is \u2026 I\u2019ve lost everything twice, 2000 and 2008, because I was convinced and I was a genius. eCommerce was everything, and then tech was everything. The market is bigger than any individual, and you are putting yourself in a position where if you take a bullet, it can kill you financially.
So now I diversify, put money in all sorts of different unrelated things. That way if I take a bullet in my stock, a stock goes to zero, it hurts, but I survive.
Then time. Find things you want to invest in, where you don\u2019t have to pay attention to them and ignore them. The best performing cohort of investors are dead people, and there\u2019s research here, because they don\u2019t trade their accounts.
So, anyways, find your talent, focus, a certain amount of stoicism, save more, spend less than you make, diversification, and then let time take over. You\u2019re going to wake up \u2026 You guys are younger than me. I was 22 yesterday. I\u2019m going to see my college buddies in LA. It\u2019s like we\u2019re seniors at UCLA. I literally can almost feel and smell the same things.
Now I\u2019m 57, and just a little bit of money back then, just a little bit of money every month would be millions of dollars right now. Most young people don\u2019t believe it because they can\u2019t evaluate time. They can\u2019t assess time correctly.<\/p>\n
Or inflation, the way that the actual value of the currency changes so dramatically over time.<\/p>\n
100%. Yeah. I\u2019m always invested. I\u2019m always in the market, because I don\u2019t think you can time the market. I just try to diversify. I think the market\u2019s going to absolutely throw up in the next 12 months. I\u2019m still fully invested, because I don\u2019t know. I mean I don\u2019t know. I have a gut, but I don\u2019t know.<\/p>\n
I heard a conversation on the Lex Fridman Podcast, where he was speaking with someone \u2026 I couldn\u2019t pronounce the guy\u2019s name, it was like Amadeus or something, that was talking about \u2026 He was a proponent of Bitcoin as well. He\u2019s talking about the fiat standard versus the gold, or he was calling it the Bitcoin standard, and just discussing how in a fiat economy like we have, which basically means the government can manipulate the money supply, they can print the crap out of it \u2026 And print isn\u2019t actually accurate, but it serves the same purpose \u2026 to fund wars that we\u2019re fighting or interests that we have overseas or programs that we have here. Whatever it is that the government wants to do, instead of raising taxes on people, which is unpopular, they just print more money.
For some reason, none of us talk about it. To me, it\u2019s amazing that we\u2019ve done what we\u2019ve done to our money supply. Maybe 80% of the entire money supply has been created in the last little over two years, probably. It hardly ever gets talked about at all. But we\u2019ll talk about other things in the news nonstop.
Well, anyways, his point was savers are punished. If you\u2019re just simply making money and saving money and setting it aside, you can never catch up to the rising tide. You are forced to become an investor if you\u2019re in a fiat economy, almost just to stay even. Like you were just saying there, Scott, if you look back 30 years, there\u2019s not a human alive who would say, \u201cI wish I wouldn\u2019t have bought that house,\u201d \u201cI wish I wouldn\u2019t have invested in that stock,\u201d \u201cI wish I wouldn\u2019t have invested my money in something prudent.\u201d
But when we think forward, I don\u2019t know, there\u2019s a disconnect that the same will be true 30 years from now, and probably much more dramatic with the way that we\u2019re printing money now. Are you of the same opinion that we should be telling people you have to be investing your money and you have to be holding onto it because you\u2019re not going to get ahead if you\u2019re just making some money, spending some money, and saving a meager amount?<\/p>\n
So in terms of \u2026 So let\u2019s go here, fiat currencies. Every fiat currency throughout history has eventually failed because, to your point, the political temptation to spend more money such that you can provide a short-term sugar hit to the economy and not be fiscally responsible, which requires short-term pain and oftentimes means you\u2019re going to be booted out of office, requires adults thinking about their kids and grandkids, and the political system doesn\u2019t occur. So that\u2019s long-term thinking. So, ultimately, over time, the temptation to print money becomes too great and the currency becomes inflated and goes to zero.
So by that standard, you probably always want to be in an asset. You don\u2019t want to hold onto cash. Now having said that, treasury bills and bonds, for the first time, are giving a decent amount of reward relative to the risk. So I think there\u2019s a decent argument. Older people would say it\u2019s not a bad time to own treasuries because you can get 4% instead of 1%.
But I\u2019m a big believer in always have your money in the market, diversify. But I would tell young people \u2026 Adidas, I\u2019m fascinated with what\u2019s going on with Kanye right now. Adidas is at $60. It\u2019s off, I don\u2019t know, $50 or $60. It\u2019s been cut in half. Alibaba\u2019s been cut by two-thirds. PayPal\u2019s off. There\u2019s just so many great companies.
I don\u2019t want to say they\u2019re on sale because their valuations got so high. But I think a decent strategy is looking at places where there\u2019s dislocation and then buying stock, trying to be really disciplined. I\u2019m going to try and save a thousand bucks a month, which is a lot for a young person, and I\u2019m going to put it in names I like or I\u2019m going to, better yet, put it in an index fund or an ETF, the natural trajectory the market is up, and then ignore it.
You know what is a low ROI? Buying crypto. The reason I don\u2019t like kids buying crypto, it\u2019s not that I don\u2019t like the asset class. What I don\u2019t like is that crypto usually means you\u2019re staring at your (censored) phone all day. That\u2019s an investment.<\/p>\n
Yeah.<\/p>\n
Well, that does remind me of the older folks that are like \u2026 They\u2019re retired, they\u2019re bored, they have nothing to do, and they sit at their computer and they watch the tickers. They tinker with their portfolio doing absolutely nothing to benefit. But it\u2019s such like their brain needs something to do.
