This episode of My First Million features Sam Parr and Shaan Puri discussing the concept of “studio” models in business, where successful entrepreneurs launch multiple ventures simultaneously. They explore the potential of buying and monetizing unique assets, such as Michael Jordan’s former home, and analyze the success of various “studio” companies like Atomic and Big League Advance.
Topics: Studio model, entrepreneurship, asset monetization, venture capital, business strategy, Michael Jordan’s house, Atomic, Big League Advance, startup investing.
Studio Models and Misconceptions [00:00]
Sam Parr: Look, if you don’t figure this out, you’re fucked, you’re broke.
Shaan Puri: Yo, what’s up?
Sam Parr: Shaan, why we keep getting two things that’s kind of like keeping me up at night. The first, which doesn’t keep me up at night, but weirds me out, why do people keep confusing us? And the second thing, and the second thing that does keep me up at night is I don’t know if they’re saying it just about me or about both of us, but they say that we look differently than they thought.
Shaan Puri: Yeah, they yeah, and I think both are like, I think both are insults wrapped in disguise. Like they’re not saying anything bad, but the way they’re kind of like laughing makes me think, uh, it’s not a it’s not a good thing. I don’t think it’s an upgrade for them when they see.
Sam Parr: Someone said that I write like a bro, but I look like a nerd. And I’m like, you’re you’re you’re insulting both my looks and my like, how do you make me look I want to look like a bro maybe and talk or wait, which one do I want to do? I want to look like a bro and talk and and talk like a nerd maybe.
Shaan Puri: That’s hilarious. Um, yeah, so so the second thing, people mix up, that means for months, they’ve just been listening to this and they think I’m you and they think you’re me and when they follow us, they uh, you know, they have it all wrong.
Sam Parr: It’s kind of funny. And then, um, I have a, do you know what e-foiling is?
Shaan Puri: What what’s e-foil? What are you talking about?
Sam Parr: I’m about to rent one. So it’s a $12,000 device and it’s looks kind of like a wakeboard, but it has like a three-foot to four-foot like rudder that sticks on the bottom of it. And and on the bottom of that rudder is a motor and it’s like a boosted skateboard with like a with like a handheld acceleration device and it you lift off and it you ride three feet above the water.
Shaan Puri: I’ve seen this uh now that you say it. I thought you were talking about something related to like, I don’t know, microphones or voices. You you just switched topics uh with a hard left turn, but I appreciate that. So I saw this because what’s the name of that one surfer guy who’s like uh super famous?
Sam Parr: Laird Hamilton.
Shaan Puri: Yeah, Laird Hamilton. I saw him doing this where he was going I don’t know if his I think his was like even taller, but basically he was surfing with, you know, there’s like a there’s like an underground fin and then he’s elevated above the water and he was like and there’s it’s like a jet ski that he’s standing on. It was kind of crazy. Sounds like that’s what this is.
Sam Parr: Yeah, well, I’m about to go do it in a in an hour. I’m pumped. Before we get into ideas, it might be, it might be. They’re I’m getting ads for it constantly on social media. It might be. Um, we have a good episode today because you brought something up incredibly interesting and I do I went deep on it. But before we get into that, can I tell you a quick story?
Shaan Puri: Yeah, go for it.
The Andrew Chen Story [02:53]
Sam Parr: Okay, so a few weeks ago, I got mocked on the internet for like doing this trapped in a closet for with Andrew Chen thing. So this guy named Andrew Chen, what is a partner at Andreessen Horowitz. He’s got a cool startupy blog. But I heard he told me one of the wilder stories I’ve heard recently. So when he was in, I think, I could I might get some of the details like wrong by year, too. But when he was in about sixth grade, he took the SAT and scored really high. And when he did, I think it’s the University University of Washington does this thing where every five or 10 years uh they take five or 10 students per year who are in sixth or seventh grade, sometimes younger, like 12 years old, whichever grade that is, and they ask them to come to college, to come to University of Washington. And he was one of the students. And so he at in sixth grade, I think he skipped seventh grade and went straight to college and he moved there in a dorm, went to college and I asked him who else was in it and he actually said Emmett, Emmett Shear from Twitch was one of the folks.
Shaan Puri: Wait, wait, wait. So he didn’t go to college, he didn’t like become a college student, he just went for like a camp or something or he like enrolled in the university?
Sam Parr: No, no, no, no, no, no, no. Doogie Howser stuff. Like he literally instead of going to seventh grade, he moved into a dorm, went to college and and here’s where it gets even crazier. So he like moved there, moved away from home, which I think his parents are from the state as well, but it was like moved half an hour or however far away from home, lived there as a college student and he understandably was kind of embarrassed and didn’t really tell a lot of people. And so they thought that even though he was however whatever age you are in seventh grade, they kind of assumed that he was just another 18-year-old. And apparently he told me that he even dated a girl, he um just kind of acted normal and they didn’t find out that he didn’t like hide it from them, but he didn’t bring it up and they didn’t find out until senior year or something like that when everyone was turning 21 and they were like, when do you turn 21? He was like, oh, I’m I’m actually 17 years old or six whatever.
Shaan Puri: 16, yeah.
