Interview with Tai Lopez
Tai Lopez on Secrets to Building Wealth & Creating an eCommerce Empire
In an extremely volatile market and business environment, it’s easy to think that success would be hard to reach. However, crisis situations can be the gateway to massive wealth if you play your cards right.
That’s why I’m talking to today’s guest, Tai Lopez. Tai is a man who spent his teenage years in a mobile home park, lived with the Amish for 2.5 years, became a self-made millionaire in his 20s, authored several bestselling books and still finds time to excel at jiu-jitsu.
Today, he rubs shoulders with the world’s most successful entrepreneurs and he’s made it a habit to study these people. By applying what he learned, he managed to become an investor, partner, and advisor to over 20 multi-million dollar businesses. Tai is now helping other people chart their own path to success in their businesses.
Tai has dedicated his life to learning, and that mindset led him to greatness and mastery in many areas.
In our longest episode to date, you’ll learn the businesses that Tai would get into right now, his top tips for creating wealth, why you need to learn more so you can earn more, the importance of staying humble and spending time with people that are smarter than you, and much, much more.
Featured on This Episode: Tai Lopez
✅ What he does: Tai Lopez is an investor, partner, and advisor to over 20 multi-million dollar businesses. He’s currently the owner of RadioShack, Pier 1, Ralph & Russo and Stein Mart. Tai hosts a podcast called The Tai Lopez Show. He has interviewed Kobe Bryant, Rihanna, Steven Spielberg, Mark Cuban, Daymond John, and many other successful visionaries. Tai also owns Mentor Box, the largest book club in the world.
💬 Words of wisdom: “Investing and wealth are created by postponing present pleasure for future gain.” – Tai Lopez
Key Takeaways with Tai Lopez
- Why Tai decided to leave California.
- Learn the 70% – 30% welfare trade-off ratio that applies to countries, states, businesses, and personal relationships.
- How individualism and entitlement are slowly leading to the decline of the US as a global superpower.
- Why some European countries are catching up, and are even ahead of the US in terms of billionaires per capita. What can you learn from this?
- Tai’s thoughts on college, and what he thinks is a better alternative for young people that are entering the market.
- To create wealth you need to catch trends early, but not too early. Find out why.
- Tai shares how he bought Pier 1, a company that was going through bankruptcy in the middle of COVID, and still made it work.
- How he learns from Mark Zuckerberg, Jeff Bezos, and Warren Buffet, but also knows when they’re wrong and learns from their mistakes.
- Founding vs. buying businesses. Learn which option is better and why.
- Learn Tai’s three pools of value that he believes every entrepreneur should invest resources in.
- Why Tai believes that recessions are an opportunity for businesses to not only bounce back, but generate massive wealth.
- What’s the number one thing that Tai would teach his 18-year-old self?
Tai Lopez Shares Secret to Succeeding Faster
Why Tai Lopez Moved to Puerto Rico
Tai Lopez Tweetables“I always tell people the real risk in life is living a crappy life. The only thing you should fear in life is underperforming what you could have done.” - Tai Lopez Click To Tweet “About half the people in the world are really good at the big picture, but not good at the nitty-gritty. If you want to be a black belt entrepreneur and run something that makes $100 million, you have to be able to do both.” - Tai Lopez Click To Tweet
- Retail Ecommerce Ventures – Co-Invest with Tai Lopez!
- Tai Lopez Website
- Tai Lopez on Instagram | Facebook | Twitter | YouTube
- Pier 1
- Stein Mart
- Linen ‘n Things
- Modell’s Sporting Goods
- The Franklin Mint
- Authentic Brands Group
- Marquee Brands
- The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell
- The World Is Flat: A Brief History of the Twenty-first Century by Thomas L. Friedman
- The Omnivore’s Dilemma: A Natural History of Four Meals by Michael Pollan
- The Selfish Gene (Popular Science) by Richard Dawkins
- Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers by Geoffrey A. Moore
- Flash Boys: A Wall Street Revolt by Michael Lewis
- Alaska: A Novel by James A. Michener
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Read the Full Transcript with Tai Lopez
Justin Donald: Well, Tai, great to have you on the show.
Tai Lopez: Back in Austin. I haven’t been here for like eight years. I don’t think everybody moved here, Elon, Joe Rogan.
Justin Donald: It’s a popular place, there’s no doubt about it. I mean, first of all, the city’s blown up. There’s a lot of cool stuff going on. You got a lot of techs, you got a lot of investors. You’ve got founders and owners of big-time corporations and just the general populace seems to be moving here. Good to have you here.
Tai Lopez: California’s your best affiliate.
Justin Donald: That’s right.
Tai Lopez: There’s affiliate marketing for California. They’ve been getting paid a lot from Austin. Nobody wants to pay that high state tax. I left California in 2018. It’s just such a beautiful state. It’s where I was born. Beautiful state, ruined by bureaucrats.
Justin Donald: Yeah, it’s a bummer because it is gorgeous, but some of the decisions made from top-down, the increasing taxes, this whole like– they think that you’re captive to the state and they’re seeing a mass exodus. That’s crazy.
Tai Lopez: Yeah, you can’t– life is about, there’s this thing that Dr. Buss, who’s actually here in Austin, the evolutionary psychologist, he said, “Tai, there’s a concept of WTRs – welfare trade-off ratios.” And so, a friendship or marriage or dating, but also the state of California. Basically, the human brain is built to be able to calibrate if they’re getting a fair deal. And when the welfare trade-off ratio, when you’re giving 70%, you’re only getting back 30%, people leave, whether it’s, like I said, business partnership, love, but also, it happens in countries and states. So, California, you can’t push too hard or people leave.
Justin Donald: Well, and you had a really nice place in Hollywood Hills that you left and you moved to Puerto Rico. I’m curious, number one, why? And by the way, I have a good idea why, we’ve talked about this, but number two, what are some of these benefits because I’m sure a lot of my audience would love to know some of the specifics?
Tai Lopez: So, yeah, I was living in California. I was actually in Beverly Hills, where I lived, was trying to put another tax on me. They have their own little tax, so it’s like paying 52.5% when you count state plus Beverly Hills. But two reasons, I’m like 10% Puerto Rican. I’ve been going to Puerto Rico since I was a little baby. I used to be a professional salsa dancer, believe it or not. So, I’ve been going back and forth to Puerto Rico. I’ve always liked Puerto Rico. I first went there as a baby. I went there in ‘06. So, there are different reasons people moved to Puerto Rico. I think you can look at it so cultural, you can look at it health, and you can look at it financial, one, probably the healthiest place possibly in the world. So, remember Ponce de Leon? He was seeking the Fountain of Youth.
Justin Donald: Oh, yeah.
Tai Lopez: I think in the 1500s, he went to Florida, which I could have told him, is not the Fountain of Youth. That place got mosquitoes, crocodiles, and is hot, like extra hot. So, he ended up after that, landing in Puerto Rico, and the Native Americans there where he saw these 100-year-old healthy people. So, he never left. He thought it was the Fountain of Youth. You have these Yunque mountains.
Basically, if you look at it on a map, the biggest pollutant of Puerto Rico is the sands of the Sahara Desert blowing across the Atlantic. So, it’s super kind of sheltered from pollution and all that. So, I like that it’s healthy, I like the food. I do a lot of farming. So, I have farms in the US where we can grow temperate climate stuff, so corn and wheat and apples and all that. But I was always like, I want to be in a place where I can grow all the tropical stuff like avocados and coconuts and pineapples. So, Puerto Rico, I like it for the health benefits. I’m buying a little farm there, growing my own food there.
And then on the financial side, a ton of people have moved there. So, where I live is just like the little development that I live in, it’s all these New Yorkers in California. It’s the highest concentration, it’s probably more billionaires on the block. I’m on there than it was in Beverly Hills.
Justin Donald: Wow.
Tai Lopez: It’s pretty insane. So, now, there are some pros and cons about that, for the island of Puerto Rico in terms of it’s kind of like where people come in and regentrification. So, you have that kind of issue. But overall, it’s good, people are moving there for different reasons. One of them, for a lot of New Yorkers and Californians, is if you qualify and you got to do it legit, some people turn it, sneak it. But legitimately, it has 0% capital gains on qualified staff. It’s got 4% taxes on qualified income.
Now, some people think you just move there and you pay no taxes, it’s not like that. It depends where the revenue is sourced. So, Puerto Rico sourced income gets better tax benefits than if you have a business in the United States. But all in all, there’s a financial aspect that has brought a lot of people there. Also, I want to build what I call Silicon Island. You got Silicon Valley, you got Silicon Beach. You have all these kind of Silicon Scandinavia, Stockholm. And so, it’s cool, and a lot of people move to a place where it’s kind of this new vibrant. So, it’s good for business, too.
When I tell people, “Hey, you want to move to Puerto Rico?” A lot of people are like, “Yeah, tropical paradise.” Somebody’s living in Minnesota, somebody’s living in Saskatchewan, Canada. They’re like, “Ah, Puerto Rico, yeah.”
Justin Donald: The last time I was there, I hung out with you. And after we got some time, I went up into El Yunque, the rainforest.
Tai Lopez: And you went there?
Justin Donald: Yeah. And we looked at some properties there because I was with one of my friends that was looking to open up kind of like a wellness spot. He’s trying to figure out, not like a spot, but like a center, like rejuvenation all the way…
Tai Lopez: I know one for sale. I’ll tell you later.
Justin Donald: I like it, yeah. And we looked at so many cool properties, but yeah, you’ve got all that natural vegetation, you’ve got the clean air, you’ve got clean water. That’s why a lot of these pharmaceutical companies and so many other companies kind of had their home base there prior to the mass exodus.
Tai Lopez: Yeah. It’s kind of like living outside the US, but it’s a territory, so people can come from the US without a passport. So, it’s like kind of the best of both worlds. And I was going to say that cultural aspect, I mean, the US is becoming a little bit crazy in my opinion. It depends who you read if you read. Will Durant, he says, “A nation is born stoic, and dies epicurean.”
The US has this element, and it’s hard to know and make predictions, but sometimes it reminds me of the Gibbon’s, the rise and fall of the Roman Empire. And the Roman Empire didn’t fall all at once. You’re talking it was a slow decline into, let’s say, the 300 A.D. The US strikes me as people who came here that were stoic, they were hard workers. Farmers, they cut down trees, built a log house, did whatever they had to do.
And now, it’s kind of like, well, I’m not going to do that job because it’s beneath me. You know what I mean? That’s kind of the American. For me, I started milking cows by hand, like Joel Salatin, my first mentor used to tell me, “Tai, at the beginning, when all you have is your dream for yourself financially is like you got to put in sweat equity.” He says, “Sweat of your brow.”
