Scott Galloway's Ultimate Guide to Financial Well-Being: The Algebra of Wealth

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[00:00:59] Bottom up.

[00:01:10] The Algebra of Wealth, very good book title by Scott Galloway.

[00:01:15] Very good conversation I had with him about how to create wealth, all the mistakes he's ever made.

[00:01:21] He started nine companies.

[00:01:23] Two of them were successful, super successful.

[00:01:26] Several of them were pretty successful.

[00:01:28] He's talked about entrepreneurship so much.

[00:01:31] He's a real smart guy and these lessons about building wealth.

[00:01:36] I wish I had known them when I was younger.

[00:01:40] I wish my kids would know them and I want your kids to know them.

[00:01:44] So pay attention to this conversation I'm about to have with Scott Galloway, Professor G.

[00:01:58] This is the James Altiger Show.

[00:02:10] Yes, Scott, you have a new book, The Algebra of Wealth and we'll talk about it.

[00:02:14] Very interesting.

[00:02:15] Good.

[00:02:16] But just what have you been up to lately?

[00:02:17] What's the biggest thing going on in your life?

[00:02:19] I don't know if you've spoken since I moved to London about two years ago.

[00:02:24] I don't know how long it's been.

[00:02:27] I think I might have...

[00:02:28] No, I don't know if I knew that.

[00:02:29] Like the last I was kind of going into this assuming you're still a professor at NYU.

[00:02:34] I am. I'm still in faculty. I'm just not teaching right now.

[00:02:37] So what do you do for NYU?

[00:02:39] Well, I do like fundraising or events here.

[00:02:42] I still do, you know, if I'm there, I'll host an event.

[00:02:45] I still get involved in, you know, strategy sessions, basically not a lot.

[00:02:51] But they wanted me to maintain the affiliation.

[00:02:53] I'm happy to maintain the affiliation.

[00:02:55] They also have sister relationships with LSE here.

[00:02:59] So I'll probably teach at some point here, but right now I'm on leave.

[00:03:03] And why are you doing that?

[00:03:04] Why did you decide London?

[00:03:05] Why are you on leave?

[00:03:06] I wanted to give my kids something different.

[00:03:10] We just wanted to get out of the U.S. for a few years.

[00:03:13] I'd never lived overseas.

[00:03:14] I was in like the idea of not getting any younger and thought it would be just a gift for our children

[00:03:19] to have them be raised in another country for a few years.

[00:03:22] You know, why are we here?

[00:03:23] Because we can.

[00:03:24] And it doesn't make a ton of sense.

[00:03:28] I have no professional activity here.

[00:03:31] I'm on planes a lot again, but the kids are happy.

[00:03:34] And you know, you have to answer James.

[00:03:36] It's not around these decisions.

[00:03:37] I'm an influencer, not a decision maker.

[00:03:39] So my wife decided we were moving to London and here we are.

[00:03:43] Well, if I was to move to a European city, I think in order,

[00:03:49] London, Amsterdam.

[00:03:52] And that's it.

[00:03:53] Those are my only two choices.

[00:03:54] There you go.

[00:03:55] Yeah.

[00:03:56] Madrid is actually really hot right now, but you got to speak Spanish.

[00:03:59] We live in Munich if I spoke German and my wife is German.

[00:04:02] But London is the easy choice.

[00:04:04] If you have money, London is a nice city.

[00:04:07] It's in the proximity to the continent is great.

[00:04:10] It's very civil.

[00:04:12] It's very nice here.

[00:04:13] It's not in my opinion, it's not even in New York shadow in terms

[00:04:18] of the quality of a city and density of opportunity and things to do.

[00:04:22] But it's a little bit more civilized, fewer homeless.

[00:04:27] Anyways, we can talk about it.

[00:04:29] But yeah, I'm here.

[00:04:31] And you know, it's interesting you say density of opportunity.

[00:04:35] So, and I want to ask you about this because you talk

[00:04:38] about this in the book too.

[00:04:39] I would describe this book, the algebra of wealth as a guide to

[00:04:45] what things you need to do to create the greatest opportunity

[00:04:51] for luck because we all know luck is involved in success.

[00:04:56] Not a huge amount and there's hard workers, all that stuff.

[00:04:59] But you talk about lots of different things that all ended up together

[00:05:03] will increase, let's say the surface area of your possible luck.

[00:05:07] That's how I interpret this book.

[00:05:09] Yeah, I like that James and it's like, it's really difficult to predict

[00:05:14] the weather but you want to have your sales up such that when there's

[00:05:17] a gale force wind, your sales are up.

[00:05:20] And you know, so for example, I've always believed you should always

[00:05:24] be invested in the market.

[00:05:25] It's very hard to time the market.

[00:05:28] Economists were unanimous that 2023 was going to be a recession.

[00:05:33] They had never, when they did a survey, they had never had

[00:05:36] unanimity around anything and they all said in 2023 we were going

[00:05:40] into a recession.

[00:05:42] So it would have made sense in late 2022 to dramatically scale back

[00:05:45] your public markets or your S&P investments up 23%.

[00:05:50] Yeah, so I mean, in the history of the stock exchange, at least

[00:05:55] in the US, anytime you would have bet against the market

[00:05:58] unless it's like a short term thing which is a 50-50 gamble.

[00:06:02] If you had bet against the market today, you would be drastically

[00:06:05] wrong, like specifically today.

[00:06:07] Like we're at all-time highs.

[00:06:09] That's right.

[00:06:10] And so this is a series of things that say, okay, if you're really

[00:06:14] lucky or you're just a genius, if you're Kanye or Jay-Z or Beyoncé

[00:06:18] and you have or Ronaldo or Messi and you're so talented

[00:06:21] you can't help but make money fine.

[00:06:23] But it's kind of based off this notion, you've probably seen

[00:06:27] this study that if you hang out, you're the sum and then

[00:06:30] the mean of the people you hang out with.

[00:06:32] So five people hang out together a lot.

[00:06:34] They end up the same weight, same income, same jobs, same

[00:06:37] political values.

[00:06:38] But what's got greater variance is five people can be making

[00:06:41] approximately the same amount of money.

[00:06:43] Three end up okay, one ends up wealthy and one ends up

[00:06:46] financially strained.

[00:06:47] And I try to understand what are the habits and strategies

[00:06:50] such that even if you don't have that big win, how do you

[00:06:53] make sure that by the time you're kind of our age

[00:06:56] or I should say my age, you got to plan B and you have

[00:06:59] to figure out what's going on with your wealth.

[00:07:02] And then what are the attributes that separate people

[00:07:05] who are economically secure from those who are very,

[00:07:07] very wealthy?

[00:07:08] And the reason I brought up the luck aspect in relation

[00:07:12] to cities and by the way this concept of you also bring

[00:07:15] this up in the book, the average of the five people

[00:07:17] but you say basically hang around rich people.

[00:07:20] First off, the cities, I remember one time this was

[00:07:23] in 2005 roughly, I had an office on Fifth Avenue.

[00:07:28] One of the reasons I had an office on Fifth Avenue was to

[00:07:30] have an office on Fifth Avenue.

[00:07:32] Like I didn't really need an office but to your point,

[00:07:35] go to a city, have an office is a chapter in your book.

[00:07:38] And I ran into one guy and he said the great thing

[00:07:41] about New York City is you're literally tripping

[00:07:43] over opportunities on the street.

[00:07:45] And it's true if you're in, I don't know,

[00:07:48] the middle of Oklahoma you're not going to have as

[00:07:51] unless you're Sylvester Stallone in the TV show Tulsa

[00:07:55] you're not going to necessarily have opportunities

[00:07:57] that you're tripping over.

[00:07:58] Whereas New York you meet people, there are deals happening,

[00:08:01] you could raise money and so on.

[00:08:03] I wonder though if that's getting got distributed

[00:08:06] because of the pandemic and the exodus from large cities,

[00:08:09] like New York City is number one ranked in terms

[00:08:12] of the exodus of basically high taxpayers leaving the city.

[00:08:16] Well it's distributed but I mean, okay,

[00:08:20] so two-thirds of economic growth over the next 30 years

[00:08:24] are going to be in 20 cities.

[00:08:26] So while you can play like,

[00:08:29] you can handicap which cities are going to,

[00:08:32] like Austin and Miami are booming.

[00:08:35] You know I was just in Madrid, Madrid is booming.

[00:08:38] But generally speaking where you know you're safe

[00:08:40] is while you're young if you're ambitious

[00:08:42] you want to get to the biggest city in your nation.

[00:08:45] And then if you're super ambitious you want to get

[00:08:47] to London in Europe in my opinion or New York in the U.S.

[00:08:51] And the data I've seen around the exodus

[00:08:54] and from California, New York, yeah there's some of it.

[00:08:56] But there's still, it's gone from a massive amount

[00:09:01] of opportunity every day to just a shit ton

[00:09:04] of opportunity every day.

[00:09:06] Living in New York, living in a big city,

[00:09:09] one you're constantly bumping off

[00:09:12] of personal and professional opportunities.

[00:09:14] It's the density of professional

[00:09:16] and personal opportunities is unmatched.

[00:09:18] Also the competition is greater and the expenses are higher.

[00:09:20] So the only way you can survive in New York

[00:09:22] is to be pretty good at something.

[00:09:24] And it's very motivating and I would say that if you want to play,

[00:09:26] it's like playing tennis with someone better than you.

[00:09:28] It elevates your game.

[00:09:29] When you're in New York you're playing tennis

[00:09:31] with really talented tennis players.

[00:09:34] Now has some of that reduced?

[00:09:37] I would argue no.

[00:09:38] My world's a little bit sequestered in New York

[00:09:41] because I live in Soho and as far as I can tell

[00:09:43] it's shed its skin and it's back stronger than ever.

[00:09:46] A lot of people point to data around high taxes

[00:09:49] and increasing crime for reason why people are leaving.

[00:09:51] They make that argument more often

[00:09:53] for people moving from California to Texas.

[00:09:55] But something like 90% of the people who move in California

[00:09:57] move somewhere else in California

[00:09:59] and despite what is the second highest tax burden

[00:10:03] I think behind New York, all of these people

[00:10:05] who shit post-California who are rich

[00:10:07] could live anywhere they want

[00:10:08] and yet they choose to stay in California.

[00:10:10] The reason why I think these people endure high taxes

[00:10:13] is quite frankly because it's worth it.

[00:10:15] Whereas Oklahoma has the lowest tax burden in the nation.

[00:10:18] Why?

[00:10:19] I don't think a lot of people are dreaming of moving to Oklahoma.

[00:10:21] So I think the market is really good at calibrating this.

[00:10:24] I like that states compete.

