In this episode, Sam Parr and Shaan Puri discuss the strategies for building wealth, the trade-offs between cash flow and asset appreciation, and the importance of aligning business ventures with personal goals. They explore the concept of “democratizing” knowledge and the reality behind the “hustle” culture often seen on social media.
Topics: Wealth building, entrepreneurship, cash flow, asset appreciation, business strategy, personal branding, startup culture.
Cash Flow vs. Asset Appreciation [00:06]
Sam Parr: Um, can I let me ask you a quick question before we wrap up. Getting wealthy, like we’re talking nine figures liquid net worth wealth. Getting wealthy, is it is it really hard to do it just from cash flow or do you think you have to sell sell something, sell a business, sell real estate, sell something, capital gains versus income?
Shaan Puri: You’re saying liquid, so not paper, not not not your paper net worth.
Sam Parr: Liquid, which includes thing things that could be traded in 30 days.
Shaan Puri: Um, very hard. Very hard to do just off cash flow, I I believe. Um, I think, you know, it’s just much slower, right? Because you can I mean, just look at the basics, right? Like when you sell something, you’re going to sell it for some multiple of the free cash flow that it’s going to generate for you, right? And so, so just by definition, right? Sometimes it’s 5x, sometimes it’s 10x, sometimes it’s 20x, sometimes it’s 3x, whatever. There’s different multiples for different industries, but like fundamentally, it’s a multiple, which is a multiplier on how fast you’re going to get the money, the value out. So let’s say to get to 100 million, uh whatever number of years that would take, you then have to divide that by five and that’s like how fast at minimum you could have got there just selling the the asset, um and getting and taking the 5x multiple, right? So, so you know, of course you can get there, but do I know ways you can get there with the same speed? I don’t think so. Because even those are like, I take the cash flow, I invest it in a thing and then that thing grows faster and like I can sell my stake in that. So, you know.
Choosing Your Business Model [01:39]
Sam Parr: Because it’s like you you have a choice. So you could spend your time, you know, you could spend your time building a service or some type of business where you can make significant cash flow, two, three million dollars a year, not work that much, but it’s not necessarily an asset that could be sold. So there’s a a few businesses like this, or it could just be like um like the way the this podcast gets paid. Like it’s not like a particularly, maybe, but maybe the podcast is not a good example, but it’s not, you know what I mean, not necessarily an asset. Like your Maven course. Your Maven course is not an asset that could be sold, but it could potentially make many millions of dollars a year versus you just say, you know what, screw it. I’m not doing that because I have to build a business that could sell. So do you prefer, do you think cash flow or or or or an entity, an asset that is independent of you and can be sold?
Shaan Puri: Um, I don’t know. I don’t think “do I prefer” is really the right way to think about it. It’s like you need both, right? Like for example, um I you need both for two reasons. One is maybe you’re going to use the cash flow to invest, right? Maybe what you’re going to do is you’re going to buy great assets and let them compound over time. Well, where are you going to get the cash flow to begin with, right? When we had Andrew on it last week, he’s like, I I took the cash flow from the design agency of Metalab and I used it to buy majority stakes in all these other businesses and then let those compound over 10 years and like boom, you know, so he reached, you know, that goal and more uh doing that. And so you you know, maybe you need the cash flow to make those investments, right? Like if you if you have no cash flow, how are you going to invest in anything? And secondly, um I like to live a good lifestyle. So sometimes cash flow businesses are great because it’s like, yeah, I sure, compounding is awesome, but so is, you know, like fucking, I don’t know, Gucci shoes or whatever. Like choose your choose your thing you’re into. Like, yeah, Gucci shoes, like sometimes those are better than like this 20-year buy and hold asset.
The “Long-Term” Myth [03:34]
Sam Parr: Whenever I hear Buffett talk about the long-term and like patience, I’m like, bitch, you’re like 95. Like there is no long-term. There you don’t have pay you shouldn’t have patience anymore. You should have like you should immediately spend whatever you want to spend. There is no such thing as a long-term view for you.
Shaan Puri: Same part. Let’s see like that headline. Sam Parr colon to Warren Buffett. Bitch, you’re 95. There is no long-term. You’re right. I think about he needs to pivot his strategy.
