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LearningTranscript
00:00It's not bad to go after money.
00:02I think that we should actually obsess over money.
00:04Money is a weapon.
00:06And either you're armed or somebody else is.
00:09I think the best way to take control
00:11is to follow in the footsteps of where the data leads
00:13seen as the path from the really, really wealthy.
00:16What do these guys know that we don't?
00:19We are seeing the really rich get richer
00:21and the rest get left behind.
00:23It's time to play a little bit of a different game.
00:25Today, as opposed to being a dancing bear
00:27and making this a really entertaining speech,
00:30I thought we'd just make some money.
00:31Is that sound okay?
00:32Let's talk about how the rich actually make their money.
00:35Because the truth of the matter is
00:37they are not getting rich how you think.
00:40And I wish people had told me this before.
00:42That in fact, the way they think is so different than us.
00:46That most people, one, have been taught
00:48that being rich is bad.
00:51I was actually in a room just like this
00:52with a bunch of female executives.
00:55These are pretty high-powered female executives
00:57back in my finance days.
00:58Fascinating.
01:00There's this woman up front.
01:01She was kind of touchy-feely.
01:02Not my style, but I'm participating.
01:05And the woman says, okay, you can imagine this right now.
01:08She goes, I want you, I want everybody in the room
01:11to close your eyes.
01:12So we all close our eyes.
01:13And she says, I want you to picture
01:15how you feel about money.
01:18Okay, so I'm like, I don't know how to picture that,
01:20but yeah, I'm picturing it.
01:21And then she goes, now I want your body
01:22to make a physical representation
01:23of your feelings when money comes up into the equation.
01:29So if you can imagine, you know, I'm in finance.
01:31I've been around money a long time.
01:32My eyes are closed.
01:33I don't see all these other broads.
01:35So what do I do?
01:35I'm like, yeah, give it to me.
01:37Money right here.
01:38You know, I'm just like, this is what happens, right?
01:39This is what everybody's doing.
01:40And then as I turned around, it was like this.
01:44I mean, you would have thought an attack happened.
01:47Nobody's like this.
01:49And I realized in that moment that that is the reason
01:51why most people don't make any money.
01:53Because it's really hard to get a thing that you hate.
01:55And so they were actually wrong.
01:58It's not bad to go after money.
01:59And in fact, I think you should relentlessly chase
02:02your first million to the point where everybody else
02:05is uncomfortable at your level.
02:07And the reason why is because it gets a lot easier
02:11after you've made your first zeros.
02:13After you've made a first couple of zeros,
02:15then you actually can afford life.
02:18I don't need money to show status.
02:20I truly believe that money is a weapon.
02:23And either you're armed or somebody else is.
02:26And so the idea today is that I think
02:29that we should actually obsess over money
02:30in some way, shape, or form.
02:32I think we should obsess on money because
02:34it is the only thing that allows you to push back.
02:36If you have money and you don't like something
02:40that's happening in your state, what do you do?
02:42I don't know, move.
02:43I don't know, run for office.
02:45I don't know, donate to a local politician.
02:48If you don't have any money, can you take your kid
02:50out of school?
02:51Can you push back on local regulations?
02:53Can you quit your job?
02:55No.
02:56And so what do they want?
02:57They want us to be renters while they own everything.
03:01Without money, you can't actually have your own
03:05independence, and you definitely cannot have
03:07ideological independence, which means the ability
03:10for you to think for yourself.
03:11What is the world missing?
03:13We're missing this ability to question things.
03:15I think when we think about money,
03:17it's about actually getting freedom.
03:19Has anybody seen this?
03:20The best thing that happens here is New York Times
03:22goes, hey, listen, you have said a bunch of stuff
03:26and advertisers have come off of your platform,
03:28such as the CEO of Disney.
03:29And he said, what do you think about that?
03:32And what do you say to them?
03:34If somebody's going to try to blackmail me with advertising,
03:36blackmail me with money, go yourself.
03:40Go yourself.
03:42And you know why I love this?
03:44Is because this guy is an example of,
03:47whether you like him or not is kind of irrelevant,
03:50he's an example of when you have personal sovereignty
03:53and a bank account so big, you get to do the things
03:57that you want to do in life.
03:59And I think more of us should strive for some example
04:01of that as opposed to having to beg for crumbs.
04:03So the second lie that we've been taught to win
04:05is a really odd lie.
04:08And I want to get into some of the numbers really quickly.
04:10It's that how many of you guys were told by your parents,
04:12you got to go to a really good school.
04:14You got to go to a good university, right?
04:16And then maybe you got to get a really good job, right?
04:20And that's what I did too.
04:21I went to a good university, that's Georgetown.
04:23I went to Goldman Sachs and State Street and First Trust
04:28and all these companies with guys who have
04:30a side swoop in their hair like that.
04:33We're not friends anymore.