It does turn that into the 23-year-old that bought an NFT or some crypto, and now they\u2019re doing the same thing. It gives you this dopamine release as if you accomplished something. But, like you said, Scott, it\u2019s not building skills. It\u2019s not putting your 10,000 hours into something. It\u2019s not putting you on a path that\u2019s going to improve your position. It\u2019s like a substitute for it that many of us have just been hypnotized into.<\/p>\n
Yeah, there\u2019s an inverse correlation between how often you check your portfolio and your returns. I think you mentioned that with dead people, Scott, like the less you look at your returns and the more you just allow your investments to compound over time, the better your returns actually become.<\/p>\n
Robinhood\u2019s tagline, if it was honest, would be the more you trade, the more you lose. 80% to 95% of day traders lose money. If you owned any five stocks in the S&P and you own them for longer than a decade, no one has ever lost money.
So now I want to be clear, occasionally I trade. Occasionally I buy options or I usually write options, and I enjoy it. It\u2019s like gambling for me. I take a little bit of money and I do it.
I love Vegas. I was in Vegas last week. I go with a group of guys. I put on a kilt, I get (censored) up. I go down, I take a thousand bucks. I assume I\u2019m going to lose it all. So if you\u2019re trading stocks or you\u2019re trading options or doing weird stuff, realize, okay, it\u2019s fun, it\u2019s consumption, but you\u2019re probably going to lose most or all of your money.
But don\u2019t con yourself into thinking that you\u2019re learning or investing. I\u2019m not against it. I love to gamble. I love to drink. But neither of those things are going to create economic security for me and my family, their consumption. What makes wealth is the boring (censored) buy a REIT. You think the future is in eCommerce, buy Prologis and then don\u2019t look at it for 10 years.<\/p>\n
Scott, what do you think about regular real estate, though, in addition to REITs? Buying rental properties. How do you view that in the spectrum of potential investments?<\/p>\n
So I\u2019m now at the age where I think about what if I could do it all over again. If I could do it all over again, I\u2019d be a Broadway dancer, a Navy Seal. So there\u2019s still time. But I would also get into real estate.
Essentially, if you look at the most valuable companies in the world, they\u2019re a thick layer of innovation based on enormous government investment. Google and Apple are built off of GPS and DARPA technologies. Tesla\u2019s built off of massive subsidies for carbon credits. Moderna is built off of NIH investments and vaccine research at universities.
So the way to make a lot of money is to be a remora fish on massive investments by other people. The regulatory capture of the real estate industry is extraordinary. I don\u2019t have any other investment. I wish I\u2019d come into this later.
I bought some apartments. During 2010 or \u201911 in Florida, the Palm Beach County Clerk\u2019s Office was auctioning off repossessed condos. I was buying these things for $80,000 or $100,000, and I could get $12,000 a year in rent. I\u2019m like I don\u2019t know real estate, but I can do math. If I can get 12% cash-on-cash, this is just going to work out. If I can hold onto these things long enough, this is going to work out.
Then I find out, your industry, I can depreciate these things. I\u2019m like, okay, they\u2019re going up in value, but I can depreciate them? I can\u2019t depreciate my Amazon or Apple stock.
Then if I get a call from an investor who says, \u201cOh, you own 30 apartments. I\u2019d like to buy them,\u201d I can then, within six months, not incur that gain and roll it into another asset? I mean you can\u2019t do that anywhere else. You guys have figured it out. So here\u2019s the thing. You can be good in real estate, and it\u2019s as good as being great in any other asset class.<\/p>\n
That\u2019s true.<\/p>\n
So what I would tell people, through no fault of your own, the lobbyists who have fomented this notion that buying a house is the American dream, there\u2019s been such amazing regulatory capture that if I had it to do again from day one, I would probably be putting a disproportionate amount of my capital in real estate.
Now, having said that right now, I wouldn\u2019t buy a house right now. I think there\u2019s a standoff between buyers and sellers because the top is sticky. I love real estate. I\u2019m one of those SNL skit where I look at real estate like a lot of people look at porn. I\u2019m just fascinated what\u2019s selling where and for how much. I don\u2019t think sellers \u2026 Sellers anchor off the high. They go, \u201cOkay, my house was worth $500,000.\u201d<\/p>\n
That\u2019s now their baseline.<\/p>\n
Yeah, that\u2019s it. \u201cOh, that\u2019s the normal market.\u201d No, it wasn\u2019t. That was the peak. Now your house is worth $380 and it\u2019s probably going to be worth $340 in another six months. Eventually there\u2019s capitulation, but capitulation usually takes 12 to 24 months. I wouldn\u2019t want to buy a house right now, I think, with interest rates going up.<\/p>\n
What about an investment property that would cash flow positively?<\/p>\n
It\u2019s all about cap rates and specifics and nuance. When I saw the hurricanes coming to Florida, I started looking at Fort Myers. I love these apartments that I bought and I\u2019m like, \u201cOh, maybe there\u2019s opportunity.\u201d I also, and I\u2019m in a position of privilege, I try to pay all equities so I\u2019m not forced to buy insurance, which is a total (censored) scam.<\/p>\n
Oh, I\u2019ve heard you talk about you\u2019ve saved, what, $200,000 over four years or so of not paying for \u2026<\/p>\n
Again, everything we do in our society is a transfer of wealth from the poor and the young to the old and the rich. Okay, let me give you a shocking statement. Me and my family do not have health insurance. Really? Bad dad, bad husband. Irresponsible citizen.
Here\u2019s the thing, I\u2019m a narcissist. So I think if I have health insurance, I have to have the best plan. So I got the best plan costing me $48,000 a year for me and my family. $48,000 a year. I am very privileged. I could absorb any health shock, any rare disease, million, two million bucks. I can absorb it. I don\u2019t need to worry.