Sam Parr: Well, I’m just like, you know, like if you want to do it, it makes you happy, fine, but like and Bezos talks about this too, like long-term, I’m like, I mean, you don’t really, who cares? Like, you know, just live life how you want to live. You got it. Yeah, and so I’ve always like, why are you delaying? It always it always pissed me off. I’m like, why are you delaying to have the best time of your of your life when you’re like old and don’t even want to do shit? Like you you don’t have to do that anymore.
Shaan Puri: Yeah. Yeah, for sure. Uh and you know, some people are happy along the way. That’s that’s fine, but like uh but yeah, I feel like you had it I feel like you asked me this question because you had an opinion or a story, so let’s just skip that part because I think you have a good opinion or story on this.
Building a Business from Scratch [04:50]
Sam Parr: I don’t have a no, I don’t have an opinion yet, but I’m like, with my life now, it’s like I can I I think that in I think in six to I think in a matter of six months, I could probably create a business from scratch that does a million dollars a year in profit. It would be based off of like my image. I’m not saying I have that, I’m just saying like I I I’m sure I could do that. Plus with like a couple other side projects, I think I could very realistically have two or three million dollars a year in cash flow.
Shaan Puri: Easily.
Sam Parr: But very, but yeah, easy. And maybe I do already have that. I’m not I don’t even want to say I do or do not. But I I But like if you did, that would have been a weird way to say it. It would have been a weird hypothetical, but okay, let’s continue on.
Sam Parr: I’ve got some cool shit going on, I’ll say. But and I’m thinking about where do I spend my time and I’m like, is it actually worth it? Like or should you just not care about cash flow and build something that’s like much bigger that you could sell? I I don’t know. I’m just trying to figure out like where do you actually spend time. The real answer is what gives you most joy.
Shaan Puri: Yeah, exactly. And and like uh whether you don’t work backwards from do I want cash flow or do I want long-term, you know, capital gains. That’s not like the starting point of a decision. Um, you kind of just need to make sure you’re winning in one way or the other. Uh don’t be weak in either area or like don’t be weak in both, basically, is like the way to do it. Like for example, you could buy a home in San Francisco, you’re going to have terrible income from that property. It’s not a good income property because in most places in San Francisco, your rent, the rent you can charge somebody is not going to outpay the mortgage plus good taxes and insurance. But you can go buy, you know, some home in whatever, you know, Houston or something like that. It can cash flow $1,000, $2,000 a month and it’s good income property, but it’s, you know, going to appreciate super fucking slow. Whereas the the San Francisco home, you know, in 10 years is going to have, you know, whatever, more than doubled in in value. And so, you know, it’s a there’s appreciation properties and income properties, the same thing. Like I think you just do whatever gives you the kind of whatever’s whatever gives you juice today and you think might give you juice going forward and then you got to say, all right, before I do this, I got to make sure it’s going to be strong in either one of these. Either it’s got to be awesome for cash flow or it’s got to be awesome for for uh appreciation. And if it’s awesome for cash flow, basically I’m just going to use the cash flow to buy assets that are going to appreciate with somebody else doing the work instead of me doing the work. It’s kind of you kind of end up at the same point either way.
The “Foo Fighters” of Business [07:11]
Sam Parr: Yeah. I don’t know. I’ve just been thinking about like how to spend time. You know who’s killing it and he’s done a really good job of like putting off making cash is our friend Nick Huber. I am an investor and so I get to see some of the numbers of his storage deals and I don’t think he crushed it like in terms of personal cash flow for a long time, but like the way that things have compounded, I’m like, oh, holy moly. If you just eat shit for like six, seven years and pick the right asset, things look really cool.
Shaan Puri: Yeah. Yeah, I think he’s done great and also I think he has like a I think he personally has great terms for with his investors, meaning like I think it’s quite favorable to him. Yeah. Not in a bad way, but like he makes sure he gets to right? Whereas at the beginning, if you have no capital, you like you know, you sort of make a deal with the devil in a way where you’re like, all right, I’m going to take no management fees, no acquisition fees and a low carry. I think now he’s like, look, I’m good and I know it. So I’m going to take a higher fee, higher higher acquisition fee and I’m going to uh take, you know, my my healthy carry. Um so you know, you know, good on him. I think a lot of people in real estate are able to do that pretty well. Uh I know somebody who’s crushing it in real estate and they they do just that. They they have like a, you know, 50% carry on the deal or something something crazy and they’re like, yeah, because my deals are awesome and I win. So like it doesn’t make sense for me to do this at any less than that. And I’m like, okay, that that’s like next level winning.