[00:10:26] I think it's going to put pressure on New York and California

[00:10:29] to get their act together when people start moving to Florida and Texas.

[00:10:32] So I think interstate competition is actually a good thing.

[00:10:36] But I think most people have decided

[00:10:38] that it's worth it to stick in those cities.

[00:10:41] Most people.

[00:10:42] And I would argue yes,

[00:10:45] to live a quality life with a family in New York City

[00:10:48] in Manhattan is extremely difficult because of the cost.

[00:10:52] But I moved to New York City as an adult.

[00:10:56] I grew up around there,

[00:10:57] but I moved to New York City as an adult after graduate school

[00:11:00] and I had zero dollars in the bank.

[00:11:03] You know, you basically when you're young

[00:11:05] and in your 20s and you don't have a family,

[00:11:07] you can live in the shittiest circumstances

[00:11:09] and love it because it's New York City.

[00:11:12] But the question I have is young people,

[00:11:15] particularly those in their 20s and I'm thinking of my own experiences

[00:11:18] being in New York then,

[00:11:20] it's hard to necessarily find the opportunity there.

[00:11:23] It's easier when you are aware of these things

[00:11:26] and what opportunity looks like.

[00:11:28] If you're young, how do you look for the opportunity?

[00:11:30] How do you push yourself to look for the opportunity

[00:11:32] in a great city?

[00:11:34] Well, it's increasingly hard.

[00:11:36] And I'm not here with a message of hope.

[00:11:38] Our parents' generation on an inflation-adjusted basis

[00:11:40] when they were 25, we're making 105,000.

[00:11:43] We were making on average about 85

[00:11:45] and now 25-year-olds are making 55.

[00:11:48] You can't live in New York on that.

[00:11:50] I mean, the sad truth, James,

[00:11:53] is if you want to live in New York,

[00:11:55] you either need rich parents or a crazy well-paying job

[00:11:57] if you're young.

[00:11:58] But you could live, like I said,

[00:12:00] you could live in like, you know...

[00:12:02] Gowanus or something?

[00:12:03] Yeah, three subway stops into Brooklyn

[00:12:06] or Astoria Queens or Forest Hills

[00:12:08] or Jamaica Queens.

[00:12:10] Like, I was sharing one room

[00:12:12] with a guy paying...

[00:12:14] And I was paying $300 a month

[00:12:16] and it turned out he actually wasn't paying...

[00:12:18] He was squatting illegally

[00:12:20] and I didn't know that

[00:12:21] and we had to like move at three...

[00:12:23] So, like, New York...

[00:12:24] That's a common story in New York City.

[00:12:26] It's like the horror real estate story

[00:12:28] for young people.

[00:12:29] I think that was more common.

[00:12:31] I had a similar...

[00:12:32] I paid $1,900.

[00:12:33] My first job was in Morgan Stanley

[00:12:34] right out of college, 1987.

[00:12:36] I was 22.

[00:12:37] And I paid $1,900

[00:12:39] and there were three of us in a one bedroom.

[00:12:40] And one of us slept in the entryway,

[00:12:41] one in the bedroom

[00:12:42] and I slept in the living room.

[00:12:43] So, $633 you can figure it out.

[00:12:44] I think it's actually gotten harder.

[00:12:46] I think dancing between the raindrops

[00:12:48] has gotten harder for young people.

[00:12:51] But back to your question around...

[00:12:53] I think your 20s are for workshopping.

[00:12:55] I think you work really hard.

[00:12:57] You get to a city.

[00:12:58] You don't spend a lot of time in your house.

[00:13:00] You pursue opportunities.

[00:13:01] You try and meet as many people as possible.

[00:13:03] You work really hard

[00:13:05] and you have a sober conversation around

[00:13:07] not what you're passionate about

[00:13:09] but what you're good at.

[00:13:10] And I think that the key is to find something

[00:13:12] you think you could be in the top 10%

[00:13:14] of at some point.

[00:13:15] Not now, but at some point you think

[00:13:16] I have a natural aptitude towards this.

[00:13:18] I'm good at it.

[00:13:19] And then the second question

[00:13:20] and this is the key part

[00:13:22] is that it's an industry that has

[00:13:24] a 90 plus percent employment rate.

[00:13:26] So, I know you like stand-up comedy.

[00:13:28] I know some guys who are the top

[00:13:30] 0.1% in stand-up comics

[00:13:32] and they have a tough time making a living.

[00:13:34] Oh, yeah.

[00:13:35] Go ahead.

[00:13:36] Sorry.

[00:13:37] Well, whereas if you're in the top half

[00:13:38] of tax accountants,

[00:13:39] you're going to make a good living.

[00:13:41] And if you're in the top 10% of an industry

[00:13:43] that has a 90 plus percent employment rate,

[00:13:45] you're going to make a really good living

[00:13:47] and the accoutrements of making a good living,

[00:13:49] being able to take care of your kids,

[00:13:50] your parents,

[00:13:51] take wonderful vacations,

[00:13:52] have people laugh at your jokes

[00:13:53] when they're not that funny,

[00:13:54] a broader selection set of mates.

[00:13:56] Whatever gets you those things

[00:13:58] is going to make you passionate

[00:14:00] about whatever that thing is.

[00:14:01] And your 20s is the opportunity

[00:14:03] to try a bunch of different things,

[00:14:05] develop a kinship cabinet

[00:14:06] of people who will be honest with you

[00:14:08] and also just have an honest conversation

[00:14:10] around where you expect to be economically

[00:14:12] and what are the trade-offs.

[00:14:14] Yeah.

[00:14:15] So, a couple of great points there.

[00:14:17] One is, you know,

[00:14:19] and you make this point in the book that

[00:14:21] doing what you love

[00:14:22] isn't necessarily going to lead to success.

[00:14:24] In fact, it's often quite the opposite.

[00:14:26] Like if what you love is stand-up comedy,

[00:14:28] forget it.

[00:14:29] Like there's zero people who make a living

[00:14:31] at stand-up.

[00:14:32] It's very easy to go broke and commit suicide

[00:14:35] doing stand-up comedy.

[00:14:36] That's more common than getting rich

[00:14:38] in that world.

[00:14:39] But it's the same thing for like,

[00:14:41] you know,

[00:14:42] being a novelist who's rich

[00:14:44] or a screenwriter or an actor

[00:14:46] in Hollywood.

[00:14:47] Yeah.

[00:14:48] And but here's the flip side of that.

[00:14:52] Doing several years of stand-up comedy

[00:14:55] like amped up by 10x

[00:14:57] my public speaking skills,

[00:14:58] where it is possible to make a living.

[00:15:00] So sometimes getting good at what you love

[00:15:03] can be translated.

[00:15:05] You can borrow 10,000 hours from that

[00:15:08] to do something that makes a lot more money.

[00:15:12] But I think you're right that...

[00:15:15] But the other thing you said,

[00:15:16] which is very important,

[00:15:17] is that when you find what you're good at

[00:15:19] and you start seeing results from it,

[00:15:20] you do become passionate about that.

[00:15:22] And that's a key insight,

[00:15:23] is that your talent actually leads to passion

[00:15:26] as you start seeing results from it.

[00:15:29] There's just nothing like being great at something.

[00:15:31] Mastery is intoxicating.

[00:15:34] And the moment you start to get good at something

[00:15:36] and you get promoted

[00:15:37] and people admire you

[00:15:38] and want to learn from you

[00:15:39] and the economic accoutrements

[00:15:40] are being great at something,

[00:15:42] just make you...

[00:15:44] I know a guy who's passionate

[00:15:46] about iron ore smelting

[00:15:47] because he's really good at it

[00:15:48] and he makes a shit ton of money doing it

[00:15:50] and it affords him amazing life.

[00:15:52] So he's just fascinated by

[00:15:54] the collision of heat and metal.

[00:15:59] So this is your challenge as a young person.

[00:16:02] Find something you're really good at,

[00:16:04] again where the employment rate is positive.

[00:16:06] To your point about you can transfer those skills,

[00:16:08] I wanted to be an athlete.

[00:16:10] Going UCLA disabused me of that notion really quickly

[00:16:14] but that discipline and that grit

[00:16:18] and that willingness to push myself really hard

[00:16:21] paid huge dividends

[00:16:23] when I went to work for Morgan Stanley.

[00:16:24] I didn't want to be an investment banker.

[00:16:26] I was bad at it and I didn't like it

[00:16:28] but the attention to detail,

[00:16:30] the work ethic,

[00:16:31] the understanding of the markets

[00:16:32] have paid huge dividends for me

[00:16:34] and then finally in business school

[00:16:36] I said okay I kind of enjoy

[00:16:38] brand and I figured out that companies...

[00:16:40] I did some student projects

[00:16:41] and I found out that companies

[00:16:42] will pay you to do this.

[00:16:43] There's a word for it, consulting.

[00:16:45] Started a consulting firm,

[00:16:47] was good at it

[00:16:48] and started making money

[00:16:49] which made me love it

[00:16:51] and I got to do cool things

[00:16:52] and go to board meetings

[00:16:53] and foreign cities

[00:16:54] and start a firm

[00:16:55] and that just made me pat...

[00:16:57] I never grew up thinking

[00:16:58] oh I want to be a brand strategist

[00:17:00] so generally speaking

[00:17:03] the industries the kids dream of going into

[00:17:05] are the worst lowest ROI industries

[00:17:07] because basic chart in the book is

[00:17:10] the sexiness of a job or an industry

[00:17:12] is inversely correlated to its ROI

[00:17:15] and that is the amount of brain damage,

[00:17:17] energy and the return you'll get

[00:17:20] from that investment in the fashion industry

[00:17:23] is just awful

[00:17:25] whereas if you apply the same grit and talent

[00:17:27] to another industry that's less romantic

[00:17:29] or less sexy

[00:17:30] the return is immense

[00:17:32] because these sectors and jobs are asset classes

[00:17:34] when everyone's buying real estate in Florida

[00:17:37] in 2007

[00:17:40] it gets over invested

[00:17:41] the returns go down

[00:17:42] and it's due for a crash

[00:17:43] and then when no one wants it in 2011

[00:17:45] that's when the time is to buy

[00:17:47] it's the same is true of careers

[00:17:49] the careers and investments

[00:17:51] I get pitched on a members only club

[00:17:53] and SOHO for artists

[00:17:55] in the entertainment industry and models

[00:17:57] I'm like yeah I want to be a member

[00:17:58] but I won't invest

[00:17:59] I get pitched on it

[00:18:00] Oh my god you may have gotten the same pitch I did

[00:18:02] but this was...

[00:18:03] I got this pitch ten years ago

[00:18:04] when did you get this pitch?

[00:18:05] It was a while ago

[00:18:06] we probably...