Then I did the analysis. Half of our medical expenditures, we weren\u2019t getting reimbursed for, because the insurance industry is very good at creating complexity and nuisance. You have to call somebody and they\u2019re only there from 11:00 to 3:00, central standard time. You give up and you don\u2019t get reimbursed for going to have that mole removed. Oh, and the dermatologist I want to go to is not covered under their plan. There\u2019s purposeful breakage.
So I said (censored) it, I\u2019m not having health insurance. I did that six years ago. I\u2019ve saved $300,000. That will buy a lot of healthcare. 45% of insurance premiums go to administration and profit. When I bought these apartments, because I paid cash, I\u2019m like I\u2019m not getting flood insurance. These things could fly away. They could Wizard of Oz on me. As long as they don\u2019t fly away more than every 11 years, I can afford to rebuild them with the money I\u2019m going to save in insurance.
It\u2019s this industry that plays on fear and ignorance, and also regulatory. If you get a mortgage from the majority of bulge bracket banks-<\/p>\n
They\u2019re going to require it.<\/p>\n
\u2026 you have to have insurance. Otherwise, you can\u2019t qualify for a mortgage. So what does that do? It means a guy with some money who\u2019s older like me doesn\u2019t have to have health insurance, doesn\u2019t have to have flood and fire. So, again, another transfer of money.
But I think real estate \u2026 Again, if I had to do it again, the wealthiest families in Manhattan, they don\u2019t really talk about them. Everyone\u2019s obsessed with tech billionaires. There\u2019s like a handful of families in New York that own all the office buildings. They never sell them, they just borrow against them. I mean if you have the capital and the staying power to survive cycles in real estate, which can be very vicious, those are the people \u2026
If you look at the Fortune 400 or the Forbes 400, the two people that populated outside of people who inherited wealth are entrepreneurs, number one, and number two is real estate people. It\u2019s just a great way to get rich slowly.<\/p>\n
So why\u2019d you get out of it? You bought in at a great time in 2010 and you like a lot about it. What stopped you from continuing?<\/p>\n
Well, in my core, I\u2019m an entrepreneur and I\u2019m fascinated towards eCommerce and growth. I think I\u2019m seduced by what I\u2019ll call the sugar hit of investing in Airbnb and seeing a double. Tech is my bag. It\u2019s what I get. I\u2019ve worked with Ned Spieker at Spieker Properties, and Hamid Moghadam is someone I would call a friend. I know people in real estate and it strikes me that their business is better than my business, but it\u2019s just not my business. I\u2019ve never really done it, understood it.
So I did a crash course in it in 2010 because I saw an opportunity. Now, looking back, I wish I bought 300 of these things, not 30 of them. But I think it\u2019s a fascinating business. Again, if I\u2019d do it again, I would probably try and be in and around real estate. I think it\u2019s a great business.<\/p>\n
Well, it gives you some of those advantages you were talking about that might be geared towards older people. But if you\u2019re able to buy real estate as a young person, it does allow you to capture those things, like you talked about, mortgage interest, depreciation, some of these things that you said at the top of the show are more designed to help older folks. But if you are young and able to get into this industry, it can help you get some of those cheat codes that the older generations are enjoying, right?<\/p>\n
Well, again, going back to what other asset class can you get five to one leverage on? I mean-<\/p>\n
Or better sometimes, yeah.<\/p>\n
Some young people do some \u2026 I think government programs can get 10 or 30 to one leverage. Again, I think prices have gotten a little too high, so I\u2019d be careful. But I work with Goldman Sachs. They\u2019ll give me two to one on my stocks. By the way, if my stocks go down, they start issuing margin calls. But I can lever up 10 to five to one in real estate. Usually, if you get a five or a 10-year mortgage, they can\u2019t do margin calls on you. They can\u2019t go, \u201cOh, your house has gone down 30% of value. We need you to put more money up.\u201d<\/p>\n
No, that\u2019s-<\/p>\n
They can\u2019t do that. So it\u2019s the most tax advantaged, it\u2019s the most levered. Now the bad news is all of those things have probably led to an asset class that I would say \u2026 And, again, it\u2019s so specific, it\u2019s so regional in asset class type, but I would argue the majority of residential real estate \u2026 You didn\u2019t want to be buying six months ago, right? I\u2019m not even sure you still want to be buying.
You guys are going to forget more about this and I\u2019m never going to know. But I went back to the Fort Myers thing. When I saw the hurricane hit and they were saying insurance costs are going to triple, I\u2019m like, okay, there\u2019s opportunity here. I love running into the fire.
I called some brokers down there and said I\u2019d be willing to buy some apartments, or even a small apartment complex, and I thought I was going to get a great deal. They were like, \u201cOh, yeah, all the guys with the black hats have already shown up. All the biggest capital in the world is already down here trying to be \u2026 \u201d It\u2019s like, \u201cOh, this wasn\u2019t an original idea?\u201d They\u2019re like, \u201cNo, the blip, if you will, or the decline in prices in these areas that were hit by the hurricane lasted about 48 hours.\u201d
But I love the asset. I think it\u2019s a very interesting way to make a living. The majority of my friends out of business school who went into real estate didn\u2019t get as wealthy as I did in the first 10 years, but they didn\u2019t get as broke as I did during the downturn. Yeah, they\u2019ve just slowly but surely \u2026 I think real estate\u2019s a great way to get rich slowly.<\/p>\n
That\u2019s a wonderful line. When you were describing why you didn\u2019t get more into it, and I really appreciate your transparency there, which what I heard you say is compared to what I\u2019m used to, it\u2019s slow and it\u2019s boring and it doesn\u2019t hold my attention. There isn\u2019t as much upside, there\u2019s not as much creativity I can exercise.