The “Democratize” Trend [15:05]
Sam Parr: Have you noticed how the word “democratize” is the new “disrupt”?
Shaan Puri: Democratize is like, you know, what is democratized? Uh It’s the new disrupt. Democratize is the new like um no offense, but that’s a democratize. Democratize is like, I’m about to fool you. This is good for me and not good for you, but I’m going to fool you by saying I’m democratizing something for you by my service, by my product. Yeah. And by the way, I I do all the I do this myself. I I again, I know it. I spot it because I got it. All right, I’ve done all this before. With my e-commerce brand, I’ve done the origin story thing. With uh my fund, I do this too. Like my fund is called the All Access Fund because I wanted to give access to every to access to all to be able to invest in the deals I do. Do I feel good that other people get access to good Silicon Valley deals? Yeah, sure. Is that why I did the fund? Fuck no, that’s not why I did the fund, right? I did the fund because I was writing checks and I wanted to write bigger checks and more checks into more companies that had more and that was more than my personal bankroll would allow. So I raised money from other people to do that and I get, you know, like and so now I get to write more checks into more awesome companies. That’s why I raised the fund, not because I wanted to democratize access to like, you know, Angel investing for like, you know, a a a middle school teacher in uh Tennessee.
Sam Parr: I can’t stand democratize. We’re going to democra- cut democratize this by only charging you $50,000 for this piece of clothing instead of I’m like, I I’ve seen people like, we’re going to democratize knowledge and it’s like a $5,000 course. I’m like, uh, not really, dude. Um, can you oh, you can democratize these nuts.
Shaan Puri: What do you think, Ben? Was today uh where were we with it or what?
Sam Parr: I thought today was a hit. I thought today was a huge hit. This is uh Yeah, other than like the Steph Smith episodes or Rob Dyrdek, this is uh this is A+ territory.
Shaan Puri: Oh, great. Are we going to have to cut out my uh democratize these nuts? No, no, no. Don’t do it. Yeah. And then well, so we we have to plan the MFM summit. So uh I agree that making a destination is cool. I have a thing that I I you’re going to have to bleep bleep out what I’m about to say, but only I know the thing. I know the thing. Yeah. Yeah, I got the guy. I got a really like famous house that person might be interested in hosting us. I don’t know if that But that’s just going to be a dinner, right? Like that’s going to be a No, no, no, no, no. We we might be able to do a proper thing there, but I don’t know if the logistics are going to work out. So I think but but I think that we could do like something outrageous. You know, I we have to think about what outrageous means, but I do think we could have something outrageous. I think a cruise ship, I like it that that’s that’s not a bad idea. A cruise ship or like some type of famous venue or fuck, we could just go to Hawaii. Just do like in the beach in Hawaii. We can figure something out. But we do need to do like a summit. I think if you get people to fly out, like if people are going to have to travel for it, I think to get the value, again, the the easiest hack is first make it a couple days where people get to hang and meet each other. So do make it like a two-day thing and then and then secondly, um just make it already fun if it was just a vacation if there was no content on top. But it’s like then you combine some content, uh getting to meet us and getting to meet other people in the community, plus already it was a good like kind of vacation type experience, then that’s cool, right? And like, I don’t know, let’s do like bring a fitness component, bring a like let’s bring all the components of the stuff we talk about where there’s like, you know, experiences beyond sitting down and listening to people talk. It’s like why not do a group workout or like let’s get an MMA guy to like, you know, take us through a set like take people through a session or something. I don’t know, like something like that.
Sam Parr: Down. All right, let’s schedule it. I I do you do you like that $500 price mark? Price point?
Shaan Puri: This, I mean, we should do this as an NFT, no doubt. We should make this an NFT and then only NFT holders can attend and then they can flip their NFT to somebody else if they want to, but make it a limited number of NFTs uh for this.
Sam Parr: Down. All right, that’s it. All right, that’s the episode.