04:35I can't imagine why.
04:36And I really think that's the wrong game to play
04:39in America today.
04:40That in fact, the university system is another reason
04:43that we are really broken.
04:44And let me show you why numerically.
04:47Look at this number right here.
04:48Student loan debt and the amount that it is compared to,
04:52well, the fact that we all have to have a car,
04:55revolving consumer credit, meaning even credit cards,
04:57living day to day.
04:58So you're telling me one stint, four years,
05:03is worth almost double me having consumer credit debt overall?
05:07And then the government doesn't say,
05:10oh, hey, let me take from your parents' taxes,
05:15put it towards the university that you're going to go to.
05:17You still have to pay me.
05:19By the way, it's one of the only types of loans
05:21that you can't kick off with bankruptcy.
05:24And so instead of doing anything about that,
05:27what are we going to do instead of the government?
05:28We're going to give them $174.9 billion
05:31in just one year to their investment funds.
05:35These places aren't universities.
05:37What are they?
05:38They're hedge funds.
05:39They got swoopy-haired guys all over them.
05:42That's the only thing they do there.
05:43They don't actually teach anymore.
05:44They take our tax dollars, they put it into huge funds,
05:48and then they enslave our children.
05:50And if you don't think that's true, well, look at the numbers.
05:52Look at the endowments in just the 27 largest funds.
05:56Then the last lie I think we were told, this one kills me.
05:59I made my millions by brewing my coffee at home, said nobody ever.
06:02You can't save your way to riches.
06:04Now, you need to have some sort of savings,
06:07and that is really, really important that you don't outspend yourself.
06:10But here's the next problem with that.
06:12Check this bad boy out.
06:13U.S. Treasury, so what do you do when you save?
06:16Why would the government want you to put so much into dollars,
06:19in your bank account, to save?
06:21Because you're giving it to the government to go spend it at universities
06:24to basically enslave our youth and all of us
06:26and tell us what to do all day.
06:28And then there's something a little crazy that's going on lately,
06:31which is, well, it turns out the safest asset in the world,
06:34a.k.a. bonds, is one of the riskier assets in some ways.
06:38Why?
06:39Because on an inflation-adjusted basis,
06:41we're not actually beating inflation with the interest rate of the treasuries.
06:45And so this is just sort of the start of the things that we were taught
06:49all throughout our time learning money
06:52and learning how to make money
06:54that maybe we should question.
06:57Maybe we're in a cycle,
06:58or maybe this cycle is kind of continuous.
07:00There's five clear signs that we're accelerating.
07:03Look at the debt.
07:04We've got $34.5 trillion.
07:07But let's put this in perspective here.
07:08Look at this number down at the bottom.
07:10$102,000 for every American today.
07:14Today, right now.
07:16The average American in the U.S. makes $57,000 a year.
07:19But we owe $100,000 in debt.
07:2220 years ago, it was $20,000.
07:24And if you just thought,
07:27Cody, I thought we were going to make some money.
07:29Why are you over here stomping on my heart and dreams?
07:31Let's look at actually what's happening that's worse here.
07:34Now, this is kind of a confusing graph,
07:36but basically what this is showing you
07:38is that even though here,
07:41down at this bottom level,
07:43we had interest rates at 2021 and 2020, 2022
07:47of incredibly low levels.
07:49We all should have been buying real estate
07:50with $0 interest rate loans.
07:51But last year, what did we do instead?
07:54We didn't do 50-year bonds
07:57like the savant of the financial system, Mexico.
08:01We instead continued to lend out at normal rates,
08:04which means something really bad for our society.
08:07It's that interest expenses
08:09are now the biggest payment our government spends.
08:1376 cents on average of every dollar
08:17that we put towards our government
08:19is now going towards interest expense.
08:21If you were to go back and look at a dollar
08:24from, let's call it, I don't know, the 70s,
08:28your dollar would be worth 25% less.
08:31If you were to go back and look at it since 1913,
08:35your dollar today is all the way down here at the bottom.
08:38So those savings that you have,
08:40if you don't have them in cash flowing assets,
08:42what's happening?
08:44The government is eating away at your money
08:46every single day.
08:48And the real problem with this is
08:50both parties love spending money.
08:53They see your tax dollars come in
08:55and they see an opportunity to spend a little here
08:58and spend a little there
08:59so that they can get re-elected
09:01from the state that seems at most in the middle right now.
09:04And we have to push back against this.
09:07Because the problem is overall,
09:10you can't keep spending more than you earn.
09:12Total debt of the U.S. government,
09:14$34.3 trillion.
09:17We have this huge bubble hanging over our head.
09:22And one of the best ways to push back against it
09:24is exactly what you are doing in this room here today.
09:27It is making sure that sadly,
09:31you're one of the less than 30% of the population
09:34on average that owns assets.