People like you that have the capacity of intelligence that you have, Scott, they know what they can do when they\u2019re put in the highest of stakes environment, which in our modern day environment, I would consider to be tech. You\u2019ve got the biggest upside.
It does make real estate, by comparison, just seem, I don\u2019t know a good comparison, elementary. It\u2019s just this is hard for me to follow. I\u2019ve heard several other people in tech that were pitched real estate opportunities. They\u2019re like, \u201cSo you\u2019re telling me I\u2019m going to get a 12% return over five years? It doesn\u2019t really move the needle for me. It\u2019s not a bad idea, but I don\u2019t get excited.\u201d
That is absolutely true. I look at it like people in your space and a lot of your audience, they\u2019re used to throwing haymakers and they\u2019re getting big knockouts. It\u2019s very exciting. They know they\u2019re very talented fighters. This is just a steady stream of body shots that don\u2019t appear to be very powerful until you look over a 20 or 30-year period of time.
Like you said, it\u2019s very difficult to lose and your returns start to amplify, largely because, this is David Greene\u2019s opinion here, inflation. Inflation makes your casual real estate tinkerer look like a brilliant mad scientist because it\u2019s so leveraged. So you\u2019re putting 20% of your capital into an asset that triples in value, but your 20% down payment then would have a 600% increase. It\u2019s different when you\u2019re looking at how quickly you can build equity over real estate, but it\u2019s boring.
So when I come across the people that are very successful in the tech space, a lot of our audience is, they\u2019re into podcasts, they\u2019re into media, they\u2019re also \u2026 I live in Northern California. So I\u2019m right near Silicon Valley. They\u2019re fascinated by innovation and creativity and what\u2019s next, what\u2019s a better way to do it, how do you do it more efficient. I look at it like you\u2019ve got to work these vegetables into the sexy, fancy diet that you\u2019re used to. You have to bring this in as a safety net or a baseline on top of what you\u2019re already doing.
When we\u2019re giving advice to young people about building wealth, are you of an opinion that real estate could be a part of a bigger picture or are you pick your thing, completely doubled down on that, and excel as far as you can in whatever asset you\u2019re investing in?<\/p>\n
So there\u2019s your human capital and there\u2019s your financial capital. I think with your human capital, you should be 110% focused, and that is I don\u2019t believe in side hustles. I think if you have a side hustle, it means you need to find a different main hustle, and that if you find a good job that\u2019s your main job, that incremental investment and time and effort and mental bandwidth that you would give to a side hustle, you\u2019ll get a greater ROI.
In other words, try and figure out a way to be great at your main hustle. The difference between being good and great at your main hustle will produce more than if you\u2019re just good at your main hustle because you\u2019re on weekends and evenings selling rare tennis shoes or something.<\/p>\n
DoorDashing.<\/p>\n
I think side hustles are actually dangerous, unless you see it as a short-term pivot to something else that\u2019ll be your main hustle.<\/p>\n
So if you don\u2019t like your girlfriend, get a better girlfriend. Don\u2019t start dating other girls on the side as a hedge.<\/p>\n
That\u2019s a whole other talk show. But in terms of your investments and your capital, you don\u2019t have to be fully diversified when you\u2019re a young person. You can take more concentration risk. But a third of my net worth, maybe 40%, is in real estate.
A lot of it\u2019s around consumption. It\u2019s hard to time, \u201cShould I buy a house right now?\u201d I get a lot of that question. Then I\u2019m like, \u201cWhat\u2019s the situation?\u201d They\u2019re like, \u201cWell, we\u2019re in an apartment and we\u2019re having a kid.\u201d I\u2019m like, \u201cWell, do you make a good living?\u201d \u201cYeah.\u201d \u201cDoes your wife make \u2026 \u201d \u201cYeah.\u201d I\u2019m like, \u201cBuy a house. You need a house. I mean your family\u2019s growing.\u201d
Real estate has a different component of it. Some of it is about consumption where you are in your life. But I wouldn\u2019t \u2026 I go all in and have huge concentration risk around your human capital when you\u2019re young to get great at something. I think focus is a key component of being great at something.
But in terms of when you start investing, if you love real estate and you\u2019re young, maybe half your money goes into real estate. But as you get older, and especially when you get to my age, you really don\u2019t want to have more than, in my opinion, 20%, maybe 30% in any type of asset type, because real estate just might get the (censored) kicked out of it the next 24 months.
Now I don\u2019t care what kind of genius you are, market dynamics will always trump individual performance and genius. And so, as smart as you are, as good as the opportunities, your Kevlar is diversification. I invested in oil companies, I\u2019m investing in aircraft maintenance companies.
Another thing you said, David, that I think is really important. I have a chart that I present at the end of my class at Stern. On the Y axis, I have sex appeal and on the X-axis, I have ROI. I\u2019m sorry, I flipped that. Y-axis, ROI. X-axis, sex appeal, how sexy an industry is. The line just goes straight down.
A friend of mine is starting a members-only club here in New York just for artists and entertainment people. It just sounds like it\u2019s going to be awesome. No way will I invest. That is way too cool.
Another friend of mine is starting a healthcare maintenance company that uses scheduling to manage workers who maintain health tech equipment. I hear this business, I want to put a gun on my mouth. That sounds so boring and so awful. I am absolutely stroking a check to that guy. The less sexy the business, the higher the ROI, because not every kid\u2019s dreaming of going into that business. It\u2019ll have an underinvestment in human capital. It\u2019ll have an underinvestment in financial capital.
