Why You Should Have a Diversified Investment Portfolio | My First Million #214 with Ramit Sethi

Investing, Courses, Money Rules, and a Rich Life - August 27, 2021 (over 3 years ago) • 01:22:24

This episode of My First Million features Ramit Sethi, author of I Will Teach You To Be Rich. The conversation revolves around online courses, personal finance, and Ramit's unique approach to wealth building. Sam and Shaan explore Ramit's insights on building a successful online education business and his perspectives on risk and reward.

Ramit's Podcast and Course Business: Ramit discusses his new podcast, I Will Teach You To Be Rich, which features anonymous couples discussing their finances. He also shares his experience with cohort-based courses and insights into the evolution of online education. He emphasizes integrity and running a business according to one's own values.
Jay Abraham's Influence: Ramit highlights the influence of his mentor, Jay Abraham, a renowned marketer. He shares anecdotes about Abraham's unique approach to business and his emphasis on customer-centricity.
Branding and Naming: The discussion touches upon the pros and cons of Ramit's distinct brand name, "I Will Teach You to Be Rich." Ramit explains his rationale and how he has embraced the name despite initial skepticism.
Business Ideas: Ramit shares three business ideas with insatiable demand: pets, cosmetics, and children's products. He emphasizes the importance of packaging, pricing, and celebrity endorsements in these markets.
Money Hacks and Investment Strategies: Ramit emphasizes the importance of investing in the stock market, even for successful entrepreneurs. He and Shaan debate diversified versus concentrated investment strategies, highlighting the importance of aligning investment choices with individual goals and risk tolerance. Ramit also shares his personal money rules, which include unlimited spending on books, appetizers, health, and friends' charitable causes. He encourages listeners to create their own money rules based on their values.
The Engagement Ring Story: Sam recounts how Ramit's advice led him to rethink his budget for an engagement ring, prioritizing his fiancee's desires over his initial utilitarian approach.
Rich Life vs. Numbers: The conversation concludes with Ramit emphasizing that a rich life is not solely defined by financial metrics. He stresses the importance of prioritizing experiences and relationships over optimizing for small percentage gains.

Transcript:

Start Time	Speaker	Text
00:00	Ramit Sethi	In our copywriting program, we say, "Be clear, not clever." It's really hard to be crystal clear. It's super easy to create marketing that is clever. But in the grand scheme, we believe clarity wins.
00:27	Sam Parr	Alright, so Ramit, have you, you could be honest, have you ever listened to the podcast?
00:35	Ramit Sethi	I've heard your clips and I love them
00:38	Sam Parr	Alright, good answer. You know what you're getting into. Yeah, you know what you're getting into, and you're also... we'll just say it: you're one of the reasons you're here is because I like you. We're friends. Another reason is you're smart and good at this stuff. But the third reason is you just had a podcast come out. You'd been talking about doing a podcast forever, and now you actually have one. It's about... are they anonymous? Right, it's anonymous couples having discussions about money.
01:02	Ramit Sethi	Well, most of them use their real names, and they're all real voices. I always wanted to listen in on couples fighting about money or discussing money, but you can never do it. You know, the only place you've ever heard anyone fight about money is in a movie. Now, you actually get to listen to real couples sharing real numbers, talking about what's going on with their money. How do they disagree? And then, what do I help them do to get over it?
01:29	Sam Parr	and and what's it called
01:31	Ramit Sethi	it's called I will teach you to be rich with ramit sethi
01:34	Shaan Puri	And so this is a little bit like... what's her name? Esther Perel. Is this sort of like her model? I forgot what her podcast is called. It was very good. She's kind of like a relationship coach, and she has a couple come in.
01:45	Ramit Sethi	She's a therapist. Yeah, Esther Perel's amazing. You know, she helps couples with therapy. Mine is not therapy, but if you imagine, for example, a couple where the classic example is, you know, he's an overspender. "We don't have enough money for that." That's a classic one. But then it becomes much more interesting. For example, we have a couple where the guy hates paying too much for organic blueberries. He hates it. So when he orders blueberries, he has two tabs open; he's comparing notes. I know all your personal finance nerds listening to this are like, "What's the problem? That's totally normal." No, it's not normal. He opens it up, he's comparing, cross-comparing. Guess his net worth. What do you guys think?
02:27	Shaan Puri	I'm guessing it's high based on the setup, so I don't know. We'll go over. I'm going to say over $10,000,000.
02:35	Sam Parr	sam a $1,000,000
02:38	Ramit Sethi	$8,000,000. And he's comparing the price of blueberries. Really, what this shows is that money is not just about math. In fact, we overvalue math and undervalue psychology, which is what the podcast gets into.
02:52	Sam Parr	did did launch go well how how how how the the the first episodes do
02:57	Ramit Sethi	Great! I mean, we're learning, right? So, I know all the metrics cold for email and even social stuff, but for podcasts, we're still figuring it out. I texted some of my friends, "Hey, what's good?" and they told me some numbers. I'm like, "Okay, so we released it." It's getting tens of thousands of downloads per episode, and we're happy about that. I'm more happy that people are writing in and saying, "My wife and I finally talked about money for the first time. We've been married for 6 years." I'm like, "Yes!" So, the quantitative stuff seems to be good, but I'm more interested, for a creative project like this, in the qualitative aspects.
