Episode of My First Million with Sam Parr and Shaan Puri.
Transcript
Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.
Kind: captions Language: en most people should not be out there trying to build the next facebook and i think it’s kind of [ ] up that a lot of people try to tell people that’s what they should do most people want maslow’s hierarchy of needs right you want your family taken care of you want food on the table you want to be able to do the [ ] you want to do on the weekends and that’s it and so i like the portfolio actually better of a portfolio of small bets i think of buying businesses a lot like i think about buying stocks i feel like i can rule the world i know i could be what i want to i put my law in it like no days off on the road let’s travel never looking back sam you showed up i thought uh i thought you were too hungover from last night’s pod that went till two in the morning uh to show up today dude it went later for me i mean i didn’t go to bed till four what time did you what time what time was it over for you it ended but my brain didn’t turn off so like i don’t even know if i slept last night i straight so we so cody we had um biology on the pod yesterday and uh i don’t know if you know how yeah kind of a real smart smart dude and he definitely um you know has like a ton of different ideas and thoughts and he’s like super super smart on a math perspective science uh you know technically for computer science uh and so he was you know rattling off a bunch of interesting things but when he left and i’m going to sleep and it’s just you know you know i’m sitting there i’m in bed my dog’s in the bed and like my mind is like making up a straight up i was just making up like scientific theories in its head like you know that state where you’re dreaming but you’re you’re like lucid dreaming or whatever you’re like kind of like half asleep and so i was half asleep but my mind was like oh but then the vector has to go to the scalar and then it has to you know the order of magnitude and i was like then i’d wake up what the [ ] am i talking like what the [ ] is going through my head this is not even this gibberish this is a scientific gibberish and that straight up happened like the whole night so i’m not a great be prepared to be underwhelmed in comparison to him today i think is the moral of the story well he uh he’s just like like we’ve had a i think we’ve had one other person on the podcast like i guess michael saylor could be this but i i for sure think that uh rahul from superhuman was like this but there’s like these a handful of people who we’ve talked to and you know people say like oh that person’s a genius they’re not they don’t really mean it but if we define genius as just like a certain iq i would bet a lot of money that that he was the highest iq person that i’ve ever had a conversation with and it was very obvious and he actually was quite he tried really hard to hide it in that he tried to act nice and friendly and there was times where he was like sorry you guys probably don’t understand that let me try to re-explain and that was that was actually pretty cool but he just his he’s just smarter than me like his he’s his oven just burns hotter and i there’s nothing i could do to try to understand that like i remember one time i didn’t want to embarrass sean but like biology was telling something and he used up he used math metaphor he’s like he’s like what i try to find is the dot product between me and this and i was like dot product i remember that like in eighth grade i heard this phrase 15 years ago didn’t understand it then never ever thought about it again and then he’s referencing it for like the way he thinks about something he’s like you know so i try to find the dot product and i was like [ ] i don’t know what that means wait but he what like he went from math so he was talking about math to talk about an idea and then he moved to like uh this one battle like some type of chemistry and then he went to the battle of the balls and he goes to shot he goes sean you know like you know like it’s a battle of the bulge right um and john was like yeah and he’s i don’t think he knew what the battle of the ball was yeah anyway it was an interesting podcast but this could you imagine how like you felt like that last night sean could you imagine being in his head every day or at like a dinner with normal people he probably wants to kill himself yeah we were we even asked him about that stuff uh we were like you know we asked a whole bunch of questions that were like i hope not even like condescending but we’re kind of like were you always like this and like what did your family think like were you like an oddball to them or are they like was this like totally normal because i’ve never met somebody like you so i want to know like what’s your life like what do you do for fun like uh you know how does this all work and so we asked him a bunch of goofy questions like that actually unfortunately the best the very best part was at the end after the recording ended and we just kind of after a three and a half hour podcast we then shot the [ ] for like 30 minutes and it was great and his guard was totally down and uh that was awesome and then sam started helping him with his newsletter tips and he was like taking notes and he was like oh this is this is great this is awesome stuff and like that was ironically the best and simplest part of the podcast and we have like three and a half hours of like good stuff but in a i mean the way you said it his oven burns hotter than ours uh and so you know i didn’t feel like we were able to really add too much to the conversation or really like steer it because i was like riding a bronco that i didn’t know how to ride basically it’s too smart for me i love that can’t wait to hear it anyways so uh with that out of the way welcome to our guest uh cody’s cody’s here so uh cody i guess like how do you explain yourself uh when you kind of introduce yourself because you have a newsletter that’s pretty cool you know uh this country and cash flow newsletter you have an investment uh fund and business there you have built and owned businesses i think majority share in some businesses so like what do you how do you describe this jack of all trades so hi i’m cody here’s what i do what do you say well i think if i’m on an airplane sitting next to somebody i usually tell them i’m a sales person so i don’t have to talk too much uh but in a conversation where i was trying to impress somebody you know i’d probably say i’m an investor i am a private equity investor i run a fund that’s about a couple hundred million bucks focused on cannabis before that i did emerging markets couple billion dollars raised there and and now i write about all the things i wish i knew when i was first figuring out anything to do with this green language of money and i do that at contrary in thinking and i mailed the two but i think these days that’s not that weird there’s a ton of vcs not so many pe investors out there probably that write about investing and share their ideas and i kind of think that’s probably the future and where it’s going going forward you you i didn’t know that i knew that you had the newsletter but so you have you run a 200 million there’s five partners but yeah we have a 200 million dollar cannabis private equity fund we invest in companies that do like 10 to 50 million dollars in revenue largely it’s called entourage effect capital and uh we’ve invested in 67 companies thus far some cool ones um that you all would know i think there’s been six unicorns in there thus far so you know um you guys maybe know gti green thumb industries acreage canopy growth uh cura leaf i don’t know if you’re big weed connoisseurs you know them and then uh and then we have a smaller fund that’s about 20 million bucks that’s for micro pe so that’s just me and a couple other partners money where we buy small businesses and that’s if if we’d sort of fancy and not fancy i guess trendy uh then the other one are super boring and things that