So there is an inverse correlation between sex appeal and return. Real estate is somewhere in the middle. It\u2019s kind of cool. It\u2019s kind of cool, but I would imagine investing in sea malls or warehouses. It\u2019s not that sexy. Everybody wants to buy, probably.<\/p>\n
Self-storage, mobile home parks, [inaudible 00:53:13].<\/p>\n
Whatever it might be. Yeah, that\u2019s where the money is. When something sounds awful, you should smell money, and when it sounds boring. My dad, later in life, four marriages, total train wreck financially. He and his fourth wife bought a trailer park and it saved his ass. Just saved his ass. A weird business banging on doors for rent, collecting quarters from the washing machine. Great business. Like 17%, 18% a year. Great business.<\/p>\n
All right. Well, we do have to get out of here soon ,Scott. So I want to bring it back to your book, Adrift, and some of those high-level realities that we\u2019re all facing as Americans. Is there anything you think real estate investors or the people who listen to this podcast can do to create some of the change that you suggest?<\/p>\n
It\u2019s a thoughtful question. I would just say that \u2026 And this is more around, I guess, philanthropy or trying to. I think this notion of third spaces, I think we need more spaces where people who are strangers, or maybe don\u2019t know each other through the course of their day, have a chance to be in physical proximity with each other. Open layouts.
I tell my kids \u2026 When I say my kids, the kids who work for me. I have about a dozen people. The median age is like 24. It\u2019s like a bunch of kids straight out of college and then a few of us old people. I say to them, I give them my credit card, and I\u2019m like, \u201cAnytime you want to get together, if you all want to go to Tulum, if you all want to go have dinner, if you all want to go to a concert, I will pay for anything you guys do together.\u201d
I think young people need to be in physical proximity. I worry we\u2019re losing our third spaces, our movie theaters, our malls, the workspace. So any opportunity \u2026 I think an investment in your culture and an investment in society is to try and figure out really compelling places for people to meet each other, to establish friendships, to establish romantic relationships. But I worry that young people aren\u2019t meeting, that they aren\u2019t meeting people from different backgrounds. So they don\u2019t have the opportunity to develop empathy, to realize that, okay, that guy who just immigrated here from El Salvador loves his kids, kind of like me, and you have a little bit more empathy for someone.
You run into someone who had a marriage that didn\u2019t work out and she\u2019s trying to raise a kid on her own, and you realize, (censored), this is hard. This is hard. Also, have the opportunity to meet people, fall in love, have sex, and get married.
I think that\u2019s the basis of our society, and we\u2019ve decided that somehow it\u2019s bad, that somehow people getting together and wanting to have romantic relationships, that that\u2019s fraught with all sorts of HR risk. Now that\u2019s the whole (censored) point of all this. That\u2019s the whole point.
So what I tell young men is there\u2019s nothing wrong with approaching a stranger and exhibiting interest. If you don\u2019t know the difference between expressing interest and harassing someone, you\u2019ve got bigger problems.
But I\u2019ve had three weddings from my last company, L2, and each of them is a mitzvah. It\u2019s wonderful. They met and they expressed interest to each other. They started a relationship and now they\u2019re getting married and they\u2019re going to have kids.
Anyways, you asked me what real estate people need. Create third spaces. You might already have your mate, you might already have your house, you might already have great places to hang out with people you love. The majority of young people, and they\u2019ve been taken away. Those opportunities and those spaces have been taken away from them. We need to create more of them<\/p>\n
Is what you\u2019re talking about here, Scott, really boiling down to community, like a lack of community?<\/p>\n
I think that\u2019s right, but you can have communities online. You can have \u2026 What I\u2019m talking about is physical proximity. Online dating, I think, is a disaster for men-<\/p>\n
Oh.<\/p>\n
\u2026 because we don\u2019t like to talk about it on the left, but women have different criteria for mating than men. Women primarily want kindness, number three, intelligence, number two, and, number one, resources. Online dating creates this mating inequality where 50 women on Tinder, 50 men, 46 of the women throw all of their attention to just four to six men, leaving 44 to 46 men fighting over four to six women.
The beautiful thing about relationships, friendships, romantic relationships is there\u2019s an X factor, smell, body language, movement, your humor, all this stuff, the way you laugh. You just never know the people you\u2019re going to be drawn to for friendships, mentorships, or romantic relationships, and you\u2019ve got to give the bottom 90% of us an opportunity to exhibit some of those behaviors. You can\u2019t do it online.