09:36Because while everybody else's dollars get deflated away
09:40or inflated away, depending on your situation,
09:44you guys have assets that grow in value.
09:46The last part that kind of freaks me out,
09:48but you guys know when you go to the bank
09:50to get a loan for whatever your new mortgage
09:51is going to be for your property,
09:53they kind of look and they go,
09:54this guy looks sketchy.
09:55What do you guys think?
09:55Kind of sketchy?
09:57The glasses, I don't know,
09:58he's got a button now,
09:58he's shaking his head no.
09:59That's how you know sketchy.
10:01And he goes, I'm the U.S. government.
10:04I can keep, I'm rock solid, baby.
10:07Look at these new balances.
10:08Just kidding, he doesn't have new balances on.
10:10But he, and yet what's happening
10:13with our U.S. government debt?
10:15It's actually getting downgraded too.
10:17From my days on Wall Street during the financial crisis
10:20to what happened during COVID
10:22to what's happening today,
10:24we are continuing to see those who own assets
10:27and those who have money get more and more and more
10:31we are seeing the really rich get richer
10:33and the rest get left behind.
10:35And the way we push back on that
10:36is we own assets that they cannot inflate away.
10:40I think there is one good part about this today.
10:43And the good part is that these people on Capitol Hill,
10:47they forget that we're not dumb
10:49because this is going to impact ordinary people.
10:52And eventually we stop seeing red or blue
10:55and we start wanting some green
10:57because that makes our life a little bit easier.
10:59And so one of the hopes I have for you
11:01after we go through this next section
11:03to talk about how to make more money
11:05and better ways to do it
11:06is that you spread the gospel a little bit.
11:08So it's time to play a little bit of a different game.
11:12And I want to run through how I think about
11:14if a business is a good business to go into
11:16or if it's not.
11:17I'm going to use six examples.
11:19I'm going to use a six-part strategy that works for me.
11:23And then you can apply it to any business that you want to.
11:25So this is the game the rich play today.
11:27And the best part about this game is
11:30that it happens across industry.
11:32Everybody know who these guys are?
11:34We got my buddy, Mr. F*** You Himself.
11:35You guys know Elon Musk.
11:38Everybody knows Jeff Bezos for sure.
11:40What about this guy in the middle?
11:41You guys know who this is?
11:43I hear him a little bit, a little bit.
11:47Designer.
11:49LVMH.
11:50Everybody's struggling.
11:50All Americans struggling to pronounce Bernard.
11:53Are not.
11:54Yeah, I feel you.
11:55Richest man in the world.
11:56It's right there.
11:57And we, most people in this room,
11:59we don't even know what he looks like.
12:01Why?
12:03Well, one, LVMH, Kristen Dior,
12:06the biggest single conglomerate holder
12:09of fashion and luxury brands in the world.
12:12Does he look like a fashion mogul?
12:15You think he went out there and he's like,
12:16ooh, this one.
12:17I'm going to buy that.
12:18This is this season.
12:19Absolutely not.
12:20This mother f***er bought those businesses
12:22for pennies on the dollar.
12:23And he did it with the exact same strategy
12:25we talk about, ad nauseam.
12:27Because even though these guys on screen
12:29are geniuses and built big companies,
12:32if you pull back the hood,
12:34underneath the build was a big portion of buy.
12:37Because the rich realized one thing,
12:40which is that money is actually all around
12:42for the few who know how to use it
12:44and if you can turn it into cash flow.
12:46And that's what we're going to talk about.
12:47Now, what's fascinating is that historically,
12:52how did these guys make all their money?
12:54How did Elon Musk become one of the richest men
12:57in the world that's sometimes the richest man
12:58in the world?
12:59Public stocks, right?
13:01So back in the day, when these guys were going public,
13:03which we don't even have on this chart,
13:05that's how you made your money.
13:06You built a company, you burned a lot of people's money,
13:09you made it kind of profitable
13:11or had a huge market share, then you went public.
13:13Us retail investors got in,
13:15you got to take a big payday on it
13:17or you got to take what's called a securitized loan,
13:19which is a loan on your stocks, right?
13:22But then something weird started happening.
13:24Then we started to see year after year after year
13:27that IPOs were not as big anymore or as common,
13:32that also the number of IPOs was down.
13:35The trend's pretty clear,
13:36but what's actually happened here?
13:37You used to, when you were younger,
13:39like let's say my parents' age,
13:41when you got in on an IPO,
13:42you got in early enough on the IPO
13:45to see a lot of their realized returns.
13:49These days, IPOs are waiting longer than ever
13:52and often have a dip after they go public.
13:56The interesting part is the difference
13:58between public and private,
13:59so stick with me for a second.
14:01This is a company called Mr. Car Wash.
14:03Mr. Car Wash is the biggest conglomerate
14:06of car washes in the country.
14:08What's fascinating though is, look at this,
14:09IPO price, 15 bucks, all-time high 24,
14:14current price under seven.
