Shaan shares a legal tax strategy using film production tax credits that lets wealthy investors write off a million dollars by putting in $150K. Sam and Shaan then debrief their Martin Shkreli episode, discuss Ramit Sethi’s “rich life” philosophy, and dig into Andrew Wilkinson’s Tiny company going public — analyzing the financials from the public filing.
Speakers: Shaan Puri (host), Sam Parr (host)
Film Production Tax Credits: The Rich People Tax Scheme [00:00:00]
Shaan: Can I tell you about a cool rich-people tax credit scheme I discovered?
Sam: Yeah.
Shaan: A mutual friend put me onto this — I won’t say his name because, you know, never talk about another man’s taxes.
When we sold Milk Road, I was like, how do you reduce taxes in a situation like this? We sold in October, so there’s this windfall of profits in October. Is there anything between October and December I can do to lower taxes?
When most people try to generate large deductions or write-offs, they typically think of a car or real estate. Real estate is typically the one. But I’m lazy — your boy doesn’t like to own things and manage properties. So I was looking for other options.
The problem with real estate: if you need, say, $10 million of depreciation, you’d need to buy like a $30 million property just to get close to deducting enough to make it significant. That’s a big deal for someone who’s not already in real estate.
Our friend put me onto something else: film production depreciation. Ever heard of this?
Sam: No. Tell me about it.
Shaan: Okay. It sounds like a horrible idea, but it’s actually great. So there’s this thing called Film Production Tax Credits.
Obama changed the rules so that you can write off 100% of a film’s cost — before they even make the film. Before the money is even spent, just on the basis of the budget commitment. If you buy into a million-dollar movie, you can write off a million dollars right then and there.
So here’s how the math works: you put down $150K in cash. You get a $1 million deduction.
Sam: Oh my gosh.
Shaan: If you’re in California, a $1 million deduction is saving you $400,000 in taxes. So right away: I put in $150K and I save $400K. That’s already a $250K gain.
Sam: Where’s the rest of the money come from?
Shaan: You need the other $850K to finance the movie. A few ways to get it. First, you can go get a loan — put the movie up as collateral. Second, most movies are not made in Hollywood anymore. Do you know where they’re made?
Sam: Georgia?
Shaan: Georgia, Alabama, a bunch of states. They come in and say: “If you’ve got a million-dollar movie, we’ll give you up to 30% of the film’s budget in state tax credits.” Because the state wants jobs, tourism appeal, art in the community. So you get $300K from the state in the form of tax credits. You can either use those to fund the movie or sell them for 90 cents on the dollar.
So basically, wealthy people don’t need a million dollars to fund the million-dollar movie. They put in $150K, they save $400K in taxes, they get $300K in state tax credits, they borrow the rest.
Then what happens? The movie starts getting made. They’ll do things to help pay off the loan — sell the international rights before the movie’s made, sell an option to Netflix, get some revenue while the movie’s in production. Use that to pay down the loan. Five years later when the movie’s made, hopefully the loan’s paid off. Then you have whatever revenue the movie generates.
And it doesn’t even need to be a blockbuster — because you got your tax benefits five years ago. You just need it to pay off the loan amount.
Sam: This sounds like such a racket.
Shaan: That’s Hollywood, baby. There are companies that throughout the year are buying up rights to movies or scoping out projects — looking not at the script or the plot but at the budget. “I need a million-dollar movie. I need a five-million-dollar movie.” They hold options on all these projects till the end of the year, then go to their clients: “How much of a write-off do you need? You need $3 million? Cool, here’s a $10 million project. We put in this much cash, get that much write-off, finance the rest.” And you can do it as a group of investors.
Sam: And this is completely legal?
Shaan: One hundred percent. Section 26 of the tax code. Bonus depreciation of 100% of the film’s cost. You do have to be an active investor — meaning you’ve got to attend film festivals, do a certain number of hours of film study online — in order to offset against your active income. There’s nuance, like with real estate.
I didn’t do this last year because I learned about it four days before the end of the year. I was like, “We need to make a movie, baby.” It was a little too rushed. But the more I looked into it — it’s a completely legitimate thing.
Sam: And coincidentally, the Obamas now have a wonderful production company. Beautiful home in Georgia.
Shaan: It’s called Higher Ground Media. They’ve made a handful of movies, they have an Audible deal, they have Renegades — Barack’s thing. So: does this work for podcasts? We have video over there. Premium production.
Sam: I think we need to change the LLC name to Premium Productions.
Ramit Sethi’s “Rich Life” Philosophy [00:18:00]
Sam: How was your podcast with Ramit?
Shaan: Awesome. You want a recap? I haven’t listened to yours, so what’s the best part?
Sam: He made fun of you a little bit. There was that episode where you said you could invest in anything other than your own business at 8% consistently, and he was furious you wouldn’t accept that. He was like, “Sean was crazy.”
Shaan: He’s very principled, which I actually like. He’s laser focused on a couple things.
Sam: He talked about the rich life, which I’ve heard him explain. He made a list of what the rich life means to him and used that as his financial blueprint. Like: I just want the best assistant because I want things booked perfectly. When I fly, I want a very specific type of airline with a very specific seat. A certain plane. A certain type of food ready for me when I arrive at my hotel room. He was very exact.
Shaan: I love how exact he was. It sounded like a lot of work to set up, but he knew exactly what he wanted.
Sam: I hate people who are that particular. I find it to be extremely spoiled and snobbish. I admire the opposite — someone where their happiness or mood is not contingent on anything. That, to me, is an absolute superpower.
