Transcription
I have seen a couple of videos from you where you talk about the things that you stopped spending money on, and there is a narrative that says, you know, in order to get rich or to save to get to where you want to go with your financial goals, you should not have the Starbucks coffee.
>> Sure.
You should not do these things. What, what did you stop spending money on, and what's your framework there?
>> So, I looked at, I took a look at my expenses from 2014 and onward and just kind of like saw the differences in how my spending habits have changed. The first thing I stopped spending money on are Airbnbs. So, Airbnbs used to be a great value. They used to be a unique experience, but these days they're all kind of commercialized. And I feel like with the cleaning fees and all these fees, you end up paying more for less convenience than a hotel. So that's number one.
I stopped buying food in bulk. I know that sounds kind of random, but, uh, I'm a single guy. Sometimes I, I get two gallons of milk and I can't finish it, right? So, I'm pouring milk down the drain, or I'm buying 48 eggs at a time from Costco and I'm just like, dude, like, I, I, I mean, I like the gym, but I can't eat 48 eggs in like two weeks or what, whatever that that time is, right? So, that's, that's another.
And then, um, another thing I did was I started to switch my car insurance because I moved into San Francisco, the city. I'm driving less. So, I used to drive 15,000 miles a year. I drive 3,000 miles a year now. And just by calling my car insurance, I was able to save like 40 bucks a month just because my driving requirements are much lower. So those were like
>> Explain that.
>> Yeah. So, you know, a car, a car insurance rates are dependent on how much you drive. And if you drive less and you, you move to a city, then your rates should come down. But I think some people are a little bit too loyal to their providers. They're not willing to compare rates because it, it's painful. You don't really want to do it. It takes time. Uh, but I think doing that, spending an hour calling your insurance provider, looking at different insurance providers, not just for cars, but for homes, too, you can save a lot of money because insurance is kind of commoditized. So, it's like you're going to get coverage from many different providers. You might as well put them kind of in a bidding war for your business.
>> I used to work selling car insurance. So, you know, I used to, it was one of my tele-sales jobs.
>> I've done that as well.
>> Yeah. Yeah. And there was, interestingly, I don't think people know this, but as I sat there in the, the car insurance call center, there's this bar on the screen that I can move in either direction to basically give you a discount,
>> based on how the sale is going. So, if I really think I'm going to lose your sale, all I do is slide the bar to the left and it brings your, your upfront payment down and your monthly payment down.
>> M. But if I thought this sale was easy, I could bring the bar up in terms of the price I quote you and give you breakdown insurance and all these other upsells. And so I don't think people realize how negotiable all of their insurances are, even their, their phone insurance and all these other things. And sometimes you don't figure out until you take you say you're going to quit and then suddenly they give you some great offer where they're going to give you 50% off.
>> Yeah.
>> Yeah. And the other way of approaching it is I never really sold for cost. I sold for income.
>> Okay?
>> And that is saying that is saying, okay, your lifestyle, as long as you're not being ridiculous, right? It's like, do I really want to not go to a, go to a restaurant or get that Uber Eats or whatever?
>> Understand. Yeah.
>> Because that's penalizing yourself and that's not a nice thing to do always, right? It takes a lot of discipline and discipline is hard. But if you've got an equal and opposite amount of discipline in solving for income, you actually move your lifestyle further ahead. So, you know, the rise of, I mean, I do three, four jobs. You do three, four. We all do lots of different things now. You do as well. We all got different income streams. You're almost better off to spend your energy thinking about how do I increase my income stream than your cost basis. At a certain point, we agree, like Steven's friend who sent him the message, he needs to desperately rescue his cost base.
>> Um, but generally, if you're looking at a life plan,
>> you'll get to your coast fire or whatever it's called
>> quicker by solving for income than you will for cost.
>> I just think lower hanging fruit is solving for expenses, which is like everyone can cut back a little bit, but everyone can't just like say, "I'm going to make 2x more tomorrow." That's kind of a harder problem. And I think if you want
>> well, you just trade off your time because you, I mean, you can, if you're in a lower earning job, you can drive an Uber and earn extra money, or you can do a bar job.
>> I see what you're saying. Yeah.