[00:18:07] it's probably the same guy

[00:18:08] we're probably both friends with him

[00:18:09] but I'm like I'd love to be a member

[00:18:10] but I'm not going to get near this

[00:18:12] in terms of investment standpoint

[00:18:13] whereas I'm just about to invest

[00:18:16] in a healthcare maintenance SaaS company

[00:18:17] I hear the business and I think

[00:18:19] this sounds awful

[00:18:20] I'm definitely investing

[00:18:22] because the industries that have a

[00:18:24] dearth of human capital going into them

[00:18:26] and we know this

[00:18:27] when everyone's investing in venture capital

[00:18:29] don't get near it

[00:18:30] when no one's investing in real estate

[00:18:33] run into the fire

[00:18:34] and it's the same is true of sectors

[00:18:36] don't write off sectors just because

[00:18:38] you'll be a DJ on the weekends

[00:18:40] but figure out there's going to be

[00:18:41] an enormous opportunity in trades jobs

[00:18:43] there are five people leaving trades jobs

[00:18:45] baby boomers and selling their businesses

[00:18:47] and only two entering them to them

[00:18:49] because we've shamed them so much

[00:18:51] there's going to be a huge opportunity

[00:18:53] to start like a carpet cleaning business

[00:18:55] or a drape hanging business

[00:18:57] or the guys that lay the soap stone down

[00:19:00] in your kitchen

[00:19:02] if you're not one of these people

[00:19:03] that is cut out for college

[00:19:05] there's going to be huge economic opportunity

[00:19:07] in sort of these trades jobs

[00:19:09] and also let's say

[00:19:11] you're not talented at carpet cleaning

[00:19:13] and you really don't want to do it

[00:19:15] but you are let's say you're talented

[00:19:17] or fascinated by business

[00:19:18] there's also an opportunity in

[00:19:20] investing in 16 carpet cleaning businesses

[00:19:23] and you know combining the cash flows

[00:19:26] and bringing that public

[00:19:27] so if you're talented at business

[00:19:28] and you study business

[00:19:29] there's all sorts of opportunities

[00:19:30] in any industry

[00:19:32] if you love it

[00:19:33] well I think financial literacy

[00:19:35] and economics should all be taught

[00:19:38] and accounting I think

[00:19:39] should all be taught in high school

[00:19:40] because here's the thing

[00:19:41] 80% of the jobs in any industry

[00:19:43] aren't in that industry

[00:19:44] 80% of the people that work in Google

[00:19:46] aren't tech workers

[00:19:47] they're in marketing

[00:19:48] they're in biz dev

[00:19:49] they're in sales

[00:19:50] you know they're doing different shit

[00:19:52] exactly

[00:19:53] so Eve like you said

[00:19:55] you don't have to love carpet cleaning

[00:19:56] to be in carpet cleaning

[00:19:57] but if you're a business person

[00:19:58] and you recognize there's an opportunity

[00:20:00] and there's a baby boomer

[00:20:01] who's trying to sell his five trucks

[00:20:03] and his business

[00:20:04] and his three million dollar business

[00:20:05] spending off 500,000 in Evita

[00:20:07] there's going to need to be someone

[00:20:09] who's passionate about the business

[00:20:10] and then there's going to need

[00:20:11] to be someone who understands business

[00:20:14] so but in terms of picking a sector

[00:20:17] what I generally have found is

[00:20:19] being good at something

[00:20:21] and making money

[00:20:22] and developing economic security

[00:20:24] it's just a shit ton of fun

[00:20:27] and your job is to find that opportunity

[00:20:29] and to say okay

[00:20:31] what are my really good ads

[00:20:32] you want to develop

[00:20:33] you want to get to where there's a lot of opportunity

[00:20:35] before you have dogs and kids

[00:20:36] that's usually a city

[00:20:37] you want to develop a kinship cabinet

[00:20:39] of people that can advise you

[00:20:41] to have this

[00:20:42] who could have saved me for myself a lot

[00:20:45] I made a lot of stupid self inflicted

[00:20:47] unforced errors when I was young

[00:20:49] and you want to develop a really strong

[00:20:51] social network and try

[00:20:53] we always talk about compound interest

[00:20:55] in the power of investing capital when you're young

[00:20:57] but also just try and create a lot of allies

[00:20:59] hang out with impressive people

[00:21:01] try and have good character

[00:21:03] talk them up behind their backs

[00:21:05] try and collect a set of allies

[00:21:07] and mentors as a young person

[00:21:08] don't be afraid to switch careers in your 20s

[00:21:11] I had an opportunity to make the jump

[00:21:13] to associate at Morgan Stanley

[00:21:15] and I didn't do it because I'm like

[00:21:16] I hate this and I'm not very good at it

[00:21:18] but that was a great move for me

[00:21:20] even though I didn't know what I was going to do next

[00:21:22] so keep in mind your 20s is about figuring it out

[00:21:38] email me at AltatureGmail.com

[00:21:40] and tell me why you subscribed

[00:21:42] thanks

[00:22:39] I feel like I have a similar story to you

[00:22:42] in terms of the types

[00:22:44] or the category of mistakes I made

[00:22:46] in my 20s and early 30s

[00:22:48] and I too would have benefited from having allies

[00:22:51] like a team of people who I knew

[00:22:53] I could go trust, take advice from them

[00:22:56] I wouldn't be...

[00:22:58] everybody has their purpose

[00:23:00] a big danger of being in your 20s and early 30s

[00:23:02] and having early success is you get arrogant

[00:23:04] and you think you're too smart

[00:23:06] and you're too good to listen to people

[00:23:08] and this was a big mistake of mine

[00:23:10] is I didn't have that kitchen cabinet as you call it

[00:23:12] but like right now I think of

[00:23:14] I have two daughters who are in New York City

[00:23:17] who want to do glamorous jobs

[00:23:20] that are...

[00:23:22] have a high probability of not being successful at

[00:23:24] so in the meantime they're

[00:23:26] waitresses

[00:23:28] and I also feel they don't necessarily

[00:23:31] push themselves to find success

[00:23:33] they sort of feel if they keep doing the typical New York thing

[00:23:36] they forget about survivorship by it

[00:23:38] so they think success will happen

[00:23:40] but like what do I tell them

[00:23:42] about how do I translate what you just said

[00:23:45] into something that will create action for them?

[00:23:48] James, me and every other parent of kids

[00:23:51] would like to know the answer to that

[00:23:53] and I don't have an answer

[00:23:55] I often said I have 13 and 16 year old boys

[00:23:58] and one of my biggest fears

[00:24:00] if not my biggest fear about them is

[00:24:02] if I had what they have

[00:24:04] I wouldn't have what I have

[00:24:06] Okay so let's say you are 25

[00:24:08] and in this city or 24 in this city

[00:24:10] and

[00:24:12] you don't have a clue how to

[00:24:14] find the right people

[00:24:16] you're the average of the five people

[00:24:18] and you don't have a clue how to find opportunity

[00:24:21] you don't know what your talent or passion is

[00:24:23] and you see people make money

[00:24:25] but they live up high

[00:24:27] in the big buildings on, you know

[00:24:29] Central Park West

[00:24:31] and you don't know how to get there

[00:24:33] what actions do you think you should take?

