All right, so Tom, my question to you is, if I was starting from scratch and I had zero dollars, in your opinion, what will it take for me to get rich in three years? Whoa. Okay. Getting rich in three years, that is a very aggressive timeline.
The only way you're gonna get rich in three years, and we should probably define that, I'll say seven figures or higher seem like a reasonable baseline. Okay. So the only way that you're gonna get that kind of wealth is and I'm assuming that you're not able to invest something to buy something or something like that. So we're literally starting scratch.
So you're going to have to create a company, create something that generates a lot of value. Typically that's going to be a company. So you're going to create a company that meets a very well known need that has not yet been serviced by a product that is relatively easy to get across the finish line and into the marketplace. It needs to be something that is going to resonate with social media and it needs to be something that doesn't cost a lot of money to get started.
So either you're going to layer on way better marketing. So if somebody has a solution to a well known problem they don't know how to market, you can go and partner and say, look, I understand marketing, I'm going to be able to get this out there. Or if you have an information product that can be associated with a known problem that you uniquely can solve, I have to know a little bit about your background. So if there's an element to working the music industry, to becoming a professional singer, improving your voice or something like that, that you really have a beat on that you know, a lot of people are interested in that you could turn to a course, for instance, that people would really resonate with.
That could be a great one. The reason that I keep coming back to information products is you're looking for something that doesn't cost money upfront. If you're going to like take cost nutrition, for instance, we were building that there was still a substantive amount of investment that we had to make. Even just buying a bunch of protein powder was expensive.
Buying the liquid fiber, you have to buy them the 55 gallon drums. So it's like there were still thousands of dollars that we had to put in in the beginning. And so to find something that really takes little to no money down, you're either going to be doing information product or you'll be doing something that you can make yourself that doesn't have expensive constituent parts or you're gonna be finding something that's already made that the person doesn't understand marketing. So it's really about what is the bit of value that you're gonna be able to bring to that, that's unique, that somebody else can't easily replicate, that the world is gonna know instantly that they need.
And you just have to make them aware of it because three years is fast. And so Quest, for instance, depending on what you mean by rich. So for instance, three years into Quest we had a billion dollar brand, but I was, I didn't have a billion dollars I could put in my pocket. So I still driving.
I think by then I finally upgraded my car, but for a first couple years of that I was still in a beater car, even though it's worth a lot of money. And so if you need the money to be in your pocket, that's probably going to take a fair amount of time, longer. And if I can take a minute to get everybody watching to understand the difference between net worth and income, that would be really valuable. So if you don't mind generating a million dollars plus in net worth, now we're back to you just have to build something that other people say that they want.
To have the actual money in your bank account, you have to build worth in something that people say that they want. And then you have to sell that thing. So it's very rare that you're going to get rich off of the operations of your business. You get rich by building a company where somebody's looking at that.
It's going to get complicated fast. So ask follow up questions. So you're either going to build something that's going to ipo, okay, initial public offering. And what you're saying is, hey, I built this really cool thing, it makes a lot of money or people think it's going to make a lot of money.
And by going to the sec, they'll actually let me fractionate my company, break into a bunch of pieces known as shares. And I'm going to sell some of those shares on the open market, the public markets, and then people can buy those shares. And so that's the way that you're going to be able to put that money in your pocket. You're literally selling a piece of the company that you own.
Otherwise you can sell a minority, controlling or total interest in the company to private equity, venture firm, something like that. But usually when people do that, they're not doing it for founder liquidity, they're doing it because they expect you to invest the money back into growing the company. Which is why IPOs get people really excited. Because some of the shares you will sell as part of the company treasury generates operating capital.
Some of the shares will be yours personally that you get for being a founder and so you can use that as a liquidity event. So now you actually have that money in your pocket. But most people, in three years it's going to be tough. You could get to an IPO stage, but that's going to be a really rare moment that again follows the equation of you're solving a problem that people already know exist in a very dynamic way that people are basically falling over themselves to give you money for.
And you've actually created a company that can be sold, which is we could do a two hour class just on what that means. So it's interesting you ask that question. I really want to give you a hot sexy take and just be like, oh, go do this. But the reality is to, to have a seven figure exit that fast would be hyper rare.
It does happen and I would rather get people thinking about how do I build a business that's doing a million dollars in revenue. All the following things apply, but then it's really about reinvesting every dollar that you're getting back into the company to grow and scale. But again, it's a problem with a killer solution that you're doing in a unique way that didn't require startup capital. And so going off of that, who would be the, I guess the top three people that I should first hire to take on this, this event?
This should hire nobody. You should be going after people that are going to partner with you so that you're not paying salaries because the thing that eats companies alive is overhead. So when you're starting, if your goal is like, look, I got no money and I'm trying to build a million dollars in value in the next three years. Now you want to be focused on what is it that I'm good at, so what's the problem I'm solving, Who's my audience, who am I making this for and what skills are missing from myself, Right?
So even if you're doing an info product, you're going to need maybe a marketer, you're going to need a tech person to help you package up, you're going to need customer service, you're going to need somebody to run the day to day operations. So there's a lot of things that are going to have to be done, but you don't necessarily have to pay somebody to do it. And, and so the mistake that I see entrepreneurs make is that they're imagining, oh my God, it's gonna be worth A hundred million dollars. Why?