14:16It's like 60% of all value over the last three years
14:19since it went public.
14:20What's fascinating about this though is,
14:23that if you actually went to look
14:26at the difference between the two,
14:28Mr. Car Wash was traded four times
14:31by private equity firms before it went public.
14:34Every single private equity firm
14:36before it went public, made money.
14:38Then the company went public,
14:40we came in as its normal investors,
14:42we meaning all of us, and what happened?
14:44We lost 60% of the value.
14:47But when you've stripped out hundreds
14:49and hundreds of millions of dollars in value
14:51before it gets to the retail investors,
14:53it's really hard to recoup that.
14:56So what you're starting to see
14:58is if you were sneaky and behind the scenes
15:00and didn't trust anybody like I don't,
15:02you would go and you would look at
15:04where those university endowments
15:05are investing these days.
15:07Remember those guys?
15:08You guys think they have more IPOs
15:10and public stocks on their balance sheet now
15:12or more private companies?
15:15Do you think the trend is moving
15:16more and more like this
15:18or the other way around?
15:20The fascinating part is our government
15:21actually doesn't want normal people
15:24doing private investments.
15:25Why?
15:26Because they think you're dumb.
15:28So you're not allowed to invest
15:29unless you're an accredited investor.
15:31So increasingly, we have another way
15:33where the big guys get to earn
15:35and we don't.
15:37The other thing about private investments
15:39is control.
15:41Less attention.
15:42Less short-term trades.
15:44But not only that.
15:45The returns are different.
15:47So in private markets,
15:49make about 11% per year.
15:51Now, obviously, up and down markets,
15:53no guarantee of results.
15:54These are totally performative
15:55because an average of everything
15:57is not that useful.
15:58But versus public market returns.
16:00So over time,
16:02what you're basically seeing,
16:04you're seeing a huge delta
16:05between what the average person gets
16:08and what the institutional investor gets.
16:12There's very few markets
16:13where you can play a game
16:14the same as institutional investors.
16:17You guys, I have a friend.
16:18He runs, he's a partner
16:19at a company called Sequoia,
16:20one of the biggest venture capital firms
16:22out there, right?
16:23I remember I called him up one day
16:24because we were doing some investing
16:26in something.
16:27I asked his opinion.
16:27I said, what's the hardest part
16:28for you right now?
16:29Here's my hard part.
16:30And I go, is it the raising the capital?
16:32And he said, no, of course not.
16:33Kind of like that to me.
16:34And I thought, I was like,
16:35oh yeah, of course not.
16:36Me neither.
16:36I don't know what you're talking about.
16:38And I said, why is that not a problem for you?
16:42And he said, money is such a commodity
16:45that we only take dollars from non-profits.
16:49If you want to go invest at Sequoia
16:51and you're a for-profit business,
16:53they go, f*** off.
16:54No thanks.
16:55Don't want you.
16:57Because they've realized
16:58that the hardest part is getting the deals.
17:01The hardest part is not funding them.
17:03And yet all of us were told the opposite.
17:05I can't do a deal
17:06because I don't have enough money.
17:07If I only had more money,
17:09I could do this.
17:09And yet that tends to not be the case.
17:12And so you're increasingly seeing
17:13some of, let's say,
17:15the biggest, sexiest industries out there.
17:17Everybody likes AI, right?
17:18But if you look at the interest
17:20in private investment in the AI space,
17:22since it started to take off,
17:24you'll realize that the AI hype is here.
17:26$292 billion in private investments.
17:30How many of those companies have gone public?
17:34So think about this for a second.
17:36The things that make the most money,
17:38we don't get unless we start them
17:40when they're private.
17:41So we have to ask ourselves,
17:42what do these guys know that we don't?
17:45They know that they want to get their hand
17:47on ownership of the assets
17:49as opposed to wait
17:51for a company to go public
17:53after all of the equity
17:54has been stripped away from the company
17:55and all of the value
17:56has stripped away from the company.
17:58So I thought I'd go really quickly
18:00through my process for looking at
18:02do I like a company in a sector,
18:04do I not?
18:04Most businesses fail.
18:06We all know this, right?
18:06How many businesses fail
18:08in the first year of business?
18:1190%.
18:12Again, average number.
18:13Most businesses do not make it past a year.
18:15How many businesses ever hit
18:17$1 million in sales?
18:2010% of businesses.
18:22How many businesses ever hit
18:24$10 million in sales?
18:260.4%.
18:28So if you have an eight-figure business,
18:30take a little bow,
18:32you're incredibly rare.
18:33So the question then becomes,
18:35if most people fail, why?
18:38I think a lot of people fail
18:39because they pick industries
18:41that are missing six key components.
18:44So we're going to use these examples
18:46as a way to walk through them.
18:48I like something called the profit triad.