you know your your father did when you were growing up and you didn’t tell people about and that’s like uh give us examples we’re talking laundromats we’re talking um what are we talking about plumbing businesses what are you looking at actually the first one was a plumbing deal we started it because my uncle ebb uh he had a five million dollar business let me make sure i get the numbers right that was doing about two to three million dollars in profit and he was old you know 70s ish and he was a shared crop he grew up in a sharecropping family um didn’t know anything about the business world and when he came to uh retire he didn’t know anything about m a so instead of selling the company he basically just wound it down and uh and you know he took a company that had two to three million dollars in profit and just just you know let everybody go and and sort of wound on the business and i thought that was a real waste and so um we realized wait a second there’s actually like a business model here it’s called pe i’ve been doing it for 12 years at goldman and vanguard and state street and all these different firms why don’t why don’t they apply this to these micro sized businesses anything below three mil and uh instead of us making a bunch of money for other people we could make money for ourselves so we ended up taking an offshoot of ebb homes plundering you can look it up it’s in phoenix and we bought a another plumbing company rolled it in sold that one that was a little tiny company and and then i’ve done it for a bunch of others and now we own laundromats we own a podcast production company uh we own some lawn care businesses we own a professional services business it’s in the cleaning space so a slew of tiny sort of boring businesses and most of the time i don’t operate any of them there’s somebody else that’s an operator in them or we place somebody in the business uh we love this model me and sam both uh a couple of our best friends started a kind of micro pe firm we invested in and i think have been i don’t know sam i don’t know how how closely you track them but we’ve been i’ve been learning a ton as they look at all these different deals and it just seems like there’s a huge generational shift of people who are aging out of their business and need to hand it off the kids don’t want to take it over necessarily or aren’t able to or whatever and so basically the boomers handing over businesses there’s just like all these businesses that are beautiful five fifteen million dollars a year profitable super steady book of business um and you can you could buy these out like super yeah it’s like a 65 70 year old mom and dad whose kids went to a good school and they’re like uh i’d rather work at facebook than run the moving company please i don’t want to do that uh so and they’re like all right what do we do now 100 uh and that’s what these guys are buying it’s going great uh like i get their updates they’re making a lot of money and so yeah good for me can you can you draw a quick line so like let’s do a quick uh hop through the resume because so people because i think where you’re at now is super interesting anytime i meet somebody who’s in a really interesting spot now i’m like how the hell did you get there uh so you said something like goldman but without going into the details of like i did this and here’s how it went just sort of like i went to school thinking i’d do this first job was here second job was here third job was here now i’m here like can you give us that shirt and sweet uh so i went to school totally unrelated to anything financial i’m not really a finance nerd at the core um i started off in human uh trafficking and drug smuggling as a journalist not doing it but along the u.s mexico border so um so i was covering things like uh you know old people being left behind at the border and um you know went with a couple coyotes and actually saw what the process was and anyway super young at the time i thought i was going to change the world to realize like ah you know britney spears shaves her head and nobody cares about these stories so maybe there’s a different way and so anyway uh so moved from uh journalism to had my little quarter life crisis and decided that maybe i wanted to understand finance because my last name sanchez all these people’s last name was sanchez suarez whatever the case may be and i was in a very different position than they were so i was like what’s the difference why are they there and i’m here and i think the only difference is green it’s not actually even that i’m american and so went to from there i got recruited to go to vanguard accelerated development program saw a bunch of parts of finance didn’t understand any of it but journalists we asked a lot of questions so it’s pretty decent at that so asked a lot of questions got from vanguard they’re all about passive investing right so create an index that was at the very beginning etfs and create an index and replicate and replicate and replicate and i thought that was cool but not that sexy or fun so i went to goldman and i wanted to understand active how do we do ipos what do these alternatives look like because they’re more margin that went from gold men to state street ran international investment business for state street at the time and then left did a jv with a company called first trust and built out their international portion so i grew the business to a couple billion in latin america and uh and basically we sold products to big pensions sovereign wealth funds etc and then after that business i was ready to exit myriad of reasons and looking for the next emerging markets uh and i started invested in cannabis a few years back but real quiet i wasn’t sure my mom would approve and uh and then went full in as a partner into eec what’s your um um what’s your heritage you said that you’re are you i you’re talking about the point my father’s half so i’m half spanish half mexican are you catholic yes me too so a mexican catholic mother probably wasn’t a fan of uh oh yeah she was thrilled maybe this baby’s a weed financier she was really excited about it um just making daddy proud but um you i think once we kind of understood i mean here’s my pitch on cannabis but once we kind of understood the you know psychoactive portion of it and the benefits for those who are overusing opioids like i got her around to it but certainly up front she was not thrilled about that but that’s when you know right when people think you’re a little crazy for doing something there’s usually at least some opportunity left otherwise all the smart people would have moved first and i’m not smarter than anybody else i’m just better at maybe finding some early emerging markets people won’t go into yet and i thought you would be a great guest for two reasons a i went on your thing and you were so prepared uh i’m not anywhere near as prepared for this as you were for me unfortunately but i knew enough which was like oh she’s great at talking and uh which is like half the battle and then the other half is like oh wait she’s wicked smart with a bunch of industries that i think people don’t know a ton about so micro pe i know there’s a lot of people interested but for most people it’s a little bit daunting they don’t understand how to identify the business how do you value them how do you buy them what do you do after you buy them that sort of thing and then same thing with cannabis uh people kind of know it’s a big market but don’t spend you know if you’re not spending every day in that world you don’t know how it’s going how what’s what’s been growing and so you sent us a bunch of things so you sent us ideas on the micro pe side you sent us ideas on the canvas side and then you sent us some controversial thoughts sam where do you want to start uh of those three uh the ideas particularly the she posted something in trends about mailbox mailboxes which so like you just have five or eight different things that i think are interesting they’re not like huge home runs but they’re small business entrepreneur