Sam Parr: And I it’s a pretty wild story and I asked him like who else was part of this program and he said the founder of Twitch was, some person running a huge hedge fund, just like baby genius, like real baby geniuses. Crazy fascinating story. And apparently the University of Washington still does this every year where they select, I forget what they call the program, but it’s like a a thing where they have psychologists and therapists meet with the kids every uh quarter, every month to discuss what’s going on. And it was incredibly fascinating. And in a very typical genius response, I said, isn’t that weird that you skipped high school? And he was like, well, when you think about it, adolescence is really just like a societal constraint. And I kind of experienced the same thing and I was like, oh yeah, I mean, I guess you’re right, but like thanks for proving my point.
Shaan Puri: Age is just a figment of my imagination.
Sam Parr: Isn’t that wild?
Shaan Puri: That is wild. Also, I don’t know if that’s true because Emmett definitely went to Yale and so did Justin Khan, so I don’t know what.
Sam Parr: Oh, maybe it was through Yale, but he said that Emmett was part of the same program.
Shaan Puri: He said that Emmett was part of his program. I don’t know what if program that they do it in a ton of different schools, but like a 13-year-old freshman in college.
Sam Parr: Would you let your kid do this or would you want your kid to do this? Let’s say your kid’s 12, scores high on a test. Would you want them to skip high school and go and be a 13-year-old college student and like amongst the, you know, amongst the crazy 18-year-olds?
Sam Parr: So it’s a good question because your my gut instinct is probably the same as everyone else’s, which is high school is important. You learn uh about yourself and and it’s important to go through all that normal stuff. But we also complain that high school often or that like what you learn in high school is kind of bullshit and and you know, what does the world look like if you do combine the two? So like maybe it is I don’t so I don’t know. But isn’t that isn’t that a wild story?
Shaan Puri: Yeah, that that’s crazy. I um uh It’s just such a fun fact about someone.
Shaan Puri: Yeah, I also think it’s an interesting strategy for the colleges, like why are they doing this? Um, I think it’s kind of cool. I remember the reason I ended up going to Duke is because they had this thing called the the TIP program, which is the Talent Identification Program. And you would take the, I don’t know, the PSATs or something like that. And then if you scored above a certain thing, Duke would send you this kind of like kit, this goody bag. And it basically was like, it felt like getting an owl from Hogwarts and it’s like, hey, you’re 12 and like we want to invite you to this special school for the gifted and talented. And it just said like, you scored high on this, we have identified you as a talented person. We would love to, you know, like have you come visit our campus and like eventually and the shit worked. I went to Duke eventually. I didn’t put two and two together that that’s why, but like if I think about it, that’s why I started paying attention to them. And that’s why I started following the basketball teams. That’s how I even heard about it. Otherwise, as a 12-year-old kid, you don’t even you don’t even hear about colleges, right? So I thought that was pretty interesting. And if you think about it, you know, these schools are for profit. These schools are trying to get um, you know, they’re trying to get tuition. They’re trying to get people to come in and pay the uh 40, 50 grand to go to school. And so these little investments um and and you know, who doesn’t like to be called talented? Who doesn’t like to be called kind of like a phenom? Uh what parent doesn’t want their kid to be identified as a special? Um that shit works and I’m surprised that more schools don’t do this. And when I start my school, I I too am going to do this.
Sam Parr: Yeah, I’m I’m I’m trying to like do some research on it right now while we’re talking and it’s not really effective, but uh you’ll have to look up this program when you’re done. It’s just a really cool interesting thing. Uh and it was funny to meet someone who went through it and it was just such a silly fun fact about someone.
Shaan Puri: By the way, my roommate in college, um we when he got when we got to college, I was like, yeah, yeah, you know, we’re all 17 or 18, whatever we were as freshmen. And he was like, yeah, like um he would say like, yeah, but then like I noticed his expression. I was like, well, what? And he’s like, well, I’m like 19 and a half, about to turn 20. And I was like, what? Why are you so old? And basically they they do the exact opposite when it comes to sports. So in sports, uh the common thing to do is to like sandbag your kid and basically hold your kid back a grade or like send them to school a year late so that they’re always bigger, faster, stronger than all the other kids in their grade and you’re always like the star athlete because you have like an extra year of development or you have a better shot, I should say, of being a star athlete. And so he he was from Wyoming. He’s like, oh dude, in Wyoming, this is that’s par for the course, dude. Every, you know, every sixth grader is like an eighth grader’s age because everybody wants to like have their kid be, you know, the top of the team.
Sam Parr: So when I my first two years of college, I was an athlete and I would compete against these guys and there was two groups of people that we would like, and I was friends with them, but we would tease about they’re not really it’s like it’s not it’s a little unfair, which is the first was Kenyan, so Kenyan runners. Um, I think that there’s I don’t know, uh I don’t know, I don’t think they were lying about their age, but I think there’s a an exemption if you serve in the military. So you get to compete in college in college athletics, I think until you’re this was a 10 years or eight years ago, however long, you get to compete until you’re 26 years old. Um, and then the second is for um religious stuff. So the Mormons at age 18 would bounce for two years, so they would be a 20-year-old freshman, which means they’d be a 24-year-old senior in college. So I was 18, my freshman year competing against 24, 25-year-olds. And so yeah, more the Mormons and the in the Kenyans if they and uh anyone who served in the military.