>> It's like multiple revenue streams is now the way the world works because the cost of living has become so expensive
>> that everyone's having to do multiple jobs, but with technology, we can actually do it much easier. I try Rory's point as well, though, you can get a 30% pay rise today just by maybe bringing a pack lunch or
>> sure.
>> walking somewhere or whatever else. And it's probably harder to get a 30% pay rise. Not sure about it. Depends. I think it depends on which stage of life you're in because now if you just stick with a lunch,
>> if you're on the lunch example,
>> packing lunch costs time. And depending on how much your time is worth,
>> that one hour of time could be $20, it could be $2,000. And I think that's that key difference. And, and I think there's,
>> definitely times and places you got to cut. I fully agree with you on that. But I think at a certain stage, look, I'm, I have still cheap with my money in multiple places. Uh, but I have on when it comes to time. So our office is in downtown Detroit and my commute there, it's 45 minutes. But I don't drive. What I do is I get driven there. Uh, and the reason why I do that is because I can sit in the back seat and work. And one of the things that, you know, we publish daily financial news. So sometimes something will be happening in the with our market briefs where, oh, this is important. And if I'm driving, I don't want to be texting and driving. So instead, I pay for an Uber or whatever and I go that 45 minutes there, 45 minutes back, and it's money out of my account every single day, but I get back an hour and a half of my time, which is worth way more than whatever I'm paying in my driver fees. So I, I think it depends on where you are in the stage of life because I wouldn't do that if this was way before.
>> What is the biggest, for this is an open question to everybody. What do you think the biggest money mistake the average person makes is?
>> They spend all your money. The, the two S's, you, you're spending all your money.
>> And if you get past that, then you're saving all of your money.
>> Both of them are mistakes.
>> Both of them are mistakes.
>> So just having your money sat in a bank account doing nothing,
>> you're becoming poorer every single day.
>> I don't think most people know this. I've got a friend who's steadily compounded his his bank balance over time. And I remember asking him like, "How much money do you now have in your bank account?" He's taken a really slow approach over time. He runs a business as a freelance. And he goes, "I think probably about a million dollars." I was like, "It's just sat in your bank account." He was like, "Yeah." And because he's scared, like he's scared. He doesn't know what to do with it. So he thinks just putting in the bank account is the safest possible thing to do.
>> Well, it's a guaranteed loss. Uh, if your, if your bank account, the average bank account in the United States today, not the high yield accounts, but the average account is paying
>> 0.1%, 0.5%, I don't know, something, something super low. If we just say inflation is 3%, meaning the, the cost you have to spend out of the bank account to buy something is going up by 3%, and that's the reported numbers, not the, the real inflation that many people feel. Well, that means there's a net loss of 2 and a half% on that. So if I have a million dollars there, that's $25,000 of lost buying power.
>> Rory, do you think companies, because a lot of my audience are companies, whether they're, you know, one-person companies or big companies, do you think they should be putting their money that they have sat in their account into Bitcoin?
>> In essence, if you're Microsoft, they have huge cash piles. What does Microsoft buy with their cash? Really, they buy some investment stuff, but it's generally cash-based. And then they may buy another company, or they may buy real estate, data centers, let's say, or they may buy their own shares back. All of those three things that they buy are driven by the debasement of currency, and they get more expensive every year, and they're holding a cash return of three and a half%. So, it's stupid what they're doing because actually all your shareholder cash is not buying the equivalent of the actual things that drive the value of the company.
>> But what about small companies? What if there's people listening now that have companies where they've got a million, two million in the, in the bank? They probably don't need it all for cash flow reasons.
>> And so, I do think that investing versus saving is misunderstood. To go back to your original question, I think investing is much more important. I made the mistake of being a saver when I was young because, you know, that the fear that, you know, all of that stuff meant I was super risk-averse. And I was an investment banker. I was investing, but I didn't, so I made money from being in that industry. So I'm like, I'm just going to hoard cash. I did worse for doing that. And then once we saw the banking system fail, I'm like, I'm not doing this anymore. I'm going to take control of my own finances. So the same is true of a business. If they're generating cash, they shouldn't be sitting on a massively large amount of cash, but some liquid investments, I think, massively help because you're going to make your cash grow for you and your shareholders. Um, and that's important. But, but don't let go of your liquidity because when you really need it and you don't have cash, that's the worst thing in the world, particularly when you've saved the money.