like stuff [ ] that like an immigrant who came from nothing like would start and then eventually did that for 30 years and they would have like a [ ] empire let’s wrap it up let’s rapid fire them and here’s how we’ll do it uh you sent us this bullet point list i’m just gonna say the phrase and you’d be like okay so here’s what i’m thinking and then if we just want to switch if i’m like okay that’s great i’m just gonna throw another one at you and then you go from there i think you’ll be able to volley these pretty well all right let’s do that one mailbox money what are you what are you thinking about here so this is pack and ship centers so basically think fedex ups except get rid of the franchise fees because that’s 25 of your your profit off the top and instead you just put you know sam and sean’s shipping center on the front of it and what this is that i didn’t realize my friend lisa did it i’m always curious for my people who make money in ways that are repeatable since i’m not smart enough like biology or whatever his name is to create the next tesla instead i just want a bunch of stuff that cash flows now um and so with this you know how everybody’s obsessed with storage units everybody builds these storage centers and that’s been like a sexy thing right and and that’s really just a riff on everybody was obsessed with multi-family and apartment beforehand they’re like going smaller and smaller and smaller but still trying to get as much profit as possible well that’s what packing ships are so essentially the money is not in the taping of boxes and the stuffing of stuffing to make sure stuff doesn’t break it’s actually in the little mailboxes in the front uh oh i was gonna ask you what do you think of this po box rental so at first i like the trend which is you’re buying a box of real estate and you want like kind of these low operation you know rental units so okay self storage but now you should shrink the self storage unit instead of being you know 100 square foot little room you’re shrinking it down into a one square foot box that you’re renting out for 20 bucks and what you were saying so let’s just do the bathroom quick on this you’re saying 200 boxes in a location roughly is that right 200 would be what you don’t want that’s ups fedex go a thousand okay okay okay gotcha okay that now the math works so a thousand boxes average fifteen dollars a month of renting out the po boxes and how do you get customers to like what does she do to get what is your friend lisa do to get customers how does she acquire these po box tennis well i the smartest way what i talked to her doing she built the first one that took a year and a half to become profitable because she had to do what you were just talking about it’s not really that complex of a business it’s ads so ppc it’s dropping actual hard mailings in the surrounding neighborhood it’s things like she does like a book set up out front little pop-ups for the neighborhood where you can like you know free packing if you ship this day all that kind of stuff those squiggly arm things you know that you put outside of a new unit all that stuff and then uh she uh but but the second store i told her to buy and so what she did is went out and bought an already an existing store that had customers and then just up sold them and that’s a much easier way to do it and so you buy the store for about two to three x profit her second store she got for about 1.5 x retiring uh owner and then she was able to take that business and sort of double the revenue for that one uh i like this idea i actually might steal this idea because um i just rented out a big warehouse for my wife’s uh business and one thing we could do is just put a bunch of these mailboxes in into that space and uh and just actually offer this as a sort of a simple way to take advantage of a small footprint of real estate yeah i think you have to decide what type of human you are like if you are the type of human that has a capability to build up a really big business and that’s what you in fact want to be a ceo of a puzzle or to be a ceo of an even bigger company then i think the roi on that is potentially more interesting long-term you’re not going to get the same type of multiples with these tiny but here’s the thing most people are not like the three of us and i don’t even know if we’d all be in the same category we’re all different in the way we’ve built things care of you want food on the table you want to be able to do the [ ] you want to do on the weekends and that’s it so how can i get a little portfolio of them with somebody running or operating them so that my risk is diversified and you’re right it takes more time but if what you’re really going for is i want to make you know two hundred thousand three hundred thousand five hundred thousand a million bucks a year and that that is my goal not to change the world there’s so many better ways to do it than do a startup in my opinion yeah i’m 100 with you on that uh i think that build versus build verse buy is so slanted towards build because building sounds sexy building sounds like virtuous it’s what the media talks about and it’s really unfortunate because i know a lot of people that would have been really happy with 250k a year of profits um and low maintenance low headache and um and unfortunately they get sucked into either one of two paths it’s like i guess i’ll do the startup thing because i want to be entrepreneur i want to be kind of my own boss uh so then i gotta like do this from scratch find product market fit like damn that’s hard and the other path is like ah that’s that sounds really hard i’m just gonna stick at this job and um and you know i’ll be an employee for the next you know 25 years and never really get that freedom because i’m sort of on their schedule i’m basically renting my time out to this company and so the the bypass versus build or join i think bi gets criminally underrated right now but i think it’s changing like we have andrew wilkinson on the podcast a lot and one of the reasons he’s so popular is that when he says what he does there’s a hell of a lot of people out there who are like [ ] i want to do that that sounds fun uh that sounds like an easier path than the one i’m on right now and so i think it’s quite appealing yeah sam you want to jump to one of these other ones that sounds interesting to you we got i see a bunch that i know you’d like tiny homes buying distressed assets for zero dollars laundromats which one you want to do oh no we got to tell you sam the audio’s gone again okay sam has uh peaced out the technical difficulties have overcome him and he cannot continue on he is he is out of the game uh okay i’ll do one uh so i want to talk about just buying distressed assets for zero dollars is this something you’ve done or why did you bring this up on the list yeah so this one is one i’ve done um and actually there’s an example of it i’ll give you the actual example so i have a friend brittany who owns a bunch of gyms and not a bunch she owns two and they’re like you know like the gyms that um a lot of women go to where they have you know set classes and you know they all get in and work together it’s kind of like women’s crossfit but not with big weights anyway so she owns a couple of those like shapes without the franchise basically exactly so um she was telling me that a bunch of her friends their businesses pilates studios bar whatever were going out of business right during the pandemic and um what was fascinating to me is she was like so i’m buying some equipment you know i feel bad for them i’m helping them out i’m like the way we got to do this is think about those businesses they’re going under and they’re worth now zero to the market but they have value so you know they’re not getting anything out of the client roster that they have all the goodwill that they’ve built up so what we decided to do was reach out to some of these gym owners and basically say hey you know i’m really sorry i know you’re going through this terrible time what if we could help annuitize