Shaan Puri: And uh I know this topic is basically nobody gives a shit about what we’re talking about, but I will say there is a lesson. Uh it’s in life you get to choose, are you going to punch up or punch down? And uh the Andrew Chen thing going to college at 12 or 13, that’s a kid who’s punching up. You’re, you know, you’re in an unfamiliar circumstance, you’re stretching beyond, you know, what you what you you’re playing in the bigger leagues than where you are. And then there’s the uh athletes that are that are held back years or or, you know, come back and compete against people, you know, two to five years younger than them. That’s punching down in weight. And I would say like punching down has some benefits because typically you’re going to score better, do better, um in these little like games, uh you know, in in, you know, high school or college athletics. But in the end, you really want to be somebody who punches up. Uh you always want to I I think, you know, for long-term success, you want to be somebody who punches up, who’s some somebody who’s always in a room where you’re just barely hanging on because it’ll push you to get better more so than just dominating people because you’re older and stronger than them.
Sam Parr: Well, it works for Andrew Chen. I I think he’s 38 years old, but I was like, but you’re really like 45. Right? Like you’ve got the experience of like a 45-year-old.
Shaan Puri: In life, yeah.
Sam Parr: All right, let’s get to the topic.
Shaan Puri: Yeah, it’s his first full-time job at 18.
Sam Parr: Okay, let’s get to the first one. So, Sean put something on here that I actually think I was telling uh a friend as I was researching. I actually think that this is one of the better ideas that we and and you you’ve ever come up with. The Michael Jordan thing.
Shaan Puri: All right, you want to Yeah, you want me to explain it? Okay, so um I’ve been looking at this house for a long time. Michael Jordan’s house has been for sale for like a decade and it hasn’t sold. And this is his house uh kind of like you know, in Illinois near Chicago where, you know, Michael Jordan was on the Bulls and he had this 56,000 square foot home in uh Highland Park. And so this thing originally he put it up for sale in like I don’t know, nine years ago for $30 million, $29 million. And now it’s, you know, the price has been cut in half and the thing is still not selling. And if you look at the photos, you can just go, it’s like on Zillow. So you can go look at the photos. He’s got like an indoor basketball court, you know, the gate leading up to the driveway has this big 23 number like in Boston and it he’s got, you know, everything you would want, like huge, you know, closets because he’s got, you know, all his Air Jordans or whatever. And so his house is it’s pretty unbelievable, right? There’s there’s all kinds of um epic shit here, but it’s not selling and it’s not selling for I think a couple reasons. It’s like, you know, it’s very custom to Michael Jordan. Um like it just it’s like it was custom made in in in many senses. So, you know, that other rich people don’t necessarily want to live in a house that’s like made for another dude. Um it’s also, you know, it’s very expensive for the area. The property taxes are really expensive, all that stuff. But I was thinking, okay, the price is now cut in half. Now it’s now it’s a $13 million house or a 12, you know, $13 million home that you could buy, 13, 14. And now it’s in range where maybe there’s something fun you could do with it. Now you might be getting a value buy. So I was thinking, all right, there’s a bunch of people obviously that are basketball fans that love Michael Jordan. Um, there’s a bunch of, you know, new ways to crowd fund that we’ve been talking about, NFTs or uh Kickstarter or different different crowdfunding platforms. So the question is, should we buy Michael Jordan’s house? Should we start a crowdfunding campaign and buy Michael Jordan’s house? So if you could get 5,000 people to each put in $2,500, then you could own a fractional share of Michael Jordan’s house. Uh you could you you could own a piece of of this history and we could just buy it out, take it off the market, um and we could own this thing. And then the question is like, what do you do with it? Um and so I wanted to brainstorm with you, A, should we buy Michael Jordan’s house and B, what could we do with it if we did buy it? What do you think?
Sam Parr: So, the whole NFT thing, I wouldn’t do that. I think that I think you’ve had two ideas here. One is to buy his house and two is to end do the NFT thing. Uh one of those ideas is great. I think the other one is overcomplicating it. I would 100% buy it. And the reason why I I think it’s such a great idea is immediately after you seeing you write this, my thought right away went to Graceland. You know what Graceland is?
Shaan Puri: No.
Sam Parr: That’s funny that you don’t know what that is. It’s because it it’s such a big deal in my family or Elvis is at least. So Graceland is Elvis Presley’s house. Uh it’s in Memphis. It’s in downtown Memphis. It’s actually in a pretty crappy neighborhood now, or the neighborhood is not nice and it’s like kind of gross, but it’s just like a cutey thing to do if you visit Memphis. And I went and did research on it. And so around 600,000 people a year go to Graceland, which brings in something like where I have the numbers here. Okay, so Graceland just in attendance, uh just in ticket sales brings in $21 million. So it’s yeah, pretty wild. Just on tickets. And then 600,000 visitors a year, uh $36 a ticket, right?
Shaan Puri: Yes.
Sam Parr: And I got interested in this. So I thought, what are the most visited homes in America? So I came up with a few and I want to fill you in on them. So the White House doesn’t count because you can just you I think you can get a tour, but you can also just walk outside of it. But Graceland, 600,000. The second one, I’m you guys are going to make fun of me. I don’t know how to pronounce this. What is it Monticello?
Shaan Puri: I think so.