If I give you, you know, even 10% of my company, that's $10 million. Why would I ever do that? Because you'll never get to $100 million. You don't have other people.
So to give you an idea, I've never once done a company where I didn't have a partner ever. So I highly encourage people, obviously. And I've become fantastically wealthy, so I highly encourage people to bring on partners that you trust. It is literally like choosing a romantic partner that you're gonna be married to for a long time.
And it's gonna be. It's like having a spouse and kids. Right. But you don't just have one, two or three kids.
You have 10, 20, 30 kids. And all the stresses of running a business. So be very thoughtful about it with. But bring out a partner who's strong, where you are weak, and then you guys are gonna be able to really multiply your efforts and you can work things into it.
Like if they end up flaking out, if they quit, then that the shares then revert back to the Treasury. So it's what's often referred to as phantom shares. So you get what we do here at Impact Theory. So we give phantom shares and we say, hey, as long as you're employee in good standing, you own that much of the company.
If we exit, boom, you get it. But if you leave or get fired for any reason, the shares revert back to the Treasury. Because what we're trying to incentivize is performance. We want people that are in here killing it, doing it long term, versus the sort of traditional tech VC back company that knows they're going to exit in three to five years.
And so that's a very different mode of being that's raising a lot of capital, that's having the idea that sounds amazing on paper. It's knowing that you're part of a portfolio. So let's say they invest in 10 companies. You're only expecting one to hit.
So means nine of them they know are just not going to work out and we can really see the future. So I would say, especially for beginning entrepreneurs. Yeah, partners that you don't have to pay that are going to work as hard as you and they're good at something, you're not. Awesome.
Thank you. To follow up on that, do you need an entrepreneurial mindset to become wealthy? No doubt. I mean, you can win the lottery or have your parents give you money.
That certainly is possible. I don't think you're ever going to get what I would call wealthy in the short term without an entrepreneurial mindset. Now in the long term, you can invest very traditionally and generate incredible wealth. It's really pretty startling what compounding interest looks like over time.
And if you're willing to sit in the stock market, which returns an average percent of 7% over inflation. So being in the stock market for 30, 40, 50 years really is pretty amazing. And you double your capital every seven years. So you put it in, you know, if you've got 50,000 to begin with, seven years later you've got a hundred thousand dollars.
Seven years after that you've got $200,000. Seven years after that, you've got $400,000. So it gets big number pretty fast, right? And you're going from 1 million to 2 million, 2 million to 4 million.
But you've got to be in it 50 years, right? So you've got to have a lot of those seven year cycles. And that quite frankly, for the vast majority of humanity is exactly what you should do. You're effectively, if you do the right way, do not try to pick stocks, okay?
Don't try to pick stocks. Nobody beats the people like Ray Dalia, right? He's got hundreds of millions of dollars in AI, 1800 employees that all they do is that for a living. And they know how to make arbitrage on milliseconds.
If you're not going to play at that level and you're basing your decisions on things you hear about on Twitter, it's already too late by the time that makes its way out. So don't. That's where people make the mistake. They want to do it sexy, they want it to feel like gambling.
They're trying to treat an NFT like an investment vehicle. All mistakes. You want an index fund and the reason you want an index fund is index funds are, you're betting on a sector of the entire economy. So you're not trying to pick a winner.
It's kind of like saying, I'm going to the horse track. All I'm going to bet on is that a horse wins the race. A horse comes in second place, a horse comes in third. Doesn't matter which.
I just know that they tend to work out in this distribution. So I'm going to invest in something like the s and P500, which is a list of the 500 strongest is probably the Right, way to think about it, the 500 strongest companies in the economy, if one of them ceases to meet that criteria, they fall off, stop being a part of that portfolio. Anyone comes on and becomes part of that portfolio. So it is not what they call actively managed.
So nobody's trying to buy a quick stock. They just, it meets this criteria or it doesn't. As you get fancier, you can invest in more index funds. So maybe you want a growth index or an index out of China or developing economies, whatever, and you can start to broaden out like that.
But still index, still passive, still long term hold. It's the only reliable way historically to buy low and sell high, which sounds stupid, but is the hardest thing to do. Investing the easy thing, and what most people actually do is buy high and sell low. Now the question becomes, if we all know that's dumb, who would ever do that?
It's because of the emotion. You buy high because you think it's actually low. It's euphoric. Numbers going to go up forever.
Even though it's a really high number compared to where it was a year ago, it couldn't possibly go down. Come on. Everybody knows it's only up. Only up.
It's different this time. And so people convince themselves that this time it really is different. You live through the crypto euphoria. You know exactly what it feels like and it feels good.
It's. It feels good. It was so fun. I was having a ball.
Now, thankfully, I don't trust myself. So I was like, I'm gonna invest this much and that's it and no more. And even though when I hit that number, I was very sad because I want to keep investing. Keep investing, keep investing.
I was like, no, I know better than that. And so we stopped. And then of course, numbers come down. Now the problem is they bought on the way up.
Euphoria felt good. Number go up forever. And then as it starts to come down, they panic. And it's like, whoa.