I think people get praised for being super meticulous, super organized, planning everything, working backwards — and I never hear about anybody praised for being in a good mood regardless of what’s happening. But to me, that’s the superpower.
Shaan: Yeah. I’m closer to you in that regard. Recently I went somewhere and ordered a steak and they brought me a pesto chicken pizza. I didn’t even say anything. My wife was halfway through her meal: “Didn’t you order a steak?” I was like, “Yeah, but it was here, so whatever.” I respect that he knows what he wants and lives that way, but I’m not wired like that.
Martin Shkreli Debrief [00:28:00]
Shaan: Martin Shkreli. Do you want to debrief?
Sam: Yeah. We got a lot of heat for that one.
Shaan: Dude, friends were messaging me: “Why would you give this guy a platform?” I don’t think they even listened to the episode. My response: did you watch the documentary about him on Netflix? If yes — well, then he has a platform. Did you criticize Netflix? You watched it. And second: we actually did challenge him quite a bit. I explicitly said, “Why’d you act like an idiot? Why are you such an ass when you didn’t have to be?”
A fair criticism: he gave explanations about how the healthcare system works, and we’re not well-versed enough to know where to push back. If he said something incorrect or used sleight of hand, there’s no way I would have caught it. That would be a fair critique.
But the most interesting thing he talked about was the contrast: I could have been the Pfizer CEO. Corporate speak, don’t give the media anything to get mad about, quietly make your millions, raise prices and just do whatever you’re going to do. Most pharmaceutical companies aren’t seen as angels, but they don’t get the same level of flack because they keep their heads down.
He was loudmouth, vocal, poked the bear constantly. And what I liked was this moment where I was like: you knew what to do. Your PR team told you — don’t doodle when Congress is asking you questions. Don’t have a smug look on your face. He knew what to do, but he chose the troll life. He’s like, “I don’t want a world where everybody who’s successful has to be a robot. I’m going to be me, have fun with it, call BS on things.”
That is one part I genuinely admire about him. You can learn from someone who’s highly intelligent and has interesting things to say — and also acknowledge they’ve made bad choices. Like how you can appreciate Michael Jackson’s dancing and moonwalk without endorsing everything he did.
Andrew Wilkinson / Tiny Goes Public [00:40:00]
Sam: Okay, this is something I care about. Our friend Andrew Wilkinson took his company Tiny public. It’s officially public — around $750 million Canadian, so roughly $560 million USD. And when you go public, you’ve got to release a huge report. I read through about 300 pages of it and found a bunch of interesting stuff.
The foundation: Tiny owns either outright or partially something like 30 different businesses. The whole thing started with Metalab, an agency Andrew created by himself in 2008. He basically made websites for Silicon Valley companies. It was nothing fancy at first — like $20,000 websites. He just kept going and kept going.
Metalab’s listed as “Digital Services Revenue” in 2021 — $62.8 million in revenue, growing at around 23% a year, with about a 40 to 45% margin. So for every $100 they make, net income is about $40. That’s crazy for an agency.
He’s been taking dividends out along the way — something like $15 million according to the documents. They also took down about $100 million in debt to grow the company, as opposed to equity — which is awesome because if it works, debt is significantly cheaper than equity.
They also sold a company called Meal Time — like a meal-prepping software — for $25 million, with a $13 million profit. So he’s been actively making tens of millions along the way.
Shaan: Do you remember when we had lunch with him? You asked him at what number life started to change for him. He gives some answer and you go, “Okay, so that’s the net worth?” And he goes, “No, per year.” And we were both like… wait. We were both like, what the actual hell?
Sam: And now it’s all on paperwork. It all checks out.
Here’s what I found remarkable when I invested in this right before it went public: when you look at where the bulk of the revenue and EBITDA comes from, it’s really two companies. Metalab and Dribbble are carrying this portfolio of 30 companies on their backs.
Digital Services — almost entirely Metalab — $63 million in 2021. Creative Platform Revenue — which is Dribbble primarily — $34 million in 2021. Other stuff — about $14 million. So just those first two: $63 plus $34 is roughly $100 million, with $50 million in EBITDA.
And that $800 million market cap? I believe less than $10 million of total equity was ever put in. The seed capital came from the profits of the agency. He started as an 18- or 19-year-old — the filing says he was working at a coffee shop and started this on the side — and it just kept compounding.
Sam: The thing that blew my mind was the WeCommerce spinout. That was the roll-up of Shopify apps. They took that public separately — I think it was around $25 million in revenue and $10 million in EBITDA when it went public. So it’s another value-creator that came out of the same machine.
Shaan: The thing I find remarkable is: yes, he’s got a portfolio of 30 companies, but it’s really Metalab and Dribbble doing the heavy lifting. And he started Metalab as a teenager at a coffee shop. Dribbble he bought and grew. The whole rest of the portfolio — the job boards, We Work Remotely, the creative tools, Funky the photo app — they add flavor and optionality, but the core engine was an agency he started without outside capital.
That’s a really interesting model. Not a venture-backed roll-up — just a scrappy agency that throws off enough cash to buy things, and the things you buy throw off enough cash to buy more things.
Sam: We Work Remotely, by the way — they bought that from 37signals. Jason Fried and DHH. It’s three people on LinkedIn, makes about $6 million a year. Very fun company to own.
Shaan: The other interesting part: the amount of dividends he paid himself along the way while also growing. He wasn’t waiting to cash out at the end. He was building real wealth along the way — millions every year — while also building the company. That’s different from the VC model where you’re all illiquid until a big exit.