Sam Parr: Okay, Monticello, that’s uh Thomas Jefferson’s house. And so the interesting thing about this place, as well as a few other I’m going to mention, is that they’re nonprofits, which means all of their numbers are public. And so uh the revenue for Monticello, which includes a ton of investment revenue, was around $200 million in 2010, but around uh 8 million, 7 million came just from ticket sales. So 8 million a year in ticket sales, which is crazy. And they have around 500,000 people. Another uh most visited home is never or uh like homes that people drive by, Neverland Ranch. People don’t go there. But the other one another great one is Mount Vernon, which is uh I think uh what’s our first president? George Washington’s house. Uh and they do in in in uh food sales alone, this is crazy. Just in food, $17 million a year.
Shaan Puri: Wow.
Sam Parr: Is that crazy? The whole but the whole operations and then they do $15 million a year in admission sales and in total they do about $51 million a year in total income, which includes 10 million from contributions. Is that crazy?
Shaan Puri: That No, that’s absolutely insane. So let me ask you, these Okay, so this all of a sudden this starts to get really interesting, right? Because I think Michael Jordan is on par with Elvis and you know, Thomas Jefferson. Michael Jordan’s got TJ beat by a long shot. So, you know, MJ over TJ, I think is is is part of the the the slogan that we have when we when we buy this thing. But um if they’re doing this much in traffic, I got to know, is there something else? Meaning like are these in really high like popular areas uh where there’s already just a lot of tourists or something like that and this is just a pit stop? Because you know, Michael Jordan’s house is in a neighborhood. You’d have to only be going to go to this place.
Sam Parr: I looked up Michael Jordan’s address. Guess how far away it is from Chicago airport, one of the most popular airports in the world.
Shaan Puri: I’m going to guess 45 minutes.
Sam Parr: 20 minutes. It’s 20 minutes away. Okay, so it’s at like have you been in Memphis? Memphis is like there’s not that much going on in Memphis and all these people are going to Memphis. Um people are Chicago’s what, the fifth most populous city in America? Or maybe third, something like that. Something is interesting here. So what I would do is I wouldn’t do the NFT thing. I would raise uh two or $3 million from a bunch of rich people, um or I would try to use my own money if I had two or $3 million that I wanted to spend on this. And I would buy it and then it would probably cost a fair bit of money to get it set up. It would probably cost a lot of money, another many more millions. But then you would have to convince collectors to lend you the stuff and you create a Michael Jordan museum. Yes. And that’s how you do this. And the companies that we’ve just mentioned, Graceland, Monticello, and um Mount Vernon, so those obviously those folks lived in the 1700s or probably died in the 1800s. So they’ve been around, those properties have been around as tourist destinations for 100 plus years. But they’ve done $50 million in revenue, which is a shit ton. But even if you just done two or $3 million in revenue and you could do that and adjust for inflation for 50 plus years, kind of like Graceland has done it for 60 years, that’s incredibly fascinating.
Shaan Puri: Right. Yeah, I I’m with you. So I so I think you, you know, you’re shitting on the NFT thing a little bit, but it’s not about NFT. What I’m saying is crowdfunding. Um so I think that there’s a benefit to crowdfunding, which is that crowdfunding is a way to make the story more viral. Um it is a it’s a more PR worthy story that uh you know, people from the internet, people from Reddit, whoever got together and bought Michael Jordan’s home off the market for for $15 million. They they raised $15 million and bought the house versus a rich guy went to his rich friends and raised some money. The second thing is those become, you know, the your your evangelist to spread the word and to come make the uh the pilgrimage to go see Michael Jordan’s house. And I think you could do two or three things with it. I think you could make it a museum that’s like a modern museum that we’ve been talking about, like the Museum of Ice Cream or something like that where the tour is very heavy um photo based. And so you’re, you know, you’re going through and it’s all these different photo exhibits of, you know, you in Michael Jordan’s bed, in, you know, wearing, you know, a pair of his Air Jordans or standing in a pair of his giant Air Jordans or something like that and you make it like a Museum of Ice Cream where you’re going to walk out with, you know, 10 photos that are Instagram worthy at the end of it. I also think give give give people background on on Ice Cream Museum.
Shaan Puri: Yeah, you can pull the latest numbers, but I think these guys uh raised like $100 million plus valuation. And if you if you ever go to one, they’re they’re pretty cool. It’s, you know, it’s not the most amazing thing. I honestly, I was a little bit disappointed, but the photos do turn out cool. It’s a museum that you walk through, uh so it’s like a guided path and you go through maybe like 13 different rooms and every room is something cool and you get a little, you know, you get an ice cream cone of some flavor and then you can take photos next to some like exhibit that they’ve set up. And the idea is not for you to look at the art like a traditional museum, but for you to like take a photo in the art uh and post it on Instagram and that’s their marketing. That’s the free marketing that they get. And so Museum of Ice Cream, oh yeah, here, Aubrey has it. They raised $40 million, they raised a $40 million Series A at a $200 million valuation last year. And um and I think this could be bigger. Um I think this could be much, much bigger as a brand. Um the other thing uh the other thing that you could do is uh sports cards are having this incredible boom right now. And I think what you could do is you could have certain collectors put their collection um uh in in the house. The house could be basically the vault to store some of the most rare memorabilia in the sports world, signed basketballs, shoes, and sports cards, and that could be part of the museum and you’d you’d basically store it and you um you store it for some of these collectors. So I think I think there’s a bunch of stuff you could do to make this work, but the idea is like, can you buy this thing for 13 million, put another four or five million into um you know, getting it all set up and then could you make $5 million a year, could you make $10 million a year like you’re saying these other guys do, um as a pilgrimage for, you know, tourists going to Chicago and basketball junkies.