you a little bit where you could get some revenue off of the business that you’re about to close for xero and instead we can do a rev share and so i own a business right now we’ll transition over your clients from your business to mine very carefully very thoughtfully but give them a new home and then for every client that we bring over from you i’ll pay you out on it for a year or i’ll pay you out on for six months at x amount and 24 months at y amount however you want to structure it but this way you actually make money while you’re closing your clients have a new house and we have new clients and we can serve them and we’re friends and you like me anyway and so this business what to me what’s fascinating is nobody’s doing this that i know of like i if i owned any business i would be out there right now for every business closing on yelp sixty percent of the businesses on yelp that close temporarily close per permanently so i would be out there right now going after every one of their client lists even if they were unrelated and doing discounts and coupon codes giving a rev share to the owner who probably could use it and taking their clients base and that’s how i would buy distressed assets i wouldn’t spend a dime i love that i think that’s great uh if it’s basically you’re picking up the assets and none of the liabilities so you’re not buying the business and then having the rent and then you know having to bring that business back up you’re basically saying what is the what is remaining as an asset to this business um and it’s the customer rolodex and i think that’s a that’s a great one that costs xero out of pocket from day one it’s just profit share uh you know if if a customer does come on over to you so i think that’s a great one let’s talk about um modular homes or tiny homes i think you have a couple of ideas on this so uh do you have one yeah we bought a modular home which i didn’t even know did you know there’s a difference between manufactured in a modular home there’s also weird terminology no like i actually this is what i was going to ask you is like i thought a manufactured home is a modular home no there are two different things i guess so manufactured home basically means it’s what we think about like stereotypically right it’s a it’s a trailer home basically all the difference is is that there’s no foundation set so you can pick that bad boy up and you can move it right that’s manufactured modular is that it’s built in pieces which is modular what that means but it has a foundation so at the end of the day there’s really no difference between a what is called a stick built home a house that probably you’re living in that i live in right now and this modular home but the crazy part is is well one we’ve all seen these cool modular homes all over the place popping up but i was surprised i’m like they don’t really make sense not at scale they’re not that much cheaper and they’re not that much faster when you just drop one on your property and i did a bunch of research asked a bunch of people they’re kind of sexy but they’re not that much cheaper but when they are cheaper is when you do them at scale and i was i was surprised that there weren’t any developments that did this and so i started scouring the country found a few one in park city and bought there and the numbers were amazing and i bought it so i know they’re real we bought our house for nine hundred thousand dollars in park city and um on an acre three thousand square feet the average price average or median is like uh 2.5 million dollars in park city so the cost that they were able to save was so amazing and they didn’t pass it on to the user fully i think they weren’t sure if we all were gonna actually buy into this but the houses are super sick and i think that’s a model if i was a developer i’d be using those all day long and and i’d probably buy a modular housing company and then use it don’t you think right yeah and so when you look at that home today can you tell basically this is anything but a normal home like is it aesthetically different uh once if you didn’t know coming in what it was so i’ll drop you the link right now i’m not gonna say where it is just in case anybody wants to come yell at me about something stupid i say online um but uh i’ll drop you the link and you can see the difference but no it’s super sweet looking so it’s it’s kind of the open concept big windows whatever the case may be and uh and you can’t tell the difference the only difference really is that the turnaround time so we bought this in december of last year or january february i don’t know and it’ll be done by july and so it hadn’t been built at all are you going to add to it like are you gonna have more modules to it so i’m gonna add a back office like module and then what we did is we got like five or six of our friends to buy in the same community and they’re cool looking and so i think i’m going to do some event or something and utilize the four or five of them and then you could have it as a tax write-off because it’ll essentially be like a little business okay this house is sick and so the company that’s doing the development the company that’s doing the development here they are not the actual uh manufacturer so there’s three layers right there’s the manufacturing level then there’s going to be probably some delivery layer and then there’s the developer who’s doing a development marketing that and then there’s like kind of the individual home buyer uh beyond that so have you looked at the manufacturers of this yeah so that’s where this one’s interesting the builder and the manufacturer actually in this deal together so they do own the modular company and at least a portion of it and then the builder is one that’s built this in a couple other places they also have another location that i think is cool and also could work at scale which is modular tiny hotel rooms essentially and i believe that’s in jackson hole wyoming and the economics are just so fascinating because you know our modular home will be built in less than six months it’s about a third of the cost the square footage uh if you break out by square footage it’s about a third of the cost and then the part that’s interesting is in these locations where they’re the weather’s terrible you know and you can’t break ground very often they um they build it all in a warehouse so it’s fine they lay the foundations all in one period of time and then boom boom boom boom do all throw all the houses up as opposed to everybody else in park city has to wait like you know two years or something like that so we’ll see but so far so good okay this is pretty sick i like this one um i’m gonna jump to more because i want to see uh what these other ones are all about so talk to me a little bit about let’s do a couple of the controversial thoughts um i’m gonna rip through them pretty quickly and uh and so let’s let’s do the first one number one angel investing is largely dumb is that painful because we both are angel investors too and you have a rolling pin no i actually i actually say this i say this often and people are like you have a rolling fund and i’m like yeah uh i don’t of all my investment types that i do this is i would say the worst one but i think it’s still good and fun and i do it anyways but i have like two or three better ones than i do besides this yeah so i think you know one of my uh good friend’s name is justin donald and we’re both pretty obsessed with deal structuring one of the biggest things i have a problem with with angel investing is it’s it’s too fun it’s like gambling right like you get excited about the founders and guess what founders are charismatic that’s how they raise millions of dollars and so you end up getting sold and it’s not their fault and then you know there’s fraud and you know i wrote this whole piece about this one guy that we lost to two million dollars with because he just was super egotistical and like big images of himself on the wall like all this stuff later that i got added to my due diligence