03:33	Sam Parr	The growing of our podcast... We've talked about it a bit on this podcast, which people like and sometimes don't like us talking about too much. But it's been the hardest thing that I've had to grow. The why, the what you'll learn... I'm sure you've already learned this. With email, you can advertise somewhere or you can write a blog post, and you know exactly where the new email subscriber is coming from. You can also guess how long they're going to stay with you. With podcasts, you don't really know that. It's like iTunes won't tell you how many subscribers you have. They're not exactly going to tell you where they come from. You don't know a lot of information, and so it's really, really challenging. When we grow, we'll do a bunch of stuff and we're like, "Did it work?" It takes us a week, and we're like, "Well, the numbers went up. Let's just continue doing everything we just did." Did it not work? No, it didn't work. Alright, so let's just change. It's been really hard.
04:21	Ramit Sethi	that's interesting
04:23	Sam Parr	Anyway, so Ramit, you have this... Your main thing is "I Will Teach You to Be Rich," and it started as a blog. It's a book now, and it's this major course business. That's actually what I wanted to talk about a little bit early on: course businesses. Sean just launched a course called "Power Writing."
04:39	Shaan Puri	power writing yeah
04:42	Ramit Sethi	wait you don't even know the name of your own partner's new course what's wrong with you
04:46	Sam Parr	Well, I knew it was called power writing. I didn't know if it was like power writing and then, you know, the "how to write." I don't know what the full...
04:53	Ramit Sethi	My name is... I'm taking over this podcast right now. Sean, are you offended that, number one, he didn't know the name of your course, and number two, that he hasn't bought it for full price?
05:02	Shaan Puri	Not at all, no. Sam basically taught me everything that I teach in the course. So in a way, I actually owe him some royalties, really. And then the second thing is, when he asked that, I just thought it's like a setup, you know? Like when you kind of give someone an assist, you're like, "Oh, you wrote a book, right? What's the name of that book?" You're just letting them plug their thing. It's like that's a podcaster's old trick.
05:24	Ramit Sethi	okay that didn't go the way I wanted
05:26	Sam Parr	So look, it did look... it's called, I know what it's called. It's called power writing, but there's a subheadline as well, right Sean?
05:32	Shaan Puri	No, there's no subheadline. Also, I think I'm retiring from the course. I taught it just this time and it was... it was really good. I'm, unfortunately, the type that gets bored of things really quickly. So just when we got it where, like, after the second one... from the first one, the second one made double the money and it took a quarter of the time, which is exactly what you would want. It should... the answer should be "go do it again," and instead, I don't want to do it at all. I'm just like, "Okay, I want to move on to something else."
06:01	Sam Parr	you've written can you say how you said the first time how much it did so can you say this time how much it did the second time
06:06	Shaan Puri	just double that so for those who are following along just double the number that's how much you made this time
06:11	Sam Parr	really okay and but and you're not gonna do this again you're done
06:14	Shaan Puri	I'm going to teach something else, something I'm interested in that's totally different. It will be like kicking over the sand castle and starting over, which is kind of silly from a business point of view. But from an enjoying myself and entertaining myself point of view, it's the right move.
06:28	Sam Parr	But your courses are different than Ramit's. So Ramit, I bought your copywriting one again. I'm sorry I don't remember the name of it. It was just called... Matt, is it? Was it "Sales Pages"? Which one did I buy?
06:41	Ramit Sethi	We have our biggest one called Call to Action. We have another one called Behind the Sales Page, where you actually watch me write a sales page that I think made $1,000,000. So, it's maybe one of those.
06:54	Sam Parr	Okay, I took it two years ago. I've taken a couple of yours, but your business is different than Sean's. Sean's was the cohort one. Have you ever done one of these cohort classes?
07:04	Ramit Sethi	Yeah, I've done several. In fact, I'm doing one as we speak right now. Cohort classes are definitely hot. It's fun to watch this new model. If you trace the history of courses, I mean, they've been going on for generations. But let's just say in the last 20 years, first off, there were eBooks. They were kind of hot in the early 2000s. You had dating eBooks and a famous eBook on how to train your parrot. Those were typically priced between $10 and about $100. Then you started seeing video being added. Video added higher pricing, and it was technically very difficult because YouTube wasn't even out when some of these started. Then it went on to higher value. People got more sophisticated with topics, and you added masterminds, which were hot but have kind of fizzled out over the last few years. Now you have cohort-based courses, and there's some focus on completion rates, which we can talk about. That's a terrible decision to do if you choose to do that. We can talk about that, but yeah, cohorts are hot. It doesn't necessarily mean they're lasting, but they are certainly hot right now.
08:14	Sam Parr	so how many courses right now do you guys have
08:17	Ramit Sethi	we have between 2025 live
08:20	Sam Parr	is your business doing north of 20,000,000 in sales
08:24	Ramit Sethi	I'm not going to share my sales numbers
08:27	Sam Parr	I thought you might not... I thought you might not, but I respect that you just told me that. Because if I ask someone and they're like, "Oh, you know, it's..." I'm like, just say you don't want to talk about it. That's totally fine.