[00:24:35] Well I mean

[00:24:37] let's say you read Scott Galloway's book

[00:24:39] Well my advice is more around

[00:24:41] my advice is more for the person who is

[00:24:44] tracking, has some certification

[00:24:46] has a job

[00:24:48] I'm not at what colors you parachute

[00:24:50] or how to get out of debt

[00:24:52] I'm like I'm making decent money

[00:24:54] I'm reasonably talented

[00:24:56] I want to be one of these people

[00:24:58] that ends up financially secure

[00:25:00] Well you're talking about

[00:25:02] I think is even more difficult

[00:25:04] and that is how do I find

[00:25:06] how do I develop not only find

[00:25:08] a place to apply my energy

[00:25:10] but find kind of a mojo to apply that energy

[00:25:12] and at the end of the day

[00:25:14] I think it's kind of the same thing

[00:25:16] and I got this from sports

[00:25:18] get up every morning early

[00:25:20] make a certain amount of progress

[00:25:22] and don't let perfect be the enemy of good

[00:25:24] and take a job in an industry

[00:25:26] where like you said your kids are

[00:25:28] I've been fired from the best restaurants in LA

[00:25:30] I worked as a waiter all through college

[00:25:32] and I was terrible at it

[00:25:34] but that was never an end game for me

[00:25:36] and I always put a limit on stuff

[00:25:38] okay I want to be an athlete

[00:25:40] well I'm not nearly good enough to be an athlete

[00:25:42] alright next I want to be an investment banker

[00:25:44] I'm going to show up every day

[00:25:46] I'm going to try hard I don't want to do that

[00:25:48] and then if you're a good student

[00:25:50] you know I think grad school

[00:25:52] is a great way to buy time

[00:25:54] and maybe try and find something

[00:25:56] but we all pretend in our

[00:25:58] in our applications that we're supposed to be very focused

[00:26:00] my application at UCLA

[00:26:02] I said I wanted to be a pediatrician

[00:26:04] and I thought that was true until I took chemistry

[00:26:06] when I was applied to business school

[00:26:08] I said that I wanted to be

[00:26:10] in computer science and that was true too

[00:26:12] until I started you know actually coding

[00:26:14] and realized I wasn't very good at that

[00:26:16] your job is to every day show up

[00:26:18] work hard at something really test it

[00:26:20] in an industry that you'll get better at

[00:26:22] and it'll pay well

[00:26:24] and what I would say to your daughters who are

[00:26:26] it sounds like pursuing kind of one of these romance industries

[00:26:28] is I don't want to crush anybody's dreams

[00:26:30] but what I tell people is if they want to be an actor

[00:26:32] ring fence it

[00:26:34] unless you're making a sustainable living

[00:26:36] within 24 months

[00:26:38] realize that you're going to be one of the nine

[00:26:40] I mean do you really, the SAG After-Union

[00:26:42] the Union for Actors and People in Hollywood

[00:26:44] these are the best in the world

[00:26:46] there's 180,000 members of the union

[00:26:48] 87% don't qualify for health insurance

[00:26:50] because they don't make more than $23,000 a year

[00:26:52] so it's a shitty industry

[00:26:54] now but where you're going to tell

[00:26:56] your daughter who dreams of being an actress

[00:26:58] not to be an actress no

[00:27:00] what I think you can say is alright

[00:27:02] you're talented

[00:27:04] you're going to find something that you can

[00:27:06] find reward in maybe this is it

[00:27:08] maybe it isn't but let's ring fence it

[00:27:10] let's give it two years and certain hard

[00:27:12] metrics around whether

[00:27:14] this is really working because in those industries

[00:27:16] if you're not in the top 0.1%

[00:27:18] and you'll know pretty early whether you are

[00:27:20] or not messy knew he was messy at like

[00:27:22] 11 right

[00:27:24] and and and lean on

[00:27:26] me your parent although it's hard when you're their dad

[00:27:28] listen to anyone but you

[00:27:30] but lean on me to say okay let's be

[00:27:32] honest about how this is going

[00:27:34] because you are talented and there's a ton

[00:27:36] of opportunities and what you said James is really

[00:27:38] I think compelling in terms of your narrative

[00:27:40] those skills as an actor

[00:27:42] actress or in the creative industry

[00:27:44] you can apply those to other industries

[00:27:46] and also I

[00:27:48] you know I for me grad school

[00:27:50] was a great way for what I call the

[00:27:52] lead in the aimless to kind of figure it out

[00:27:54] or explore other industries

[00:27:56] while getting certification but

[00:27:58] I would say at the end of the day get up

[00:28:00] get a job don't let perfect be the enemy of good

[00:28:02] meet as many people as possible

[00:28:04] try and make as many allies as possible

[00:28:06] and have mentors such

[00:28:08] you can say is this working for me

[00:28:10] is it really working and if it isn't don't be afraid

[00:28:12] to switch because in the

[00:28:14] matter of five years I was a doctor investment

[00:28:16] banker MBA student and consultant

[00:28:18] you know none of it

[00:28:20] worked until it did

[00:28:22] what when did you first feel like

[00:28:24] that so

[00:28:26] I know that feeling you're talking about where

[00:28:28] suddenly you fall into a job

[00:28:30] and it's neither here nor there

[00:28:32] but then suddenly you realize

[00:28:34] oh I'm good at this

[00:28:36] and the harder I work at it

[00:28:38] the better the results are

[00:28:40] the more money I make

[00:28:42] and now I have this excitement that I've never had

[00:28:44] before in my life I'm enjoying

[00:28:46] getting up in the morning to go to this job

[00:28:48] where I see my future

[00:28:50] for the first time when did you first have that

[00:28:52] experience

[00:28:54] I know the exact moment I was a second year in business school

[00:28:56] and I took a class called brand

[00:28:58] strategy David Ochre and we were

[00:29:00] supposed to our final project was to do a

[00:29:02] consulting engagement for a client and I pitched

[00:29:04] Yamaha motors they said sure we'd love

[00:29:06] to do this we're looking at the youth market how

[00:29:08] we can reinvigorate the Yamaha brand in the youth market

[00:29:10] and I said you know what I said

[00:29:12] this requires this is a real

[00:29:14] important project for you and this requires

[00:29:16] market research and interviews with experts

[00:29:18] and real

[00:29:20] statistically rigorous data

[00:29:22] and I said I want to do this right

[00:29:24] I'm going to write you a project

[00:29:26] but I need money to do this

[00:29:28] and they said okay write us a proposal

[00:29:30] and I wrote my proposal I called my friends at BCG

[00:29:32] and I said what should I charge and they said well we would charge

[00:29:34] this is 1992 we would charge half a million

[00:29:36] dollars so I said well I'm not BCG

[00:29:38] so I'll charge them a quarter of a million so I wrote a proposal

[00:29:40] and mom proved it and I sent

[00:29:42] them be a FedEx so it would seem important

[00:29:44] a proposal and I'm asking for a quarter of a million

[00:29:46] dollars to do some market research and a brand

[00:29:48] strategy engagement for Yamaha

[00:29:50] and they didn't call me back for like two or three weeks

[00:29:52] and then I pulled up to my apartment in Rockridge

[00:29:54] Oakland that was spent $280 a month

[00:29:56] and I opened the mailbox and there was a check for

[00:29:58] around $25,000

[00:30:00] and a voicemail from this guy Matt

[00:30:02] Takazawa said I'm really excited about the project

[00:30:04] you should have received the first installment I remember

[00:30:06] thinking James at that moment

[00:30:08] looking around and thinking that I just commit a crime

[00:30:10] is this fraud

[00:30:12] and what you realize is that no one

[00:30:14] everyone's a fraud everyone's an imposter

[00:30:16] but for me it was

[00:30:18] I was very economically focused at a young age

[00:30:20] something that was a benefit of growing up

[00:30:22] without a lot of money was I was very focused

[00:30:24] on economic security

[00:30:26] so recognizing that I had

[00:30:28] the skills to convince a company to pay me

[00:30:30] a quarter of a million dollars to try and answer

[00:30:32] very difficult questions and then

[00:30:34] do a good job of it and get multiple

[00:30:36] engagements from Yamaha over the next several years

[00:30:38] it was intoxicating

[00:30:40] I felt relevant

[00:30:42] I loved making money I enjoyed

[00:30:44] hiring people and

[00:30:46] I enjoyed standing up in front

[00:30:48] of a group of people

[00:30:50] and communicating and storytelling around

[00:30:52] business issues that was intoxicating

[00:30:54] over time

[00:30:56] I decided it wasn't for me I got out consulting

[00:30:58] and services is young

[00:31:00] man or young woman's business you're traveling

[00:31:02] all the time it's depend upon relationships

[00:31:04] I got older I became more of an introvert

[00:31:06] I didn't want to hang out with clients

[00:31:08] so I pivoted to academia

[00:31:10] and I think you're going to see that a lot in industries

[00:31:12] but for me that moment was

[00:31:14] when someone would actually

[00:31:16] write me a check for 125,000 dollars

[00:31:18] that was the moment I thought wow maybe

[00:31:20] there's a there there

[00:31:22] did you um

[00:31:24] while you were doing the Yamaha Motors project

[00:31:26] did you seek out in parallel other clients

[00:31:28] to pay you 250,000 dollars

[00:31:30] yeah and here's the thing

[00:31:32] you must know this is a stand-up comedian and someone who had to raise money for a hedge fund

[00:31:36] your success has largely correlated

[00:31:38] your willingness to pull out a spoon in each shit

[00:31:40] I started calling every alumni

[00:31:42] of Cal and saying hi

[00:31:44] CEO of Levi's I just started a consulting firm

[00:31:46] where you have coffee with me

[00:31:48] no no no okay and no men

[00:31:50] I would email them again in a month

[00:31:52] I mean I was just relentless

[00:31:54] and go ahead

[00:31:56] go ahead

[00:31:58] your willingness to each shit

[00:32:00] your rejection

[00:32:02] is the only way you're going to score above your weight class professionally and personally

[00:32:04] if you want to marry

[00:32:06] or

[00:32:08] date people who are nicer

[00:32:10] higher character and hotter than you

[00:32:12] then it's really easy

[00:32:14] get used to rejection

[00:32:16] if you want to score above your economic weight class

[00:32:18] if you want people to look at you

[00:32:20] in 20 years ago I wouldn't have guessed he'd be that successful

[00:32:22] then get ready to each shit

[00:32:24] because that means walking up to strangers

[00:32:26] emailing people

[00:32:28] taking risks

[00:32:30] risking public failure

[00:32:32] by trying to raise money

[00:32:34] starting businesses that might fail publicly

[00:32:36] and here's reality

[00:32:38] 98% of people

[00:32:40] aren't willing

[00:32:42] to endure rejection

[00:32:44] everyone's so impressed that

[00:32:46] I'm an entrepreneur the only difference is

[00:32:48] I'm willing to sign the front of checks not the back of checks

[00:32:50] the majority of people would never put their own money into their own venture

[00:32:54] it's so true

[00:32:56] but it's so real

[00:32:58] the decades

[00:33:00] decades

[00:33:02] maybe for some people who are more talented than me

[00:33:04] it was years but not decades

[00:33:06] but the decades of rejection and as you put it

[00:33:08] eating shit

[00:33:10] you just get humiliated all the time

[00:33:12] it's not just rejection

[00:33:14] it's humiliation in many cases

[00:33:16] because people who have the power to reject you

[00:33:18] also have the power to tell you why they're rejecting you

[00:33:20] and sometimes they don't know

[00:33:22] so they just say whatever they want to say to you

[00:33:24] that's the mojo

[00:33:26] that's the push

[00:33:28] is that you have to

[00:33:30] have a goal

[00:33:32] that you're willing to jump through fire to get to

[00:33:34] and it's painful

[00:33:36] to do that

[00:33:38] I don't know if there's really a formula for it

[00:33:40] like you say

[00:33:42] you already have to have that

[00:33:44] willingness before you can go out and get it

[00:33:48] I don't know how you teach someone

[00:33:50] the willingness to be rejected

[00:33:52] I ran for sophomore

[00:33:54] junior and senior class presidents

[00:33:56] lost all three times and based on my track record

[00:33:58] decided to run for student body president

[00:34:00] where I went on to wait for a lose

[00:34:02] and I think that that just paid huge dividends

[00:34:04] for me

[00:34:06] the recognition that feeling is painful

[00:34:08] but a couple days later you're fine

[00:34:10] and

[00:34:12] again I've described success as the ability

[00:34:14] to mourn and move on

[00:34:16] like oh this didn't work out

[00:34:18] mourn and move on

[00:34:20] I'm now reading that an average venture capitalist

[00:34:22] has to do 300 meetings to find one person

[00:34:24] to fund him or her

[00:34:26] it's just constant

[00:34:28] constant rejection

[00:34:30] and the majority of people aren't willing to endure that

[00:34:32] so

[00:34:34] I don't know how you train it in people

[00:34:36] I'm trying to do with my boys

[00:34:38] I force them to speak to strangers when they're out

[00:34:40] because it's awkward and uncomfortable

[00:34:42] and I'm like we'll get used to it

[00:34:44] that's the key to success is putting yourself in awkward and uncomfortable positions

[00:34:46] and I've sat outside of the front of my house

[00:34:48] with my youngest

[00:34:50] very upset because I won't let him back into the house

[00:34:52] and he talks to a stranger and I'm learning like

[00:34:54] just go pet that dog

[00:34:56] but those skills I think especially for

[00:34:58] men who are still expected to initiate

[00:35:00] conversation with potential

[00:35:02] romantic partners I think that skill

[00:35:04] is so important

[00:35:06] and I'm not saying that everyone should be an entrepreneur

[00:35:08] or you have to be risk aggressive

[00:35:10] but be clear

[00:35:12] one out of seven businesses

[00:35:14] succeeds so I've started nine

[00:35:16] I mean when I business

[00:35:18] failed I mourn for a little while

[00:35:20] and then I got up dust up my pants

[00:35:22] and called people I was I like to think I was a good person

[00:35:24] a good employer a good

[00:35:26] good person an operator

[00:35:28] took out of people's money and I try and start another business

[00:35:30] and I've started nine businesses

[00:35:32] and two have been very successful

[00:35:34] two have done okay and five have

[00:35:36] crashed into a fiery ball

[00:35:38] of flames but all you need is one

[00:35:40] and so

[00:35:42] to think that you're going to be successful in your first relationship