>> So, in your business bank account for Real Vision, yeah, do you put some of the
>> the money into crypto?
>> It depends. A lot of it gets reinvested for growth within the company. So you're making a decision, is how's your capital going to grow? Is it going to grow, grow your share price via reinvesting in the business,
>> or is it better to use the savings pool and buy other investments and diversify away? That really depends on your business where it is in the growth cycle. But if you're like a, a cash generating regular non-growth style business, then you're going to be generating cash. You might have taken some dividends out and bought a house and done all that thing. Yeah, there's no reason not to do some relatively conservative investment strategy.
>> Humphrey, you worked with lots of rich people advising them.
>> What is it that rich people know that the average person doesn't know as it relates to money? Because there are money games that you discover when you get to see behind the curtain. What is it that they're doing with their money that the average person isn't aware of or isn't able to do with their money?
>> Rich people are typically more disciplined. They're, they're typically checking their bank account every day, right? They, they're doing the little things that compound into huge results at the end of 10 or 20 years, and they're, they're thinking in decades, not just what am I going to do this week, right? They're, they're choosing investment choices for themselves in 10 years, 20 years from now, instead of choosing sports betting on on the football match for 1,000, you know, uh, that night, because they know that their 1,000 working for them today will be worth, you know, 10,000, 20,000 in 10 or 20 years. So, it's more just like a long-term mindset versus a short-term mindset.
>> Like delaying gratification.
>> Delaying gratification. Yes.
>> What were you writing down there? I was writing down how the system is rigged in the favor of rich people. It's extraordinary because it's the, it's the Charlie Munger quote of, show me the incentive and I'll show you the outcome. What people get, once you get it's not the 100,000, but it's like the people who've got 10 million in their bank account, they get loans that are called non-recourse loans. It's an extraordinary thing because unlike your friend, they don't have to pay it back. So, a non-recourse loan means you're not legally liable for the loan in the end. Now, there'll be some provisions and how to do it, but why are they doing this? Why are they getting these favorable terms? Why are they getting the private placements in stocks before they go public? Why are they getting all of the best offers? Because they pay fees. They pay fees to the investment banks. And the investment banks desperately want these people because they have a lot of financial activity. And so they incentivize them. None of us get a look at all of that. It's the same thing that I talked about with the hedge fund industry in the beginning. It's like they were incentivized by a phase to get information that was better than everybody else. And I think part of that is, is the ability that all we're trying to say to people is you don't have to play the same game. You don't have to pay anybody's fees. If you buy a Bitcoin, stick it in your Coinbase thing or wherever. It costs you nothing to run and you're outperforming a venture capital investor. There's, you know, simple things like buying an index fund. You're not paying the Wall Street complex thousands of dollars for active management. There's ways of hacking this and it's not that expensive to do.
Just before we move to Jasp, one of the things that I think you kind of both alluded to a little bit and you said earlier on was about how relationships make money. And because what I was watching when I was sat in that apartment with this billionaire is his friends and his contacts who had done business with him in the past were getting,
>> the allocation, the prime allocation of being able to invest just before this company went public, which means that the next day it would multiply. But those were relationships. So if there is a strategy to to build wealth, it goes back to what Ralph said at the start. Being around people and having good relationships is actually, I think, really, really underappreciated. I've got a friend, I can name my friend, um, called Harry Stubbings. He runs a podcast called 20VC. And on that podcast, he sits with extremely rich people. The podcast. Harry's podcast isn't as big as Joe Rogan's, but because Harry has had two-hour conversations with the richest people on planet Earth and continues to do so, he's built one of the biggest investment funds in Europe, especially as like a guy in his 20s. I mean, I think he's raised, if I'm not mistaken, 750 million just from the relationships. And he said to me, he said, you know, the biggest value leverage I've built in the last five, 10 years isn't like the views. People have more views than him. It's he knows everyone rich.