And the US used to be that understanding. Even if you read the great business people, or you could call some people, call them the robber barons. But if you read Vanderbilt and the Rockefellers and the Morgans and all these people, Vanderbilt’s the first billionaire basically in the US, and he started with a fairy business where he was rowing people from New Jersey to Manhattan. Like it was a tough job, you got strong.
And America has this cultural thing. Basically, it’s become very epicurean. It’s just about feeling good, and the rise of the individual and entitlement, you see that. I have a friend, he’s like, Tai, everybody I go to hire in the US, he has a hotel. He’s like, they want $30,000 above normal, like one year ago. And I think that will go away if the economy hit some level stagflation. But anyway, I moved to Puerto Rico partly. I have this feeling like, yes, because I love America, and certain things I love about it, but I’m kind of like in another country, but I’m still part of the US.
Justin Donald: Right. Yeah, it’s the best of both worlds. There are downsides, for sure. But overall, it’s interesting you made the comment of a slow decline. You see a lot of nations that have a slow decline. Very rarely is it that they just got wiped off via war. It’s generally over a period of time. They were a superpower, but they lost that power. No one saw it happening until it was gone.
I’m curious to know what your thoughts are on the US. There are a lot of people that speculate that the US is already in that. And we see so many declines. We see, like you said, people that are too above doing certain jobs that in the past, they would have done. Our parents did them. When we were young, we did them. But now, you’ve got a lot of people that just refuse. They’d rather sit home and collect a check. And even if there was no check prior to that, they would just sit home and collect nothing. So, what are your thoughts on the economy today?
Tai Lopez: Yeah. So, speaking to that, there were two philosophies or there had been many. But if you look at the Greek philosophers, you had a stoic school of thought and epicurean, although epicurean is kind of better than people think. But one of the downsides is I always say, investing and wealth are created by postponing present pleasure for future gain. And that goes against human DNA if you study the human life cycle.
So, for example, in the 1600s in London, the average mortality was 17 years old, the average person because of high child mortality and disease. And that’s not that long ago, that’s 500 years ago. The average person lived to 17. So, we humans are built to be very, how do I say? Short-term minded. So, it’s kind of natural, the rise of technology in the US. Technology has bolstered GDP.
Also, if you look at M1, kind of the amount of money in cash flowing, it’s very high. And of course, we know the US Government in the last several years has printed a crazy amount of money. I saw the numbers, it’s almost mind-blowing, like there was $2 trillion, let’s say, 10, 15 years ago of cash money circulating in the US. And now, it’s 21. So, it’s pretty insane. Don’t quote me on the exact number, but some kind of insane jump like that, so…
Justin Donald: And the unfunded debt. So, it’s like, maybe we haven’t printed this, but we still owe it, and every year it’s coming due.
Tai Lopez: Yes. I mean, when people say unfunded debt, I say, remember, the US has the taxation power of a military and a police force, meaning the US can pay its obligations. In addition to printing money, they can take more from citizens, but all of those have negative externalities, right?
Justin Donald: Yep.
Tai Lopez: So, I think that big picture, I mean, look, if I had to say the pros and cons of the United States, pros still are you have one of the most fertile pieces of land in the world with tremendous variety. I always go down to like Maslow’s hierarchy of needs. So, at the very bottom, because a nation is just individuals writ large, so you take 300 individuals. So, you can just go to individual psychology.
What individuals mean? The classic or the modified Maslow’s hierarchy of needs at the bottom is physiological – food, shelter, water. America’s good there, tremendous food and physiological security. We even have oil, gas, but more importantly, we have a lot of timber wood, we can mine for things, and we have food. So, you see that’s becoming a bigger deal.
If you look, let’s say Ukraine at 15% of the global wheat, and you see India just recently passed that their banned exports on grain, which is a large supplier of the US. The US will survive this because they’ll just be a diversification of how farmers plant. When corn prices are high, they plant more corn. Now, Americans are planting more wheat. I have about 1,300 acres of an organic farm, and we grow wheat and corn. If it goes to $6, $8, $10 a bushel, people will grow it here.
So, the good thing is the US has it. It’s low-level Maslow’s hierarchy of needs – food, shelter, water cover. Number two, the US still has the most powerful military for all the bad things in the waste with government spending, when you have the most powerful military. Now, little caveat to that, you do now have hypersonic nuclear missiles. So, a rogue nation can bypass our entire massive multitrillion-dollar military with missiles that we can’t stop theoretically. So, that’s just a little caveat when I say we’re the most powerful. Now, you have a technological race, nano where little micro bugs come and start killing people in a war.
But in terms of if I was flying into– I did a seven-city five-day tour the other day, and we flew in. I stopped, met a guy at the airport in South Carolina, a little private airport. And when I landed, there was a military presence. And I was just like, man, America’s Air Force is pretty insane, like the OSS. You would not want to wake up and have the US military targeting you. They will vaporize you from 50 miles.
I read in one of the Gulf Wars, the Iraqi army, their Air Force mobilized out of the barracks and ran to their own jets to fight America. And American pilots were sitting 35 miles away, just kind of on a flight rotation waiting, and they had ordered when the heat signatures of the Iraqi Air Force turn on, vaporize them. And we vaporized their whole military. Those people never knew what hit them. Like every single jet was vaporized in 60 seconds or whatever, some for 20 minutes.
So, number two, America’s safe from that standpoint, although, like I said, there was a caveat. And I actually think like I’ve been telling people. Now, I’ll toot my own horn, but last five years, I’ve been telling people, fear Russia more than China. I’ve got 20 videos. I’ve got proof. China, if you study Chinese history, they’re not aggressive territorially. China’s an ancient civilization, 5, 6, 7, even beyond BC, 7000 B.C. And they rarely went anywhere. They kind of fight among themselves and maybe their border, like President Korea.
Russia also is less aggressive than people think. The British Empire was the aggressive one. And the Germans. So, Russia, just speaking of military, I’m not sure we totally need to fear. Some people fear of 3 million-man, Chinese army invading the borders of the US. This is a low likelihood at this point. It really is a pipe dream, I think. Chinese, it’s not in their culture. And culture is very strong, culture is massively powerful in humans.
Russia is a little more aggressive, but Stalin, even when he was aggressive in World War II, that was an agreement where Roosevelt said, if you invade Berlin from the East, we’ll give you this whole– what became the Iron Curtain, the Eastern bloc. So, even then, that was permission. So, anyway, the US military, these are good things about the US.
And then number three, America has this very in business, in finance, has one major advantage. I used to say America is the most entrepreneurial place. This is quickly an advantage as being lost in the US. I travel, I live in Europe, and I have offices for REV all over the world, and Stockholm has five times the billionaires per capita than the US. Super, super entrepreneur. Canada is insanely entrepreneurial. You see big companies like Shopify, so on coming out of Canada.
So, I don’t think America has any longer the– and now, because of the COVID epidemic, people could work for home. A lot of people enjoyed it, and now they don’t want to migrate to the US. They’re like, “I can just do business from Stockholm or Copenhagen, I live in part-time. It’s considered the happiest people and the best place to live in the world.” Twenty years ago, those people were like, “You know what? I need to go to Silicon Valley. I need to get a visa or become a citizen.” That aspiration is going away. Even India, I had an Indian, he’s almost a billionaire, flew out last week to meet me. He can stay in India now.
So, America used to have a really intelligent– America was like a business. What’s the best way to improve a business? The quickest way is the old Jack Welch, genius GE CEO, which is every year, fire or warn the bottom 20%, and then reward the top 20%. And then the middle is kind of less important, or I shouldn’t say less. I used to work at GE Capital a long time ago. So, America used to do that.
Basically, we would encourage the immigration of the greatest people. Now, Donald Trump, he had his policy, which probably had unintended effects. And be careful what you try to get because you might get it. So, America said, “We don’t want people from other countries.” Well, be careful what you wish for because you want engineers, PhDs, and medical doctors, and potential Nobel Prize laureates like these. What kind of company wouldn’t be like, hey, you want a whole bunch of geniuses working at your company?
So, America made a little bit of a booboo. And then on top of that, it was exacerbated by COVID, which allowed people the realization that I can work from anywhere. Friedman wrote a book about 20 years ago about The World is Flat, and he was early. The world wasn’t flat 20 years ago. Now, it’s flat. And that’s why we have a global office. It’s too hard for me to recruit people in America. But there’s still one event that kind of I’m listening out the cons here of the United States, but there’s still one advantage of the United States. It is the only place where people don’t care about your family name.
Now, that sounds weird because you’re American like me. We’re born here. Americans are like what? There are still countries that care about your last name? Absolutely. The Middle East cares about your last name. India, this guy that flew out, he brought somebody with him, who I was like, what’s your background? And he said his last name and he’s like, my family’s Brahman. So, Brahman is a caste system. He wanted me to know he’s from the highest caste. I wanted to say to him, buddy, this is America. I’m the only person you’re going to meet who knows what Brahman caste because I like history and culture. Or I’m not the only, but most Americans definitely don’t care.
And so, that is a bigger advantage than you think because America still has a merit-based culture. You know what I mean? When I was like 19 and I had this mentor after Joel Salatin, his name’s Allan Nation. He’s a real genius. I wish I could introduce the world to me, Tai, but he’s in the book The Omnivore’s Dilemma. It’s a famous book about food.
Justin Donald: Great book, yeah.
Tai Lopez: Yeah, so there are two chapters. One chapter about Joel Salatin, my first mentor, and one chapter about Allan Nation. But Allan Nation, I said, “Allan, I want to go to college.” And he said, “Why do you want to go to college?” And I said, “You know, then people respect you. You have a degree.” And I’ll never forget, he goes, “Tai, this is America. Make a million dollars. That’s what Americans care about.”
So, America not only doesn’t care about your last name, even though there is some racism and stuff, but I’m talking about they’re not trying to figure out if you’re from the Brahman caste or in the United Kingdom or even places like Scandinavia more than you think. They have a phrase in Scandinavia called [Indiscernible], which means we don’t really like outsiders. Now, not all people are like that, but there’s no word like that in America, maybe xenophobia, but in general, once you’re in America, what Americans care about, they don’t even care about what you did 20 years ago. America is like, what do you do in the last two years?
Justin Donald: That’s right.
Tai Lopez: And that’s a good aspect of the United States.
Justin Donald: Yeah. And if you think about it, it’s really interesting because at one point in time, college was really important, that you were going to get ahead because you graduated, you had a degree, you had a master’s, you had a doctorate. That doesn’t matter anymore unless you’re super-specialized. That doesn’t matter at all. And a lot of the most successful entrepreneurs, they did not go to college. They dropped out. I believe you dropped out. It’s just not what it is.