[00:35:44] your first business your first job

[00:35:46] is just you're deluding yourself

[00:35:48] and so forgive yourself

[00:35:50] and get up and try again

[00:35:52] you are the answer

[00:35:54] I think a key component

[00:35:56] and I even just articulating this

[00:35:58] looking in the mirror and saying

[00:36:00] I am the answer to a firm's problems

[00:36:02] I would be great for a firm

[00:36:04] and then answer the question well why would you be great

[00:36:06] and get in front of people and start practicing

[00:36:08] convincing them why you'd be great

[00:36:10] you could make someone very happy

[00:36:12] right there's no

[00:36:14] there's no pain like getting

[00:36:16] your heart stomped on

[00:36:18] but then convince yourself

[00:36:20] I could make someone very happy

[00:36:22] and I'm going to someday

[00:36:24] I remember I mean

[00:36:26] I didn't have girlfriends in high school

[00:36:28] in my freshman year

[00:36:30] it wasn't until I was a sophomore that I had

[00:36:32] really my first serious relationship

[00:36:34] and I remember thinking I'd be so good at this

[00:36:36] I'd be so good at this

[00:36:38] and it gave me the mojo

[00:36:40] to be more aggressive and ask people out

[00:36:42] and then have them say no

[00:36:44] and then ask them out again

[00:36:46] but for me that's been really the key

[00:36:48] to success and if your business fails

[00:36:50] if you're

[00:36:52] getting nos that just means

[00:36:54] you're on your way to yes

[00:36:56] so the more nos you get

[00:36:58] the more that means you're on your way to yes

[00:37:00] I think also very important

[00:37:02] as crass as it sounds

[00:37:04] hang out with rich people

[00:37:06] because for instance take raising money

[00:37:08] if you're trying to raise money

[00:37:10] and everybody you talk to

[00:37:12] has $100 in the bank

[00:37:14] you're not going to raise money

[00:37:16] if everyone you talk to has $50 million in the bank

[00:37:18] you're going to raise money

[00:37:20] even if you have a crappy idea

[00:37:22] you're much more likely to raise money

[00:37:24] you increase the potential for your luck

[00:37:26] so

[00:37:28] and maybe it's hard to

[00:37:30] hang out with people who are

[00:37:32] rich but

[00:37:34] I would say one shortcut to that is

[00:37:36] getting to mentoring too

[00:37:38] offer as much value as you can

[00:37:40] you can't get a mentor until you offer value

[00:37:42] to somebody who then says

[00:37:44] okay I want to guide this kid along

[00:37:46] and so

[00:37:48] if I had hung out with

[00:37:50] like you were at Morgan Stanley

[00:37:52] if I had worked at Goldman Sachs

[00:37:54] and then worked at a hedge fund

[00:37:56] it would have been much easier to raise money for a hedge fund

[00:37:58] than doing what I did which was

[00:38:00] starting without any of that pedigree

[00:38:02] or any of those connections

[00:38:04] when you're in New York you can't be in a room

[00:38:06] with more than 20 or 30 or 50 people

[00:38:08] and not have a lot of wealthy people in the room

[00:38:10] so you're just around a lot of wealth

[00:38:12] what I would say is that

[00:38:14] I would frame it a little bit differently

[00:38:16] the people you hang out with

[00:38:18] you want to try and hang out with

[00:38:20] really high quality impressive people

[00:38:22] people who are funny

[00:38:24] interesting ambitious

[00:38:26] and a lot of those factors lead up to wealth

[00:38:28] and because really impressive people

[00:38:30] other people want to know them

[00:38:32] and if you speak well of them behind their backs

[00:38:34] and you're a good person they're going to want to

[00:38:36] put you in a room of opportunities

[00:38:38] even when you're not in that room

[00:38:40] what I would say is

[00:38:42] and this is sort of crass too

[00:38:44] I would say if you can go to work for a rich person

[00:38:46] because

[00:38:48] when I didn't have money, when I was hiring people

[00:38:50] I just have to watch every nickel

[00:38:52] and what I would do is try and compensate that with equity

[00:38:54] and when the companies worked out

[00:38:56] that would work out really well

[00:38:58] but now that I have money

[00:39:00] I would pay people really well because I can

[00:39:02] and it would just be

[00:39:04] it would just feel very awkward to live the life

[00:39:06] I'm leading

[00:39:08] and be really like

[00:39:10] pay people market salaries

[00:39:12] I pay above market, I mean they probably don't think that

[00:39:14] but I know I do

[00:39:16] because okay how could I ever

[00:39:18] be on the wrong side of this equation

[00:39:20] given

[00:39:22] absolutely if you have a different job offers

[00:39:24] go to work

[00:39:26] for the boss

[00:39:28] because they

[00:39:30] it's just easier for them quite frankly

[00:39:32] to pay you really well

[00:39:58] for just ten dollars

[00:40:00] help your soil retain moisture longer

[00:40:02] with color that lasts up to 12 months

[00:40:06] shop spring black Friday deals

[00:40:08] for special buy on scott's earth grow mulch

[00:40:10] five bags for just ten dollars

[00:40:12] at the home depot how doers get more done

[00:40:14] color selection

[00:40:16] by store limit 60 bags for customer wall supplies last

[00:40:28] I'm always trying to think kind of the very beginning

[00:40:30] side of this equation like what you called

[00:40:32] getting them the mojo if you

[00:40:34] work for

[00:40:36] a rich boss and it doesn't matter what industry

[00:40:38] you

[00:40:40] try to pitch ideas to them

[00:40:42] or come up with ideas for them

[00:40:44] or do something that adds a little

[00:40:46] just like they just like

[00:40:48] you pay above market

[00:40:50] so you can

[00:40:52] you can do it

[00:40:54] you can do it

[00:40:56] just like you pay above market salary

[00:40:58] a young person

[00:41:00] should have above market

[00:41:02] service they provide

[00:41:04] so don't just do

[00:41:06] your job do more than the job come up with new ideas

[00:41:08] come up with ways to be more efficient

[00:41:10] do things that are outside the scope of your job

[00:41:12] because you have to have some way to stand out

[00:41:14] because

[00:41:16] the competition is immense in New York City there's

[00:41:18] five million kids wanting to break out

[00:41:22] yeah look I don't

[00:41:24] I'm very I'm very boomer on this

[00:41:26] I think it's ridiculous when

[00:41:28] I ask my kids when I say my kids

[00:41:30] I mean my students where they

[00:41:32] expect to be economically

[00:41:34] somewhere between about

[00:41:36] two thirds by the time they're 35

[00:41:38] and want to be making

[00:41:40] three quarters of a million a year

[00:41:42] which means they expect to be in the top 1%

[00:41:44] and my experience

[00:41:46] is the only way you can be in the top 1%

[00:41:48] unless you're smart enough to be born rich

[00:41:50] is to pretty much do nothing but work for a solid

[00:41:52] decade and then in the same breath

[00:41:54] they'll talk about the need for

[00:41:56] balance I'm like these two

[00:41:58] don't work together that's like

[00:42:00] saying you really want to get into ice cream but you want to be really fit