08:39	Ramit Sethi	We have a private business with a great team, offering 20 to 25 programs and serving around 50,000 customers. We're thrilled with it.
08:48	Shaan Puri	you're not teaching these live then they're recorded
08:52	Ramit Sethi	Generally, they're recorded. The biggest ones are... we do some live ones to experiment with concepts, and it's just fun. Well, you know, like you mentioned, Sean, you like to be able to engage. Then you're like, "Okay, do we want to double down on that, or are we done with that topic?"
09:06	Shaan Puri	And what do you think? So, I think some people are interested in your course business. I think more people would be interested in what you've learned about the course business, having done a bunch of it, being kind of like near the top of the game there. Which is like, first and foremost: 1. Who's crushing it when it comes to courses? 2. What's a model you look at where you say, just from a pure respect of the way that business works, "I respect this course business"? Who or what stands out to you? It might be your own.
09:32	Ramit Sethi	That is a great, great question because "crushing it" and who I respect are totally different things. Okay, let me break that down. Who I respect? I respect people like Marie Forleo, who has an awesome business. She runs it her way and launches when she wants to, which is sparingly. It's beautifully done, and she just loves the way she runs her business. That's awesome. I also respect people like some of the legacy figures in our industry, such as Jay Abraham, who I just saw for coffee two days ago. He's one of my mentors and has been around since the eighties. In fact, even before Brian Dean. High integrity, Matthew Hussey in the dating space is great; he's a friend of mine. I think Reforge is interesting, although I think that is quite different because it's venture-backed compared to what the typical individual wants to create. What I admire about all those folks is their high integrity. We can talk about why integrity is lacking in the course business because it is. They run their businesses the way they want to. Each of those could easily double their revenue if they made a couple of different decisions, but they don't. And that's why I respect it.
10:51	Sam Parr	Sean, do you know who Jay Abraham is? No? Okay, so he's... I'm gonna guess probably in his sixties, and he wears... He looks like if I told you, "Imagine what a rich British guy in the 1960s would dress like if he were into hunting on the countryside of England." That's what this guy dresses like.
11:14	Shaan Puri	I imagine he has
11:15	Sam Parr	this like impeccable
11:16	Shaan Puri	you know the hunter in jumanji that's what I just that's what I got in my head
11:20	Sam Parr	That's a really good... Yes, okay, so Google him. He wears a kind of scarf tucked into a tie, and you would imagine him smoking a pipe, right? Rami, am I wrong? Like, he dresses...
11:29	Ramit Sethi	Like, in fact, let me add to that. I once asked him, "Jay," because we're close and, you know, he's been a mentor for many years. He tells me, "I flew to Asia," and I said, "Jay, what do you wear while you're on stage?" Because he loves... he's a sartorial guy, he's into it. He goes, "Well, you know how many suits I take for a 3-day presentation, right?" I go, "1." He goes, "40." I said, "What?" And he said, "They're hiring me not just for the information I'm gonna teach. They're hiring me to be theatrical. It's a show." So at every break, he changes his suit. Now, to the typical Silicon Valley utilitarian, they're like, "That's so stupid. What's the metrics?" There's more to life than metrics, you Silicon Valley nerds. That's a huge mistake. All these ROI attribution positives... sometimes, in fact, the best companies know that's why they advertise in Times Square. They can't track that, but they do it because it's the right thing to do, and it's about branding. Jay is a genius at doing that. That's why he's been at the top of the game for decades.
12:31	Sam Parr	And he's been around forever. If you go and study a bunch of copywriting books, I think his background was as a copywriter.
12:38	Ramit Sethi	yeah one of the best
12:40	Sam Parr	Okay, so he's a copywriter. I don't know him; I've seen him in person once or twice. I know you know him well, but this guy has got this huge cloud of mystery around him to me from the outside. And... yeah, I think that's the vibe he purposely gives. So like, for all I know, he could be a billionaire. I have no idea what this guy's story is. He's just this like business guru-type of guy. What is his story? What's the truth about him?
13:02	Ramit Sethi	So, the truth is that he has been doing highly innovative marketing for the last 40 years. He would go into companies like gold companies, umbrella companies, and all kinds of random industries—dozens and dozens of industries. He would show them ways to exponentially grow their sales. IcyHot was one of his successes, and he has a fantastic story. He bought remnant radio advertising and paid 100% of the first fee to the radio station, so it was no risk to them. Then, he took the long-term profits and grew that business in a massive way. What I like about him is that his ideas are extremely powerful. In fact, on my bookshelf, I have a very highly curated collection of some of the best marketing books that I've ever read. I have two of his books on that shelf. He takes a multidimensional approach to business. For example, he would tell me early on, "Ramit, put your customers at the center of your world." I said, "Okay, what does that mean?" He has this concept called the theory of preeminence. He would say, "Look, tell them explicitly. Tell them you are here. You might not be ready to buy today; that's fine. Enjoy my free material. Use it for as long as you want. When you are ready, I will be here, and I will be here for the rest of your life." This is totally true. I do some things in my business that are very unconventional. For example, I don't allow people with credit card debt to join our flagship programs—the higher-end ones that cost us $1,000,000 every year. It's funny; people will plagiarize our sales pages and our email copy, but for some reason, they don't plagiarize that policy. I wonder why that is? Because 90% of their customers would disappear overnight. But when we do that, even though it costs us in the short term, it benefits us tremendously in the long term. So, Jay helped us really articulate that vision clearly.