So I think to your point, Dave, we need to create more opportunities to develop community in person, boy scout troops, sports leagues, church groups, if that\u2019s your thing, riding clubs, whatever it might be, talking to strangers. I think we\u2019re desperate for touch. I think we\u2019re desperate for community. I think we\u2019re desperate for affection.<\/p>\n
Yeah, get out of the YouTube comments.<\/p>\n
100%.<\/p>\n
If you don\u2019t mind, I\u2019d like to move us on to the last segment of our show before we get you out of here. It is called Would You Rather in 2023. So Dave and I are going to take turns asking you questions, and you can give your answer and a supporting statement of which you would choose. So I will go first. In 2023, would you rather buy real estate or stocks?<\/p>\n
Yes, whichever declines more in the next four months. Whichever takes the biggest beating in the next four months. Probably real estate because \u2026 Probably real estate.<\/p>\n
Because you see what interest rates are doing and it\u2019s just creating it.<\/p>\n
There\u2019s opportunity and dislocation. I think the next six months, we\u2019re going to see capitulation and a lot of buying opportunities in real estate.<\/p>\n
All right. Well, along those lines, which would you rather invest in: tech stocks in the next year or a REIT?<\/p>\n
Probably a REIT because, at my age, I\u2019m more focused on diversification. I\u2019m just always overinvested in tech.<\/p>\n
That\u2019s wise. Got to eat a little more vegetables. That\u2019s my problem. I always want to eat that steak.<\/p>\n
There you go. 100%.<\/p>\n
All right. In 2023, would you rather invest in a series C round of startups or in a real estate syndication deal, which is basically somebody else is buying a property and you are having an opportunity as a limited partner to come in and get access to the equity?<\/p>\n
Probably the latter, because I get a lot of opportunities around series C investments. I\u2019ve been investing a lot in opportunity zones. Again, another tax avoidance scheme you guys have figured out. But, yeah, probably \u2026 I\u2019m at a point in my life \u2026 It\u2019s all so true. I\u2019m at a point in my life where I\u2019m not looking to get rich. I\u2019m looking to not get poor. So probably real estate.<\/p>\n
Yeah, defense.<\/p>\n
Yeah, that\u2019s right.<\/p>\n
All right. Well, then we might know this answer already and, Scott, we\u2019re going to have to have you back on to talk about your opportunity zone investing. But a short-term rental like an Airbnb or Bitcoin?<\/p>\n
Investing?<\/p>\n
Yeah. Which would you invest in? I know you like gambling. Want to throw some Bitcoin in there?<\/p>\n
Oh no, no. Short-term rental. I\u2019m a no-coiner. I\u2019ve never owned a coin. I don\u2019t get it. I just don\u2019t get it. I can\u2019t think of a use case-<\/p>\n
It\u2019s too sexy.<\/p>\n
What is there to get? What\u2019s there to get?<\/p>\n
I don\u2019t.<\/p>\n
That\u2019s the first thing I thought of when you described your inverse relationship between successful and sexy was all these cryptocurrencies that were just popping up out of thin air along with the NFT space. Then we found a way to marry them. So you\u2019re like, well, if you buy this crypto, it works in this theoretical metaverse that we\u2019re trying to create, that has an NFT that is the door to get into it. They took all of these things that were inherently useless on their own and tried to make them valuable by turning them into \u2026 It\u2019s like combining a bunch of alcohol together that shouldn\u2019t be good and trying to make it taste good. This Voltron of nonsense is how it looked like to me. It was very sexy, and we saw what happened. It corrected very quickly.<\/p>\n
Yeah, some of it\u2019ll be enduring. You can\u2019t have this much human in any asset class and not have enduring innovation. But at this point, every time I try and understand crypto, I feel like I could slip and break a hip. I just feel old. I don\u2019t get it. I don\u2019t.<\/p>\n
[inaudible 01:01:28].<\/p>\n
More power to them. I know some really smart people making big investments in it. I\u2019m on the board of a company called Ledger, which is a cold hardware storage for mostly crypto, but also for identity. I did it just so I could learn. But I\u2019ve never owned a crypto asset and I doubt I ever will.<\/p>\n
So short-term rental it is.<\/p>\n
Oh, by the way, I should have disclosed, Airbnb is hands down my biggest holding from an investment standpoint.<\/p>\n
All right. Dave, any last questions for you?<\/p>\n
No. Scott, it\u2019s been a lot of fun. Really fascinating. Wish we had more time. But appreciate you coming on the show and sharing some of your thoughts with us.<\/p>\n
Well, thank you guys and congratulations on your success.<\/p>\n
Thanks, Scott. If anybody wants to look you up and learn more about you or opportunities that you present, where\u2019s a good place they can go?<\/p>\n
God, to resist his futile. I\u2019m everywhere. It\u2019s Prof \u2026 Again, my Twitter handle is-<\/p>\n
He\u2019ll find you first.<\/p>\n
Yeah. Twitter\u2019s @profgalloway. I have a newsletter called No Mercy\/No Malice that comes out every Friday. I\u2019m about to do a show on BBC. If you want to take a course, I\u2019m involved in an edtech company called Section4. So I\u2019m everywhere.<\/p>\n
Well, we appreciate you, brother. Thanks for coming on. We\u2019re going to have you back to talk opportunity zones and Tinder strategy in the future. Seems like you have a lot to offer on every element there.<\/p>\n
They\u2019re related. All right, gentlemen.<\/p>\n
Thank you.<\/p>\n
All right. Take care, Scott.<\/p>\n
Take care.<\/p>\n
All right. Man, well, that was a fascinating conversation, David. What were your initial takeaways from the conversation with Scott?<\/p>\n
Well, first off, we went all over the place, which was pretty cool. Scott gave us some pretty insightful commentary on a lot of different things, a lot to chew on there.
I like his perspective. He\u2019s coming from someone that has made a lot of money that has been successful in a lot of different areas of finance and has a nuanced position when it comes to both the individual, specific micro ways that we can earn more money for ourselves, as well as the generalized macroeconomic perspective that has to do with government policies and the unseen pressures that allow wealth to be created in different ways.
So I mean I would love to have talked to Scott for longer. We only had a short period of time, and I\u2019m glad that he did talk to us. So what were some of your favorite things that he brought up?<\/p>\n
Man, yeah, there was a lot there. I do agree, I wish we could have a longer conversation. But I think one of the things that really stuck out to me, which I have conflicting opinions about it, I should say, is the idea that he hates side hustles. I think that\u2019s pretty contrarian to what we talk about here on BiggerPockets a lot.
I get what he\u2019s saying and I think for a certain type of individual, it makes sense to do what he\u2019s saying. But I\u2019m not sure that\u2019s advice I would give blanket to everyone. What do you think?<\/p>\n
Yeah, you\u2019re making a good point. See, I think when he said side hustle, we never defined what he meant by that. So I don\u2019t know. I\u2019m now speculating for Scott. But when he said side hustle, what I interpreted was don\u2019t allow your energy to be diverted in several different ways. This is when Brandon Turner would say don\u2019t try to build five bridges to Hawaii at the same time.