[00:42:02] it just well you know

[00:42:04] three quarter of a million dollars by the way

[00:42:06] what job pays three quarters of a million

[00:42:08] dollars other than in the finance industry

[00:42:10] or like a top lawyer or unless

[00:42:12] you're in the top of any industry but

[00:42:14] by the time you're 35

[00:42:16] you got to be in finance but or

[00:42:18] quite frankly you just have to work

[00:42:20] to get to that level

[00:42:22] by that time

[00:42:24] you buy 45

[00:42:26] you have to just work your ass off and what I

[00:42:28] I mean one of the things I took

[00:42:30] I tell the story when I was at Morgan Stanley

[00:42:32] I'm like okay you got to figure out where your strengths are

[00:42:34] what can you do that no one else can do

[00:42:36] strategy all boils down to one question

[00:42:38] what can I do

[00:42:40] that is really hard

[00:42:42] that other people aren't willing to do that's your strategy

[00:42:44] what are my strengths 25 years old

[00:42:46] how do you even

[00:42:48] right now you're not good at

[00:42:50] anything that's really hard

[00:42:52] so how do you find that

[00:42:54] what I did at 22 is the following

[00:42:56] I was an athlete I was mentally strong

[00:42:58] I didn't have a girlfriend I was living at home

[00:43:00] I had no social life so what I could do

[00:43:02] and I did this was every Tuesday morning

[00:43:04] I'd go into work at 9am and I'd stay till 5pm on Wednesday

[00:43:06] I'd work through the night

[00:43:08] and because it was such a macho

[00:43:10] bullshit weird abusive culture

[00:43:12] they valued that I'm like okay

[00:43:14] I am physically capable of doing this

[00:43:16] there is no sacrifice or tradeoff

[00:43:18] other than being very tired because I have nobody

[00:43:20] at home I have no dogs

[00:43:22] I have no kids so I thought

[00:43:24] every week I'm going to work 36 hours straight

[00:43:26] and they valued that

[00:43:28] I wasn't as well educated as my Ivy League

[00:43:30] peers but

[00:43:32] that was one of the things you can do

[00:43:34] at a very young age quite frankly

[00:43:36] is work harder than anybody

[00:43:38] you may not decide to you may decide

[00:43:40] that you don't want to employ that strategy

[00:43:42] but you have to have

[00:43:44] an eye towards an unassailable

[00:43:46] differentiated

[00:43:48] unambiguous talent

[00:43:50] or skill or commitment that

[00:43:52] other people aren't going to bring

[00:43:54] you have to figure out what that is

[00:43:56] it's funny how

[00:43:58] like you're bringing back

[00:44:00] memories from me like I haven't thought about this in a long time

[00:44:02] but I remember being in my

[00:44:04] 20s and almost feeling sorry

[00:44:06] for my boss at the time

[00:44:08] he was in his 40s and

[00:44:10] because I was young

[00:44:12] I did have the ability to do

[00:44:14] like I would work through the weekend for instance

[00:44:16] like there was no problem for me

[00:44:18] to come in Saturday and Sunday

[00:44:20] and put in full work days

[00:44:22] was nobody else there in the office

[00:44:24] and my boss couldn't do it and then Monday morning

[00:44:26] when he would come in I would have so many achievements

[00:44:28] he'd have to figure out how to take

[00:44:30] credit for them so that he could keep

[00:44:32] rising and

[00:44:34] that developed a good

[00:44:36] relationship between him and me where

[00:44:38] he would then essentially let me do whatever I wanted to do

[00:44:40] I would let him take credit

[00:44:42] for it and you brought up

[00:44:44] twice I would say good things

[00:44:46] about him behind his back

[00:44:48] I would give him the credit so that he

[00:44:50] could let me continue to rise

[00:44:52] and that was good for my career

[00:44:54] In consulting or in business

[00:44:56] the easiest way for you to develop really strong

[00:44:58] relationships is to get your boss

[00:45:00] or your client

[00:45:02] promoted

[00:45:04] Yeah, that's very true. My job was

[00:45:06] I was always working for the CMO as a brand strategist

[00:45:08] My job I would say at the firm

[00:45:10] our job is to make that guy the CEO

[00:45:12] to make him so brilliant

[00:45:14] with our work that he becomes

[00:45:16] the CEO of Latin America for Levi's

[00:45:18] or Dreyer's or whatever it was

[00:45:20] and the same if you can make your boss successful

[00:45:22] by just doing great work for them

[00:45:24] you're going to be the boss at some point

[00:45:26] and you got to figure out what is it

[00:45:28] am I brilliant analytically, do I understand design

[00:45:30] am I great at PowerPoint, like fine

[00:45:32] what are your weapons of choice

[00:45:34] you got to be able to fire a bow and arrow

[00:45:36] you got to be a reasonable athlete so you can handle any weapon

[00:45:38] but then what are you going to be a ninja at

[00:45:40] like where is your ninja

[00:45:42] you've got to be

[00:45:44] at any company

[00:45:46] you got a year to figure out

[00:45:48] what do they go to you for

[00:45:50] and it could be pretty fucking narrow

[00:45:52] well that's the guy that knows how to run the copier like no one's business

[00:45:54] I mean he can get pretty narrow

[00:45:56] he is great at planning the social events

[00:45:58] for the company, that's important

[00:46:00] that's important, right

[00:46:02] he is great at

[00:46:04] welcoming new people or pitching people

[00:46:06] when we make and hire a young

[00:46:08] hire to have him speak to

[00:46:10] Jake, he's great at talking up the firm

[00:46:12] like what are you the go-to

[00:46:14] for that's the first quite, within a year

[00:46:16] I've got to be the go-to

[00:46:18] girl or guy when they need

[00:46:20] X done, right and then more broadly

[00:46:22] how do I make the people I work

[00:46:24] for and the firm successful and pretend

[00:46:26] and good firms do this

[00:46:28] you know make you a shareholder

[00:46:30] how do you think to yourself

[00:46:32] I want to make this firm

[00:46:34] really successful because

[00:46:36] people will notice, right

[00:46:38] it's like if someone

[00:46:40] likes your kids you immediately like them

[00:46:42] if someone comes up to you at your school

[00:46:44] a drop off and says oh I'm just so impressed with Alec

[00:46:46] he's such a good kid

[00:46:48] you immediately love that person

[00:46:50] anyone who likes your kids you like

[00:46:52] you want to show and demonstrate every day

[00:46:54] that you really want the company to be

[00:46:56] successful in little ways

[00:46:58] I don't care if it's picking up litter in front of the office

[00:47:00] I don't care what it is, people notice

[00:47:02] you know

[00:47:04] I wrote about this concept

[00:47:06] in one of my least read books

[00:47:08] it was called The Rich Employee

[00:47:10] and it was this idea that

[00:47:12] what you're saying is

[00:47:14] you have to become the identity

[00:47:16] of the firm you have to like absorb that

[00:47:18] into your own identity so I worked at HBO

[00:47:20] for instance and HBO had a very

[00:47:22] distinctive type of show

[00:47:24] compared to like let's say NBC

[00:47:26] so I had to feel

[00:47:28] what was the HBO aesthetic

[00:47:30] in order to then

[00:47:32] implement it

[00:47:34] at my job at various levels

[00:47:36] and that technique works

[00:47:38] you have to love where you're working

[00:47:40] I'm talking too much here

[00:47:42] but the same time

[00:47:44] I got offered a job for HBO

[00:47:46] making 40,000 a year

[00:47:48] and at the same time I was offered a job at JPMorgan

[00:47:50] making 80,000 a year

[00:47:52] and I was going to move to New York City

[00:47:54] to take one of these two jobs

[00:47:56] and I got offered a job at JPMorgan

[00:47:58] because I felt what's the difference

[00:48:00] between JPMorgan and Morgan Stanley

[00:48:02] or any other bank

[00:48:04] whereas HBO I had a feeling

[00:48:06] I could feel what that brand is

[00:48:08] and I would do good at it

[00:48:10] and that worked for me

[00:48:12] the money wasn't the important thing there

[00:48:14] I think when you're young like you said

[00:48:16] and you have the opportunity

[00:48:18] you want to find something

[00:48:20] you're going to be really good at

[00:48:22] so if HBO you think it's going to be better suited for me

[00:48:24] and I'm not going to go with JPMorgan

[00:48:26] but they make a shit ton of money

[00:48:28] they'll make tens of millions

[00:48:30] if you think where could I be a master

[00:48:32] would I better

[00:48:34] would my skills

[00:48:36] am I more likely to develop mastery at JPMorgan

[00:48:38] or develop mastery at HBO

[00:48:40] it's simple do I have more creative instincts

[00:48:42] am I better analytically

[00:48:44] that's JPMorgan

[00:48:46] whatever it might be

[00:48:48] but you want to go somewhere where you can say

[00:48:50] this is where I can develop mastery

[00:48:52] and again it's still

[00:48:54] you use a really important word

[00:48:56] workshopping

[00:48:58] you can't be afraid to switch jobs

[00:49:00] interests

[00:49:02] talents, passions many times in your 20s

[00:49:04] because you're not really going to know

[00:49:06] what you love until you try lots of things

[00:49:08] the only wrinkle I would add there

[00:49:10] is have a kitchen cabinet

[00:49:12] and never leave a job

[00:49:14] until you talk to some people

[00:49:16] because young people and old people

[00:49:18] but especially young people

[00:49:20] they need to take actions to things

[00:49:22] that they need to take a breath and take a beat

[00:49:24] and

[00:49:26] you need

[00:49:28] a group of people you can call

[00:49:30] and say I'm thinking about leaving my job

[00:49:32] and this is why

[00:49:34] and because sometimes they'll save you from themselves

[00:49:36] sometimes they'll go where your ego was hurt

[00:49:38] you're just putting up with the bullshit

[00:49:40] that exists in every other company

[00:49:42] don't have an emotional reaction

[00:49:44] or find another job before you quit your job

[00:49:46] just like

[00:49:48] I wish I'd figured this out

[00:49:50] I don't make a big decision without talking to at least two or three other people

[00:49:52] personally or professionally

[00:49:54] it's really important

[00:49:56] you have to put all questions of ego

[00:49:58] aside as well

[00:50:00] which I think is hard for young people

[00:50:02] like you have to really

[00:50:04] learn to listen to people

[00:50:06] very important

[00:50:08] you can't read the label from inside of the bottle

[00:50:10] and I've known so many

[00:50:12] radically successful people

[00:50:14] everyone is a fucking idiot

[00:50:16] in certain aspects of their lives

[00:50:18] I have friends who are

[00:50:20] amazing

[00:50:22] business people

[00:50:24] credible judgements, good board members, great investors

[00:50:26] and they have just

[00:50:28] they have terrible judgment when it comes to their relationships

[00:50:30] and then I have other people

[00:50:32] who are like great at what they do

[00:50:34] professionally make a ton of money

[00:50:36] great family members, great shape

[00:50:38] and for the life of them they can't save

[00:50:40] there's something about their

[00:50:42] their saving and their ability to manage money

[00:50:44] that's just broken

[00:50:46] everybody has blind spots

[00:50:48] everybody

[00:50:50] and a series of people you ask questions to

[00:50:52] and friends and a social network

[00:50:54] and advisors, that's your Kevlar

[00:50:56] that protects you from making really stupid mistakes

[00:50:58] because when you're young you like to think

[00:51:00] I'm smart and I conflated leadership

[00:51:02] and masculinity with making my own decisions

[00:51:04] and then convincing the world and myself and other people that I was right