Sam Parr: I think the answer is definitely yes, and I think it’s so interesting. Um, I found a I found another example of one and it’s called the um it’s called the National Trust for Historic Preservation. And it’s a nonprofit and all they do is buy nash um historical buildings. And they’re historic I looked at their numbers, they’ve been doing like 50 or 60 million in revenue for years. And I’m still trying to figure out how to entirely read uh nonprofit statements, but they have a buy uh a line item that’s revenue less expenses, which I guess that just means profit. I mean, I don’t know how they define Yeah, it’s EBITDA, yeah. I don’t know how they define either of those, but it was 26 million. And it’s been doing that for years. Is that nuts?
Shaan Puri: So I like this idea. I like this idea a lot and I kind of want to dig a little further into how these um homes, home museums work because I think this is pretty interesting. The other good thing about this by the way is that the Basketball Hall of Fame sucks. Uh nobody cares about it, nobody goes to visit it. Um all the other sports like, you know, Canton for football, these are like tourist destinations, you know, tons of people go there every year, it’s really cool. And the basketball one um is known to be super lame because they let way too many people in and um and it’s not like it’s not a thing that basketball fans really care to go do.
Sam Parr: Can I give you two more examples that we what what what we could consider doing instead of even doing a museum? Maybe this is even simpler. So I’m staying at my friend Jack’s house. It’s a badass house. Um five doors down or 10 doors down, something like that, nearby is what they call the Obama house. And when Obama was in office from uh when was he in office? The 08 12 was the the second the second term. Um or whatever it was, he would stay at this house down here and the owners let him stay, I think for a massive discount. Now, it’s like it has its own Wikipedia page and it’s called like the Obama house and it’s sold 10 years ago for 7 million after he had already stayed there, which or sorry, 7 million, I did I say seven? For 7 million, which is a lot of money, but they rent it out right now on Airbnb for $6,000 a night. Or if it’s booked all the way up, 180k a month. Right. And it’s branded as the Obama house. I think that you could absolutely crush it with a Jordan Airbnb house. Would you would you and a group of friends be willing to pull together $3,000 a day to stay there? Maybe. I think I think the way you’d have to do it is you’d have to make it like a Vegas alternative for bachelor parties and stuff like that, birthdays. It’s like, what is the man cave man dream vacation? It’s like, dude, we’re going to go stay in Michael Jordan’s house. 14 of us are going, um and it comes with like all the amenities and you know, all that stuff. This is where you go, this is where you want to go if you want to live like the sports fan’s dream. I think you could do that. I do like the museum one better. What was the second idea you had? You said you had two.
Sam Parr: Oh, well, it wasn’t the second I guess it was more so uh just another example. The Fresh Prince of Bel-Air house. Um it’s it’s kind of interesting. But do you remember living in San Francisco how there’s like the what’s it called the Painted Ladies, which is the full the full house house, and then there’s the Miss Doubtfire house. Um I would just want to buy all these and turn them all into tours.
Shaan Puri: So I lived a block away from the um from the Full House house and uh literally 24/7, there is somebody standing outside of that house during the daytime uh taking a photo of it. So there’s just a constant and it’s not like a it’s not like a huge line of people, but there’s always like four people standing outside taking a photo in front of the Full House house every single day for the whole year. It’s kind of crazy. And then it just sold actually, and it sold at basically like I think 1.5 or 2X the market rate in that area. So, um they got basically like a double premium because it is the Full House house, which I think is, you know, kind of interesting. Um but okay, I think we should uh I think we should buy Michael Jordan’s house. I think we should crowd fund uh I think we should crowd fund 5,000 people together, we should own this thing, or we could go to Rally Road and we could say, hey, Rally, let’s put Michael Jordan’s house on Rally and uh you know, let’s sell this baby out. I think if 5,000 right now with if you go on Rally Road, you’ll get 2,000 or 3,000 people buying a fractional share of, you know, a pair of Jordans or a signed autograph or a signed rookie card or something like that. Fuck all that. Let’s own the guy’s house. So I think you could easily get 5,000 people on Rally Road to uh buy a fractional share of Michael Jordan’s house. I’m surprised they don’t already do this. If they’re listening to this, uh you know, go go for it. Just give us credit and give me a share of the house.
Sam Parr: I actually think that they wouldn’t do that because how do you liquidate that? It’s been on the market for 20 or how long? 10 years. No one is obviously no one’s buying it. So like how do you get liquidity from that after seven years? I don’t think you don’t. I think the the game here is That’s the point of Rally, right? The point of Rally is that they take things that are not assets and they make them not liquid assets, they make them liquid assets. So because you can own a fractional share, now there’s liquidity. Any one person who owns a piece of Michael Jordan’s house can swap it for anybody else who wants to own a piece of it. So you don’t need a $15 million buyer because you can sell them in blocks of a thousand or $1,500. And so when you bring that price point down, there’s people who want to own a piece of the a piece of the art, a piece of the asset, which is how they do like, you know, they’ll sell um, you know, a Harry Potter first edition signed, you know, set of books and uh, you know, instead of selling it for $25,000, they’ll get, you know, 2,000 investors to each put in whatever, whatever the math comes out to, 150 bucks to go buy uh, you know, to to own a piece of that thing. So they introduce liquidity by making it fractionally owned.