questionnaire of like how many images of yourself do you have in your office but um but the uh the thing with angel investing is you know this you need like 20 30 40 deals for every one to four that are going to go through and so i think that the other thing that we do a disservice is telling people to invest in angel early on once you’ve made a few million dollars and i mean that literally then i think go into angel investing or if you’re on a path where you’re making really good money and you’ve made at least half a million a million bucks then i think you can start angel investing but until then you know let other people lose money and learn from it you said it like you were like take a take a you know docusign image of every deal you want to do write down how you do it time stamp it so people can see and then decide later on how good you are at it without burning through a few tens of thousands of dollars yeah exactly uh okay so i have a bunch more thoughts there but i i largely agree with you and i would say like it’s one of those here’s my red flag is in order to talk in order to justify angel investing you have to give a blend of reasons it’s like well it’s really fun uh i like learning about the you know the future and the mark and these are all true things by the way so it is fun you do learn a [ ] ton so it’s like an education um you can make great money if it you know pans out as you assemble your basket you know you should over a you know you should you know be netting you know a 20 plus irr it just takes a long time it’s a liquid um and it’s like not too much work um because you’re largely investing in your network that you’ve already built for 10 years like that’s kind of the thing and so there’s like this blended reason and anytime you have a blended reason it really means that there’s not one really great reason to do something um and so those are always like you know sub-optimal choices i find for myself at least whenever i have to come up with a blend and so and because i tell everybody this around me whenever they hear me justifying something with a blended reason they’re like oh interesting so that’s a pretty big blend and i’m like oh yeah we should just not do it never mind take it all back um because i’m giving you this huge list and instead of just saying we should do this because of x right like we should invest in this business because it’s growing like like a weed and if it wins it’s going to be this big that i can get behind and some angel investors do fall into that but the act of angel investing as like a job or a hobby is um is like it’s more like when you describe playing basketball with your friends like oh it’s great i get to hang out my friends i get a good run in i get exercise you know i i you know it’s i get outdoors it’s like you’re giving this blend of reason uh for doing the the really fun thing you just really want to do and you’re justifying it but the reality is you just want to do it your brain comes up with reasons afterwards i think that’s exactly right yeah the only caveat i have to that is if you can go later stage deals which now you can do with a lot of the late stage uh angellist syndicates or if you can structure debt like if you can figure out a way where you start earning interest day one on a startup that actually has you know it’s a little bit later stage and so it has some revenues or you could you know get into a debt deal that’s on some of its you know factoring of the invoices it has like there’s you know people always think of equity with startups but lots of startups prefer debt so do debt with like a equity warrant kicker on it and you can actually make money from day one and then have some equity upside and that i think is interesting but you know throw the y combinator term sheet out the window because it’s not going to be on that right um and all that being said i’m still gonna angel invest uh because it’s because it is fun um and it’s you know it’s a hobby that makes money so okay so let’s do another one public market public market investing also kind of dumb talk to me there well this one i like to talk about a lot with big investors because if you look at the forbes 100 list there is not one person on there who made their money from just investing in the stock market and then this is where people are like cody warren buffett carl icahn and it’s like i remember i was at goldman in 2009 when do you remember buffett did the deal to invest a bunch of money in goldman to stabilize it yeah yeah so um i was there then and it was not a public market deal warden didn’t go out to the street and buy a bunch of stock he had a ton of warrants and options on top of it it was a total backroom deal and that’s the only reason that he did it because he basically had this huge asymmetric wrist right where he had a bunch more upside than he had a downside and that’s the same thing with icon who tries to affect the outcome so my point with people especially these days with like games and all the madness and stock investing is like if you don’t have an unfair advantage if you can’t like write down why specifically you’re gonna win instead of somebody else you should be really careful speculating on stocks because the big boys don’t really do it uh yeah i have a cousin who runs a hedge fund and uh when he told me kind of like all the different things that they have at their disposal i was like oh okay i’m i’m coming into a gunfight with like a fingernail uh that’s kind of like how how uh lopsided it is and i so you know so so that being said again i think this is important to say skin in the game here do you own any public equities and uh so despite this do you just do like vanguard do you just say oh here’s 10 companies i believe in i’m going to do that or what do you do yeah i don’t hold any individual stocks for speculation purposes i invest in indices and i’m not saying this is right or i’m some guru i’m just saying i don’t think i’m smart enough to beat the market and so i don’t play games where i don’t like the rules i’d rather write my own rules if at all possible so i go you know equity indices vanguard you know whatever the case may be i like vanguard the best um and then i go uh mutual funds on alternatives private equity reits where you can actually have an unfair advantage but i don’t speculate on any individual stock now i don’t i mean would i own apple amazon facebook whatever would i make a play on twitter if i thought that might be fun yeah maybe um but i think there’s so many easier ways to make money with private market investing and buying as opposed to having to deal with the irrationality of the crowds right i mean do fundamentals really matter in today’s world or is it whoever has the best ir and doesn’t have some crazy thing the ceo said or done right uh yeah exactly uh have you ever heard this term a keynesian beauty contest no what is that so uh named after i think the economist uh keynes yeah basically the the idea is that this is how the stock market works so a keynesian beauty contest is where you don’t just uh send a normal beauty contest you sort of just would assess uh let’s say the contestant that’s that’s on the stage but in this case the way the stock market works is it’s not you assessing the true beauty of the thing it’s you guessing what other people will value it at who are also guessing what other people will value it at and so it sort of is this like extr you get these like really warped things happen because everybody is not betting on the thing they’re betting on what the other people will do about the thing and everybody knows that everybody’s betting on what the other people will value the thing at and so you get these like really crazy um sort of out of whack things that that aren’t you know value investing uh at its core yeah i totally totally agree let’s do a couple more so uh buying real estate at auction so a way to buy real estate at a discount talk to me about this one i’ve never done this yeah this one’s fascinating so for instance let’s use texas well sam’s in texas right