[00:51:06] and if I just checked

[00:51:08] in a couple times with people they could have gone

[00:51:10] well Scott does it really

[00:51:12] make sense for you to do this? Have you really

[00:51:14] thought this through like what about X, Y

[00:51:16] and Z it would have saved me so much heartache

[00:51:18] and saved me so much money if I just

[00:51:20] had two or three people I could call on

[00:51:22] and ask basic questions to

[00:51:24] in another part of the book

[00:51:26] you talk also you talk about all

[00:51:28] aspects of wealth and

[00:51:30] I think that's what makes this book so valuable

[00:51:32] is it not you know once you have money

[00:51:34] for instance how do you invest it

[00:51:36] how do you save it, the importance of compound interest

[00:51:38] etc. but one point

[00:51:40] I don't know if

[00:51:42] I disagree or not

[00:51:44] when you're young

[00:51:46] if someone says

[00:51:48] X, Y, Z cost 2,000

[00:51:50] let's say you have six months in the bank save

[00:51:52] so you know you're not dying tomorrow

[00:51:54] but if something costs you 2,000

[00:51:56] and you had a friend who said

[00:51:58] if $2,000 is important to me

[00:52:00] you know 40 years from now

[00:52:02] then something's wrong

[00:52:04] and so

[00:52:06] you were talking about personal finance and the importance of savings

[00:52:08] but I kind of agree with the person who says

[00:52:10] you don't need to worry about

[00:52:12] $2,000 because it's true

[00:52:14] your money making power

[00:52:16] grows so much faster

[00:52:18] than the interest on $2,000

[00:52:20] particularly when you're younger

[00:52:22] it doesn't really matter $2,000

[00:52:24] or if Starbucks coffee

[00:52:26] is $10 or whatever

[00:52:28] I'm up two minds here

[00:52:30] the first is

[00:52:32] okay first off

[00:52:34] if you just cut out one cup of coffee

[00:52:36] from Starbucks and save $7

[00:52:38] a day

[00:52:40] and then you can figure out a way to live

[00:52:42] in a place that's clean and nice but a little bit smaller

[00:52:44] you can find a way to save $500 or $1,000

[00:52:46] a month

[00:52:48] which isn't easy but if you can figure that out

[00:52:50] from 22 on

[00:52:52] and you just put that money in SPY

[00:52:54] you're going to be financially secure when you're our age

[00:52:56] they just

[00:52:58] the market's been going up 11%

[00:53:00] a year since 2008

[00:53:02] that means every 21 years your investments go up 8-fold

[00:53:04] so my friend who I referenced

[00:53:06] who was putting those $2,000 away

[00:53:08] from the time we got out of college

[00:53:10] I would say on average every year he made

[00:53:12] 20 or 30% of what I made

[00:53:14] he ended up in almost the same spot because

[00:53:16] the compounding

[00:53:18] of that money early on that he saved

[00:53:20] ended up being hundreds of thousands

[00:53:22] and then millions of dollars when we were in our 50s

[00:53:24] so there is something

[00:53:26] about having the discipline to put some money away

[00:53:28] when you're younger that just

[00:53:30] that magic box of

[00:53:32] and ignoring or trying to

[00:53:34] trying to recognize the flaw

[00:53:36] in our species is we don't realize how fast time is going to go

[00:53:38] because for the majority of time on this planet

[00:53:40] our species has not lived past 35

[00:53:42] it's impossible for us to calibrate

[00:53:44] that 20 years is going to go by in a blink

[00:53:46] I mean it's just going to go by so fast

[00:53:48] and it's 7-11% a year

[00:53:50] a small amount of money over 20 years turns into a lot of money

[00:53:52] having said that

[00:53:54] I also recognize that there is a

[00:53:56] balance and that is

[00:53:58] you don't want your youth wasted

[00:54:00] it does make sense every once in a while

[00:54:02] to buy a cool

[00:54:04] outfit and go to Coachella

[00:54:06] to really try and enjoy yourself

[00:54:08] to occasionally spend some money

[00:54:10] I would never want to deny

[00:54:12] a young person or their youth

[00:54:14] and say

[00:54:16] saving is the only thing you should be doing in your 20s

[00:54:18] because you won't really start

[00:54:20] making real money probably until your 30s

[00:54:22] and then you can catch up

[00:54:24] what I would say though

[00:54:26] is that develop that savings muscle

[00:54:28] even if it's just a hundred bucks

[00:54:30] 50-100 bucks a week

[00:54:32] and then here is the key

[00:54:34] find partners or friends that also gamify

[00:54:36] money

[00:54:38] I went to UCLA I didn't have any money

[00:54:40] I had to save $3,300 every

[00:54:42] summer otherwise I wasn't reenrolling

[00:54:44] in school because I would rack up fraternity bills

[00:54:46] and I needed to pay my tuition

[00:54:48] everybody knew who the six guys in the fraternity were

[00:54:50] it was mostly wealthy Jews from the valley

[00:54:52] but there were six of us that didn't have any money everybody

[00:54:54] who we were

[00:54:56] gamified and we'd have a whiteboard

[00:54:58] and every day we talk about how much money we made

[00:55:00] in the summer and how much we spent

[00:55:02] I spent $77 a week for 12 weeks including rent

[00:55:04] I lived on top ramen, bananas and milk

[00:55:06] and guess what

[00:55:08] I still had a good time

[00:55:10] we'd pool our money and buy a 24-pack of Schmidibiers

[00:55:12] we saw it a nice time

[00:55:14] gamify it find a partner

[00:55:16] a spouse, a girlfriend when you're younger

[00:55:18] that is also

[00:55:20] wants to track their budget

[00:55:22] wants to build something with you

[00:55:24] it's really powerful if you can surround yourself

[00:55:26] with people like that

[00:55:28] and I'm not suggesting you don't go to Bangkok

[00:55:30] and do something cool

[00:55:32] or go

[00:55:34] I just came back from Egypt and Israel

[00:55:36] have some fun

[00:55:38] but develop that savings muscle in your 20s

[00:55:40] and also recognize

[00:55:42] and you just have to make the trade-offs

[00:55:44] $1,000 a 22

[00:55:46] is like saving $25,000

[00:55:48] when you're 42

[00:55:50] so just do the trade-off which is going to be harder

[00:55:52] if you want to spend all your money in your 20s

[00:55:54] and have some fun, I get it

[00:55:56] that's what I did

[00:55:58] my first bonus check, Morgan Stanley

[00:56:00] I bought a BMW and hung swim goggles

[00:56:02] out the rearview mirror to pretend I was more athletic

[00:56:04] than I was, totally peacocking

[00:56:06] how old were you?

[00:56:08] 22, 23

[00:56:10] 22 you bought a B, how big was your bonus check?

[00:56:12] I think it was like

[00:56:14] $20, $25,000

[00:56:16] Morgan Stanley praised video well

[00:56:18] what was your salary at Morgan Stanley?

[00:56:20] $40,000

[00:56:22] I think I made $60,000 my first year out of college

[00:56:24] in 1987 which probably today is the 1 or 2 year

[00:56:26] you were rich

[00:56:28] well yeah and I spent it all

[00:56:30] I spent it all and if I just saved a little bit of money

[00:56:32] here's the bad news

[00:56:34] I didn't save money

[00:56:36] I was assumed I'm such a baller

[00:56:38] I'm starting companies one even one public

[00:56:40] and I always raised my consumption

[00:56:42] to my spending

[00:56:44] I didn't spend more than I made

[00:56:46] but I always raised my consumption to my spending

[00:56:48] and in 2008 the great financial recession hit

[00:56:50] I lost everything

[00:56:52] because I was way over invested in tech

[00:56:54] and about the same time my oldest son

[00:56:56] had the poor judgment to come marching out of my girlfriend

[00:56:58] and

[00:57:00] when your kid, your first kid is born

[00:57:02] you're supposed to be told that it's going to be

[00:57:04] bright lights and angel singing

[00:57:06] I was so sick and nauseous

[00:57:08] I really came very close to fainting

[00:57:10] and at first

[00:57:12] I thought is this because I find

[00:57:14] the process of childbirth so disgusting

[00:57:16] which I do but more than that

[00:57:18] I was ashamed

[00:57:20] I was 42

[00:57:22] I had a lot of curb success

[00:57:24] I could have been on the cover of magazines

[00:57:26] and I didn't have any fucking money

[00:57:28] and now it was no longer just about me

[00:57:30] I started my first moment with my son

[00:57:32] was a recognition that I was already feeling

[00:57:34] as a father and it was

[00:57:36] emasculating and it was really upsetting

[00:57:38] and if I had just put a little bit

[00:57:40] of all that money I'd made away

[00:57:42] and let time take over in an index fund

[00:57:44] instead of going all in

[00:57:46] on these investments that were going to pay off huge for me

[00:57:48] I might not have been had millions

[00:57:50] but I would have had enough money to be able

[00:57:52] to enjoy my kids

[00:57:54] as infants

[00:57:56] and that's really what this book is about

[00:57:58] I want you to be rich

[00:58:00] I hope you hit it big, I hope your company goes public

[00:58:02] I hope you have a best-selling book or album

[00:58:04] but just in case you don't

[00:58:06] there's a little bit of effort

[00:58:08] a little bit of discipline

[00:58:10] when you're younger in your 20s

[00:58:12] or 30s

[00:58:14] that can make sure you have a plan B

[00:58:16] and have some financial security

[00:58:18] and that's what I did not do

[00:58:20] and I started doing it in my 40s

[00:58:22] when I started making real money

[00:58:24] I got very serious, my kid changed everything

[00:58:26] I'm like I am lowering my burn

[00:58:28] I am going to save a shit ton of money

[00:58:30] I'm going to diversify

[00:58:32] I'm going to find unique opportunities

[00:58:34] I'm going to save a ton, diversify

[00:58:36] and let time take over

[00:58:38] and then I got very lucky

[00:58:40] I started to save a lot of money

[00:58:42] and it compounded

[00:58:44] it went crazy

[00:58:46] and I would have saved myself

[00:58:48] a lot of stress

[00:58:50] if I'd started doing that

[00:58:52] just a little bit much earlier

[00:58:54] How did you deal with that fear

[00:58:56] in 2008

[00:58:58] your kid's born

[00:59:00] you don't have as much money as you'd like

[00:59:02] and by the way the capitalism

[00:59:04] is falling apart

[00:59:06] on the front pages of every newspaper

[00:59:08] you must have been terrified

[00:59:10] and how did you personally deal with that fear

[00:59:12] Well

[00:59:14] I'm used to a certain level of failure

[00:59:16] I just got to work

[00:59:18] I started working hard

[00:59:20] and trying to

[00:59:22] trying to find opportunities

[00:59:24] I started a company

[00:59:26] that ended up being very successful

[00:59:28] I started L2 which 7 years later

[00:59:30] was it 7 years?

[00:59:32] Yes, 7 years later we sold for 160 million

[00:59:34] that was a big hit

[00:59:36] I just got very focused

[00:59:38] and I also had an honor's condolence with my partner

[00:59:40] I'm not going to be a great dad

[00:59:42] I'll be here for you

[00:59:44] but I'm going to be working all the time

[00:59:46] My job is to co-kill the goddamn mastodon

[00:59:48] and bring it home

[00:59:50] I had a very traditional approach to it

[00:59:52] by the way my wife or my now wife

[00:59:54] was working at Goldman Sachs

[00:59:56] so I would go home for bat time

[00:59:58] but I was just working around the clock

[01:00:00] and I gave up a decent amount

[01:00:02] I didn't see my kids a lot when they were very young

[01:00:04] it cost me time with my infant children

[01:00:06] it put a strain on my relationship

[01:00:08] it was not great for my health

[01:00:10] and it was worth it

[01:00:12] because now I have a lot of balance

[01:00:14] and now I have a lot of time with my kids

[01:00:16] and what I tell people is you can have it all

[01:00:18] you just can't have it all at once

[01:00:20] and I just got very focused

[01:00:22] and very serious on career and economics

[01:00:24] So you didn't let the fear paralyze you?

[01:00:26] That's a huge point

[01:00:28] because what I see with a lot of people

[01:00:30] who are successful is they hit their first failure

[01:00:32] and they get stuck

[01:00:34] They can't quite recover

[01:00:36] they lose their mojo

[01:00:38] they start a business

[01:00:40] and it doesn't work

[01:00:42] and they're afraid to ask for more money

[01:00:44] or they stick with it too long

[01:00:46] and they fail slowly

[01:00:48] or they get kind of like a dog

[01:00:50] that's been hit by a car

[01:00:52] they're skittish, they're too skittish to start a new business

[01:00:54] or get back in the game

[01:00:56] or they have just the wrong amount of money

[01:00:58] what do I mean by that?