18:50It's what I've used to acquire a portfolio
18:53worth now hundreds of millions of dollars
18:54with tens of companies inside of them.
18:57And here's how it works.
18:58You basically need three things.
19:00You need a business that has
19:01a high percentage likelihood of success
19:04based on prior industry, history.
19:06You need one that has a high profit margin.
19:09And then you need one that is less risky.
19:12I want to try to spend as little money up front
19:14to have the highest ROI as I can in the future.
19:17So the reason why most people fail
19:19is because they're playing the wrong game.
19:21They're trying to get jacked and look cool
19:23and yet they're playing pickleball, you know?
19:27And let's break this down.
19:29We are going to look at how to buy businesses
19:32like some of the richest guys in the world do,
19:34Buffett and Bernard Alnant.
19:35There are six things that I think you need
19:37in order to have a high likelihood for success
19:40in a very difficult game.
19:42You need leverage, you need velocity of capital,
19:44Lindy effect, simplicity, cash on cash return,
19:47and reoccurring revenue.
19:48We're going to break those down.
19:49Leverage means as often as possible
19:51you can use other people's money, not yours.
19:54Velocity of capital means how quickly
19:55do you get the money back after you have put it in
19:58and you want it in your pocket.
20:00The Lindy effect is what is the historical likelihood
20:04of a business to stay around based on how long
20:08it's been in the past.
20:09So has the business succeeded for the last 20 years?
20:11It's actually more likely to succeed for the next 20.
20:14Simplicity means is it so simple you can explain it
20:18to grandma?
20:19If it is, then it's an interesting business.
20:22And last is if you spend money,
20:26how quickly can you get that money back in your pocket
20:28in a way that you can actually re-put it back
20:31into the business, not just for you to take home in salary?
20:36Then we've got recurring revenue,
20:37which basically means do I have to keep working
20:40for every single dollar?
20:41Or if I get the dollar once,
20:43can I have that dollar continue to come to me
20:45in some form or fashion?
20:46And we can talk about all the different ways that does it.
20:48So the way that I like to explain this
20:50is I like to go through six businesses,
20:52we're going to play a game,
20:53and you're going to go yes or no
20:56if you think it follows my six, cool?
20:58And we'll see if by the end of this,
20:59every time you look at a business,
21:01you're going to immediately go,
21:02does it have the six?
21:03Yes, no, yes, no, yes, no, yes, no.
21:05And if it does,
21:07then I know that I'm playing a game
21:08that might be easier.
21:09So I'm going to use some that are an easy scapegoat.
21:11Amazon FBA.
21:13Can you use leverage?
21:14When you started your Amazon FBA store,
21:16did somebody say,
21:17this sounds like such a good idea,
21:18let me give you a million bucks?
21:20No.
21:20What about you, fine star in the back?
21:23Somebody give you money
21:23the second that you wanted to open your store?
21:25No.
21:25Okay, so we know it is a no, right?
21:29Is it profitable day one?
21:31No.
21:33Why?
21:34Cost of goods, she said.
21:35Cost of goods, yeah.
21:36Because the funny part about Amazon FBA
21:38is you've got to pay for the stuff
21:39before you can ever see if somebody will buy it from you.
21:41So it's not profitable day one.
21:43Is it a long-term game?
21:44No.
21:45Why is it not a long-term game?
21:46Why do you think it might not be?
21:47Your supplier can just X you at any time
21:49if they want to sell it themselves?
21:51She's like, so many reasons.
21:54She sounds smart.
21:55You're exactly right.
21:56Why?
21:57Why is it not a long-term game?
21:58I usually like to use one thing,
22:00which is what sort of multiple do I get
22:02if I sell this business?
22:05Clean.
22:06I want the highest multiple I can get for my business.
22:09But she gave you a bunch of insider stats information,
22:12which was, if you own a car wash,
22:14is Cody competing with the Jeff Bezoses of the world
22:16for my car wash located in Lubbock, Texas?
22:19No.
22:20I could probably handle those guys.
22:22If you're playing with FBA,
22:23you've got a huge group of people to compete against.
22:26Guess who else you have to compete against?
22:29Motherf***ing Jeff Bezos,
22:30because that guy likes to white label products
22:31and sell against you.
22:33Not a long-term game.
22:34Is it simple?
22:35What do you think?
22:36They're like, we hate all businesses.
22:38I actually say yes.
22:40And here's why I say yes.
22:41This is a simple business
22:43because you don't have to create the product, right?
22:46Somebody else does.
22:47There's a ton of data out there
22:49to tell you if the product could potentially work or not.
22:52You don't actually have to take inventory of the product.
22:54You don't have to have a warehouse for the product yourself.
22:56You can do that all third party,
22:57so actually simple business.
22:58Can I replace your salary?
22:59Yes, she looks rich.
23:01It can definitely replace your salary.
23:02Lots of people make millions of dollars with Amazon FBA.