That sense of like, it couldn't possibly go down, you realize isn't true. It is going down. And now you're terrified that you're never gonna get your money back. And if you got yourself in too deep and you have money to live on, you start going, oh, damn, like to pay my bills, I'm gonna have to get money out.
So now you've effectively got a lifegun at your head that's telling you to live your life, you're gonna have to cash out. Even though that would have been worth $10,000, you know, three weeks ago, it's now worth $1,500. But you need the money, so. So now you lock in your loss by selling low.
You buy high, you sell low. That's what most people do. And they do it all for emotion. On that note, so if there's certain things about understanding your emotions, what are certain things that people need to understand about money to actually attract it into their life or to build it, build out wealth, what do you think are those key things that they need to understand?
Okay, so you don't attract money. The only thing you can hope to do with your mindset is to allow yourself to be optimistic enough to do the right things to move forward. What I mean by that is it's what I call the only belief that matters. The only belief that matters is that if I put time and energy into getting good at something, I actually will get good at that thing.
So you do need to have that mindset. So Napoleon Hill, in the book Think and Grow Rich, he says like, it was like page 45, he kept saying, I've already told you the secrets of this book on every page. And he was like, you don't get it by now, you're never gonna get it. I was like, what has he said on every page?
And I was like, the only thing that he's repeated on every page is that if I think I can, I can, and if I think I can't, I can't. I was like, oh my God, that's so true. If I think I can, then I'm acting accordance and I'm going to go learn and do the things and ask other people to invest. I'm actually going to take money and invest it.
I'm going to figure it out because I think I can. But if I think I can't, I'm not going to read the books, I'm not even going to try because I already believe that it's not going to work. And so you do have to get your mind right in that way so that you have that belief, so that you are moving forward, so you are learning. But make no mistake, if you have the best mindset in the world, if you say a thousand times a day that you are, I already am a millionaire, I'm attracting money in my life, it isn't going to work.
And the reason it's not going to work is that's not how values create. That's not how money arrives, right? So if I did work, there'd be a lot more rich people. So it really comes down to do you.
Going back to the first question, do you do the things that you need to do to generate money which then enough of that stack and becomes quote unquote wealth. And to do that, you have to identify a problem, solve it and solve it in a way that people get right away and they're like, oh damn, you solved my problem. And now I would rather have that solution than the money that I have in my hand. And if you fail to do that, you never get anywhere.
And so unfortunately, a lot of people think that thinking about something moves me forward because it really does feel good. It puts you in an expansive mindset. It makes you feel like you've made progress, but the reality is you haven't. And this is why the most like hardcore manifestors who are like, this is all you have to do.
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So how, in your opinion would you say, how can we get into a money mindset? What is a money mindset to you? I guess just, you know, how when we're, for example, me anyway, growing up I was told, you know, whenever you have much money, save it, put in the bank and if you can buy a house, blah, blah, like very traditional. But I'm learning, especially just with all the resources that are out now, that there are other ways to make, I don't know, to just invest your money in a more smarter way.
And I would classify that as like a money mindset where I'm just smart with where I allocate my money. Let me use different words that I think are really gonna help people. It's not about a money mindset. It's about mastering the game.
Money is a game and it's played by extremely Savvy people that know the rules and you don't know the rules. And because you don't know the rules, they get you to contribute to their wealth fund by buying the things that they want you to buy, by investing the way that they want you to invest. Like I remember. So there's a whole thing which most people don't even know about called accredited investor.
So to buy something before it reaches the public market, you have to be an accredited investor. Now, I remember when I became an accredited investor, which meant you had a net worth of over $1 million. So the day before that, I couldn't invest in something private, and the day after that I could. And I was like, why?
I'm not a better investor. From the day before till now. I know how to make money. So fair enough.
Being able to start a new company, yes, you should let me do that. I've proven that I can. But you shouldn't be rewarding me. As investors, they are entirely different skill sets.
And so I was a little bit offended on behalf of the rest of the world who do know about investing but don't have the money to qualify. And so now those guys are stuck. And so there are years and years and years where they're gonna have to go play in the public market game to build enough net worth that they can finally go be an accredited investor. Now why does it matter?
Being an accredited investor means that you get what they call deal flow. For the people who want the fancy words, you get deal flow, where people are coming up to you and they're saying, hey, I'm starting this company, and especially if there's something about you. So let's say people come to me and say things like that, because I have a platform, and they know that if I talk about their company, then that's gonna be valuable to them. So they'll ask me on their advisory board, whatever, and they'll give me shares in that company.
So if I wanted to buy some shares in that company, they might come to me and say, hey, we're gonna have an oversubscribed round. So let's. We're raising $50 million. It's gonna be oversubscribed, meaning we'll have people that want to put in more than $50 million.
But, hey, Tom, we're coming to you because we know that you're savvy, you know, you're doing. We love you to, you know, give us advice or whatever. And the secret thing that they're not gonna say is you also have a platform. We Help you talk about us.
So it's like, okay, cool, so now I get deal flow because I'm an accredited investor where I can invest in that. But think about a TikTok influencer that may have a way bigger V. They can't do that same thing. And so that to me is crazy.
Now, there are other ways you've worked out you can become a partner in things. Not like there aren't ways around it, but in terms of being an accredited investor, you can't do it. Now, usually in the private rounds, where the bulk of the meat is picked off the bone. So the people that end up getting really wealthy are the ones, the VCs that come in early.