[01:01:00] They're not going to get it right away

[01:01:02] but they don't have enough money to retire

[01:01:04] and so they let perfect be the enemy of good

[01:01:06] If you're out of work

[01:01:08] or your business fails or something happens

[01:01:10] put a statute of limitations

[01:01:12] 3 months, 6 months, whatever it is

[01:01:14] the best opportunity that rolls along

[01:01:16] within 3 or 6 months, you're taking it

[01:01:18] because you got to get back in the game

[01:01:20] and you got to get back

[01:01:22] to the plate

[01:01:24] and I know so many successful people

[01:01:26] which are just grazed by a ball

[01:01:28] and they just get a slight

[01:01:30] the ball just comes too fast

[01:01:32] to their face or they strike out for the first time in a while

[01:01:34] and they're just literally paralyzed

[01:01:36] for years

[01:01:38] and you got it, you just got to get back up

[01:01:40] no one remembers your failures

[01:01:42] but you, no one cares

[01:01:44] always business failed and then they go back to thinking about themselves

[01:01:46] they don't care

[01:01:48] they're not thinking about you

[01:01:50] But you bring up an important thing

[01:01:52] about like having so much money

[01:01:54] but not quite enough

[01:01:56] and I know this is consistent in the book

[01:01:58] and this will be basically my final question

[01:02:00] but it's such a fascinating thing

[01:02:02] what is the number

[01:02:04] like how should people think about the number

[01:02:06] like cash

[01:02:08] in the bank

[01:02:10] that they need to have

[01:02:12] where they really don't have to worry

[01:02:14] now I know there's not one number

[01:02:16] if it's all

[01:02:18] what's the formula

[01:02:20] I can give you the math

[01:02:22] and then I can tell you

[01:02:24] how much money you need to behave

[01:02:26] the math is pretty simple

[01:02:28] and that is you look at, you want your passive income

[01:02:30] to be greater than your burn

[01:02:32] so calculate out

[01:02:34] how much money you need and it might be reducing

[01:02:36] you have kids sounds like leaving the house at some point

[01:02:38] you'll have social security and think okay to live in New York

[01:02:40] I need

[01:02:42] I'll just pull a number out of the year

[01:02:44] I need, you know, you live a nice life

[01:02:46] I need $600,000 a year

[01:02:48] I don't know what the number is

[01:02:50] assume

[01:02:52] you're going to get $600,000

[01:02:54] and then just do the math

[01:02:56] if it's 6% and you're making $600,000

[01:02:58] that means you need $10 million in the bank

[01:03:00] that's a lot of money

[01:03:02] and if you don't think you're going to get to $10 million

[01:03:04] by assuming a 6% or 8% return

[01:03:06] in the amount of money you're saving

[01:03:08] then you need to lower your burn

[01:03:10] so you just got a reverse engineer

[01:03:12] back from when do I hope to

[01:03:14] have some sort of

[01:03:16] when do I want to be wealthy

[01:03:18] do I want to be wealthy at $55,000

[01:03:20] assume the market's going to return 6%

[01:03:22] assume you'll get some additional

[01:03:24] sources of income in terms of social security

[01:03:26] look at your burn and then just do the math

[01:03:28] that's the formula

[01:03:30] now, distinctly

[01:03:32] so like if you need $5,000 after taxes

[01:03:34] you need roughly $10 million

[01:03:36] in cash in the bank

[01:03:38] let's say

[01:03:40] right but that's awfully intimidating

[01:03:42] for your listeners

[01:03:44] my father between his Royal Navy pension and social security

[01:03:46] makes $48,000 a year

[01:03:48] when I take my dad out for dinner we go to a Mexican food restaurant

[01:03:50] he orders a margarita

[01:03:52] he drinks half of it and asks for the rest to go

[01:03:54] that's his approach to life

[01:03:56] he's rich

[01:03:58] his passive income is greater than his burn

[01:04:00] he's rich

[01:04:02] and to get to $38,000 a year

[01:04:04] which is all he needs

[01:04:06] it wasn't that hard

[01:04:08] he could figure out I'm tracking between my pension and social security

[01:04:10] I'm going to be there so a lot of this

[01:04:12] is just an honest conversation

[01:04:14] around your burn

[01:04:16] how much you make

[01:04:18] it's about how much you spend

[01:04:20] specifically how much you save

[01:04:22] so just have an honest conversation

[01:04:24] I think I can get to this wealth

[01:04:26] you can do it the other way

[01:04:28] I think I will get to this wealth

[01:04:30] I'm saving this much money

[01:04:32] I can account on this return by the time I'm 50 or 60

[01:04:34] I'll have this much saved

[01:04:36] it'll spin off 4 or 6%

[01:04:38] plus social security I'll make this much

[01:04:40] how do I adjust my lifestyle

[01:04:42] to foot to this

[01:04:44] I'm going to be able to control my financial

[01:04:46] and mental comfort

[01:04:48] because you can think of how can I

[01:04:50] manage and take control of my financial future

[01:04:52] so I don't have that type of anxiety

[01:04:54] and then the things that can take you off track

[01:04:56] are obviously an illness

[01:04:58] but this is the difference between being wealthy

[01:05:00] and super wealthy

[01:05:02] the people who are really wealthy

[01:05:04] are the ones who bring

[01:05:06] character to their investment strategy

[01:05:08] what do I mean by that

[01:05:10] the most devastating, the way to snatch defeat

[01:05:12] are divorce

[01:05:14] personally and professionally

[01:05:16] I'm divorced, I lost 60% of my net worth overnight

[01:05:18] probably more than that because not only do you have to split everything

[01:05:20] but now you have two households to manage

[01:05:22] so your net worth goes down by 60%

[01:05:24] you know overnight

[01:05:26] maybe even 70%

[01:05:28] because you're a 4th seller

[01:05:30] it's never going to be a 4th seller

[01:05:32] it also takes you off track for a year or two years emotionally

[01:05:34] in addition if you look at a small business

[01:05:36] it's doing really well

[01:05:38] and ends up going out of business

[01:05:40] and the owners in the business get a divorce professionally

[01:05:42] they stop getting along

[01:05:44] they go after each other

[01:05:46] and the business gets torn apart

[01:05:48] so if you look at really rich people

[01:05:50] they usually

[01:05:52] there's a myth that rich people are lighting cigars

[01:05:54] with their $100 bills and their bad people

[01:05:56] the Elizabeth Warren every billionaire

[01:05:58] crawled over someone to get rich

[01:06:00] I have not found that to be the case

[01:06:02] I have found in general

[01:06:04] that really wealthy people are high character people

[01:06:06] they bring generosity

[01:06:08] to their relationships

[01:06:10] and people want them to win

[01:06:12] they collect allies along the way

[01:06:14] so what's the difference between being

[01:06:16] fine economically

[01:06:18] and being super wealthy

[01:06:20] it's character and it's bringing

[01:06:22] a certain amount of forgiveness

[01:06:24] and generosity to your personal

[01:06:26] and your professional relationships

[01:06:28] you want people to want you to win

[01:06:30] that's really great advice

[01:06:32] and I guess

[01:06:34] finally I want to ask

[01:06:36] what would you do if you wanted to make a steady

[01:06:38] 6% per year

[01:06:40] which is not as easy as people think

[01:06:42] well I mean steady 6

[01:06:44] you can probably now

[01:06:46] there's money market accounts

[01:06:48] that are like 5.2

[01:06:50] and you're going down 20%

[01:06:52] so you don't really feel safe

[01:06:54] you're going down 20%

[01:06:56] because you don't know how many years in a row

[01:06:58] we'll do that, I could do it 2-3 years in a row

[01:07:00] what would you do

[01:07:02] if you wanted to make a steady

[01:07:04] 5.2

[01:07:06] yeah that's true so let's say a little higher

[01:07:08] because inflation is running a little higher

[01:07:10] interest rates are higher

[01:07:12] so let's say you wanted to make a steady 8% a year

[01:07:14] I like SPY low cost index funds

[01:07:16] any one stock as you said James

[01:07:18] has a 50.1% chance of going up

[01:07:20] if you picked any 5 stocks in the S&P

[01:07:22] and held them for 10 years

[01:07:24] no one has ever lost money

[01:07:26] population growth and technology

[01:07:28] create an increase in productivity

[01:07:30] over the medium and the long term

[01:07:32] so the trajectory of the markets has been up into the ride

[01:07:34] just low cost

[01:07:36] index funds

[01:07:38] the number one question I get on email right now

[01:07:40] outside of advice for young men is

[01:07:42] should I buy NVIDIA stock now

[01:07:44] and when I tell people is I don't know

[01:07:46] but your approach is if you buy an index fund

[01:07:48] in the S&P a third of your dollar

[01:07:50] 33 cents on the dollar

[01:07:52] go to the Magnificent 7

[01:07:54] so if they continue to rip because it's index suggested

[01:07:56] you'll participate

[01:07:58] but if they are overvalued

[01:08:00] and you have 193 stocks

[01:08:02] have their day in the sun

[01:08:04] you have money there

[01:08:06] don't try and convince yourself

[01:08:08] or put the pressure on yourself to be a hero

[01:08:10] and find the needle

[01:08:12] buy the whole haystack

[01:08:14] time will go faster than you think

[01:08:16] and over the medium and long term

[01:08:18] the markets direction

[01:08:20] natural trajectory is up

[01:08:22] you don't need to be a hero

[01:08:24] buy the whole haystack

[01:08:26] and then forget about it

[01:08:28] you can pick stocks and do not

[01:08:30] day trade

[01:08:32] as a former day trader

[01:08:34] I definitely agree with that

[01:08:36] that was the most stressful period of my life

[01:08:38] and I did it for years

[01:08:40] Scott

[01:08:42] author of the Algebra of Wealth

[01:08:44] thanks once again

[01:08:46] for coming on the show

[01:08:48] I think you've been on the show for every single one of your books

[01:08:50] so I'm very happy about that

[01:08:52] you're always a great guest

[01:08:54] and so many interesting things

[01:08:56] thank you James thanks for being such a great supporter

[01:08:58] and I think of you as an icon of New York right now

[01:09:00] I think

[01:09:02] if we put things into a time capsule

[01:09:04] like if there's any way

[01:09:06] you could be one of those cryogenes

[01:09:08] I feel like you kind of marked the age for me in New York

[01:09:10] I've known you for 20 years now

[01:09:12] or 15 years

[01:09:14] and the comedy clubs, the investing

[01:09:16] the HBO

[01:09:18] I think it was sort of this iconic

[01:09:20] figure in New York

[01:09:22] I definitely turned over every rock in New York

[01:09:24] during the past 20 years

[01:09:26] I mean actually right now I don't live in New York

[01:09:28] because I am worried about

[01:09:30] New York's future

[01:09:32] as I've written about

[01:09:34] but New York really has defined

[01:09:36] a lot of my life

[01:09:38] so

[01:09:40] stop to resist this feudal

[01:09:42] you belong in New York

[01:09:44] maybe maybe

[01:09:46] once again Scott thanks so much

[01:09:48] thank you James

[01:09:54] thanks for watching

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