I mean, I talk about this all the time with my daughter. I actually hope she doesn’t go to college. I hope that she becomes an entrepreneur sooner or she gets into whatever her trade or profession. Maybe it’s fashion, maybe it’s design, but I really hope that she becomes an apprentice, not goes to school for something that likely isn’t going to be relevant with way more bad influences than good influence. And truly, an education that’s virtually obsolete in a few years, if even at that present stage. It’s fascinating.
Tai Lopez: Yeah, I think it’s kind of domain-specific. Like more than a decade ago, I was one of the first people to really start ranting against college. It’s actually how I started my social media. It kind of blew up. I remember Tim Ferriss and I got on a little debate. I had a very small Twitter following when I started this in 2011. I don’t even remember what. There was a back and forth between Tim Ferris and I, smart guy, and off.
But I was telling people, a day is coming where college university will be even less relevant. I mean America has never been a hyper-intellectual society, where in Europe, it’s still a big deal when you go to college. It’s very good. My grandma is from Berlin. But America’s never been super university, but now I predicted, this is like 2011, I was like, it’s going to be less and here’s why. You brought up, it was domain specific. If you want to be a medical doctor, still important, right?
When people counterargue to me about college is safe, but what about medical doctors? I’m like, okay, my cousin is becoming a medical doctor at UCLA. What’s the actual process? He has a series of years of pure memory, like textbook stuff. But then they put you into residency and they have you start working with a mentor, which is a doctor, and you’re kind of like in the room as he’s doing stuff, and you do that for eight years, so…
Justin Donald: And the technology continues to change.
Tai Lopez: Yes.
Justin Donald: Like fast, the medical industry, community, I mean, it is rapid growth year after year after year, I mean, month by month.
Tai Lopez: And think about business, like one of the reasons I started doing online education courses long time ago, more than a decade ago, is because I was telling people by the time somebody writes a book on how to do Facebook ads, Google ads, it’s obsolete what’s in the book. So, I was like, I remember I got a lot of flak when I built video courses and telling people this. People are like, “Oh, this is a scam. You should just go to college.” I was going, I’m looking at, and by the way, actually, I have a nuanced take on college. What I think is dumb. Whose idea was you should concentrate learning in four years, 18 to 20, first off, and saddle kids with debt, $2 trillion? It’s a big part of profit. It’s a profitable business for the US.
Justin Donald: Well, it’s huge. It’s one of the greatest profit sources for the United States.
Tai Lopez: But it’s weird because you’re ineffectively taxing people with debt that don’t have income and then saying, oh, but don’t worry, for the next 10 years after school, you can pay us back. It’s almost like indentured servitude.
Justin Donald: It is.
Tai Lopez: I think what’s better because there is merit to university, is take one cold cash for the rest of your life. What’s the angst that you have to do it by 22? There’s no way you can cram that much in your brain, so it’s better to be a lifelong learner. That’s my thing. I read textbooks, I read college textbooks almost every day, but I’m a lifelong learner. I didn’t try to condense. We all know that between age 18 and 22, you don’t have enough perspective to actually absorb some of the genius things that you’re being lectured on.
So, I think the future is more hands-on, more virtual learning, more video training that can be updated with a blending of the old university style to give people. My grandma used to say, “Tai, but you go to college to become a renaissance man or woman,” and there’s truth to that. It’s to learn the thing. So, sometimes people say college teachers, you think you shouldn’t learn. Well, that’s true, but that’s also becoming a well-rounded person. But no one becomes well-rounded and a renaissance person by age 22. In fact, the name renaissance man or woman means you’re a seasoned, worldly person, which means you’ve traveled and read, and that takes 10 years.
Justin Donald: Yeah, mastery, 10,000 hours, equivalent of 10 years.
Tai Lopez: Yes.
Justin Donald: Isn’t that Malcolm Gladwell, Tipping Point?
Tai Lopez: Yeah. But that science, they actually think, is probably outdated. I always say the grand mastery is 20,000 to 30,000 because I have this thing in business that I’ve got 300 or 400 people work for me in REV, one of the holding companies, and I always tell them business and making money has levels. And I do Brazilian jiu-jitsu so I’m like, let’s use the Brazilian jiu-jitsu belts. So, you have white, blue, purple, brown, black, coral, red. There are seven belts.
Now, in jiu-jitsu, they used to have a rule. You couldn’t even get a black belt until you had a basic, one, you had to be over 18. So, even if you start at two years old, they wouldn’t give you a black belt at 16. There was a certain age and maturity you had to have, a physiological body. And that’s the same with the brain.
The brain is not physiologically formed till about 24, maybe. And even then, there are some advantages of getting older. So, white belt, I always say, is making under 100 grand. Blue belt is making 100 grand to a million. Purple belt is making a mil to 10 mil a year. We can just use annual revenue. Brown belt is $10 to $100 million. Black belt is $100 million to a billion. Coral belt is $1 to $10 billion. Red belt is like the Forbes list top of the world people.
Well, what if your goal for your kids, I call it the four pillars of the good life, right? Health, wealth, love, happiness. You want your kids to have all of them. You want to be healthy, wealthy, love, and be happy. You brought up these 10,000 hours. Well, actually, if you look at chess masters, when my grandpa was a chess master, it is more like 20,000 hours.
But that’s not a popular message in the TikTok world. I saw a guy on TikTok posting his struggle, and he was like nine months ago, I had no money. And then, I was really struggling for three months and then I learned about whatever crypto day trading or something. And then three months in, like now, I’m a millionaire and I hope you identify with my struggle. And I’m like at six-month struggle in a real struggle, brother. You can’t be like I used to be a white belt in jiu-jitsu. And then I was really struggling in my white belt class. And now, I’m a black belt. And nine months later, that money will soon be gone from his hands, unfortunately.
Justin Donald: Well, and unfortunately, we’re living in a day and age where we’ve seen money printed out of thin air, about 40% plus of the total amount of money in circulation, at least in the US. But this is similar around the world is, it was printed or added to a digital ledger in the span of two years, really, a year over two years.
So, you have these people that went from nothing to everything, but just because you got there doesn’t mean that you’re equipped, that you did it the right way, that it’s failproof. A lot of these people are losing it. A lot of these people, based on even the crypto market right now, they were the millionaire, and now all of a sudden, they’re not and they lost everything. If you’re in Luna or some of these other coins or even some of these stablecoins that people said, “No, there’s no way you can ever lose. They’re always going to be pegged,” but that’s just not reality.
And so, I think about some of the things we’re talking about with college and education, and to a certain degree, we’re always going to have people coming in. In fact, one of my favorite funds I’ve ever invested in is a fund where it’s only immigrant founders. And I love that. You know why? And I hate to put anyone in a box or a bubble, but my experience has been immigrants coming to the US work harder than just about everyone else.
And you’re also bringing in a lot of very bright people that don’t have an opportunity or the value, like entrepreneurship, in general, isn’t valued the same way that it is here in the United States. And so, there are so many interesting things here. And this is going way back to what we were talking about before. You said, the US has a superpower and our military is really strong. And I think a lot of people underestimate the Navy. Most people don’t think of, you control the waterways, you control the world.
Tai Lopez: 90% of the earth.
Justin Donald: That’s right. So, we’re going to be a superpower for a period of time, but for anyone who thinks that it’s just a given, like just because we are born into a strong nation, it doesn’t mean that it’s going to last that way. And if we’re not careful, it is not going to last.
Tai Lopez: Yeah, for sure. The Navy’s a big deal. As I said, America, it has a lot going for it, but so did the British Empire. I mean, British Empire, early America really didn’t become a superpower till some people say World War I, some people say World War II, but Britain ruled the world. And before that, you have Spain. It’s funny countries now that people think like Portugal. I’m like, this place used to run the world. Belgium was all these colonies. I’m watching that movie Hotel Rwanda again. It’s a great movie.
Justin Donald: Oh, yeah.
Tai Lopez: Crazy story, but that’s like…
Justin Donald: Don Cheadle, right?
Tai Lopez: Don Cheadle. Belgium was a big part of Africa, and they were kind of the cause of this Hutu/Tutsi genocide. So, the world’s a big place, complicated, in general. What I’d say, what matters, there’s that saying like, well, what does have to do with the price of tea in China? Who cares about the world? I just want to make money.
And now, for an investor, I know you have a lot of investors that follow you. You need to know this macro and the micro. And that’s the hard part is to be well-rounded because some people are like, no, I just want the micro. It’s like, how do I invest? How do I get in deals? Technical analysis to some people like if they’re stock, but people are like in the nitty-gritty, which is good. It’s funny if you study something called psychometrics, which is basically the science of personalities.
Evolution has pretty much spun out. 50% of people born are P’s, which is perceivers, and 50% are N’s, which is intuitive, and intuitive people like the big picture. So, they’ll like the part of the podcast we talk about like the Roman Empire.
Justin Donald: You need the big picture.
Tai Lopez: Yeah. But there are other people– sorry, not P’s, sensors, S’s, this is using the union psychology. And sensing people just care about details. Forget all this. How do I invest my money right now in the best possible returns? But the reason I was talking big picture is because you can’t separate two. It’s kind of like the person who goes, I’m just going to go to the gym. I’m going to lift weights. Don’t talk to me about the big picture like diet and sleep.
Well, you don’t get muscles just from curling, you get it from also being well rounded. Now, if you’re just sleeping and eating right, you also don’t get muscle. So, you have to zoom out of the trees, forest, and from the trees, and you also have to zoom in. And that’s the danger I find about half the people in the world are really good at the big picture, but not good at the nitty-gritty. Now, that’s the challenge of being a real– if you want to be a black belt entrepreneur and run something as doing $100 million, you got to be able to do both.
Justin Donald: Yeah. And from the standpoint of like the last 13 years, so many people have done well and people that maybe don’t have the appropriate skill set, they’ve done well because we’ve been in such a hot market. And so, you’ve got to be careful where you’re investing or who you’re investing with because you need someone that’s weathered a financial crisis before. I mean, if someone just started investing over the last decade, it’s going to be kind of hard-pressed for too many people to have lost money.
So, everyone feels like they’re a genius. Everyone’s successful, but if you scale that back, and I’ve been investing now for about 23 years and that doesn’t even count my time in college where we were managing a million dollars of one of our alumni’s money for one of our classes, which is a really cool thing. At the University of Illinois, they did all kinds of adjunct professors, unique classes just on investing and building wealth. And these are people that had really lived it. It’s not like, hey, let me give you the five keys to marketing. It’s like, here’s real life. Let me tell you how it goes.