When a company's still private, they invest at a very low valuation, then they spend three to five years trying to blow the company up even farther, and then they exit. That's their whole thing, is that the exit is often going public. So all the value that they capture from the moment they do their investment to the moment that they exit, that's all where the average person, they'll never get to capture that value, ever. Now they still have an incredibly powerful tool at their disposal, which is, now we've gone public and where does it go from there?
So they still get to capture all that value, but is that remaining value is at an extra 20% and extra 2,000%, who knows? But what we do know is the person that invested here and exits, you know, at the same time the public investor exits, they got a lot more juice from that. So that is very frustrating to me that instead of it being knowledge based, it's based on how much money you have in your account. You're trying to use a proxy for being savvy, but I think it's a terrible proxy, so people should be very thoughtful about that.
So getting away from the notion of having a money mindset and just really understanding the nature of the game. So understand, okay, literally just listening to that part of the answer, you now already know three or four different things about how the game works. You might not have understood before going very deep about how the stock market works. What, like, what's an index fund?
What does it mean to do a put or a call? Options trading? What is all that stuff? What are futures?
What are commodities? When you begin to learn all of that stuff, then the magic happens. And this is the. The very nature of learning itself is the following.
When you understand something, it makes a prediction. And now you can test your prediction to see if you're right. So you understand all of these things. And you're like, hey, wait a second.
If all of these things are right, it makes the following prediction. And cool, I'm gonna make a bet on that prediction. The market's either gonna reward you or slap you down. So I'll walk you through a prediction that right now probably is about as controversial as it's ever gonna be.
And so we're gonna see if I'm right or not. So I got introduced to the blockchain, which allowed me to figure out, oh, now I understand what this technology does. It takes a digital asset and gives it the properties of physical assets. So this is utterly fascinating.
What most people don't understand. Why did gold become gold? Why did it become the gold standard? Right.
Most people know that for a long time it was backed by gold. But most people never stopped to ask the question why. The reason is for something called proof of work. So however many billions of years ago, stars exploded.
When they explode, one of the elements that they shoot out into the universe is gold. That gold then crashes into a forming planet. And that gold chunks get locked into, in the case of the earth, into the crust, Right? So you see it in the mountains and things like that.
So you can go and pick a mountain, you can actually find gold that was an exploded star. Crazy, right? So first of all, you have the work of the universe being done to formulate that element. Then you have the work of the person shipping it out and finding that thing.
So those are two very difficult things to do. So if you have a piece of gold, you know, this was a star that exploded, that's going to be very hard to replicate, and somebody had to go find it, get it out of the ground, whatever. So we know that the supply of gold is never going to balloon up too far. It does balloon up, which is another thing people don't know about, which is inflation, which people know that buzzword because they really understand what it is.
So that's how gold becomes gold. It's scarce and it's valuable, and it's extremely hard to replicate. It's very resilient. So you can melt gold and then you can reform it again, and there's no loss whatsoever.
Gold doesn't mold, it doesn't get water damage rates. There's all these properties that it has, but it's heavy as hell. So that's one of the things that's sort of a strike against it. But this idea of proof of work.
So now you get people going, okay, wait a second. If all gold is. Is proof that A star exploded that somebody found this in the ground and therefore is provably scarce. What if I could perfect that?
Because gold inflates at about 2% a year, which doesn't sound like a lot. It's a lot. So that's inflating away. So its value is constantly dropping due to inflation, which we could get into a whole rabbit hole.
I know George really wants to about what psychopathic called the bad thing inflation because it sounds awesome. And what person called the good thing deflation. It sounds bad, but it's amazing. It means your buying power goes up over time.
Okay. When something deflates, which by the way economists hate. And we can derail into why. But this is the game of money, right?
See how many rabbit holes I keep going down? So when you talk to somebody that really knows what they're talking about and they're like, yo, the currency in China, I believe I understand this much. I predict, right? My knowledge makes a prediction.
I predict it's going to start deflating. Which means if I transfer my inflating US dollar it's going to be worth less over time into a deflating currency in China. That means it's going to be worth more over time. Yo send my US dollars over into Chinese yuan.
Hold it there. So they call arbitrage. $1 here gives me something over here. And the values are going in opposite directions.
And I'm actually making my wealth simply on the difference. I didn't create anything new. I just took the arbit deflating currency. Sorry, I should be using this hand my deflating currency over.
I'm making this up. I'm not saying China's actually deflating, although US actually is inflating. But just example, example, example. Not financial advisor either.
This is not financial advice. So in this hypothetical example where the Chinese currency is deflating, it's actually increasing in value. So a deflationary asset isn't devaluing. An inflationary asset is devaluing.
Now some people say that that was done on purpose to create a mind virus that makes people think inflation is good. When you start thinking about why would somebody ever want to trick the public into thinking that inflation is good? And this is a conspiracy theory. But if somebody wanted to do that, I would understand why.
Because inflation in a small amount stimulates the economy by changing your behavior. Because what are you going to do if the money in your pocket is worth less tomorrow than it was today? What are you going to do with it? You spend it.