So if you\u2019re in a location, in an opportunity where you can be building your skills, which I am passionate about, and I heard Scott talk about as well, like especially when you\u2019re young, skill-building needs to be at the forefront of what you do. I did my TED talk on this.<\/p>\n
Totally agree.<\/p>\n
In the next book I\u2019m writing, I\u2019m big into it. When we interviewed Cal Newport, So Good They Can\u2019t Ignore You, some my favorite books, and that\u2019s exactly the point he makes is you\u2019ve got to build your skills like Napoleon Dynamite, because girls like guys with skills.
I think what he\u2019s getting at is don\u2019t try to avoid the work. It\u2019ll be like, ugh, that\u2019s a hard path to take. I\u2019d rather look for the next NFT that\u2019s going to blow up, or I\u2019d rather make my own blog and make money that way because it\u2019s easy. He was like, no, stay the course. Walk the path.
But what we talk about with BiggerPockets when we talk about a side hustle is probably more geared towards you don\u2019t have a lot of opportunity in your job. You\u2019re listening to this podcast and you\u2019re picking up shopping carts at Home Depot or Lowe\u2019s. What you really want to do is be in construction. So you like working at Lowe\u2019s, but you\u2019re not making enough money to get anywhere.
To you, your side hustle\u2019s actually a step up. Your side hustle might be a contractor you met coming into Home Depot, that hires you to help do some work on the job site, and now you could start to learn a trade. Your side hustle becomes the path, right?
So I think that\u2019s how I\u2019m looking at what he\u2019s saying is it depends on which path you\u2019re on and if the side hustle is a step up, which is a good motivation, or if it\u2019s a distraction, which would be a bad motivation. What were your thoughts on that?<\/p>\n
Yeah. No, I actually think that\u2019s a really good way of phrasing it is that it\u2019s really about where your focus is. If you\u2019re in a career where you can make a lot of money and do what he\u2019s talking about, or if you really focus, your income can go from $50,000 a year to $500,000 a year, maybe that is a great option for you. I don\u2019t know. I don\u2019t think there are a lot of those careers out there, though.
And so, I think for everyone else who might not have that potential, maybe you\u2019re not working in finance or on Wall Street or whatever, you try and find the place \u2026 Put your attention towards the thing that can offer you that ability to 10x your income. If it\u2019s not your regular W2 job or whatever job it is, maybe real estate, or what we were calling a side hustle, can be your main hustle. It\u2019s just something you\u2019re doing concurrently or at the same time as your real job. So I think that was really interesting.
But I completely agree with the sentiment that it\u2019s just get really good at something. I completely agree with it. I think that\u2019s excellent advice for pretty much anyone.
I guess the other thing I was interested in was when he was talking about taxes a little bit and about how advantaged taxes. He was really going off about how amazed he is that you can depreciate things, you can lever it. This is for someone who is primarily a stock investor. So I thought that was pretty cool that he was recognizing some of the advantages that real estate investing have.<\/p>\n
Yeah. He also made it clear he doesn\u2019t operate in this space very often. He\u2019s not a real estate person. He\u2019s a stock person. He\u2019s a tech person. He\u2019s fascinated by innovation and startups. If you listen to Scott, Prof. G, he talks a lot about his opinion on Elon Musk per se. That space is much more in creativity.
He mentioned real estate is just comparatively boring. It\u2019s a great way to build wealth slow, which was funny he said that because that\u2019s literally what I say all the time. I\u2019d say this is a get rich slowly scheme. It\u2019s not a microwave, this is a crock-pot, and at the very end is where it starts to get really fun. When you\u2019re really hungry and you\u2019re like, \u201cOh, I want to get out of this situation in life. I want to eat. I\u2019m so hungry,\u201d no one thinks of a crock-pot.
You\u2019re looking for that hot pocket. You can hit it really big in tech. You can make a lot of money really quickly. When I say a lot of money, we\u2019re like, wow, an 18% ROI is fantastic. They\u2019re more like it\u2019s an 800% ROI. That\u2019s just the world that they\u2019re used to playing.
I liked that he admitted real estate\u2019s amazing, it\u2019s just slow. It\u2019s not my speed, because not everybody is in that same boat. For some of us, slow is the best speed. What about you? What do you think?<\/p>\n
Well, it\u2019s funny what he says about diversification, because in the venture capital world, which it sounds like what he operates in mostly, the calculus is very different than real estate. They\u2019re acknowledging that they\u2019re going to hit on one out of 10 investments, and they\u2019re hoping that that investment is a huge home run. I think he was an early investor in Airbnb, and that\u2019s awesome. He\u2019d probably readily admit that it took him failing on 20 investments to hit that home run with Airbnb.
That\u2019s just a totally different game than real estate. Real estate investing is about making incremental progress with every single investment and hopefully losing on none of them. You might never hit a grand slam, but that\u2019s okay. You\u2019re like the utility guy in the baseball team who\u2019s just hitting singles every time. That\u2019s totally fine because, for me, especially if you\u2019re starting young, that\u2019s all you need. If you\u2019re starting in your 20s or 30s, if you do that for five to 10 years, you\u2019re going to end up in a good position, almost guaranteed.<\/p>\n
You want an analogy I just thought of?<\/p>\n
Yes, I definitely do.<\/p>\n
All right. So tech in the world that Scott operates is like animal husbandry. You are trying to breed-<\/p>\n
Where is this going?<\/p>\n
\u2026 a race horse. You\u2019re trying to breed a race horse that\u2019s going to win the Kentucky Derby. You\u2019re going to go through a lot of duds, but if you get that one that hits, you\u2019re incredibly wealthy. You\u2019ve made a ton of money. You can now stud out that horse and do really well.