23:06Now, can you build once and sell many times?
23:10What do you guys think?
23:13If it's consumables.
23:15So the answer to this one is,
23:17you can't sell it many times.
23:18But you can do exactly what she said,
23:22which is you can have subscriptions
23:23and you can have reoccurring revenue,
23:25but you can't have a SaaS product that you create at once
23:28and you have no additional value,
23:30no additional spend on top of it
23:32for every client that you get.
23:34All right, the next one that I want to go through.
23:37Affiliate model.
23:37Anybody in here run an affiliate business?
23:40Everybody's like, absolutely not.
23:42Anybody run one?
23:42Okay, if you're brave, you can shout it out later.
23:45Let's run through this process.
23:47Affiliate, can you use leverage?
23:49The answer is no.
23:50Why?
23:51Do you guys know what an affiliate business is?
23:53Okay, so an affiliate business is basically
23:56when you go out in that room outside these doors,
23:59you see a bunch of vendors, right?
24:01Do you think Rob lets those vendors there
24:03because he's a nice guy, kind of?
24:06He probably takes a cut.
24:07I don't know, but I'm guessing, Rob.
24:08Every single one of those vendors outside is an affiliate.
24:11Rob doesn't have to create the product.
24:14He finds best-in-class people
24:15who are already doing this separate thing,
24:17and then he might get a cut one way or another
24:19if that thing works for you.
24:20The problem is they're definitely not going to give Rob money
24:24to start his business, right?
24:25So no, no leverage.
24:27Could it be profitable on day one?
24:29What do you guys think?
24:31You say yes.
24:33I say no.
24:34Let me tell you why.
24:35Because with an affiliate model,
24:38there's a game called volume.
24:39So unless you are all yacht buyers
24:43and Rob somehow is representing yachts,
24:46what's your average affiliate commission?
24:5120 to 30%.
24:53Okay.
24:5420 to 30%.
24:55So imagine he's selling something that's $50.
24:58How many of those are you going to have to sell?
25:01You're going to have to have a big volume game,
25:04which I say is why it's not profitable on day one.
25:06The other reason is if you're going to do an affiliate game,
25:08you've got to have some foundation to set on top of it.
25:10Now, is it a long-term game in affiliates?
25:13What do we think?
25:16You say yes.
25:19A couple reasons why.
25:21This is really interesting.
25:22Actually, we have this later on in the slide deck.
25:25I'll give you this.
25:25It's an affiliate calculator,
25:27so you can figure out how much money you might make
25:28depending on X and Y and Z.
25:30What you can basically see in the affiliate calculator
25:32is what the average affiliate makes.
25:34Most websites get about somewhere between
25:37one and a hundred visitors per day
25:38that do affiliate sales.
25:40That means your yearly income,
25:42the average affiliate marketer makes $27,000 a year,
25:45not a ton,
25:47and the average yearly income off of a website is this.
25:50Now, why might that mean that this is not a long-term game?
25:53The reason why is because,
25:55have you guys played around on Google yet?
25:57Have you guys been using chat GPT maybe,
26:00or perplexity, or other sites,
26:02in order to get your answers?
26:04So, essentially,
26:05anybody who has built an online affiliate-based website business,
26:10what are they going to have happen?
26:12They're going to have the same thing
26:13that happened in New York Times,
26:14which is their entire database scraped,
26:16pulled up to perplexity,
26:18and zero affiliate commissions given,
26:20which is happening all over the industry.
26:22Now, is it simple?
26:24Yeah.
26:25You're selling somebody else's product.
26:27It's linked.
26:27It's a pretty simple business.
26:29You can connect it straight to your bank account.
26:30Could it replace your salary?
26:32Hard.
26:33We just saw $1,800,
26:34$27,000 a year on average.
26:38Difficult to do.
26:39Can you build once and sell many?
26:41Yes, you definitely can,
26:43because Rob has zero fulfillment.
26:45So, what do we think?
26:46We've basically seen two models here.
26:49And what happens, I think,
26:50with a lot of people on the internet
26:51is we see the 1%.
26:53How many of you guys have seen
26:54those 24-year-olds on the internet
26:56in front of their Bentley,
26:57like with a six-pack ab,
26:58somehow selling you drop shipping?
27:00Anybody else seen that?
27:02Yeah, they're like,
27:03I made all my money by selling you courses.
27:06And the problem is, I think,
27:08if we know how to look at the six levers,
27:10we can really quickly tell
27:11if a business makes sense for us or not.
27:13So, we're going to rapid fire through one more.
27:16I'm going to skip agencies here.
27:19And I'm going to go through
27:20one that's near and dear to your heart.
27:22We're going to go through business buying,
27:23and then we're going to go through real estate.
27:25I like Airbnb in a way
27:27that I don't like real estate,
27:29and let me tell you why.