Yeah. Because you might as well get something that retains its value. Could be a car, could be a book, could be a handbag, a fancy shirt, whatever, but you're going to spend it on something that that price is going to be the same tomorrow. But my dollar is going to buy less of it, so I'm actually better off.
You're literally incentivized to spend your money now. And in hyperinflating economies, people go out, buy 100 iPhones, they'll buy 50 cars, they'll do things like that because they need something that's going to hold its value. And because a car or an iPhone has intrinsic value, it's better than the paper money that's being devalued by inflation. Right?
So some super sketchy about those words. Now, whether it was done on purpose, it's a totally different question. But you have to begin to understand, like all this, like, confusing mess of interconnectivity of one thing means this, another means that, but it all makes predictions. So if I can get people to master the game of money to the point where they go, oh, I know what this means.
I understand the last time this happened, it meant this. And so now I've got a prediction and now I can begin to bet on my predictions or now I understand how to use leverage or when not to use leverage. And so all these tools that are available to the quote, unquote, hyper rich are available to anybody. You may only have $10 to invest in that same way.
But it is a knowledge problem, it isn't a money problem. Now there's a speed issue for sure. The guy starting with a dollar, it's going to take him a lot longer to get to 100 million than the person that's starting with 10 million. To get to 100 million takes a lot less doublings, right?
To get it takes less risky stuff. You've got a lot more things you can try that don't work. All of that. I'm not denying any of that.
So scale becomes a question of what you're, how quickly you're able to generate that money. But you can play the same game. I actually want to call back to when you're talking about accredited investors. And so my understanding is they have such an income, you know, brackets or like network bracket where you can jump into it because of how they view risk.
And they're assuming, again, these people have more, I guess, bandwidth to take on that risk. And so I'm curious for you, how does risk play into like wealth generation? Because again, timing also plays into it. Because in my head, when you're Talking about the S&P 500 index funds, these are like safe right over long periods of time.
But at the same time you want to take risk. That's also where you get like 100xs or things like that. So how do you view risk in wealth building? Yeah, so I think people, if you want to, there's two paths before you to build wealth.
You can invest in building something or you can invest in assets. And we'll define an asset as anything that actually pays you to hold it. So there are other ways, but just for simplicity, let's look at those two. Building something is going to be ultra high risk, but high risk, high reward.
So that's how I generated my wealth. I didn't own a single stock in a single company until after I was worth hundred million dollars. So none of my money did I generate in that way. All of my money I generated by building a company that became incredibly valuable to somebody else to own by just making hundreds of millions of dollars a year in revenue.
So another company looked at that was like yo, those hundreds of millions of dollars owned by us, we can either grow it or it's created for our bottom line, which makes our share price go up. Or that product we recognize is a necessary part for our brand portfolio to own. Whatever. For whatever reason, it was extremely valuable to them.
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So when you're talking about buying a company, there are two ways to value a company more. But these are the two really typical ways you can get a multiplier on revenue. So oftentimes it's 1x2x, something like that. So if you're making $300 million, we'll give you $300 million to buy a company.
Or you can get a multiplier on what's called ebitda. So EBITDA is just an acronym that stands for Earnings before Interest, Taxes, depreciation and Amortization. I always forget you've got your all. It's basically the money you make minus fancy accounting is the easy way to think about it.
So you've got, you're trying to eliminate all the different ways that a company can do accounting and just look at how it's making money without all the accounting stuff. And that could be 10 times EBITDA, 16 times EBITDA, 20 times EBITDA because they want to know how profitable effectively is the company. So I'm only going to give you one, your purchase if it's just based on revenue. But I don't like the way revenue is going or if you've really shown that this business is functioning, we can do as a function of ebitda.
So while I can't disclose the multiplier, Quest sold on ebitda. And that was part of how we were able to win so well was we had put together a high functioning company. And so looking at the different ways that something can be structured becomes really important. And we started getting a feel what was the basically about risk and how to manage that.
Right. So going back to risk. So you have those two paths before you've got the high risk, high reward, then you've got the much lower risk, much longer time horizon to get wealthy. And so that's where I would advise people, if you get better on yourself, accept a lot of risk.
But no, that's like most businesses fail, but it could still be the right of lifetime if you've got meaning and purpose. Right. So I still don't know if Impactor is gonna do what I wanted to do. But I show up every day and fighting for it feels awesome.
And so I've already spent six years of my life just doing the same, trying to build. It's been six of the best years of my life. So it's like, okay, well nothing can take that away. So even if it ends up failing, while I will be, you know, there'll be a moment of emotional trauma that doesn't negate all, you know, going after something that really matters.
So for me, that's where I invest. The vast majority of my net worth is, I guess technically the vast majority, my net worth is effectively buried in bonds. So that I can't Lose anything, which is me saying I'm a very low risk investor. And so all of my high risk dollars though are in billion impact theory.
Right. So we're just pumping money into the continue to scale and grow and grow. So if I were doing risk I would do that. But for most people I would say you'd be a lot happier, you'll sleep a lot better if you put money into an index fund as boring as can be and just leave it in for a really long time.
Dollar cost average in. So don't put all your money at once. Buying slowly over time. No matter what price up, price down, you just keep.