but um i like texas because they do this thing where they actually sell real estate at auction on the courthouse steps of each municipality or city previous to it going on zillow or redfin or whatever the case may be like we’ve all seen those are these foreclosed is it foreclosed properties that you that you get there or what what type of properties are yes so foreclosed is really when it’s listed on zillow and redfin and so that’s sort of like this post auction step that’s when most of us see foreclosed properties right so you’re like oh no i know how to buy foreclosed i can go on redfin if it says foreclose i can buy it well prior to that you have auctions which actually are the bank auctions of bankrupt properties or foreclosed properties but you get it before the street does and then you can even front run that one step further which is there’s a list of properties that are going to go into bankruptcy or foreclosure and the list in texas you can look it up right now it’s called roddy’s list r-o-d-d-y-s and on roddy’s list you buy this list it’s cheap like a couple hundred bucks and you can get the list of all the properties that are about to go foreclosed and then you can door knock you can go knock on the door because even though it sounds predatory it’s actually not because if you go knock on the door and tell this person hey i’ll give you 200 000 for the house that you are in foreclosure because you owe 50 that actually gets them out of bank foreclosure and gives them the extra money that the bank uh was going to write off for them so this is buying on the action steps and i did it with a friend of mine aaron mitchusdeggi who’s a stud at it and uh and it’s wild millions of dollars of transactions in cashier’s checks happen same day on the courthouse steps why can’t somebody bring that online so why is nobody built basically the tech platform that says great we go to all the court steps and then we you know sort of flash list these things and you can sit at your lap i can you know sean he’s he likes this idea he loves getting an edge but he’s kind of lazy and so he doesn’t want to go do all this stuff um why doesn’t somebody bring that online maybe like roddy’s list i guess is an example of that bringing that part on mine um what about after that well i think you could there’s a couple things that you need to do in real life like you have to validate that the house exists right and the the couple keys to the actual auction game are that there’s some part that is just you gotta walk the walk so you could go and buy a house at foreclosure and look at it on google maps but google maps is an updated same day so that house actually might have burned down last week or a month ago and i know somebody that that’s happened to or the house if you look at it on google maps you may not be able to tell that the inside of the house or you know the back end of the house is totally blown out so you’ve got to kind of go walk the properties a little bit there’s one part of it right and then the other part is it’s about debt and who owns the debt and like one thing i’ve realized about wealth over time is um debt is just about everything you should always look for even before you do a startup investment is there any debt on the company am i in a first lien does that you know do i have first access to money if this company gets it in some way and it’s the same with a house so a lot of these times they’ll have a lien on the property that’s like this is weird this is actually an interesting business for you guys to look at like one of the biggest predators on uh low-income home uh owners is you know those faucets like the little water purification faucets that you have in like your house yeah so um oftentimes those are put in houses by people that come door to door and try to sell them to people and and they use it by doing a lien or applying debt to that person’s mortgage and so you could literally have a lien before you for like 1500 that hasn’t been paid so it’s now worth like 25 000 because the interest is 10 or 12 percent and you don’t even realize it so you do have to yeah so you do have to go actually figure out who owns the debt on the house and you do that again through a list like roddy’s list that will tell you who owns the title to the house but none of these are big problems if somebody can list houses on zillow like zillow now buys sight unseen you could just have apis in from roddy’s list from the local county uh location you could probably have updated google maps locations and all three of those things triangulate to go online i would imagine i like it um and uh roddy’s list is only texas or that’s only texas but there’s tons of them so usually you have to go to the county registrar and they’ll list how often they do how often do they do auctions so in texas it’s every tuesday in california depends by city and county but one of the interesting things is like the biggest buyers of homes in california for instance uh in in this downturn in my opinion is going to be the government because they’ve essentially made it where if this is not your primary residence you cannot buy these foreclosed homes at which is a crazy change but in 2008 that’s what happened all the pe firms went to all of these little municipalities and scooped up all these houses and got them at pennies on the dollar the only thing that is true about this is you need cash you got to pay cash so these are you know you’re coming with a hundred thousand dollars in cashier’s checks to buy this house and an auction and buy it at auction right yeah wild and i gotta just attend one of these to to see how it feels um okay we’ll start we’ll end on these last two um you wrote uh how to collect cool people i don’t know what collect means in this case but is that a typo or did you really mean how to collect cool people i did mean that well actually i wish sam was here because he would laugh at this one but um so one of the things that i think is important for investors or vcs or anybody um i guess really who wants to be in the startup game is like how do you make a connection with a human like you right so you know we get to know each other on twitter i kind of retweet you a few times but before the social media game was there um how i actually met sam originally i liked one of his articles that he wrote in the hustle years ago and um and i just did some research on sam and was like you know i just think he’s gonna he’s gonna do some stuff i don’t know what the hustle was small at the time uh but i think i want to know him and i want him in my rolodex in some way so i could bother him about things and um and so i found out what his favorite candy was which is butterfingers i don’t know if it still is now and so i shipped him this ludicrous sized box of butterfingers right just like a [ ] ton of butter fingers to the point where like he didn’t have a lot of choices except to like call me back and say like you know what thanks um and you know sam really well i mean he’s not always thanks and what the [ ] yeah exactly exactly and so anyway so and then i did that with another good friend of both of ours noah kagan except it was something about tacos at the time because that’s his little shtick and i sent him a shirt and so the whole point here i guess was kind of like people these days will say i’m sure they say it to you well but sean you have this huge network of course you could raise a fund this way or you know sam of course you could do this you have this giant rolodex of emails you know i didn’t have any of that at the time i was in finance we couldn’t even have social media and i think those are all excuses and instead you should just get kind of obsessed with the people that you think are interesting find ways to connect with them and you can even do it in an old school manner which might work more today than ever because dms and social media are inundated and uh what’s your uh what’s your next move so if the butterfingers and the tacos are the pickup line and that’s great because i and and this happens to