27:30So, when it comes to buying a business,
27:32what do I want?
27:33I want to be able to use leverage.
27:35I want to be able to make money quickly.
27:37I want to be able to have a high chance of winning.
27:39I want it to be simple and easy to understand.
27:41I want to be able to return that money
27:43back to my cash and pure profit,
27:45not just getting revenue.
27:47And then I want to be able to do it continuously.
27:50So, the business that I determined
27:52to hit all six of these
27:53is one that you guys are in in a varying way,
27:55which is buying small businesses,
27:58which could be Airbnb, the same thing.
28:00Let's run through why I think Bernard Alnott,
28:03why I think Jeff Bezos,
28:05why even Elon Musk buys businesses.
28:08Because can you use leverage?
28:10Well, you know, when you go to buy real estate,
28:12you can use a mortgage, right?
28:14Now, what's the problem
28:15with buying real estate with a mortgage?
28:18Interest rate.
28:19Interest rate?
28:20Okay, that could be one.
28:21Secure.
28:22Down payment.
28:22Secured.
28:23Down payment.
28:26Also, it's dependent on your earnings, right?
28:29Unless you go out and raise third-party capital,
28:31the bank will not give you more
28:33than you earn at a determined ratio, right?
28:36They won't do it.
28:38Now, when you go and buy a business,
28:39what happens with leverage?
28:42They look at the business.
28:43They look at the business.
28:45You don't get to buy a $5 million house
28:47and you go, this thing's fucking,
28:49it's valuable, give me more money.
28:50The bank goes, what?
28:52That's not how that works.
28:54Except when you buy a small business,
28:56the bank looks at the asset and they say,
28:58oh, actually, this asset produces $5 million.
29:01We will give you a loan that is representative of the asset.
29:05Nice.
29:06Best leverage out there.
29:07The second, profitable day one.
29:09When you buy a business,
29:11if you buy a profitable business,
29:12you have a business that is already cash flowing.
29:15So day one, you should be able to start
29:19returning dollars to your bank account.
29:21Long-term game.
29:23The longest-term game in town.
29:25I'm a big believer in real estate
29:26is there for wealth accumulation and taxes.
29:30And I believe buying small businesses and business
29:33is there for cash flow.
29:34You guys know this better than I do.
29:36What's the average income on a single-family home,
29:38not Airbnb, but rental?
29:40A hundred bucks a door.
29:42A hundred bucks a door.
29:43God, that's worse than I thought.
29:44I thought it was $164, but you know better than I do.
29:48So let's think about this for a second.
29:50What's the average cost of a single-family home in the U.S.?
29:52$270,000 a year.
29:57So you get the right to buy a house that's $270,000 a year
30:01and make, on average, $164 a month.
30:04You're rich.
30:05That's why people in real estate always go,
30:07I have 10,000 doors.
30:09I'm like, yeah, you make 50 bucks.
30:11Awesome.
30:12And you gotta talk to all those mother f***ing tenants
30:14and their pipes are broken
30:15and they call you all, great business.
30:18So that's why I think this is a long-term game.
30:20Now, the counter-argument to real estate could be
30:23how many times do you have a house
30:24that you buy for $400,000
30:26and then one day the house is like,
30:28well, it's only worth 50 bucks now.
30:30Doesn't happen that often.
30:32Whereas a business can go to zero.
30:33So you gotta be honest about both sides.
30:35That's why I think the game is played really well together.
30:37You have something that has more volatility and cash flow.
30:40You have something that has taxes
30:42and preservation and accumulation of wealth.
30:46Now, is it simple?
30:49Depends.
30:50If you're gonna go out
30:50and you're gonna compete with Jeff Bezos
30:52and some of these big boys,
30:53I don't buy SaaS companies on average for a reason.
30:56Complicated business,
30:57really hard to make a lot of capital on.
31:00But do you guys think that you can understand
31:01a laundromat in which somebody comes in,
31:03puts in a quarter,
31:05gets out some clean clothes,
31:06puts it in a dryer,
31:08gives me another quarter?
31:09Pretty straightforward business.
31:11And yet those sexy,
31:12sexy businesses all around us
31:14are the ones that everybody thinks make no money.
31:16Can it replace your salary?
31:17Obviously.
31:18The biggest companies in the world
31:19all have the ability to replace a salary.
31:22And it's just like a layering strategy.
31:24Now, can you build once and sell many?
31:26Depending on the business,
31:27yes you can,
31:28no you can't,
31:28can't.
31:29In some ways,
31:29I think real estate can be better
31:31for building once and selling many at scale.
31:33So next time you go
31:34and you look at an investment,
31:35I want you to ask yourself these questions.
31:38If you're not going to have leverage,
31:40if it's not going to have been there for a long time,
31:42if you don't have the ability
31:43to have recurring revenue,
31:44if you can't get your capital back quickly,
31:46if somebody's selling you on a hot new AI app,
31:49if they want you to fund their hopes and dreams,
31:51I want you to say opt out.