14:51	Sam Parr	What does he sell? What you're talking about, of course, are businesses that you like. What's his course?
14:58	Ramit Sethi	He doesn't care. He doesn't care about that anymore. He's been doing that for general for decades. He does rare consulting for equity arrangements. You can find most of his stuff free on his website if you sign up for it. But he's not doing that anymore. He's done it. He's shared a ton of his insight. Now he wants to work with selective clients.
15:18	Shaan Puri	did he tell you any good stories about icyhot or one of the brands that he helped
15:23	Ramit Sethi	IcyHot was one of my favorites. It's in his book, and he's told me all about it. He told me about gold and how he helped this gold business that was sort of struggling. They repositioned the way they sold gold, and it exploded their business. He's got tons of great stories in his book. My favorite one has a terrible title, but it's a great book: Getting Everything You Can Out of All You've Got is really good. One page in that book helped me build a multimillion-dollar product. I was sitting on a Wednesday—Wednesday is when I have strategy days—and I just read and I think. I read one of his pages, and it all clicked for me. I launched a multimillion-dollar program of ours called Ramit's Brain Trust, and it was all because of that book.
16:04	Shaan Puri	Speaking of terrible titles, we have a podcast title that is both kinda catchy but also kinda cringey, I would say. You also have a title that is kinda catchy and kinda cringey. What... so we've talked about our feelings on it. Give us your take on both your name as well as doing names like this. So give us the kind of... what's your mindset? Is it all pros? Are there no cons? Are there a mix? How do you think about it?
16:34	Ramit Sethi	no there's a lot of cons I'll tell you I'll tell you the the blunt truth so I created I will teach you to be rich while I was a student at stanford and I was helping my friends in the dining halls with their personal finance and I had learned and I built my own system because I took some of my scholarship money and put in the stock market and here I am trying to help my friends and they were like oh that sounds awesome because I got an overdraft fee and they would never show up to my free classes so I was like okay I gotta name this to make it more catchy and then event and that didn't work so eventually I started the blog looking back I wanna first say I was sober when I picked the name okay so and it was catchy but I will say it's come with its downsides for example you know I've been sitting on panels there's like the ceo of a fortune 500 company another ceo or senior vp and then there's ramit sethi ceo of I will teach you to be rich and the first reaction at some of these places is not good okay but even though many of my really smart friends including some venture capitalists and others they were like you gotta change your name you gotta change your name early on I was like you might be right and then I started going well there's some cost I've already invested all this time and then it just became too difficult and so I finally have really owned it I will say that I know very well when people hear this name of this book or the site they go that sounds like a scam so the the conversations are seriously it's not what it sounds like check it out and then I kind of have come to love that I love the push pull they go it sounds like a scam they come here it's hyper tactical it has the exact accounts to use they go oh this sounds like every other money person wait a minute this guy graduated from stanford oh wow he's in the you know times square new york times bestseller so I love that push pull I don't mind a little skepticism because I trust our material is so good that if they are ready they will receive it
18:44	Shaan Puri	and if you were gonna rebrand had you ever come up with a backup what would you go to
18:49	Ramit Sethi	Yeah, we’ve played around with some ideas. I do think there’s room in our future business for an extension with different names. But with all that said, you know what? I love clear names. Some of our best programs are "Find Your Dream Job." We've helped people get $50,000 raises—that's right on the money. "Earn $1K" helps you earn $1,000 on the side, and for many people, it turns into earning $100,000 on the side. So, I do love clear names. In our copywriting program, we say, "Be clear, not clever. Clear, not clever." It's really hard to be crystal clear. It's super easy to create marketing that is clever, but in the grand scheme, we believe clarity wins.
19:36	Sam Parr	and you've been doing this since what like 09 or something when did when did you I
19:39	Ramit Sethi	started this site in 04
19:41	Sam Parr	"04" and do you think that this could last another... So you're at it, that's what, 10, 11, 12, 16 years? 17 years? Can it last? What's it going to... What would a brand like this, a course business and your brand, what would it look like in 20 or 30 years? And are you going to continue doing it for that long, you think?
19:59	Ramit Sethi	oh yeah I mean I love what I do so first of all it's not a course business
20:03	Sam Parr	sorry
20:03	Ramit Sethi	we just happen to have courses but we also have a what do you call
20:07	Sam Parr	it then a blog a brand
20:09	Ramit Sethi	So, it's an education business. We have a book with over 1,000,000 copies sold. You could just as well say it's a book business because we sell more books than we sell courses. However, I don't love the concept of a "course business." You will find that many of the successful course creators realize, "Wait a minute, there are lots of different ways to reach people." I'm going to do events, I'm going to do a podcast. So, courses simply become a nice catch.