If you're going to buy in a thousand dollars a month, you buy in a thousand dollars a month, $100 a month, a hundred dollars a month, $10 a month, whatever. And you just slowly, slowly again. Index funds don't try to pick stocks. So I would ward if you're an entrepreneur you take risk.
If you're not, don't. I have a follow up question on the risk tolerance of index funds and S&P 500. Do you see it as more risk given Ray Dalio's most recent book about the changing world order? So I love me a Ray Dalio rabbit hole.
So I would still say that it's your safest bet. You just may want to be thoughtful about. So for those who don't know, Ray Dalio's Principles for Changing World Order is an extraordinary book that points out a fact that every empire in all of human history has ended up collapsing and their currency along with it. So whether you're talking about the age of England and the sterling being the world's reserve currency, whether you're talking the current US being the reserve currency, when the Dutch were the reserve currency, so on and so forth forever, the Romans when they were the jam and every one of them has failed.
All signs point to it's a six phase cycle and phase six is total collapse. And Ray Dalio pages are somewhere in the middle of phase five as the US empire. So we are clearly on the decline in the world order in the last 18 months at the time of filming this, 40% of all US dollars ever made in the entire history of the US dollar were printed in the last 18 months. So that is a very bad sign.
So when you think about an empire collapsing, it usually begins with inflating their currency. It begins with inflating their currency and beginning to lose their standing on the world stage and that there's another rising superpower. And of course right now that would be China. So there are a lot of things.
But Ray will be the first to tell you he doesn't know it's 5 years, 50 years or 150 years. They do tend to collapse somewhere in the 150 year range, give or take 100 years though that's a pretty big swing. So we are at what the US is 250, almost 230, something like that? No, almost exactly 250.
So we're almost exactly 250 years old right now. So we're long in the tooth. So even if it's the 100 years according to radio's research, of course nothing is ever 100%. So one might want to not just invest in a US index fund.
But I certainly would not think somebody investing in the US economy is stupid because what you're saying is that you just trust that the US economy is going to grow and the odds of it not growing over the next 50 years to some meaningful amount is effectively zero. Can never say nothing is zero. But historically certainly that's a very positive sign. Like even somewhere like England, it's not like it went to nothing.
They're still a major economic player, especially for a country the size that they are. But it's worth paying attention and seeing does try to start to pop off. Do you hedge your bets a little bit? Do you start doing emerging markets?
Do you do based on technological sectors, whatever and looking at that. But the only sort of dumb thing to do would be to pick the major like the s and P500. I'm sure there's a global index to get as broad of a portfolio as you can that is a well trusted index fund and invest in that. And then as I say diversification is critical.
You're going to hear people say diversification is for suckers. The crazy thing is they're both right because what they mean is there really will be a winner and a loser. And if you bet on the winner then you make all the money. And this is the guys incredibly wealthy.
It's never on index funds. You'll get wealthy by sort of family standards, but you're never going to become Elon Musk or Warren Buffett betting on an index fund. So if you look at somebody like Warren Buffett who did make his money in the stock market, the way that he did it was he picked somebody, he made like 80% of his wealth off of three trades. I mean it's really rigorous, less than 5 for sure.
So there are precious few companies where he looked at it, got it right and went all in. Now if he looked at it, got it right, and then was like, well, I'm still going to hedge my bets across everything, he would have much less risk for losing money, but he never would become the richest man in the world. So again, it's optimizing risk for what you're comfortable with. I'm hyper risk averse in investing and I'm hyper risk tolerant in building.
So the bad news for my wife is if I put all or most of my money at risk to build impact theory and it ends up failing, I still feel like a warrior who's in the arena. And that's why I want to view myself, if I were to fail, to take that risk and never try to build something great, that would really bum me up. But if I lost all my money on an investment, I'd feel like an asshole. So because I don't consider myself to be a clever investor, so I need to be very thoughtful, hedge my bets, be very risk averse.
And so for anybody following the FTX drama, Lisa got text messages from friends were like, oh my God, I'm so sorry that you guys, you know, you must really be panicking. I think they said to her, and she was like, oh my God, what the hell? And so she reached out to me, she's like, why is ftx? And I'm like, your husband's way too paranoid for that.
Like, we have no money in ftx. My heart absolutely bleeds for people that did the loss of human capitalism, an absolute tragedy. But because I'm so risk averse on investments, we didn't do that. We didn't expose ourselves to defi or anything.
I'm just too paranoid. So know thyself, know what your risk tolerance is. But most people would get queasy if they saw how much risk I'd taken in my life on the entrepreneurial side. And then they would laugh at me if they saw how little risk I'd taken.
The stock market. I'm actually going to interject here, but you made one comment which I know if it was on the stake, you said defi, which just in crypto world, it was actually a centralized exchange that caused like all the drama. I was not trying to say that FTX was defi. I'm saying not only did I not do that, I didn't do defi or any other things.
Get people excited because the yields are amazing. Thank you. So that nobody thinks I'm conflating the two. There was just when I got into Crypto, which already I only invested in three total coins when I sold and boiled down to just two, Bitcoin and Ethereum.
Even then, when there was so much excitement around the kind of yield that you could get when banks were paying you nothing, I was like, nope, it just seems to be true. I'm going to stay safe. And so even if I look like a chump because I don't make a lot of money on the defi and other people are fair enough, but I'm also not going to lose money. And then literally like a few weeks later was when Mark Cuban lost God only knows how much on a defi thing.