31:53I have a belief
31:54that you should not invest in angel investments
31:56until you've made
31:57at least your first million dollars liquid.
31:59Because the best way
32:01to make a million dollars
32:02in investing in angel investments
32:04is what?
32:06Just start with three.
32:07And I don't think anybody needs to do that.
32:10Now, the question most people come to me lastly,
32:12and this is where we're closed,
32:13is what business you should buy.
32:15And so I thought I'd give you a little present
32:17because Rob's my homie.
32:18Does that sound good?
32:18You guys want a little business buying present?
32:21All right.
32:22I don't actually think
32:23that you should spend your time
32:25looking for the perfect business to buy.
32:26Everybody always asks me the question,
32:27Cody, what are the best business sectors to buy?
32:29What type of business is best?
32:31And that's actually the wrong way to do it.
32:33I want you to think about two things.
32:34I want you to think about
32:35your perfect fit business,
32:36which is a business
32:37that's so perfectly tailored for you,
32:39it's going to be hard to lose.
32:41And then I want you to pair that
32:42with 130 of the most boring basic sectors
32:45that cash flow.
32:46Somewhere in the intersection of those two
32:48is a business just for you.
32:49Here's the last thing I want to say.
32:51We used to be a nation of owners.
32:53We literally came to this country in particular
32:57because we wanted ownership
32:58and we were not allowed to have it
33:00in another country.
33:01That is the reason.
33:02We wanted ownership of our religion.
33:04We wanted ownership of our land.
33:06We wanted ownership of our ability to earn.
33:08We wanted ownership and less taxes.
33:11That one got away from us somehow.
33:13I'm not sure we know our history too well anymore.
33:15And now we've become a nation of serfs.
33:18We've become a nation
33:19where only 3% of us own our businesses,
33:21only 30% of us own our houses,
33:23where layoffs happen massively,
33:25where inflation of our actual dollars we've earned
33:28is happening all around us.
33:31It's a huge problem
33:33that I think you guys are the answer to solving.
33:36At the top of our contrarian creed,
33:38we have one line.
33:39I have 13 lessons in my contrarian thinking creed
33:42because I don't believe in luck.
33:43And the first one is this,
33:45that those who say it can't be done
33:46should get out of the way of those of us doing it.
33:48And I know you guys have had a moment like I've had.
33:51Maybe you've had one here this weekend
33:53where you're like,
33:54even the baddest motherfucker that you've ever met
33:57has a sleepless night,
33:59has lost money,
34:00doesn't believe that they can actually achieve
34:02the things that they want to achieve,
34:04doesn't feel good enough,
34:05doesn't feel worthwhile,
34:07and probably has had a dark night,
34:09like my father talks about,
34:11where they kind of feel like nothing will work,
34:15where they're concerned that
34:16what they've gotten themselves into
34:18is so bad there's no way out.
34:20He calls it the head in the hands
34:22in the dark of the night,
34:24sitting alone with no idea of what to do next.
34:26Have you guys ever felt that?
34:29And I remember when I called him
34:30on one of those nights,
34:32he said that line to me.
34:34And then he said,
34:35until you have had a moment like this,
34:37you were just pretending
34:38you were never even in the game.
34:40And I want you to remember that
34:43because I think it's going to get hard.
34:45And I want you to remember something
34:47that if you can just allow me for the second,
34:51something that my mother always tells me,
34:53which is, you know,
34:54when I was younger,
34:55I was kind of,
34:57I was a little shithead,
34:57you know,
34:57I was a little atheist,
34:58and I kind of like,
35:00she was like,
35:00come to church,
35:01and I was like,
35:01no, you know.
35:02And then as I've gotten older,
35:05and we've lost people,
35:07and we've gotten sick,
35:08and we've seen reality all around us,
35:10a little bit of God crept in,
35:12you know.
35:13And she always reminds me of two things,
35:16that when you're worrying,
35:17you're practicing atheism,
35:19and that when it gets really hard,
35:22it's because somebody thinks
35:22you're capable of it.
35:24And so I hope that you feel
35:26a truth that I know to be true,
35:28from seeing hundreds of thousands of you
35:29all across this country,
35:31that if you're already in a room like this,
35:34on a Friday,
35:35on Labor Day weekend,
35:37with no f***ing windows,
35:39in Houston,
35:40what are we doing here?
35:43You're already in the game,
35:44you've got what it takes.
35:45And in fact,
35:46if you do not do what is necessary,
35:49we all will not have
35:51the wealth and the freedom that we want.
35:52And so I salute each and every one of you
35:54in this room.
35:55Thank you for being a builder.
35:57It is more important
35:58than you could ever imagine,
35:59and I want to say thank you all today
36:01for being here.
36:02I salute all of you guys.
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