And so, it’s interesting to see the moves people are making, who is listening to who, and when you kind of go back and you distill everything down, like what’s going to succeed in the future? One of the things I think is really important is to project out, like what are the trends today? What are millennials spending their money on today because that’s going to be totally relevant for the next 10, 20, 30 years? And paying attention to all these different groups to see what’s the trend, what’s the pivot, what’s going to happen, what’s not here today that is going to be here tomorrow, or what’s creeping into the frame that’s just going to grow.
And you’ve been really good on this from an e-commerce standpoint, e-commerce early on. And I’m excited to get into some of the specifics here, but before we do, your education kind of goes a long way back. A lot of people look at you as just a social media influencer. And you talked about the struggle before. You had a real struggle. You traveled the world. You had a point in time where you were broke. You didn’t have money. You at one point moved back in with your mom after you had graduated or after you “graduated and moved on.” And I remember hearing, and maybe you told me, that you were sleeping on your mom’s couch in her mobile home.
Tai Lopez: In a mobile home, sleeping on a couch, yep.
Justin Donald: And it was almost like, man, you had all these goals, these hopes. You hit rock bottom, you’re starting over, but one of the common themes that I see in your life that I would love to get into is your love of books and mentors. Those are two things you and I agree on, I mean, to the highest degree. I’m a reader, I devour books, I read every day. And I think having the right mentors in your life is just the most valuable thing that you can do.
And so, before there was Tai, the big name, or Tai, the social media influencer, there was Tai, like grinding on learning everything he could from whatever mentor. If you can have them in person, great. If you couldn’t, you’re reading their book. I’d love to hear some of that.
Tai Lopez: Yeah. I was lucky. So, I don’t know what happened, but relatively early on as a teenager, I realized you can do this thing the easy way, or you can do this thing the hard way. And the hard way is to learn by trial and error. Now, you will always have trial and error to learn, but you got to minimize it. Speaking on one of the great books, Richard Dawkins wrote a book, I think it was in 2013, or actually earlier, called The Selfish Gene. It’s a very famous science book. And there’s a sentence he says in there. Actually, one of my first podcasts was with Richard Dawkins, it’s pretty cool.
Justin Donald: That’s neat.
Tai Lopez: Yeah, at the time, he was voted the smartest, highest IQ person in the world. And I don’t know how he agreed to do a podcast with me. It was like 2011 or something like, I don’t remember the year. But one of the things he says in his book is organisms that can simulate the future without actually doing it, beat organisms that only learn through trial and error because trial is costly, and error is deadly. So, it’s kind of like if you teach your little kid art, I’m not going to tell you that you shouldn’t run across the street. I’m just going to let you learn through trial and error. This is horrible, right? You can’t recover from that lesson if you run out as a five-year-old in front of an 18-wheeler.
So, humans, in fact, if you talk to scientists, the reason we have these different brains, especially this MPFC, medial prefrontal cortex, is we can project out into the future without doing it ourselves. So, a little five-year-old, you can tell them, don’t run out into the street because you will get hurt. And you can’t do that with a little baby calf or a horse because they don’t have that medial prefrontal cortex, that’s not in their instinct, they will run out. They can learn, but they have to have pain.
So, the reason I like books and mentors, it’s like, I can do this the easy way or I can do this the hard way. Warren Buffett says, “You only learn through mistakes. There’s no rule, it has to be your mistakes.” So, it’s like, okay, can I read about Vanderbilt’s mistakes? Okay, great, two years of my life saved. Can I read about Warren Buffett’s mistakes? What he did, great. Another two years saved. And the game of life, some people think life is like a chess game, but actually, it’s a speed chess game.
In speeches, you’ve got a limited time to make your moves. And the weird thing about being a human, think about it, how long are you in your prime for? You’re not in your prime at age 100. My grandma lived 102. She was like, I hate being 102. And you’re not in your prime at three years old. So, you got this narrow window to figure a lot of stuff out.
And if you want to make money, most people, I tell people, it’s like one mistake can set you back a decade, and you don’t have enough decades that you want to waste one. It’s not like humans lived to 500 years old, being like, ah, that old. 30 to 40, I wasted that one, but 362 to 372, I made up for it like, we don’t have that game. We have this if you waste 10 years of your life, that’s like a fourth of your prime.
So, books, it’s strange that people sometimes argue with me. I actually gave up arguing with people who go, “You don’t need books.” I’m like, “Great. I’m glad you’re my competitor.” Like Charlie Munger says, if it wasn’t for the stupidity of other people, you wouldn’t be able to get rich. If you’re an investor and other people are stupid, let them be stupid, less competition. If everybody was following the straight and narrow path, it’d be harder to make money.
So, books are 20-year, you can download the wisdom, mistakes, and genius of somebody alive or dead that took them 50 years to figure out in 5 hours. If you really call yourself an investor, name a greater return on investment than being able to download 50 years of genius in 5 hours. Now, you have audiobooks.
Justin Donald: I love audiobooks.
Tai Lopez: Yeah, MentorBox, we have book summaries is a company we have. I mean there’s not even an excuse. It used to be hard to get books. You had to travel to a library or whatever. Or in the 1500s, there were 30 books in your entire city. And so, you had to beg and borrow to read one. Now, they’re everywhere.
YouTube is a good way to learn, but it’s funny, humans are cocky by nature and they’re like, ah, I don’t need that. Sometimes, especially on investors, I’m like, let me get this straight. Warren Buffett, who’s probably the best investor of modern times, he’s compounded money at, I think, 19.5%. Nobody’s ever compounded money at 19.5% for 60 years. There’s no investor, Ray Dalio… None of these people are even in that conversation, not for long periods of time.
He says when he was young, he would read 800 pages a day. Not always books, he’d read annual reports and this and that and newspapers and all that, and books. And now, he says he’s old, he can only read 500 pages. So, I’m going, okay, he has $100 billion in cash. He’s already the greatest, but he still feels like he needs to read that much.
And then I meet some investors, like I’m good and I’m like, yeah, let me get this straight. Warren Buffett needs it, but you don’t. Who’s wrong in this picture? I think you’re a little bit too cocky. And like you said, in the last 10 years, everybody looks like a genius. It’s kind of like in crypto, everybody in the last year, it’s like, oh, that’s why I didn’t go into Terra Luna. When the masses are talking about how great investment is, I go opposite. I’m very contrarian.
Justin Donald: Yeah, I am, too. Without a doubt. You pay attention to what the masses are doing in anything, and it is not going to serve you well, especially in financial services. What are the majority of people doing? Well, I don’t want to do that because the majority of people do not have their finances in order. And people think that this plan with these financial advisors that they’re actually going to be able to retire with a certain amount, like inflation doesn’t exist and taxation isn’t going to shrink what they owe. And I mean, it’s just asinine.
But then when people retire, they’re like, oh, wow, I don’t have anywhere close to what I thought I would have. And so, for me, I feel like I had some mentors that were older that retired, and they sell to work. They couldn’t live off of what they thought they were going to have. And so, I’ve learned early on, hey, whatever the majority of people are doing, just run the opposite way. And so, any time people would say, “Justin, that’s a crazy idea,” I kind of latched on to it.
When I got into whole life insurance, for me, it was like a bank replacement. People thought I was crazy, and that was a couple of decades ago and that served me incredibly well because now, I can fund whatever I want without even having to worry about using a bank. And the same thing with going the opposite direction in the stock market or qualified plans that serve me really well and I just see what the majority of people are doing. And it’s not that it can’t work, it’s just the odds are really good. It’s not going to be enough.
Tai Lopez: Yeah, well, what I tell people is if you tell your neighbor your idea and they agree with you, you’re too late. So, meaning the masses can be correct. There’s something the masses like, they like iPhones. I mean, Apple’s a pretty good company, but the time to invest in it is when you told your neighbor, you showed them your iPhone, and they go, “What’s that weird thing? I have my nice flip phone.”
So, to be an investor, in general, wealth is created in investing. It’s generally created by catching trends early, not too early. You actually can be too early and you die because there’s not enough. There’s a great book, a famous book called Crossing the Chasm, and it talks about being too early. And there are not a large enough massive people to be your customers so you can die. That’s it.
So, pioneers sometimes suffer, but you want to be in the first third. Facebook, Mark Zuckerberg, was in the first third of wealth creation. He had Friendster, he had MySpace. My friend Tom Anderson started MySpace. But then the third did the best, and that was Facebook, which has done well for the last 15 years.
So, it’s this game of like, I want to be early. Good ideas still could be good. So, I’m not so contrarian, by the way. Sometimes people are contrarian investors, which I think is stupid, when anything that the large masses of people like they think is bad. It’s not that simple. So, like multifamily housing for the last couple of years, it’s one of those ones everybody’s talking about. And it’s not a bad investment to me. But I went even further away and I went, let me buy brick-and-mortar brands, like Dressbarn, Pier 1, RadioShack, and let me convert them into e-comm because very few people were doing it.
But I wasn’t the first. So, that was important. You had ABG, Authentic Brands Group. You had Marquee Brands. There are multiple brands in New York City that do this. But I’m in the early third, I’m in that first third. And now, people are starting to go. You see these newer start-ups like Thrasio, which they’re buying up all these Amazon e-comm brands. They came in later, maybe too late for them, we’ll see, but you got to be careful because you overpay when everybody likes the idea.
Justin Donald: That’s right. Well, and when everyone likes the idea, not only is it a bidding war, so you now are paying too much most likely, but you’ve got unrealistic amounts of money that come in because you’ve got all this money printed, you’ve got companies, you’ve got institutional organizations that have gobs of money that can outbid you on anything. So, you’ve got competition.
It’s better to be where there is no or little competition. And so, when you can be early, then there are less people you’re competing against. Maybe you have one or two or three competitors, not like 50 or 100 competitors. And when you look at the stock market, you not only are competing against Wall Street, you’re competing against the algorithms and the supercomputers that you’re never going to beat. Too efficient, it’s too efficient.
Tai Lopez: And after all, one thing that people don’t like to talk about, but I don’t mind a little controversy, the actual thing you’re competing against is insider trading that doesn’t get caught.
Justin Donald: I would agree with that.
Tai Lopez: Oh, trust me, remember prison is full of people who were the least intelligent, they got caught. The world is full of people who never got caught. Some of them become politicians, leaders of nations. So, when you go into the general stock market, yes, you’re dealing with analysts, a lot of smart people, perfect information, rapid trading, but in addition, and what nobody talks about is you’re dealing with a whole bunch of Martha Stewart’s.
And there’s a whole bunch of it, think of it, if you are under tremendous pressure, you manage money in New York City and you manage a large fund, recently, there was a big implosion of a fund, your numbers aren’t hidden. There’s going to be a redemption call on the money that’s under management, but you got a buddy who knows about the thing and you meet, it’s a little mafia thing. You meet in the spa in Manhattan underground and you go– so there’s a lot of insider trading that the average investor who’s an honest person is competing against. So, it’s been that way that no matter what laws there are, people in New York City and other big markets are going to do things that make it unfair to an honest person.