Sam Parr: Yes, but there’s still no cash flow. You have to create an operation around this to create cash flow. That’s the move. I mean, there’s no cash flow on a basketball card. There’s no cash flow on Air Jordans, there’s no cash flow in in Harry Potter first edition. Yes, but there’s a rich Asian investor who’s willing to buy it. No, dude, you’re you’re you’re still thinking like the old world. You haven’t seen what’s going on on Rally. You’re staying with Jack Smith, you should go ask Jack Smith about how this stuff works. Uh he’s the one who who taught me and he’s one of the biggest investors in this stuff. He’s not buying it for cash flow. Um you know, he’s buying it because uh there are there is another there is another collector and when you make it fractional, now way more people can get in on collecting it versus just the rich deep pocketed people who could buy the whole asset 100%.
Sam Parr: Yeah, bro, but who who liquidates it after a handful of years? On Rally Road, uh someone actually buys the car after a few years. Very rarely. Occasionally, somebody comes and offers to buy out the whole the whole lot. Um and and then they put it to a vote. I don’t know if you’ve seen this, but like, you know, they’ll say a box of Pokémon cards went on there, uh like a super rare Pokémon card set. They I don’t know what the IP what the IPO was, but on Rally they IPO’d it. Let’s pretend it was $50,000. And then what happened is a is a big, you know, Asian investor came in and said, we’ll buy this thing out for $85,000 now, so you’ll all get a profit, uh but we want to own this thing. And they put it to the vote of all the share owners and they said, no, they said we’re going to hold it. We think it’s going to go up. So they voted no, they voted to keep it. Uh so they’re not all trying to liquidate um soon. You know, some some people who are are buy and hold investors will will want to own these assets for a long time because they think, hey, you know, if I just hold this now, you know, what’s Michael Jordan going to be, what’s Michael Jordan’s fame going to be 20 years from now? If Michael Jordan passes away, how much is this going to be worth? And uh there’s people who are in it for the long term. So I think there’s I think the collectibles thing is a little bit different than I think about it differently than you do, I would say.
Sam Parr: You basically need Jordan to have like a tragic accident. Or like for example, the Last Dance came out. So so the Last Dance is 10-part documentary that came out for uh on Netflix and ESPN. Um you know, millions and millions of people watched this thing and Jordan’s brand, you could see all the price of Jordan’s went up, Jordan’s like brand visibility and brand sentiment went up, um because this documentary came out. He’s still alive. It wasn’t a tragic event, but somebody told the Jordan story to the the younger generation who, you know, grew up where, you know, they were two years old when when Jordan was at his prime. And so Jordan brand got stronger with the Last Dance coming out. And I think this is just going to continue, you know, over time because he’s got all these different, you know, the legacy becomes bigger than than the person itself.
Sam Parr: But I have a different thing that’s sports-related. Okay. Yeah, can I do this one? So the different thing that’s sports-related and ties into the idea of um making assets out of things, making liquid assets out of things that were non-liquid assets. So there’s this uh company called Big League Advance. Did you see this thing?
Sam Parr: No, keep going. I’m looking it up. All right. So, um so shout out to uh Joe Pompliano, uh you know, Pomp’s Pomp’s brother, one of his one of his brothers, um who, you know, does these Twitter threads all the time. So he did this Twitter thread that caught my eye. And it was about this player, Fernando Tatis. So this guy is one of the young I don’t follow baseball anymore because baseball’s slow and boring to me now, but I used to and you know, back in the day, I remember Well, Fernando Tatis, his is that for is it Fernando Tatis Tatis Junior? Because Okay, when I was a kid, the senior played in St. Louis and he was like a huge deal. I think he hit like he hits three grand slams in one inning and he was like our hometown hero for years. Okay, that sounds crazy, but um uh yeah, basically this guy is like one of the youngest star baseball players and now like um he you know, signed one of the big contracts. So he signed a $340 million deal with the Padres. And the interesting thing that came out of that was that this company that I had never heard of called Big League Advance made $30 million off of that deal. So who who is Big League Advance? So basically what these guys do is they go to minor league baseball players, of which there are thousands, and they say, look, you’re making, you know, you don’t make shit in in the minor leagues. Um you you know, you’re riding the bus, you you you get paid nothing, um and you’re hoping to one day get to the league and you’re hoping one day to become a star. You’re hoping for the Fernando Tatis story where someday you’ll sign a a huge contract. And what they do is they go and they offer you a deal. So they’ll say like, hey, we’ll give you $100,000 for 1% of your future earnings. So it’s an income share agreement like we’ve talked about with Lambda School and whatnot. And they’ll grow and they’ll say, you know, $350,000 for 8% of all your future earnings. So we’ll bet on you, we’ll take a risk on you. So you get some money today, you can give your family a better life today. You don’t have to keep like roughing it while you work your way up. Uh but hey, if you hit it big, like we’re going to get paid out. And uh they basically do a bunch of analytics on their side to try to guess which players to invest in and what what what is the exact deal to offer them. So it’s like a startup investor who’s coming up with a valuation of every minor league baseball player. And um they know they’ll lose money money on like 80% of the deals that don’t pan out and they’re hoping that the 20% that do turn into huge returns like a Fernando Tatis Jr. And so, um I think this is an awesome idea. This actually is similar to a company that we’ve talked about called Pipe. Pipe is uh they basically take companies that have SAS revenue and they say, hey, you got all this SAS revenue, um let’s turn that into a tradable, investable asset. Let’s take your contracts you have with customers, let’s make it so that anyone can just buy some of your SAS contracts off you. And uh you get money today upfront for for those contracts. You don’t have to wait the 12 months for for your customer to pay you every month. And um and for that that investor, they’re going to get a premium, you know, so they’ll pay you the year’s worth of the contract and in exchange they get like a 12% return on on their money and you get money upfront which you can reinvest into your business. So I really like these companies that are taking things that were not investable, tradable assets and making them investable, tradable assets. And I think Big League Advance is a cool one because it it’s basically betting on minor league players that might turn into stars. What do you think of this?