me and i i always feel like well you did break through the door like i i see you and i hear you and i kind of check you out and i’m like okay cool um but honestly like most of the time when that happens i don’t like become buddies with them and i think that’s what they want it’s i sent you that shirt like i sent you that thing because you said you said you like this and that so i sent it to you i’m like yes i did appreciate it but like i didn’t necessarily go start like a bromance with you after that so uh what is what do you do let’s say with your follow-through what do you do in those cases to like turn that little like you know funny just sort of like hey love what you do i’m a fan uh here’s a bunch of butterfingers uh what did you do to turn that into more of like a peer relationship after what would you do yeah well i think a couple things one you got to be doing cool stuff to hang around cool people rule number one right right so like prerequisite exactly yeah so like you know i don’t care if i was backing up a dumpster truck actually that would be i would probably be doing cool things if i did that for for sean but um but you know you have to actually be out there creating the thing to be around creators so i think that’s rule number one and it’s to have the lowest expectations humanly possible right like i don’t want anything from sean i didn’t want anything from noah i just wanted them in my circle and then to ping them sporadically with random stuff so i think i got noah like one of them his investments that he did i pinged him uh on it like he actually had a question about something else i he put it on twitter or something and i sort of responded and said oh i knew that person so it was trying to serve them a bunch of different times and then after doing that continuously which is very similar to what i do with founders when i want to invest in them they’ll eventually be like cody just she kind of solves problems for me or she does interesting things and makes my life easier in some way and doing it without being too you don’t want to be a creep you know i think i do think when i first uh engaged with noah and i can say this now because we’re buds but i think he was like is she hitting on me like what’s happening here you know does she like me and i was like no dude i’m married sorry um so you know but also just having no shame like i don’t have an ego i’m not trying to prove anything to anybody and i think that’s important what do you think what would work for you would that work for you uh yeah that that that’s so so the thing you said that that works for me is first and foremost the ultimate networking hack is be interesting okay that sounds easy what uh that sounds like okay i can’t do anything with that well no you actually can which what is interesting to other people is somebody who either knows stuff in an area that other people want to know that that thing so if you’re an expert of a certain area cannabis defy just be knee-deep in it and you don’t have to be like a power player just the knowledge is actually quite useful um the knowledge network or be doing interesting things so if i see you out there actually making [ ] happen in your field and it doesn’t have to be a big you know so you don’t have to be doing spacex like we got to be doing something so what doesn’t work is the opposite uh you reach out you ask me for something you ask me for my most valuable thing time um without offering me any reason why i should give you that time and maybe i will anyways because i’m just in the mood but like you didn’t help yourself by like making it easy for me uh and lastly you’re basically saying hey i’m kind of doing nothing and i think if you talk to me then i’ll start to like do something or i’ll know what to do yeah and um and that’s not fun like you know so what what do i like i like people who are doing interesting things and then they reach out or i reach out either way doesn’t matter and in doing so they are like you said a non-needy person so they’re happy to give they’re happy to chat and they have low expectations one of the weirdest things is when people start with like hey big fan of what you do i know you get a ton of messages but i just wanted to put this on your radar uh cool great first message second message comes in like 19 hours later i guess you just don’t even care um you what’s the point of of this anyways you know like um i really thought you were a good guy but now i know the truth it’s like well what’s going on like you sort of pulled a 180 and now you’re really needy and desperate for some kind of response and now you expect things of me that i never ever offered to you um so i would say like you know just do the opposite of those bad things so be interesting uh don’t expect anything in return uh just give and give little bits don’t even give too much because giving too much it actually creates an obligation also so just keep it really simple share interesting things with the person share life updates if you’re doing cool stuff and be useful if they’re trying a project give them some feedback help them out reach share spread the word tell a friend whatever and uh let them know that you’re kind of you know in their corner that’s all that it takes really to like break through with most people and then from there um you know it’s either gonna work or it’s not and you know that that’s fine uh not everybody’s meant to be friends with everybody and that’s yeah and don’t ask to be uh mentored by anybody that’s my biggest pet peeve i’m like i can barely mentor myself you don’t want me mentoring you what are you not to mention talking about an obligation it’s like wait have you looked up the definition that means that i am supposed to lead you like on your path of purpose we don’t even know each other man right so yeah i totally agree uh yeah and somebody said this and i thought it was totally spot on um they said you know the easiest way if you really do want a mentor first first things first acknowledge that seeking a mentor is a advanced form of procrastination um you think that you need a mentor before you do the thing and in reality your mentor and all other people who succeed don’t use mentors as a prerequisite yeah they find people along the way that help but that’s because they’re just in furious motion and people turn and look who’s splashing in this pool and sometimes they go and they lend a hand and you know when you need it but they didn’t sit around say well if i get that mentor then i’m gonna do the things so that’s the first thing it’s a it’s an advanced form of procrastination and secondly the way you actually do form a mentorship bond is you ask somebody for a specific uh situational piece of advice so not just what should i do but like hey i’m debating between these two options how would you think about this or here’s how i’m thinking about it would you poke holes in that and then then you follow up which is where 95 of people fall off the cliff they get advice and they don’t follow up with hey i listened to what you did or i did a variation of what you did and here’s what happened uh people actually love hearing that update it’s they’re gathering data points of like what works what doesn’t and it just feels good that like you close the loop you get some closure on that that conversation and then you just say and now here’s the next thing like that’s that’s going on and you know some people will drop off because they don’t want to deal with you and some people will give again and then you do that the third time you say hey here’s what happened um and now this unexpected thing is going on uh and here’s how i’m dealing with that and by the third one you guys will know either this works um we have good rapport we see the world in similar ways they complement each other they kind of like my spunk and i like their experience and like it meshes and we should do this um or you’ll know by then that you know this is not the right fit and so how do that’s how you organically ease into having a mentor rather than trying to put