20:37	Shaan Puri	Which part of the empire? So, I'm pretty fascinated. I've been studying what I call solopreneurs—basically, people who try to build a personal monopoly around some domain. For example, there's a guy who says, "I'm the best dog trainer. I will teach you everything you don't know about training your dog." He trains dogs for the stars, but then he gives you the information for free over here. I love that! I think there is an infinite number of these personal monopolies that you could create, even within one domain. For instance, in personal finance, there's personal finance for guys who want to be billionaires. There are people who want to achieve lean FIRE (Financial Independence, Retire Early). There are others who want to maximize their time, like in the 4-Hour Work Week style. There are a number of these personal monopolies, and I've been interested in looking under the hood of these to see two things: 1. What does that business really look like? 2. Because you only see Ramit Sethi, you don't know how many people he has on his team.
21:35	Ramit Sethi	yeah we have about 20 to 25 at any given
21:38	Sam Parr	time right
21:38	Shaan Puri	So, like, even though it looks like an individual brand, obviously there's a full, talented team of people helping out to make it happen. Then you have many different plates that you're spinning at once. You've got the blog plate, the podcast plate, the books plate, the courses plate, and then there's probably four more. I mean, job board... who knows what else you've got? Which plate is the main one? I would say usually what I found—and you tell me if this is true for you—is that there's the audience core one, which might be like the blog. The blog is our core thing for growing the audience, the free audience. Then there's this other thing which monetizes, kind of like 1 to 5% of the audience best. This is where the money comes in to pay for these 25 people that work at my company. So, what is it for you? Is it a newsletter or a blog? What's the main thing on the audience side, and what's the main thing on the business side? Is it courses?
22:28	Ramit Sethi	That's a great question. I think, in general, your model is correct. There are places that are better for audiences, and typically, this will be things like social media. It's easier to grow that than to grow the number of customers; that's just sort of a given of the internet. For us, audience-wise, I think social media is key. We have people on Twitter, Instagram, to some extent YouTube, and now the podcast. I think that will end up being a pretty substantial part of the business, audience-wise, along with the programs.
23:02	Shaan Puri	but those are all about each other than one that's like the leader
23:06	Ramit Sethi	Well, Instagram is the best. It's the best! And my Twitter, because I love it. It's like I'll get up and I'll start Instagramming and tweeting and stuff. Now we've got a little IWT support in there, so we've got a regular posting schedule. Those are great! Actually, we've learned how to monetize things like Instagram. You know, Instagram is a nice part of our business as well.
23:32	Sam Parr	you also reply to trolls on twitter which is awesome
23:36	Ramit Sethi	and instagram I reply to all trolls
23:39	Sam Parr	yeah I love that
23:39	Ramit Sethi	I'm waiting in my life for one smart troll. You know, I have helped over 10,000,000 people. I have over 1,000,000 books sold and 50,000 customers. Our team is amazing. I'm still praying that one day there can be an intelligent troll out there, and so far, no. It's very difficult. You know, I get anti-vaxxers who write to me. I tell them, "You would have trouble deciphering a menu at Olive Garden, and you're over here giving me medical advice? I don't think so." So, you know, these guys—they're all guys—they really feel that they need some meaning in life. I'm happy to give it to them and show others how to respond to trolls.
24:18	Shaan Puri	what do you
24:19	Ramit Sethi	what what what do you mean by the way
24:21	Shaan Puri	Isn't that a big energy suck? "Why?" Because it's fun for a while. It is fun to slap down trolls for a bit, but... I've found, for me, it gets exhausting. "What? But you seem to thrive on it. You seem like, even right now, I could see a little pep in your step just thinking about it."
24:34	Ramit Sethi	well I remember listening to a navy seal who said when others do push ups they get tired when I do push ups I get strong and I found the same because dealing with trolls keeps me sharp and I'll tell you why it's not just you know for kicks and to make fun of them it's that in my life you know I'm hanging out with guys like you smart guys who are dissecting business models and and healthy whatever I don't get the chance to talk to someone who comes up to me and says you know vaccines are fake or these sort of crackpot you're you're only doing this so you can make money if I wanted to be rich I would create a book on being rich you know I I've candidly never had somebody come up to me in real life and say that and in part that's because when people come up in real life they're actually very positive pleasant they usually have very nice things to say what typically happens with these trolls now I've had conversations with thousands of them and I save and cross catalog all these conversations so it's fascinating right over time you can build a corpus of what's going on remember I studied psychology technology and psychology at stanford so I'm fascinated with human behavior so I wanna know what's going on in your life that you would reach out out of nowhere to somebody who doesn't know you and go fuck you so when they say that to me I go hey what's going on man you having a bad hair day and we start talking and so now I have metrics 50% of them will never reply of those who reply 50% will go oh oh oh my god I didn't know anyone would actually read this oh I'm sorry hey man big fan which kind of leads to the question if you didn't know anyone's gonna reply to me why on earth would you send that that's kind of sad and then the remaining 50% which is 25 of the original they will kind of double down and that actually is a very interesting conversation to have like what's going on with someone that they would say that and so I don't always get to a resolution but it hones my conversational skills and I get to understand and peek into the psyche of someone like that
26:43	Shaan Puri	I love that you have the intellectual answer when it's probably just really fun to just clap back at people. No, no, no explanation needed. We've all felt it. So Sam, I think you were going to ask something before I jumped in on the troll thing?