Sam Parr: Well, well, I’m looking at their website. So how can a minor league Does that ruin the amateur stat or is there still amateur status with an a Minor league is pro. Minor league is is you’re a pro, you’re a professional player, you’re part of a team’s farm system and you get paid. You’re not you’re out of the college system by then by then.
Sam Parr: So you can only do this you can’t do this for college kids. Correct. Correct? That’s cool. So I think that you could I’m looking at their website now. So I imagine this would work for golf, baseball, tennis, basketball, tennis, I guess. Anything that’s like crazy numbers related, right? Like you can kind of like I wonder which sports you think are the most predictive in terms of So baseball is known to be the most predictive um and the most like kind of statistically modelable because your your teammates kind of don’t matter. When you’re up there batting, it’s just you and there’s no like team dynamics. Whereas in basketball, a player can be better or worse because there’s five other people on the court all moving around and it all affects each other. But, you know, that doesn’t really matter in this case. What here what you’re basically saying is, let’s say there’s a like this guy Spencer Dinwiddie tried to do this on the Nets. He um he had signed like let’s call it a $30 million contract and what he tried to do was offer people um token shares in his future. So he said, look, I I I think I today I’m a like a B-level player. I think I’m going to be an all-star someday. So if you invest in me now, you’ll get a share of my future contract. And so you’re just betting on a player. You’re just saying, I think that this player is going to be a star and I think this player is going to earn this much in his career. So I will um I’ll invest now in an income share agreement of his future earnings. And so for the player, they get money upfront. They don’t have to wait to earn their contracts and they get a little bit of insurance. Like if anything happens, they get hurt or, you know, something bad happens in their career, hey, at least they didn’t risk it all. They got paid some upfront. And for a fan, it’s a way to kind of bet and uh invest in players that you think are going to have more future earnings than uh than they’re what they’re offering today as a valuation.
Sam Parr: This is so amazing. I’m looking at their uh so they’ve raised $150 million. I think they from the looks of it, it looks like they only have like 30 employees. Do you think that’s accurate? And if they make 30 million from from this this one guy alone. So this was like the big home run. Um and then you know, they’ve had other things where like they they got sued by a player because they offered him $360,000 for 10% of his future earnings. And then he um you know, he tried to sue them being like, oh shit, that was like a predatory deal. I didn’t want to give up 10% of my all my future earnings for just 360k. Um but in actuality, the guy only made 1.2 million in his career. So it actually turned out to be a profitable deal. You know, he took 360k upfront and ended up only paying 120k out uh to these guys in the end. So so he dropped his lawsuit.
Sam Parr: Why is why is there so little information about these guys online, you think? There’s really not a lot. Like I can’t find a Crunchbase page. They they’re not a tech company. Uh it’s just a financing company basically. They um they try to fly under the radar. They also got like kind of disavowed like the Major League Baseball doesn’t like them. The Players Association said, we do not like we don’t like like we don’t say that this is a good thing. Uh but for the player, you know, it’s a it’s it’s they’re cutting a deal with an individual player. And um and it I guess it’s allowed in baseball whereas in basketball, the NBA blocked the thing I was talking about. They blocked Spencer Dinwiddie from tokenizing his future contract and and basically selling off future future earnings. So some leagues are not allowing it, but Major League Baseball still uh still does allow it and Minor League Baseball still allows it.
Sam Parr: So my question is this, and you’re more of a sports guy than I am and I’m looking at this and it seems awesome. My question is, what actually would make this fail and not work well?
Sam Parr: So bad predictions. So you invest in a bunch of players that don’t pan out, you could go underwater. Like I don’t know, I don’t know how favorable their um I don’t know how much room margin of safety they have when they do this stuff. Like with startups, for example, just like just like startup investing, a lot of people um are angel investors or a lot of, you know, average VC funds actually can’t even beat the stock market in terms of returns. And um they’re illiquid and they’re risky and they they don’t they don’t outperform. And so it really comes down to these guys’ ability to pick and value players accurately. Um if they can’t do it well, they’re going to go they’re going to go broke and if they can do it well, they’re going to make a bunch of money. And I think that’s a healthy setup.