I was just like, yeah. And it really does come from acknowledgment of my level of ignorance. So I don't want anybody to think I'm smart. I want them to realize how risk averse I am as an investor.
And so you just have to. And the reason I'm so risk averse, I don't think I understand it well enough. And so you need to know your level of knowledge because again, your knowledge makes predictions. If you don't have enough knowledge, your predictions are going to be terrible.
And so the only things I invest in, things where I feel like I understand it well enough to make a prediction so that to go back to an earlier answer, that I can really buy low and sell high. So as the price of Bitcoin fell and Ethereum fell, I didn't think about it because one, I was investing for the long term. I knew that they fluctuate wildly within any four year window. The fluctuations on Ethan Bitcoin since their inception have been violent.
And so I was like, well, I know they're gonna be violent swings. So I'm only gonna invest so much that I still have plenty of capital, dry powder as they call it, to live my life and build on building. And then I want to make sure that I don't see that number and panic and go, oh my God, I have this out, it's never coming back. It's like you have to be sober that moment and go, what?
What was the knowledge that made a prediction? So what people call my thesis, right? You'll hear that a lot in crypto. My thesis is still intact.
What they mean is you learn something about the way that it worked, which made a prediction and that's your thesis. So my thesis is that the world becomes more digital, relies more on the blockchain and more of the things we think as being physical, like money, are going inevitably to become digital. If it's going to become digital. What do I think will be the digital currency?
Honestly, the digital currency will probably be nation based digital stablecoins if I'm completely honest. But I think Bitcoin will be digital gold and then Ethereum because we actually build on it ourselves here. Like that one to me is even more than a currency, it's a whole universe of creation. So anyway, as long as my thesi theses, whichever the case may be, as long as those remain intact, I don't have an emotional problem, right?
So even the other day when I saw that Ethereum 1100, I was like, whoa. It was almost more a fascination of like, wow, like volatility is really real. But then when you see people being devastated, devastated to the point of like weeping and obviously, you know, unfortunately go even farther than that and it really becomes scary. For me it is emotional because I follow the set of criteria again because I know my level of ignorance.
This is not a clap for Tom, this is a, hey, maybe I can own up to. I am as ignorant as Tom and therefore will be as cautious as Tom and play at that level. Many people change their thesis over time. So how do you decide if you're going to change or how do you always stay focused throughout the ups and downs?
One, I don't chase it because I don't know it well enough, I don't spend enough time. But if you look at somebody like Raoul Paul, who I think is a brilliant macro economist, one, he's spending all day, every day watching the macro trends. Two, he's extraordinarily educated because he's been in for a long time. So he's lived through a ton of these cycles.
So even in euphoria he was like, guys, you have to be careful, be thoughtful here. The macro trends, this is what this makes as a prediction. Be very thoughtful. And he's walking people through historical rises and falls.
And so you'll get people like that as their thesis changes, they change their portfolio. So at one point he was what he called irresponsibly long on Ethereum. So he had something like 95% of his net worth. Now as things began to change, he started changing that ratio.
For me, I was like, this is how much I'm willing to put into crypto. Once I hit that level, then I just stop and I'm gonna turn my brain off to it for the next five to 10 years. Now if 10 years from now it doesn't hit, I'll be like, yeah, maybe that was a mistake. But my thing Was I put the money in it.
And if over that time my thesis changes, then I may rethink. But the way that I see it right now, today I would write Ethereum and Bitcoin to zero. I have no intention to sell. The reason that I would write it to 0 is as of right now, today, I, in my do not follow my advice way, believe that right now those are the front runners to be the ones that last.
Because I think everything, I think a lot of things are going to digital, a lot of important things are going to go digital. And those two things still matter to me for the reasons I was explaining the video. So, okay, those don't matter. So even if the rest of the world momentarily says these have no value, it's my belief that they will once again realize, no, actually they do.
And because I'm so familiar with the technology and have built so many things now on the back of Ethereum and really have researched the life of Bitcoin, the protocol, why it matters. Watch the adoptions. Just seen some of the greatest thinkers in the world think through predicting their own future. Where this goes, I have a pretty robust map of where it goes.
And obviously it could be wrong, but I have confidence in that such that for now it's just wait and see. Now if through all that, like if the bitcoin protocol were suddenly stopped or we realize, just kidding, there's not 21 million or 22 million, then I'd be like, well, my whole thesis has changed. Now I want out, right? So if any of us saw the supply of bitcoin inflate, at least people that's part of their thesis, which is mine, that would invalidate everything.
And I would be in a mad scramble because then suddenly my thesis goes away and I'm left like, yo, I want to get out right now. So but as long as everything stays intact, then I'm good. Do you believe in the advice about, in order to get rich, you have to follow your passion and do what you love. And if that doesn't work out, how do you know when to stop and to explore a new hobby or a business venture?
So it goes back to there's two primary ways. I know the compound. Yep. What about this?
There's two PR primary easy to discuss ways to get rich. Way number one, build something. Way number two, invest like you're watching paint dry. As I have heard from Ramit Sethi.