26:58	Sam Parr	Well, I’m still curious about the course business, and I’ll tell you why. I'm curious about it because, like, I bet you’ve been in this since 2004. I have a bunch of friends, Neville, Noah, you, who are just... I think you might be about 8 years older than me. They’ve seen the beginning of the web 1.0 course businesses, and there are some people that just crushed it. So, we talk about Eben Pagan and, what was his name? David DeAngelo, that was his name. I love hearing stories about that. It’s so fascinating to hear about all these guys just killing it on the internet. It’s like learning about a drug cartel or something. It’s just intrinsically exciting to hear about these... it’s like cowboy-style business. Also, you mentioned the company Agora. I asked you, "Can some of these course businesses reach $100 million in revenue?" You said sometimes they can, but it’s incredibly hard. The ones who do are really just huge newsletters that sell courses. So, yeah, that’s what I wanted to ask you.
28:08	Ramit Sethi	Okay, so let me take you back, and I'm going to share a couple of stories from our history. We have created over 30 programs and have served tons and tons of people. First of all, I remember our first major course we launched, which was called "Earn 1K." The reason we created it was that I went on a book tour and visited 13 different cities. I was asking people, "Hey, what should I create?" This was way back in 2009, during the depths of the recession. They said, "I love your stuff on finances and automation, but I really want to know how to make more money." That was fairly unusual back at that time. So, I came home and we identified all these different areas of making money. We created a program on freelancing because we knew it and we could teach it. We recorded that in the back of the Automatic office. We got hooked up with Matt, who said, "Okay, you can record it in the back." We didn't have any fancy camera equipment, but the content was good. We launched it at $497, and the thing converted way better than we thought. It converted too well; it was around 2%, if I recall correctly. I told people in the last email, "Guys, this is actually converting way better than I thought. I'm going to raise the price." A lot of people were like, "Marketing gimmick, that's so crazy." In the end, it made $600,000 on our first launch. We raised the price and never lowered it again. It was hilarious because a couple of weeks later, people were like, "Hey, can I get in at the original price?" We were like, "No." That was the first thing where we realized, "Oh my gosh, packaging matters. Topic matters. Conversion rate and pricing are profoundly meaningful in your business." Moving along, we launched other programs. We launched another business program that I think did like $5 million or $6 million in one week. We wrote about that on the Tim Ferriss blog, and you can see the entire flow of how we did that.
30:07	Sam Parr	That's a great blog post, by the way. I've... when we launched Trends, I read that and reread it a ton of times. I think it's like a $5,000,000 launch or something, yeah? Is that what... yeah, I figured that.
30:19	Ramit Sethi	We took people behind the scenes because you have to understand. Think of all the movement behind launching a movie. Okay, we're not doing a movie, but we're doing a launch. We write an entire book per launch, and much of that gets discarded. We still end up with a book—that's how much we write and create. So, we wanted to show people what goes into it because it's not just luck. At certain levels, it's very strategic, and there's an element of luck too. Moving along, you see a lot of other models that came and went. For a question like, "Can you make it to $100,000,000?" you can, but a couple of things change. 1. You become an acquisition machine. You cannot make it to $100,000,000 without a true, massive acquisition machine. That means that most of your business will be focused on acquisition. In the self-development world or money world, if that's what you choose to pursue, you have to become very, very mercenary. For example, you will see Facebook ads that are basically like, "Make $1,000,000 in a week." I'm being hyperbolic, but you get why. That is what people respond to when you are doing a true acquisition machine. If you want to build a boutique business with high integrity, that is antithetical to that. So, it's very important to know. For example, in software, you don't necessarily have to build a very hyperbolic business. Look at HubSpot. They're not over there saying, "Fix all your CRM in 10 hours." That's not what they're saying at all. But in self-development or in a course business, it becomes more and more aggressive the bigger and bigger you want to get.
32:02	Sam Parr	And that's kind of like one of the downsides of the business, which is... it's kinda like, you know, the hustle. We had a conference, Hustle Con, and a bunch of other conferences, and it kinda sucked when that was our main stream of revenue because: 1. The more money it made, the more people we had 2. The more people it had, the worse it got And that sucked. I hated that. I hated that. I hated that. I hated that. It was a huge challenge for us. Well, it didn't end up being a challenge because we were like, "Alright, it just can't be the main revenue driver."
32:31	Shaan Puri	But let's... yeah, well, let's do a quick switch. I want to discuss some of your business ideas because this is an idea podcast. Secondly, I want to ask you about some money hacks. But let's start with ideas. So, what we like to ask everybody is... it's always fascinating to figure out how you do what you do and how long you've been doing it. Great! That's kind of past-facing. What I found is that anyone who's talented enough to build their own business, like you have, and is out there operating in the field, sees tons of other opportunities. You just have more ideas than you have time to pursue them. Or maybe you're not the right person to execute that idea, but you think someone should. Someone who loves [specific field] should go do that. What are some business ideas that you've seen that you think are genuinely interesting or worth chatting about? Then we can toss them out to the audience.