Justin Donald: Yeah. And on top of that, the risk-reward of that is in total misalignment. So, let’s just say that that is going on, most people are never caught. The ones who are caught, it’s like a slap on the wrist. I mean, you’re talking about Martha Stewart. They go to a Martha Stewart prison, but then think about all the bankers, these legit bankers, CEOs of banks, executive boards that are making– I mean, they’re caught, these people are caught red-handed and they’re not even thrown in jail. I mean, there’s maybe a fine to the company. They’re not even fined. So, if the risk-reward here is at such an opposite, then it’s going to happen. It has to happen.
Tai Lopez: Yeah, I always say empires are built. When you see empires, some of the wealthy people in the world, some of that was built with blood, sweat, and violence. There is some violence that happened at the top. When you look at the top, no one likes to admit it.
Now, the other thing that you were talking about, when you’re an investor, I was looking at some real estate in Utah. And I went there and the realtor, I said, “How many people showed up at the open house yesterday before I went?” She’s like, “27 people.” I’m like, “I’m not coming” because the law of buyer and seller, you never want to participate in the seller’s market.
And right now, in the last couple of years, it has been a seller’s market. Whoever owned the assets is willing to part with them at a very high price. So, if you haven’t been an asset owner recently, you’re screwed. And if you’re trying to own assets, really, now, last while you want to be selling assets or continuing to operate them for the next run, but that temptation, when houses are going up and the stock market is going up and crypto is going up, that sounds like the best time to get in. And no matter how much you try to take your human brain and go, no, no, no, I’m going to buy low, sell high, it’s not easy.
When I was buying brands in the height of COVID, when I was buying Pier 1, this is what you’re talking about, I made the bid, made two bids, one is pre-COVID, but I made one again in May 2020, end of April. People thought I was insane. They’re like, you’re going to buy a company going through bankruptcy in the middle of COVID. Who knows what stores will ever be open? Yeah, there’s e-comm, but who knows? If you don’t have stores, maybe the e-comm dies. How are you going to come– we’ve ended up paying $31 million for it. I was doing $1.7 billion when I bought them, more than $120 million a month but seemed good to me.
But even I had to check my own brain and go, alright, Tai, are you going to be on the emotional side or give me a logical? And investors, I think, that do the best are people who can turn on and off their emotions. I think you have to be a robot automaton. You’re like a spreadsheet algorithm, it spits out, okay, I can buy Pier 1, it’s doing $1.7 billion. It’s got 95% brand awareness, 1,200 stores, 60 years old, everybody knows it. It’s only going broke not because it doesn’t have a good business, it’s got 30 million paying customers. That’s a lot. It’s 10% of America. I’m going $31 million. What else can I buy?
And this is, like Charlie Munger says, the one thing that confuses even the most intelligent investor is opportunity cost. Everybody knows it. But if I listen to the average high net worth individuals’ conversation, I hear them slipping up. And maybe I do it too of going, okay, well, $31 million, that sounds like a lot. I’m like, but let’s compare it to other asset classes. What do I get for $31 million? I can get a 200, 300, 400-door apartment complex, which is good. It’s a physical asset. But what’s that thing going to spin off? 400-door spins off, I mean, depends on what market you’re in, maybe spins off $20,000 a door. It certainly doesn’t spin off $1.7 billion. But everybody else was doing a different thing. So, it’s easy to talk about and harder to do.
Justin Donald: Yeah, there’s no doubt. I mean, when I read Flash Boys by Michael Lewis, that was such an eye-opener to that world. And I love him as an author. He’s brought everything he’s ever written. He’s just great. And then you go on the opposite side. You go into private deals. You go into just companies that you can buy. Or one of the things I talk about in my book, The Lifestyle Investor, is invisible deals. How do you get deals that are not on the market? How do you get deals that people aren’t even thinking that they’re going to sell it until you give them an idea that they should? That is where the magic is at. And that’s completely inefficient, that you would have access to people like this. And I know you do. And I do.
It was really interesting connecting at the time that we did and with Pier 1 because I flew down to DFW with you, and we met up, and that’s really where you and I got a chance to connect in person for the first time. And it was fun seeing the inside of your master plan and kind of getting the way that you’re in your mind, you were orchestrating everything in the big picture that you saw, but it was also interesting sitting down with these executives because I had a chance to interview a bunch of these executives to figure out with you, like who do we keep? Who do we let go? Who’s going to make it, who’s not? Who’s really expensive and doing basically nothing and maybe who’s undervalued and underappreciated, which is actually what happened? It was like a handful of people that had all the knowledge that actually weren’t even making that much money, right?
And so, I’m curious where you got this idea in the first place to take these. And by the way, just as a side note, not only is it a brilliant move to take a business, sometimes people will say, oh, well, why are you trying to scale a business, a retail brick-and-mortar company online? Well, it’s the way of the future, but the other thing is, some of the people running these companies have it backwards, wherein talking to them, it was like, oh, yeah, our online portion, we started doing really well on e-commerce.
And so, that was cannibalizing our retail. So, we shut it off. We turned it down or we capped what it could do, and they didn’t even have websites that could provide scale. I mean, they had to be rebuilt because they couldn’t even handle just regular online traffic. It’s mind boggling how far behind a lot of the people who are running some of today’s businesses that were powerhouses in the past, but they haven’t innovated. They’re stuck in the past and what used to work but doesn’t work today.
Tai Lopez: Yeah, I mean, think about it, the old saying, hard to teach an old dog new tricks, it’s tough if you, first of all, the difference in e-commerce and regular e-commerce, think about it. Let’s say RadioShack, one of the brands we bought, off-market I bought, that was an off-market deal. When you think about what makes you a good brick-and-mortar store owner, well, that’s a slower business. You’re going to buy inventory, stick it in your store. So, you need to be good at discounting. You need to be good at supply chain. You can’t really dropship. You can’t just show pictures.
When I walk through a brick-and-mortar store, it can’t just be pictures on the shelves of the items, they have to be there. So, it’s more of a buying game. And the brands that win have really good buyers, but e-comm is imagery. So, I don’t actually have to own the products. So, you can do consignment, you can do dropshipping from other brands. In fact, in this post-COVID or even during COVID, that’s what made us really shine is like people are having a hard time getting goods in from China. We didn’t care. We’re only selling stuff on Pier 1 that’s already in an American warehouse. You can’t do that with a brick and mortar because you have to plan and buy ahead of time.
And now, there’s no incentive for the supply chain. The Danes, Denmark’s the biggest merchant country. They own Maersk, the big freighter line that’s shipping all of the goods from China and Southeast Asia into America. They’re making money hand over fist. It was $1,500 per container three years ago. Now, they’re getting $18,000.
Justin Donald: Wow.
Tai Lopez: Let that sink in. Plus, China has a zero COVID policy, so they keep shutting down. So, for what makes you good at brick and mortar actually is almost even impossible to do in the modern world. So, everybody’s being squeezed into e-comm or at least omnichannel, where you have e-comm, and only brands that get good at both are doing well. So, you have brands that, like you said, what I call it, accidental e-comm, they had no focus on e-comm. It’s mind blowing. I’m going, did you ever hear of a man named Jeff Bezos who’s been the richest man in the world for quite a long time? And he started e-comm in ’94, but that’s a whole generation that has to die out.
Elon Musk was recently saying, I don’t think humans should try to extend their life because he’s like, the old generation has to die off, so new ideas will come. I was like, wow, that’s a pretty brutal way to put it. But I’m saying, in commerce, in business, it’s almost like, okay, did you guys notice a Jeff Bezos? But Jeff Bezos started as an e-comm guy and he never had to re-learn new tricks. It’s tough to teach people. It’s tough to teach people, hey, throw out everything you learn here and let’s do this. So, it’s ready for the new guard.
Justin Donald: Yeah, and there’s something valuable about buying a brand, especially when you can buy it at a discount. You buy it pre-bankruptcy or through bankruptcy where you are getting the discount, but you’re also getting the customer list. So, there’s value in that, but there’s just value in the IP of a brand that stood the test of time for 50, 60, 70, 80 years that you’re not starting over. A startup, by definition, is risky because you’re starting from nothing. You don’t have any customers. You don’t have any market in most cases. You don’t know if there’s a market fit. You have no brand.
So, then you on the flip side say, “Hey, why don’t we just take something that has worked?” The model doesn’t work the way it used to, but the brand works. There’s name recognition and reputation. There’s a customer list. There’s a following even for some of the brands that were gone. You were able to buy them.
Tai Lopez: Yeah, Linens ‘n Things.
Justin Donald: Yeah, and revive them.
Tai Lopez: Collection, yeah.
Justin Donald: And people don’t even realize that they were gone.
Tai Lopez: Exactly.
Justin Donald: They were completely wiped off.
Tai Lopez: When I told my mom I bought Linens ‘n Things. She just thought her local store closed. She didn’t know I was out of business. She’s like, “Oh, I didn’t know they were for sale.” I’m like, “Mom, I’ve been in business for a decade.”
Justin Donald: A long time.
Tai Lopez: Yeah, well, when it comes to, I think, you have a big investor base. One of the challenges I tell people, the best, better than a Harvard MBA, is go really stare at the Forbes list, stare at it. And I mean, look at Make It Your Teacher. It’s a free website. Forbes operates this list.
When you go there, it’s very strange. When you look at the Top 10 Wealthiest People in the World, you start going, is it like the Hollywood movies? They came up with a good idea and they build a business as an entrepreneur. I’m like, okay, just think Elon Musk, the current richest man in the world. Okay, did he PayPals how he started his wealth? Did he found PayPal? No, he didn’t. It was an M&A deal. He merged. Okay, next, Tesla. Did he found Tesla? Wait a second. It was founded by two brothers. Now, he has started some stuff with Scott, but those are his two kind of well-known.
Then you go to Mark Zuckerberg. It’s like, okay, Facebook. Facebook would be bankrupt if they hadn’t made some acquisitions of existing brands. So, it’s like, okay, he bought something that already existed – Instagram and WhatsApp.
Justin Donald: Yeah, Facebook made no money for the longest time.
Tai Lopez: And even now, Facebook is a remnant of its older self. But then you go to like Larry Ellison, who’s usually about the fifth or sixth richest person in the world. This guy, Oracle, has bought 60 companies recently, even things like NetSuite, for example.