So if you are doing the just invest, then no, it's gonna be super boring if you're doing the build building is hard. And building will question your will to continue. Not once, not twice. Dozens, hundreds, thousands of times.
Like, my life is a roller coaster every day. And the funny thing is when something's going right and my day is awesome. Like today we just announced something big. That discord was so fun and people were loving it.
Yeah, I know something is gonna go wrong today. So today will be part good, part bad, right? Every day is something bad. Not every day has something good.
So at least I'm day with something good. I'm like word. So you have to have the emotional fortitude to weather all of those storms. And it really, like, life is a computer game and the AI is going to make it as hard as humanly possible for you to keep going.
But if you do and you develop that perseverance, you can accomplish some really extraordinary things. Because of the way the human mind works. Where knowledge stacks, knowledge has utility. Utility means you can do something other people can't do.
And now you're able to monetize that utility. So it really is about time in the game. So that's huge. To have time in the game, you have to be passionate.
Because when you say you're knocked to your knees, you're embarrassed, you failed, you lost money, it's just hard, it's boring. You'd rather be out with your friends, your kid is sick, whatever. All those things that are going to come for you when you say, why am I doing this? You better have a physical feeling to the positive.
When you answer that question, if it's purely intellectual, you're in trouble. And I think that's what people are trying to get out with. Passion. Passion is psychological energy.
It's like you've ever. You've been dragging ass all day. You're tired. I gotta go to bed, you guys.
Please, I just need to go to bed. And then somebody puts on your favorite song. You can rally for 10 minutes and be hyphen. It's crazy.
There's something about the way that you can shift your neurochemistry that makes you feel more energetic all of a sudden. That's passion. It's just like putting a song on. You get that image again for you're fighting for what you want and now you're back in it.
So passion will give you the energy to persevere. So you talked about the neuroscience of passion or just like getting into rallying. That's a lot about health. So we've only talked about wealth.
Being about finances. Is it actually more important to focus on your health first and Invest into your health rather than just purely money. For sure. I would say do both.
If you want a truly wealthy life, you need to be both healthy and wealthy. That's really important. And there's the age old adage of a healthy man wants many things, but a sick man wants only one. That's really, really true.
And so I think it's. It's important for two reasons. One, that if you're not healthy, you can't enjoy anything. And then the other reason is that if you take care of your body, it's going to show you that your actions have positive or negative consequences.
Like, I'm so even right now, I'm wearing a continuous glucose monitor because it reminds me that what I eat has an impact on my body that sometimes is invisible. But when I'm tracing it, I'm like, why do I feel weird? I can actually, if I feel weird, guaranteed my blood sugar is high. Like, I'll feel completely normal until about 120.
Now the average person, I promise you, lives their entire life above 120. If you're not paying attention, you're 120 to 180, 210, all the time. I don't feel good above one point. I don't feel as good.
But because I live my life between 65 and 85 with the occasional like spike to 100, it's like, dude, I feel awesome. And then it just feels normal, by the way. But then I'll be like, I feel weird. Why do I feel so weird?
Beep. 133. I'm like, yep, Because I ate a bowl of ice cream or whatever, something. Now that I track it and can correlate that feeling to what I've eaten, I'm like, do I really want to eat that thing?
And so you get into that with your money and your lifestyle and it's like when you gamify saving money and you're like, I know what it feels like. At the end of this month when I bought, you know, a bunch of meals out or I bought myself clothes. The last, you know, three or four days of the month were sweaty. Like, I did not feel good.
I was stressed. I used to live like this legitimately. There was a time in my life, if you've ever heard me tell the story, that I took myself from scrounging the couch questions to find a change to gas in my car. In that period, I would have to decide, what bill am I gonna pay this month?
Because I couldn't pay them all. So it was like, okay, I'm gonna skip electricity this month because I know I get a past due notice. And as long as I then pay that past due notice, they're not gonna turn me off. So you can constantly be like a month behind on different things.
And so I would just go, okay, these bills get paid this month, then I'll pay these bills next month, I'll go back to these bills. And so that is not a good feeling. And so as you go through that and track, okay, I see when I spend my money on this, I don't feel good. When I save my money over here at the end of the month, I sell everything I need.
My stress levels are going down. So getting that correlation between, oh, when I eat this way, I feel this way, you start to carry that over. And then if people are willing to really transform their physique, there is not a single thing more powerful if you want to be successful, if you want to get rich, all of it. Change your body first.
It does something to your mind. It forces you to develop discipline. It forces you to develop resilience because you have to push through the pain and keep doing that thing you don't want to do. And it works.
And then on top of that, I guarantee at some point they're going to find the biologically embedded subroutine that tells you to feel good or bad based on the state of your body. And so if you are strong and you look good in the mirror, you will have a subroutine in your brain that's like, yeah, you have. It's a form of self worth. It's exactly how people get obsessed with it because it feels innately good.
If you. Dude, I'm telling you, as somebody that used to walk around with a six pack and it's never too far from it now when you lift up your shirt and you see a six pack, you feel some kind of way even now, because now I'm less focused on the six pack, but more just making sure that I maintain, you know, slightly bubbly, physically. Body goes and laugh at me thinking I have one. But, you know, in my own reduced amount, I do.