33:20	Ramit Sethi	Okay, I always focus on where the demand is. Where's the insatiable demand? You know, as we talk about in our herbal program, "Go where the fish are." The first business I would create would be one around pets. Okay, first of all, I don't have pets and I don't want pets. My wife is constantly telling me, "Let's get a dog." I'm like, "We're never getting a dog, ever." And I want to tell you why. When I was a kid, my sisters wanted a dog, but we couldn't get one because my dad was allergic. Sixteen years later, we found out he wasn't allergic.
33:55	Sam Parr	yeah that's a lie that's always a lie
33:57	Ramit Sethi	I loved it. I love it to this day. I love that my dad just... blank... just lied to us for almost 20 years. I said, "God bless Dad." So now I will do the same thing. If my wife is listening, I'm allergic as well. It's tragic; it's genetic. But for the people who have pets, it's hilarious. They will literally spend anything. One of my good friends said, "Oh yeah, like, you know, I find it difficult to spend stuff on myself, but this new puppy? I don't care what it costs." They're getting this imported Swiss meat or something like that for the dog. I'm like, "Can't you just feed the dog, like, you know, from Costco or something?" And she's like, "No." I said, "This is a great business." There are a variety of different models I've seen. The box business is amazing. There are decorative items for dogs, which I love because the more unnecessary they are, oftentimes the more profitable it can be. Right? You're not buying a luxury sweater because you need it; you're buying it because you want it, and price is largely irrelevant. So if I knew anything about pets and had any interest whatsoever in pets, I would definitely start a pet business.
35:13	Sam Parr	I have a friend who sells dog vitamins, and I asked him, "Does it work?" He's like, "I don't know." And yeah, that's the only reason... that's the greatest thing ever. You... you have no... no one knows.
35:26	Ramit Sethi	I should say that that idea and the next idea I'm going to share with you, the other thing I would have to have would be no ethics whatsoever. Because half of these pet businesses are complete horseshit. But, you know, again, I don't want to start it because I don't know anything, and I also do have some morals around this. But the pet vitamins... I mean, come on! What is the dog giving you, a report card? "Well, I really feel my scoliosis went away thanks to this vitamin." No. Alright, what's next? Cosmetics. Insatiable demand. Heavy rotation of using different types of face cleansers. Do you guys know— you may not know as guys— but do you know that there are different lotions for your hands, feet, and forehead? Are you aware of this, Sam?
36:13	Sam Parr	No, I know that exactly. We have different lotions for different skin colors. That's what we have at our house, so I know that. But I didn't know, dude.
36:20	Shaan Puri	I haven't put lotion on in at least 16 years. It has been 16 years since I've last put lotion on.
36:27	Ramit Sethi	See, this is regulatory for the audience. They're like, "What's lotion?" Yeah, there's... and by the way, there's more to cosmetics and skin care than lotion.
36:35	Sam Parr	wait sean you don't wear lotion I thought that dark guys like you had to wear lotion
36:39	Shaan Puri	never wear lotion don't
36:40	Ramit Sethi	sean show up your legs right now I wanna see if they have little cracks
36:44	Shaan Puri	I'm ashy and I'm proud of it look there's no there's no work
36:47	Ramit Sethi	bro you got a lotion up come on
36:49	Sam Parr	do do do
36:50	Shaan Puri	do you
36:50	Sam Parr	do sunscreen white guys use sunscreen
36:52	Shaan Puri	I don't use sunscreen typically. They'll also... you know, this whole... like the whole nighttime skin care routine. Like, you know, I'm a toothbrush and out of there. It's over.
37:03	Ramit Sethi	Oh, I gotta tell you! I have to share my favorite part about nighttime skin routines. This is my favorite thing on all of social media. So, you'll be following someone, and someone will post a question to them: "Oh my gosh, your skin looks so good! What's your skincare routine?" And the person gets so excited! They go, "Oh, I'm so glad you asked me! Well, you know, I like to really keep it simple. I'm all into simplicity, so here's what I do..."
37:30	Shaan Puri	and then they fourteen part process
37:33	Ramit Sethi	Yeah, they go, "Well, I start with a serum. Then I give it a 15-minute break. I put on a lotion, but then I put a cream on top. You know, then I take a little break and let it breathe. Then I use the brush, and then I ice it out." And then, by lunchtime, you know, I need to reapply. And then you have 13 other parts for it. I'm like, "Do you understand that none of that is simple?" Most of the people I know are using like one Procter and Gamble product, if that, on their body.
37:58	Sam Parr	yeah 3 in one baby body wash shampoo conditioner
38:01	Ramit Sethi	Yeah, they're taking Dove and putting it on every part of their body. They're like, "Wow, I really nailed it today."