Now, look at somebody that people really don’t study, and they should because sometimes he’s the wealthiest man in the world, it’s Bernard Arnault, who started the Louis Vuitton kind of group. What’s interesting about his story? He’s a French guy. He goes to France, and instead of building a brand-new brand, he buys, it was either 60 or 80 businesses. And people were like, what are you, an American? Only Americans do that. But that was like a badge of honor, it worked.
So, for me, I always tell people, when you start black belt skills level if you want to be doing something, that’s doing $100 million to $1 billion at that black belt, coral belt, red belt levels where M&A comes in, that’s the final rounding out. If somebody personally wants to know how to create great wealth, it always is on the M&A side. It’s too hard to build from– we bought Modell’s Sporting Goods for cheap, under 5 million bucks. It’s an 1889 brand in New York City. Every New Yorker knows. People outside of New York do know this is a sporting goods, 60 stores.
How am I supposed to go to New York and start a brand from scratch to compete with Modell’s, which people’s great grandparents– I get people being like, my grandpa used to buy me a glove from there. How do I recreate? Alex and I, my business partner, you can spend a billion dollars on ads, on Facebook ads, marketing ads, and you’ll achieve about a 40% brand awareness. Pier 1 has 90.
So, it’ll take you 20 years and $5 billion in general, for most businesses, to get to the place where they’re a ubiquitous household name, and you make more money if you’re a household name. America loves brands, man. It loves McDonald’s. It loves Chick-fil-A. It loves its Best Buy. It’s like America. Not all countries are like that, by the way.
This formula doesn’t work as well in Sweden. They like little mom-and-pop stores. They don’t like chains. America loves chains, franchises, and big brands. And so, if you want to go up to the biggest GDP market in the world, it’s America, it’s better to buy and control brands. I always say if you can buy it, don’t build it. If you can’t buy it, then build it from scratch. There are some things you can’t buy.
Justin Donald: Yeah, and that makes sense. You’ve done both. You’ve had experience in both of those. I think that the lift is a lot easier when you buy existing, if it’s got a good framework and infrastructure or a name. The IP is becoming more valuable than it’s ever been in the past, and customers are incredibly important.
But with the right expertise in marketing, you can buy or you can create customers. You can buy existing lists, you can partner with other companies, you can do affiliate, you can do all the stuff. You can figure out what your cost per customer is based on advertising. So, you can always get customers. But to have a great brand, to have a brand that stands the test of time, to even buy it at a price that’s so little that, let’s say, it doesn’t work out, but you’re able to grow the revenue, you’re able to add value, you can still exit it later and make money.
So, maybe it’s not even a home run or a grand slam. Maybe it’s a single or it’s a double, but it’s nice when the backdrop is, hey, we can sell this for more than we bought it for. And the upside is tremendous. And potentially, even in a roll-up, so I’m guessing big picture for you, I mean, I’d love to hear it. In my mind, big picture is you roll this whole thing up, you take it all public or maybe you take it and do the public first, maybe there’s some private acquisitions, but I’m guessing you probably want to play the game of IPO. SPACs are not as popular as they used to be, but they could come back. That’s been…
Tai Lopez: You got about 588 SPACs last I read that are– so if they don’t merge into a company, the people who started it, the principals, the managers, they lose, most of those guys can lose 10 to 20 million bucks. They have skin in the game. They have costs. So, I think most SPACs are failing because a lot of SPACs are merging into stupid things at too high valuations. It depends on the valuation, right?
If a SPAC comes out and the market cap is much higher than the true value of the thing in the market figures it out, you’re going to have a collapse of the price. It’s just like an IPO. If you do an IPO at too low of a stock price, you, as the primary issuer of the stock, don’t get the money. The secondary market gets it. So, if you issue your stock at 10 bucks, but the stock pops to 50 bucks, that $40 wasn’t captured by you as the primary issuer of the stock. It’s going to people in the secondary market. But if you overprice that $40 and you overprice it and it drops to 10, now you have a whole separate set of downsides because you got a lot of mad people at you.
So, I think SPACs are just a blind pool of money. There is inherently neither good or bad. The thing about it is greed often makes people mispriced the stock and the valuation. But to your point, in terms of what we’re doing, it depends. Do you roll the whole thing up? Sometimes you get a conglomerate discount, which is negative. So, sometimes, it’s better to just sell off subsidiaries one at a time. And by doing that, it’s 100 times more value, or maybe not 100, but 20 times more value than trying it because there’s less buyers of a more complex entity.
So, I kind of think of REV, for example, as kind of like the mother that gives birth to many things, and then the children can go off and grow up on their own. But theoretically, you could sell the whole home. One of my mentors used to say, everything for sale at the right price, so I’m patient. I think the big thing we’re doing now is software.
I started in e-comm in ’01. My business partner, Alex, started in ’08, sold his e-comm. He’s also sold effectively his software business for 300 million bucks a couple of years ago. I think of us primarily as three things. So, we have the retail brands, all e-comm retail brands. And the reason we did those first is not necessarily that it was being opportunistic. Software is the second pool of value, and that’s where you get the crazy valuations. Nothing in the world gets 50x gross revenue except software. Pretty much nothing’s going to get you that. Real estate doesn’t do. Nothing does that.
And then the third thing now that the world’s opened up and there’s no quarantine and so on, we’re going back into physical brick and mortar, whether it be through franchising or corporate-owned stores. RadioShack used to have 8,000 stores. Pier 1 had 1,200. Dressbarn had 600. Stein Mart had 250. Or even our small Linens ‘n Things, same thing, hundreds. And so, we opened back up the top 20% of the stores, but we do them in smaller stores. We make it easy to buy stuff online. You have iPads in there, you use the stores as mini fulfillment centers to get people who buy offline, get picked up in store.
So, those are the three pools of value. We focused on the retail brands, converting them from brick and mortar to e-comm just because it was the first thing you could do for at a great price. But that’s not that, in fact, that can be dwarfed by the value that’s coming right now.
We launched Brahms, which is our competitor to Shopify, a competitor to WordPress. And Shopify is most valuable tech company basically ever in terms of being a short period of time. And we also have a competitor to kind of Slack and Zoom called codename, Bulldozer. I guess I shouldn’t tell everybody codename without the codename. It was private. Now, it’s no longer a secret but Bulldozer. So, those software plays, if you do those right they can– and our software will be different than Shopify and that we’re integrating all the benefits of owning Pier 1 and Stein Mart and RadioShack and Dressbarn, meaning somebody comes builds a store on Shopify. You have nowhere else, of no one helping you ship and you have no products.
With us, they’ll have 200,000 SKUs if they want on day one. They can be an affiliate, sell all our stuff. So, we’re solving a problem that nobody has even realized they could solve because you had to own the retail brands. So, this is one of these true synergy things. And now, we get back into opening up brick-and-mortar presence. This thing becomes a powerhouse.
Justin Donald: Yeah. And there are other companies that are nice to partner with, like Tradefull who I introduce you with, who does specialized fulfillment. They can integrate with Shopify, but you don’t have to have Shopify, and they’re just doing amazing things. I don’t even know that I’m at liberty to speak about some of their newest partnerships, but it’s…
Tai Lopez: I know, I was up in Ohio. Yeah, they’re a great warehouse partner and other partner, yeah. There are synergies everywhere. And now, I’m getting people calling me. I’ve gotten four huge companies call me out of the blue. These are companies doing at least $500 million of revenue. Will you take over our e-comm?
So, now, the first four, three years, REV’s three years old, I mean, this entity, I’ve been doing it much longer with the current iteration, REV. And now, people watch at the beginning, are you going to survive? Are these people out of line? Now, when they see, wait a sec, they’re surviving and thriving, now opportunities come because there’s nothing better than somebody giving you half their business for free.
Justin Donald: Yeah.
Tai Lopez: Free is a good price.
Justin Donald: That’s right.
Tai Lopez: My favorite price to pay for anything is free. There’s a billionaire who came to America, a Turkish billionaire, a few years ago, and he wanted to experiment. Can I live in America for whatever? Three months for free, off his name as a billionaire. Sure enough. He went to Vegas. All the casinos are like a billionaire is coming. So, they comped him for three months. He never spent any money there, but they comped him hoping he would. Then every business person would take him out to dinner and this and that, and he’d take the leftover. I thought it was funny, but I was saying, wealth also comes from leveraging your name, in our case, Retail Ecommerce Ventures, into getting stuff for free, equity in businesses or a very nominal price. The future for us is getting equity in things, either 100% or partial for even less and less money.
Justin Donald: Yeah. And when you bought your brands, it was a very opportunistic time and season, and we may never experience that again. That was a unique stretch where a lot of brands went under, and you were able to scoop them up for pennies on the dollar, so.
Tai Lopez: I think it’s going to come and I say, I got a little prediction. Sorry now to interrupt you, but…
Justin Donald: No, I’d love to hear your prediction.
Tai Lopez: I think we’re going to get one more wave at it because what happened is COVID knocked back some companies. So, theoretically, it was the best time to buy, right? A whole bunch of companies get knocked, their stores get closed, but one thing caused a lot of stores not to have to sell, government printed and injected trillions and saved. But it’s false security because when you print money, you don’t actually improve the dynamic and fundamentals of the business.
So, some of these businesses, like they say, you can’t polish a turd, they were turd-run businesses, and the Joe Biden money or the government, Trump and Biden, injecting money in tried to polish the turd just enough that it lasted. Well, now, if the markets slow down, we know they have to slow down. Somebody was telling me here in Austin, “Tai, my $4 million house, somebody offered me $16 million.” So, that’s a 4x.
That was in two years of him owning it. It can’t do that again because that means the house will go from $16 million to $64 million, and definitely can’t do it one time after that. Or four times 60, you’ll have a $500 million house in 10 years. So, we know the market’s going to slow down, whether it’s a 1929 recession or a 1970’s stagflation or a 2008 industry. 2008 was a sector-specific recession, who knows? But you will have a slowdown, and for sure, you have inflation on food.
Like I said, anecdotally, if you want to see inflation come, be a farmer. I own a lot of farmland. I have about 13 farms, and they’re organic. And we’re organic so we don’t use chemical nitrogen, which is made out of oil. It’s a byproduct of petroleum. It’s the number one fertilizer that grows all the food we eat to stay alive. Guess what? That fertilizer is not available, chemical fertilizer. So, now, the non-organic farmers are coming and they bought up three years’ worth of all the manure in Virginia.
So, organic farmers, I’ve never seen that. So, you’re going to have food inflation like you’ve never seen. So, guess what? You got oil, for sure, some level. Maybe oil hits $250 a barrel, think of that. So, there’s going to be a slowdown. What I was coming back to this, I think, there is going to be one more buying round in the next 18 months.