>> And, and I think we underestimate that when we think about wealth creation because if you can do what Ralph said and get around rich people,
>> help them in some way, build those relationships, it pays dividends. What forever. There's a, there's a great guy called Dvesh Macken who runs a firm, an investment firm in in San Francisco called Iconic. He was a young investment banker at Goldman around the same time when I started there as well, but he was, he was hired into the internet banking team at in 2000. He turned up the office, but a month later, the entire thing was gone. Everybody was fired, and he was too young. He was kind of too junior to bother firing. They fired all the senior bankers. And, um, he thought, what do I do? He had no bosses left. So he just basically went to Silicon Valley and hung out in coffee shops and made friends. The people he happened to make friends with were Mark Zuckerberg, Reed Hastings, Reed Hoffman, all of these people. But he then became their wealth advisor at Goldman, moved it all to Morgan Stanley, and then built his own firm, Iconic. And Iconic is massive. Runs all the wealth for these Silicon Valley people from this network of meeting these random dudes building businesses when nobody else wanted to speak to them because, you know, they'd gone through the big bust. And he made his entire life on that network. Genius.
>> Probably at that cafe where I spent all my Bitcoin.
>> The one with the gold door.
>> You were there at the same time, sending 0.1 Bitcoin.
>> It's interesting because when we talk about systems and all these things for money, nobody ever talks about a system for managing your relationships. And the way that most of us manage our relationships is we get someone's number.
>> Mhm.
>> And we hope that we'll cross paths again. But I think even I'm thinking about, obviously I do this podcast, so I meet so many great people. I should have a much better system for understanding those relationships, how I can be of service to those people, understanding their birthdays and all these other kinds of things. And, uh, not only would that be good for my mental health, in more friends, less all these kinds of sort of social psychological things, but in business terms, there's going to be opportunities, whether it's six years from now where I need your advice. That the key to networks is it's what you put into the network, not what you take out.
>> Yeah.
>> The people who have the best networks I've ever seen are always the people say, "How can I help you?"
>> Yeah.
>> "Hey, I've got something for you. You should meet so and so."
>> Oh, yeah. Yeah. Connected.
>> It's never, "Hey, listen, what can you do for me?"
>> Yeah.
>> That comes back. Karma flows back always. Give as much into the network as possible, and the network gives back. I think that's what in the case of Harry, he's also done because, funnily enough, about a month ago I said, "Oh, I've got this idea to do this thing." And Harry turned around to me 30 seconds within WhatsApp and said, "Oh, I know insert name of this person who's the very top in investing in Europe. I'll put you in a WhatsApp group with him." Put me in a WhatsApp group with this guy, sent a voice note, said, "Steve's the best ever." Then he said, he said, "Steve's way better than I am. Everything." This is literally what he said. And then he said about the guy he put me in the WhatsApp group, he goes, "And this guy's also the best at what he does ever. Putting you two together. Good luck." And immediately I thought, "Fucking hell, Harry's what a great guy." And then the guy he'd introduced me to goes, "Isn't Harry such a great guy?" And so I messaged Harry like, "Listen, if there's anything I can do for you." But that's the karma that honestly, you know, I really believe in networks. I think it's the most important thing. Your community, your network is everything. And the absolute answer is you have to keep putting into the network because if you try and, um, extract from the network, it collapses.
>> Yeah, cuz then you're just that guy who's making the phone call after 10 years saying, "Hey, Stephen, can I get some money from you because I've run out of cash?"
The last thing I wanted to talk about is the UK and the US and geographies generally and how much that plays a role. Because right now, there's lots of political social conversations about the UK. People are a little bit doomer about the UK. Some people are optimistic about the US, some aren't. How much do you think about geographies when you're thinking about your wealth creation, your finance strategy? Does it play a role?
>> So, I was fortunate enough to live in London for a little bit over a month or so and I did a number of podcasts out there. And well, I guess I could just ask you. The interesting thing about these podcasts is when I was talking to them, what they told me is that the majority of their listener base is in the United States. The majority of their money comes from the United States. The majority of their sponsors come from the United States. It's not from the UK. And I thought that was very interesting because it's a, it's a huge market. But what they were saying is people who are really looking to grow in the United Kingdom, a lot of them, at least just from what I heard, would prefer to earn from the United States because the dollar figures are much higher. Now, I don't have a lot of global experience outside of that, but I do think that the United States is more friendly for people that are interested in wealth growth, wealth accumulation. Uh, maybe not the best. There's tax-free countries out there, but in terms of for somebody who is more entrepreneurial in that sense, I think you have a lot of opportunities here that you don't have other places.
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