a label with a stranger and asking them to commit to something that they you know don’t really necessarily want to do with you yeah you nailed it i also think this is like probably not very pc but i think it all becomes easier once you’ve achieved like a little bit of financial freedom like i think the less you’re focused on making money every day and like uh you know being in that sort of employee lane and you can do interesting things with your money that opens up a ton of opportunities so i’m i’m pretty big on like it’s hard to be ideologically free it’s hard to be time free it’s hard to really have any freedom if you don’t have financial freedom and like that all means something different to us like you and i might think that that means x big dollar amount where some people might be like no it’s just enough to cover you know the money that i need to pay today but that’s like one thing i wish more people could think about it’s like how do you how do you really get financial freedom so that you can do all the stuff you want to do um and then you know how do you get critical thinking freedom where you can actually learn to ask the right questions here’s the bit of insight i’ve had uh the realization i’ve had recently because i worked for like a decade being like financial freedom that’s what i want uh and even more so i was like okay i want to buy a house so that you know i want i want to have enough or i can give my mom a place because she’ll have a better life that you know if we can do that and blah blah blah and um so i thought financial freedom that’s the best kind of like that’s my goal right now i think a lot of people are like that and um [Music] and now uh that i kind of achieved a lot of those goals i was like okay uh definitely my goals just got a bit kind of bigger and uh you know it’s not like and it’s true i definitely do like carry myself a little bit differently and choose projects and people differently because i’m not like i’m not in i don’t need you for the money but um you know so i don’t need to do this for the money i can do many and money should probably come along with all of them and i don’t i don’t need near-term money necessarily um so so there definitely has been some benefits but here’s the realization i used to think about financial freedom like if i get x dollars then for me and my lifestyle that’s i’m financially free and then um for another person they might have a different dollar amount which i think is kind of what you’re saying and i thought that you know as recently as like a month ago and then i met um a bunch of people who have a way smaller dollar amount but what they have actually also is way fewer demands and desires about what they want out of their life um uh you know in a good way like they’re happy as is so they don’t feel like well i need x then i’m gonna be happier yeah i’m super happy right now and like great if i have more money like i’ll have other things but i’m not going to have more happiness and so um and so what i realized was that financial freedom is actually just it’s an internal question it is not about a dollar amount financial freedom is when you stop deciding what to do based on money that’s when you have achieved financial freedom and for some people it takes getting a large amount of money so that they can do that stop for other people it’s wanting less [ __ ] and then they can stop because they have less demands for money their their total numbers lower and for other people it’s uh more like you know sort of buddhist or monk like where they just sort of realize that it’s actually uh an internal attachment that they have to let go of and then they are now free uh the freedom is is uh freedom from your own desire to have more money and therefore you choose things based on money uh rather than the kind of mathematical definition which is well you like like there is also like a sort of technical definition which is you have enough money where even if you earn zero income your investments will pay your lifestyle uh and you won’t be sort of dip you know you’re not dipping into savings your savings are increasing at a rate faster than your life burn and there is that technical definition but i realize i know many people who pass that technical definition and still aren’t financially free and it’s because internally they have not actually freed themselves from what they need uh uh from this idea of like well i gotta do like putting money first as the choice uh as a choice of what to do uh whether it’s people who penny pinch or people who choose projects based on a financial return as the like kind of core criteria yeah anyways that’s the sort of i like that uh no i think it makes a lot of sense i think you know above a certain level like i get a little obsessed just with everything that’s going on economically in the world with people who again like aren’t maybe where you and i are like i almost think financial freedom might have something to do with your skill stack like even if you lost all of your money today or if i lost all of my money today as long as i have put as much relationship deposit as i think i have of other humans that are doing interesting things in the world you and i are never going to be homeless like pending catastrophic issue right because you can go to some of your friends and be like hey i’m actually pretty good at copywriting don’t you see look at my twitter account hey i’m actually pretty good at building these businesses i’ve sold a couple of so once you like get that skill stack you’re like i’m fairly confident worst case scenario i can go call up somebody and work for them um so i think there’s some mixture of the dollar amount in your bank what you need to pay not having a ton of debt and then are you competent enough as a human where somebody will always need your services and and you know and i think that paired with like what can you reason and think for yourself is a pretty powerful combo yeah don’t uh totally agree i think that’s great so give us uh we should wrap up we give us where where can people subscribe to the newsletter because it’s actually really damn good um and i don’t say that like actually i’ll i’ll say i would probably say that anyways if somebody came on his guess i’m like oh you have a great newsletter but i’ll just kind of shout out that i actually believe it here i’m not just being polite uh but you actually do a really great job and you’re like us you don’t shy away from the topic of money um you actually lean into it you say hey you know like a lot of people are interested in making money and a lot of people don’t know what’s under the hood of these different business models or businesses and so like let’s lift the hood together and let’s look at this how this engine works and how it what’s good about it what’s bad about it and how you might wait make it work we do that as a podcast you do that on your newsletter and we are very like simpatico as far as that that goes and so where can people find you and where can people find the newsletter so they go subscribe thanks for the shout out yeah contrarianthinking.com is the newsletter uh and then it’s cody sanchez cody underscore sanchez on twitter i think those are probably the two places i’m most rocking and rolling um and twitter man i’ve really found that fascinating in the last six months i think we’ve finally figured out how it works so apparently i’m a little bit more a boomer than a millennial in some ways yeah there you go uh cool and we’ll link it in the description so if you didn’t remember those just scroll down and click the links in the description to uh to find that of the podcast okay cody this has been amazing thank you so much i would like to have you back on at some point maybe we’ll break down a couple of the businesses that you’ve either acquired or been looking at recently and i think that’ll be a lot of fun but thank you for coming i’m in thanks for all the questions it’s always fun brainstorming with you i put my law in it like no days off on a road less travel never looking back