And just in the last two weeks, I’ve had four CEOs on deals. I’ve tried to cut in the last two years that wouldn’t sell to me. Out of the woodwork, call me. These are big guys. Big boys. The CEO texted me, hey, you want to talk about that deal again? So, I actually have a kind of prediction I’ll do on camera, the next 18 months. That’s why I’m working on building a war chest of cash to just buy crazy stuff now, stuff that just squeaked by the first wave, shouldn’t have survived, but the government printed so much money, they propped up a dead man.
Justin Donald: Yeah, that’s interesting. I mean, I’m meeting with a lot of really smart people, I mean, much smarter than I am, much smarter than anyone, any group of people that I’m with. Now, I will say that my mastermind, The Lifestyle Investor Mastermind, is about as smart of people as you’re ever going to find. It’s some of the most successful people on the planet. We’ve got people in, I think, 19 different countries that are part of this mastermind. So, it’s very worldly.
And these are some ballers, some of these people are as successful as a lot of the people who you’re mentioning, by name or by keeping their anonymity. But one thing that I am hearing, you got one side that’s like, oh, this is just a blip on the radar, you’ve got this other side that says, “No, we’re going to be in a full-blown recession.” And I’ve got access to a handful of family offices and teams of analysts and just the smartest people out there. And I’ve got a few different groups that are like by the end of the year, we’re going to be in a full-blown recession.
So, it’ll be interesting to see how it plays out. If you print more money, that changes everything. If you don’t and inflation runs rampant, I mean, things are going to happen. So, it’s going to be interesting to see what really takes place, but I’m curious to see, you said 18 months, how soon do you see this starting? Or do you think we’re potentially even in it right now?
Tai Lopez: I think we’re in it now. Yeah, so I’ll tell you this. I’ll start by saying I try to surround myself with smart people like you and people smarter than me. I have two Nobel Prize winners that are on our advisory board. I pay them for the advisors. One is Professor Pissarides from the London School of Economics. He won a Nobel Prize. And then one is Maskin from Harvard. He also won a Nobel Prize. So, I talk to them. Professor John Zhang from Wharton, one of the most well-respected. I talked to those three, not every day, but pretty often.
Professor Christopher Pissarides is more of an optimist, but even he sees the case for stagflation. So, now, I will give you the counterargument. I’ll give you the bad news and the good news. The bad news is I think a lot of people know, you have shortages, supply chain issues, war in Eastern Europe, not just with anybody, but with a large supplier of oil, gas, and food. You have nationalization of the world where countries like India go. We don’t care about anybody else. We just want our own food security, nobody can ship out food. We get a lot of our food from India too – lentils, beans, all this kind of stuff. So, you see food shortages in baby food. You see all this stuff. That’s the bad news. And you also see a massive printing of money.
Now, here’s the good news, is that if M1 or flow of cash in the economy is high and you have inflation, people, there’s cash there now. And you saw a run on the stock market recently, but a run on the stock market is a flight to safety because the reason stocks go down is because there are more sellers than buyers. And the sellers get something for selling, they get cash or some cash equivalent. So, the money is there in the United States, in other countries.
Now, asset valuation is dropping, give a temporary illusion of poverty to people. Wealthy people, when they see all or everything, I thought, if you owned Shopify, for example, and you’re a large shareholder, you’re like, oh, it’s valued at $170 billion, and now it’s dropped down to 45. But that’s illusory. You never had the cash. So, cash is still there. The cash hasn’t been– now, when the Fed does things like it does, part of the goal, like Professor John Zhang, is to directly or indirectly get people to buy up treasuries so that money is absorbed by the government out of circulation, but it’s too much money to probably absorb indirectly through treasuries.
So, the good news and the argument for a bull market, there are people that are smart that I know make the case for the bull market, not just the bear. It’s easy to be a bear caller. Everybody, there’s these guys I saw at Business Insider, man who called the 2000 bubble again predicts. I’m like this idiotic guy, yeah, he got it right in 2000, he’d been calling a bubble, he’d been calling a recession every year. The dude missed every good investment he could every– a broken clock is correct twice a day.
But on the bull case is that alright, so you got cash, it’s not going to get absorbed in by the government. It’s too much, I think, it’s $21 trillion or whatever M1 supply up from $2 or $3 trillion a decade or so ago. And then you can’t keep it in cash because inflation at 8% scares the hell out of you. So, you got to buy assets.
I know a smart guy, a real smart guy who’s been good at predicting goes, I don’t see how every asset class can’t keep rising. So, like I said, I know smart people, but what I tend to do is think–when two smart people make strong cases for opposite things, I tend to think they’re both right. So, my prediction is sector-specific recessions, like ‘08. I predict a 5% chance of 1929.
For 1929 to happen, just to be clear, that is more than a recession. It is a recession followed by 20 to 30 inappropriate and bad governmental flub-ups, mistakes. Now, you might say our current administration will mess things up that many times. I don’t know. I give it a 5% chance of 1929. I give it a, let’s say, 50%, 60% chance of sector-specific 2008-type recessions because it can just be a shuffling of the cards, meaning there are still 52 cards, there are still aces, but the aces are no longer held by, let’s say, the real estate people because maybe real estate can’t continue to appreciate.
I mean, if you buy a multifamily property, the way you make money is by charging rent to the renters. So, if you pay $2 million a door, how the hell do you absorb that? What kind of rent do you have to do? If you want to get 7%, even 10% on your money on $2 million a door, you have to get $140,000. That’s $10,000 a month of rent. So, let’s say I’m just saying hypothetical, real estate is temporary, like 2008, or it could be another sector. It could be retail. Food is another thing.
So, I think it’s more likely that, and then you have a 30% chance of a general malaise like the 1970 or you have stagnation of the economy coupled with rising energy. Rising energy prices can also make people. I was with a guy in San Antonio, super wealthy guy. He’s loving it right now. He’s been buying energy, so he’s getting rich there.
America is so diversified. It’s tougher for there to be a full 1929. And by saying this, one of my mentors told me that I never look down on this cyclical understanding of history. So, 100-year cycles, I used to think, is he crazy, Allan Nation telling me things from 100-year cycles? Then around 2019, 2020, COVID hits, probably started in 2019.
Go back in time 100 years ago, almost to the day, maybe a few years off, Fort Leavenworth, Kansas, a whole bunch of soldiers show up sick. They think it’s cholera or typhus, turns out to be a flu. They then ship them in World War I to Spain or to Europe, and it spreads throughout the whole world. A hundred years later, a global pandemic hits again.
So, that could make the case that 1929 hits again in our 10 years. So, in percentages, I think never think in black and white and then bet on the better predict, build a plan. I have a contingency plan. It’s hard to build a contingency plan for a 1929 event. We’ll just all be poor. And I have a farm, actually. I’ll go back to Amish Barn, my farm. If things get too bad, you’ve got the Dust Bowl situation. John Steinbeck, Grapes of Wrath comes back. Then you just go live on your farm.
Everybody should buy a little piece of land. You got these Texas live oaks. Learn how to grow your food here. Get a few Longhorns adjusted. But then, if it’s a general malaise and 1970’s stagflation, there’ll be plenty of winners you can buy. I like when things go down and buy. And if it’s sector-specific, which I think is a higher probability, that’s even easier to buy because then that whole sector gets smashed up. If you have a skill set in that sector, you can go sweep up assets for cheap.
Justin Donald: Yeah. And that is likely what’s going to happen. I met with someone else that I think is one of the brightest minds in real estate, and this is exactly what he thinks.
Tai Lopez: He thinks real estate is going to shrink up?
Justin Donald: Yeah. And he’s getting his dry powder and he’s going to buy up as much as humanly possible. So, we’ll see if it happens. No one has a crystal ball. People that say they call it generally missed it more times than they got it.
Tai Lopez: Trust me. People predict the damn future. If you’d be worth a trillion dollars, if you could predict, nobody’s good at predict– people are like, I’m a technical analyst, I could predict the stock market or crypto by reading flags. I’m going, no, you can’t because you’d be the richest man in human history if you could do it. Bullsh*t.
I mean, if you could predict the stock market, there’s enough volume there, you can be like George Soros. Every day, he made a billion dollars. In one day, you can make a billion dollars every day. So, you got to stay humble and you got to go down the percentage. But more importantly, you should make that three-part plan. What do I do in the 1929 situation? Have a little piece of land, have five chickens, know how to grow a garden. Maybe you want some guns, this is Texas, keep people out of your chickens, right? Have a 1929 plan.
But you know what people forget to do? Plan for also a boom. What happens if it’s a bull market? If it’s a bull market, sell off assets, it’s the best time. Do counter, but then what’s your plan for the stagnation? To me, when there’s blood on the streets, the classic saying, or I like to say more when shoeshine boys are giving you advice, it’s like when you go to jiu-jitsu studio, and the white belts are teaching the black belts, run. That’s how I knew crypto markets were going to crash. It’s white belt.
Some of these guys I know, I’m like, two months ago, the dude was flipping burgers. And I have nothing against flipping burgers in humble beginnings. But a white belt, even an ambitious one, shouldn’t teach a black belt. And as crypto is full of people who are their last venture was 11th grade, and they’re going, yeah, Terra Luna can’t lose. I didn’t lose a penny in Terra Luna because too many people like Terra Luna. I was out. I didn’t have zero Terra Luna.
I told people to get into Bitcoin. I got the most-watched crypto video, I think, in history, 2017, told people Bitcoin is $4,500. Ethereum was $197. So, my cost basis, and I told people by the big crypto names, more like even if Bitcoin’s volatile and ETH is volatile, they’re the big names, they make sense. My brothers, of course, I have six brothers, did the opposite. They bought all the little stuff because I have no money left. They bought Time and OHM and all this stuff.
I told people I predicted in November, I put on my Twitter, all the DeFi protocols will fail, and everyone failed because people understand you can only compound money so fast before you’re projecting out more molecules than there are in the universe. You can’t, nobody’s growing money out of a thousand X per year. A thousand X compounded over time is literally, in five or ten years, it’s like more molecules than there are in the universe. People can’t do math. So, bigger investors understand the limitations on wealth creation.
Justin Donald: When you chase the overnight success, that’s when you’re going to be in trouble. And it’s not to say that you can’t get lucky, it’s not to say that you can’t pick a protocol or some sort of crypto that wasn’t here a few months ago, is here today. You write it up, you get out. Most people have a hard time getting out.
Tai Lopez: You got to be disciplined to get out.
Justin Donald: You do because you think it’s going to keep going, you think, hey, it’s going to go up forever. And it’s just never the case. But I do think it’s best to plan as if the worst is going to happen so that you can handle that situation, but be optimistic that good things are going to happen so that you’re in a good place to tackle whatever opportunities lie in front of you.