Our world is much more like farmers. We\u2019re just planting trees. We want an almond orchard. No one ever said it\u2019s really sexy to own a lot of almond trees. It is a little bit more work to have to harvest those almonds and then store them somewhere and sell them. It\u2019s a little more work when you\u2019re running a short-term rental or you\u2019re managing a property. It\u2019s a little bit more like running a business.
When you hit a big on a property, it\u2019s not like you\u2019ve got this race horse that you can make a bazillion dollars off of. You\u2019re probably going to take some equity out of it by three to four more trees and wait, wait for them to start growing almonds.<\/p>\n
[inaudible 01:10:59].<\/p>\n
Right?<\/p>\n
Yeah.<\/p>\n
But it is so easy to repeat it. It\u2019s simple. I mean it\u2019s the same freaking thing you\u2019re doing with a tree over and over and over. Maybe you have some almond trees and some orange trees and some apple trees. You diversify a little bit between a duplex and a short-term rental and a regular house somewhere, but it\u2019s all the same type of stuff. You\u2019re watering trees, the land works the same, the irrigation works the same.
And so, to me, the weaknesses of real estate is it doesn\u2019t scale incredibly fast. The strengths are it\u2019s harder to mess up, for sure. You can have a curb where you never lose money on a house ever and it\u2019s much more scalable versus the high-risk, but high-reward element of the world that Scott lives in.<\/p>\n
Well, it\u2019s interesting. First of all, if we were playing the game of bingo where you try and work weird words into the podcast, animal husbandry is one I never thought I would hear on this show, but here we are.<\/p>\n
Here we are, Dave.<\/p>\n
No, it makes me wonder about his personality. He said several times he really likes gambling. And so, it\u2019s interesting if that kind of high stakes VC, venture capital world is attracted to him. It\u2019s part of his personality trait. People always think like investing, it\u2019s so dangerous. It\u2019s risky. It\u2019s like, personally, I\u2019m a very financially conservative person.<\/p>\n
Me, too.<\/p>\n
I\u2019ve got a lot of financial anxiety. I just want to keep what I got and just build it slowly. I just wonder if it\u2019s comes down to different personalities and what you\u2019re looking for.<\/p>\n
I think that\u2019s exactly right. I\u2019m glad you\u2019re bringing it up because I think it creates confusion for the listener who doesn\u2019t know that, because they\u2019re looking for the blueprint. They\u2019re like, \u201cWell, is Scott\u2019s the right blueprint or is Dave Meyer the right blueprint, or is some other entrepreneur out there? Is Elon Musk the right \u2026 Is Gary Vaynerchuk the right one? What am I supposed to do?\u201d Well, it depends your personality. You\u2019re probably going to go in the direction that your personality is bent towards. So figure out how to make real estate work within your personality. You\u2019ll have a much more fun time.<\/p>\n
Absolutely. The last thing I thought was really interesting is right at the end, he was talking a little bit about community. I asked him what real estate investors could do to address some of the challenges that he laid out in his book, and he talked about a lot of different things there. But I think what resonated with me was that if you are into real estate and real estate investing, create your own real-life community.
We just got back from BiggerPockets Conference where it was a perfect example of that, being able to meet and connect with people who are like-minded, who can help you reach your financial goals, who you can help them reach their financial goals. I found that personally being at BPCON. I work remote. I live in Europe. I found that really energizing to be there and be with the community in real life.
And so, I thought that was a really good lesson that people can take or learn something from, especially if you\u2019re new. It feels really scary, because if you\u2019re sitting in front of your computer or you\u2019re just listening to this podcast and you never went out and talked to other people about it and seen and learned from people directly, it seems like this foreign thing that you can\u2019t really touch or feel. But if you go out there and go to a meetup, you can see that this is achievable and you can meet people that can help you achieve it.<\/p>\n
Yeah, it\u2019s funny. When I look at real estate, I don\u2019t ask myself the question of is it achievable, which is what the new person would be thinking. It\u2019s more how could it not be achievable? If you did all the right moves, how would you screw it up? You buy the right property, you buy in the right locations, you keep enough money in reserves, and you wait. Under those circumstances, it\u2019s hard for my mind to conceive of a way that people would lose money through real estate in the long term.
And so, there\u2019s some hope there if somebody\u2019s like, \u201cOh, I really want to get into this, but I\u2019m just afraid.\u201d The fear is largely based on ignorance or expectations that are incorrect, like, \u201cI\u2019ve got to make $300,000 in my first year because I\u2019m quitting my job in three months.\u201d This is not the asset class to do that.<\/p>\n
You\u2019re going to have to take on a lot of risk if you want to do that, and it\u2019s probably not going to work out. But if you like the slow and steady approach, we got some ideas for you.<\/p>\n
All right. Well, I thought this was a good interview. I enjoyed you being here with me, Dave, as always. You always ask really good questions. If people want to follow you, where can they find out more about you?<\/p>\n
Well, you can find me on BiggerPockets, of course, or my podcast, another BiggerPockets podcast, called On the Market, or I\u2019m on Instagram at @thedatadeli.<\/p>\n
Thank you very much. I am online at DavidGreene24. That\u2019s it. DavidGreene24. YouTube, David Greene Real Estate. You can check out my website, which is also davidgreene24.com. If you have not done so already, please do me a favor and go leave us a review on whatever service you use to listen to podcasts. That would really, really help us.
So thanks everybody for listening here. We hope you enjoyed this. Dave, thank you for joining me. I\u2019ll let you get out of here. This is David Greene for Dave \u201cThe Scaredy Cat Investor\u201d Meyer signing off.<\/p>\n
That\u2019s so true.<\/p>\n