Sam Parr: How challenging is it to to do this? Because I don’t I don’t know anything about sports, but I feel like this whole moneyball thing seems kind of like table stakes at this point for for professional teams.
Sam Parr: Right. Uh I don’t think it’s that challenging to be honest with you. I think that there’s uh you know, you you’re getting you’re collecting data all the time, you have scouts, you have all these different ways to value players. And in this case, it’s such an inefficient market because the minor league players just make nothing and the baseball teams don’t want to pay them a lot. It’s like, hey dude, you know, do you want to live out your dream or not? And so we’ll pay you the absolute minimum required for you know, just to have you in our our minor league system. And so what these guys are doing that’s smart is they’re taking a percentage of all the future earnings. And uh and so I think they’re they’re basically going up against nobody right now. But I think and I think there’s even an easier way to do this in the NBA because the NBA has guaranteed contracts. So let’s say I sign a five-year $100 million deal. I’m an NBA star. Cool. That means I’m going to get $20 million a year uh drip to me. And so somebody could come and offer this guy $80 million upfront or $75 million upfront, lump sum, here’s your money today and uh good, you can use that, you can go ball out if you want. But the NBA does does the NBA does the NBA have big as big of a minor league? They I know they have the G League, but I feel like I know so many I’ve got so many friends that go in the minor league of baseball.
Sam Parr: Yeah, so the NBA G League is not anywhere near like all baseball players, stars and don’t stars and not go through minor league baseball. Stars in the NBA go straight to the NBA, they skip the G League. G League is like journeyman. And so um it you wouldn’t do this with minor league in in the NBA, you do it with the actual NBA athletes and and for them what you would be doing is saying, cool, you’re on your first contract. I’m betting that your second and third contract are going to be bigger. And I’m willing to pay you upfront on this multi-year contract because hey, it’s guaranteed. You could go and break your leg tomorrow and you’re still going to get all this money from your team. So, uh the NBA has guaranteed contracts, so it’s way less risky. Uh you could just say, look, I’ll give you this money upfront so you can go invest it and you can go ball out if you want. And in exchange, I want to get some some margin on the because I’m willing to wait the four or five years for your contract to play out and I can bet on your next contract and I can, you know, give you some future money some money today in exchange for some percentage of your future because I think you’re going to be a star.
Sam Parr: It also helps to be wealthy, I think, and be able to write uh 10 to 20 $300,000 checks and have the the time to do it. And so I don’t want to dismiss that.
Sam Parr: But a lot of them raise money. Like Jack, he raised money. He raised uh I don’t know, like $100 million or something from Andreessen Horowitz and others to fund his lab. Even though he himself was like, you know, um you know, doing it super well, he had sold the company to eBay. He was like crushing it at PayPal or whatever or whatever like or eBay when he was there. Um you know, he sold his company for $75 million when he was 24. Well, I’m not just I’m not dismissing any of their skill. I’m just saying this is definitely like a after you get your hit, it’s a lot easy I’m not dismissing that at all. It’s like it’s a lot easier to become a good golfer if you have some money to afford a fancy uh uh fancy clubs and a membership.
Sam Parr: And there’s a bunch of people trying to do this who that don’t have that, right? There’s there’s a group uh there’s this guy Bobby, he listens to the podcast. He’s doing this for creators. He’s like, all right, we’re going to make a studio, we’re going to just build products for the creator economy. And I don’t think they have a big track record or anything like that, but that’s their focus. They’re trying to do a studio for that. Oh, I’m not saying it’s impossible. I know another group of guys, another group of guys that I’m bet that I would bet on that the main guy is this guy Kumar and uh if you you should follow him on Twitter. He’s amazing. Uh he’s super interesting on Twitter and Facebook. Uh his handle is uh Data Raid. I know him. I know who he is. And he’s just like really into all these alternatives. Yeah, I know. He’s a weird guy. Yeah, he’s a weird dude, but he’s really sharp and he’s really out there, different type of thinker. And so he’s like, he’s like really into like, you know, the the energy industry. And um so he’ll build like little products for the energy industry that you didn’t even know like there was a need for. So I think this guy is going to do well because he knows where to sniff. He knows where to sniff out some money because he’s looking at problems that the average kind of engineer in Silicon Valley or New York or LA, they don’t even know these problems exist. They don’t even know these companies exist. And so, um, you know, he’s he was doing one for example, like his friend is a lawyer and uh, you know, there’s like all these like little rule changes in like your local regulation or your local law and he just made an alert system where it’ll alert you about whenever this rule changes. And he can go get a bunch of lawyers to sign up for these email alerts. And it’s a SAS business that, you know, can do well or, you know, energy prices when they when they rise and fall, um, how how you know, how are you going to track that? How do you get how do you build a database of that that information? So he’s got all these like really random ideas that I think the average entrepreneur doesn’t really even know about those markets enough to like to know those problems and therefore, he finds kind of untapped opportunities.
Sam Parr: Well, I think um we should dive deep on this sometime like even more and I want to get Jack on here and I would love to get Kevin Ryan on here. Um because I this sounds cool. It definitely sounds like a rich guy’s playground and frankly, I want to do it.