Tai Lopez: You got to be like a lawyer, plan, hope for the best. Lawyers always plan for the worst, but an entrepreneur hopes for the best. You’ve got to be half entrepreneur, half lawyer.
Justin Donald: Well, I’m so excited about just all the cool things that you’re up to, and it’s awesome having you come into town. I appreciate you swinging in. This is fun.
Tai Lopez: I was like, I got to see Justin.
Justin Donald: This is cool. So, as we’re embarking in this new place, this new time, there are so many opportunities in the future. And even if things crash, hopefully, they don’t, but even if they do, there’s going to be tremendous opportunity for those that are looking, for those that are waiting, those that aren’t in victim mindset, everything or a lot of things will be on sale. There are pros and cons, every investment that you make.
You had talked earlier about real estate. You talked about software. I think real estate is great from the standpoint of you’re probably not going to lose a lot of money, especially if you’re buying based on net operating income and not just like a lot of people are buying homes just based on, hey, this home over here, a comp, this home over here sold for 2x. You could get in some trouble there if you’re not cash flowing. If you’re cash flowing, that’s fine, you can weather that.
But if you’re buying based on net operating income, a lot safer. Now, you’re probably not going to hit a grand slam of that. I mean, over time, it could be a grand slam, but you’re probably going to get 10%, 15%, 20% per year. Maybe in a bad year, it’s less than that. But you’re getting gains over the long haul. When monetary supply increases, more money is being printed, then assets rise in tandem. So, great. Probably not going to lose a whole lot of money there, but your outside returns are going to be a lot more in like, software, technology, owning a company that can scale. That’s where you can have these massive returns.
Now, you have a lot more risk. It could go belly up. But it’s nice to have both in your portfolio, but we’re also embarking on this time of a lot of people are predicting that technology as a whole is going to have a lot of down rounds. And tech hasn’t had that. Investors haven’t experienced a lot of that. And for people, I don’t know, like a down round, that can screw everything up. You got to recap the company. You got to redo the employee stock options. I mean, this can sink a company, and a down round, just for more specifics, you raised money at one value, and then the next time you raise money, it’s at a lower value. It doesn’t sound like as big of a deal that can sink a company.
And then, in COVID, you had online sales, e-commerce in general, skyrocket. Recently, we saw Amazon with their first negative return. And so, people are now concerned, oh, is e-commerce dipping? I’m curious to hear your thoughts on what these down rounds could look like. What having a negative return on e-commerce or a shrinking type of revenue scenario as a whole is going to look like? And how to mitigate that?
Tai Lopez: Yeah. I mean, I tell people, look at the S&P 500 when you’re on your app, your stock app, one thing I think is a mistake is looking at just one year. I mean, look at the stock app over the last 10 years. So, yeah, let’s take Amazon, let’s take e-comm, does the fact that Amazon goes negative, if I run 100 steps in 10 seconds and then I step back two steps, do you think I’m not making progress? I think the downside of the stock market, it’s so hyper-magnified with people trying to get rich now that it forgets how markets actually work. I mean, this means nothing.
Now, if something starts to go negative because it’s a buggy whip business, and now cars were invented by Henry Ford, now that downturn, should that priced in may go to zero, the downturn. But Amazon got rolling back 2% means nothing, in fact, and this is what people don’t like to hear, I was saying nations are born stoic, die epicurean, imagine your own children. Your own children, would you want them always to just win, win, win, win, win every day of their life? No. You need them to lose sometimes because regret, if you study evolutionary psychology, there’s a regret mechanism in our brain which is the catalyst to learn.
So, in a healthy economy, the fact that Amazon goes down, rolls back its projections, or whatever, this is good. This will put Amazon in check, and they’ll create more innovative products. Like I said, one of my advisors, this Nobel Prize winner, he says, well, all the bear markets forget, the people who love to call a recession because it’s easy to be a negative Nancy.
Is that look at the rate of technological advancement? We’re shooting this podcast on iPhones, and people are like, hey, where’s your fancy camera? I’m like, hello, 2030, the iPhone 13 is definitely more pow– well, the first iPhone is more powerful than what put a man on the moon in the 1960s. The current iPhone camera is more sensitive than anything you could have bought. Steven Spielberg didn’t have this. So, once again, technology is outpacing probably any minor negatives to the market, like Amazon rolling back their projections or two.
So, one thing I’ll tell you, people, sometimes, your time machine goes back to the 18-year-old self, what would you teach yourself? Probably, my first lesson was, “Tai, nobody knows anything, so don’t ignore almost everybody. Nobody knows what the hell we’re talking.” So, stock analysts and media reporters, I mean, which is where we get naturally most of our news, you can have to ignore this because they’re only right in the micro short term. They are correct that this micro downturn of Amazon stock is currently bad if you bought Amazon stock yesterday and you wanted to sell today. You’re not an investor if you buy Amazon, you’re a speculator.
So, there’s a different set of rules that in and– now, speculators are valid. There are speculators who get wealthy. I just read the book Alaska by James Michener, the story of Nome, the story of Eureka, the gold rushes. Those people didn’t want to live in Alaska. They were there for gold and they were getting out, they’re speculators.
But the thing I like about your audience, your book, and so on is you’re appealing to people who are actual investors. The definition of an investor is somebody who moves to Alaska in the 1800s, and I think the gold rush was the 1890s. You move to Alaska not only because you want the gold, but you’re going to stay there. So, if temporarily, there’s no gold, you don’t care because you’re there for you and your kids and generations after you. So, I think the advice you listen to online, you have to differentiate who you are.
So, going back to real– you brought up something interesting about real estate, for example, about losing money, and definitely physical, tangible assets or less likely to move money, I will tell you, though, the first super-wealthy investor ever had, somebody worth the net worth well over $500 million, wasn’t sure if he’s quite a billionaire. This is about 2007 or 2008. I went to visit him in Portland, Oregon.
This guy was wealthy. He had a 40,000-square-foot house, which is a big house. I live in a 17,000-square-foot house in Beverly Hills. People thought that was big, I didn’t know. This guy had a big house. He’s like, you can stay in one wing of my house. I never saw the whole thing, but he told me, he’s like, “Tai, anybody who tells you can’t lose money in real estate, they’re too young.” He was like 70. He’s like, “I lost money.” He’s like, “I built a skyscraper,” he told me, “in Houston.” I think it was a multi– I’m not sure if it was a skyscraper or multifamily. And he goes, “This damn thing, in the 1980s, you had this huge inflation.” Inflation rate used to make 18%, 20% at bank.
So, he said, “Tai, that place, I never sold it. I ended up having to hire security because there is a law in Texas where squatters were coming in.” He eventually bulldozed it. He said, “I took a wrecking ball, like you see.” So, first off, you can lose money in real estate, theoretically. It’s harder, though, but the problem with real estate is where do you get asymmetrical returns?
So, if you look at the “best investors,” the people follow Markowitz portfolio theory, for example, with the classic theory of how to maximize your gains, best risk-adjusted return, you got to have something that has asymmetrical returns because real estate, realistically, is not going to really– look, if you do, I know people right now like targeting projected return is 15% on real estate or 12%. And I’m going, yeah, well, inflation might be that. So, you’re doing nothing, and then you got to replace. So, you bought, you sell something, you got to replace it. Yes, you sell, but then you have to buy something else, or else you’re not in the real estate game anymore.
So, the thing about real estate that I don’t like is you never buy something for $5 million, sell for $500 million. Your portfolio ideally is exposed to some enough assets. That’s where you outpace inflation is with the percentage doesn’t have to be all your portfolio, it shouldn’t be all of your portfolio. That’s why people invest with what I’m doing, with Retail Ecommerce Ventures. There’s stuff we buy for $5 million that, theoretically, you could sell for 100 or 50 or 200.
In fact, some stuff like the software companies, you can launch a software company, let’s say, we have a pretty big development team, 60, 70 people. So, let’s say you’re $10 million into software, it can go to $10 billion. So, a little bit of that in your portfolio. I always tell people the real risk in life is living a crappy life. I mean, the only thing you should fear in life is a crappy old life and underperforming what you could have done, but in terms of some people are so conservative that you end up with nothing. You get 100% or nothing.
Justin Donald: That’s right.
Tai Lopez: Real returns on an inflationary basis or on an adjusted basis. It’s like you got 100% of no gains.
Justin Donald: Yeah. And it is important to diversify, diversify across multiple income streams, diversify across a bunch of different asset classes. And yeah, I mean, so important. And sometimes people will say, well, Warren Buffett doesn’t diversify, but he knows what he likes and he diversifies amongst that class. He likes insurance a lot.
Tai Lopez: Next time you meet that person, you smack him around, like, what are you talking about? Go to his Wikipedia, he owns about 115 A-class assets. That’s the most diversified guy in the world. Buffett likes to say stuff because it sounds cool, but he does the opposite. He’s like, put all your eggs in one basket and watch the basket. Not only is he diversified in the number of investments, but nobody’s more cross-sector than him. He’s railroads. He owns Apple. He owns Dairy Queen. He owns AmEx. He just bought a Brazilian cryptocurrency bank. I mean, trust me, Buffett, he likes to say this, he’s not diversified. I’m like Buffett. If I ever meet him, I want to go like, do you say that? Because he’s a hyper-intelligent guy, people aren’t going to realize how high his IQ is. I’m like, you must be joking when you say that, right? Anyway, go ahead. Sorry.
Justin Donald: Well, this has just been great. By the way, congratulations. You’re officially my longest podcast.
Tai Lopez: Boom. I like it.
Justin Donald: This is really fun.
Tai Lopez: I hope I wasn’t the worst.
Justin Donald: No, this is fantastic. In fact, I feel like we could talk for another few hours.
Tai Lopez: I know. We should do it again.
Justin Donald: This is amazing. Alright, I’m totally down to do it again.
Tai Lopez: You’re good at this, and we’ll do it again.
Justin Donald: Thank you. This is an absolute blast, so.
Tai Lopez: Thanks for having me.
Justin Donald: Hey, where’s the best place that people can find out about you and REV? And anything else that you’re up to?
Tai Lopez: So, yeah, for investors, go to Retail Ecommerce Ventures. You can Google it or just RetailEcommerceVentures.com. For me, personally, TaiLopez.com, has links to my Instagram and stuff. See what I’m doing on a personal basis. REV, I’ve got different holding companies that investors go in, some of your investor group. But yeah, Retail Ecommerce Ventures, you can see the brands and all that stuff, but it’s good.
Justin Donald: Awesome. Well, I appreciate it. And I like to kind of wrap things up every week with my audience with one question. And that one question is this, what’s the one step that you can take today that will move you towards financial freedom in a life by design, not by default, one that’s on your terms, that’s inspiring and compelling and just absolutely amazing? We’ll catch you next week.