38:08	Sam Parr	so
38:09	Ramit Sethi	so I would do a cosmetics or skin care
38:12	Shaan Puri	Products, both pets and cosmetics, have insatiable demand. There's pricing sensitivity, but obviously, it's competitive. So, how do you think about going into a space where you're not the first person to think of cosmetics or pets? If you were going to approach us, would you be looking for some unique angle that you feel is underserved? Or would you just say, "No, forget it! I’ll go swim. It doesn’t matter how many other people are fishing there. There’s enough fish; I just want to make it. I just want to get my share. I want a small slice of a big pie." How would you approach it?
38:45	Ramit Sethi	Packaging, pricing, and celebrities. Packaging is a huge, tremendous part of it, and I think there are some opportunities there. Pricing... what do you mean?
38:55	Sam Parr	what what do you mean what opportunities
38:58	Ramit Sethi	So, I spoke to a guy who developed a hair care product. I asked him, "How did you develop it?" He replied, "We basically went to a factory and said whatever it needs to fit this cost framework." He didn't care. This is again why I say I would not get into this business if I had any morals, which I do. That's why I'm not doing it. But I'm just telling you what he told me. He said, "Yeah, we don't care what it is. It needs to smell good, but we spend 90% of the time on the packaging." I said, "Let me get this straight. You're basically selling like... whatever. Yeah, and the packaging looks lush." He responded, "Yeah, that's what the entire business is." I thought, "This is crazy." Then, in terms of price...
39:42	Sam Parr	Well, how big was that business or that entrepreneur? Like, how big was their empire? I imagine they had a bunch of them.
39:50	Ramit Sethi	Yeah, that's a good question. I would say, if I had to guess, it's in the $30 to $50 million range. The last time I checked that was several years ago, but you know, I didn't ask. So, price is... you know, you see people doing boxes, regular delivery, upsells. There are lots of innovative opportunities that I think digital entrepreneurs are very, very smart at. In the old days, it was just put it on the shelf at CVS and hope somebody buys it and then comes back. Nowadays, you can do some really clever stuff, so I think that's an opportunity. Then there are celebrity tie-ins. Who's known for having amazing skin? If you think back to those acne commercials, remember Proactiv? They had top-tier celebrities. I got really curious about how they get these A-level celebrities, and I started looking into it. The answer is they just write them a humongous check. So, there are opportunities with celebrity tie-ins for skincare. Again, I am not trying to do this business myself; I've just been fascinated with it. I would love to see how someone would come in here and disrupt what people are normally doing.
41:03	Shaan Puri	k I like it and then did you have a third one
41:07	Ramit Sethi	Kids... anything on kids? I mean, it's wow! Talk about price insensitivity again. I don't want to do this business because I believe in less stuff for kids. I think there are more meaningful ways to parent. But just imagine the kind of toys and learning opportunities.
41:25	Shaan Puri	he's like just a regular pet could also talk he's like that's what a kid is
41:32	Ramit Sethi	Yeah, so you know, there's some really smart stuff around these areas. But the key denominator in all of this is insatiable demand. That's the first place I look, which is a little ironic because when I started "I Will Teach You to Be Rich," there was actually not that much demand for learning about money, especially when I started. I focused on young people, but it wasn't a business when I started; it was just for fun. Over time, I found that there is demand, but you have to be very clever in how you reach people.
42:06	Shaan Puri	And what about money hacks? So, I put down a note saying I want to know. You have all this corpus of content, you know, just tons and tons of material: philosophies, frameworks, tactics, exercises, blah blah blah. What would be the three money hacks that you think most people just don't do? If you could get them to do it, you'd feel good about it. So, what are your three finance-related or money-related hacks that people should be doing to achieve a big outcome with not as huge an input?
42:39	Ramit Sethi	Well, I'm glad you asked because most of my founder friends don't even invest in the market. I would say over 50% of them... what does that mean?
42:45	Shaan Puri	even mean
42:46	Sam Parr	no what what does that even mean that's so I that's so crazy to me I don't understand it
42:50	Ramit Sethi	Well, I'm about to tell you because these guys make me want to wring their necks. These are founders who have done very well in their business. Either they have a high-profit business generating considerable amounts every year, or to some extent, they've had an exit and now they're doing their next thing. I go, "Hey, what are you doing with your money?" They go, "Oh, you know, I'm putting it into my business." I go, "Cool, like what about investing?" They go, "No, no, no, no. I can make more money in my own business." This is where my voice starts to tighten up, and I bring out my hand as if I'm about to wring their neck. I go, "How many businesses do you know that are still around 50 years later?" They go, "Well, not many." I go, "Do you think it would be good to maybe take a little off the table and put some in the market where you can get really good returns?" It just boggles their mind because they've never thought about it. They see themselves as an entrepreneur, not a boring mom-and-pop investor. That is a very, very costly belief that they hold. So I always tell them, "Hey, take a little bit, put it in the market, boring Vanguard funds, do the stuff." Of course, they haven't read my book. "Do the stuff in the book, and when you do that, you will be wealthier than you can possibly imagine, and your risk will be decreased dramatically."
44:07	Sam Parr	sean where do sam
44:08	Ramit Sethi	what do you think when you hear that
44:09	Sam Parr	Where do... So, I follow a lot of what you say. I've read your book. Sarah, my wife, has read your book. You're gonna talk about like talking to your partner once a month, things like that. I do that all, but I wanna ask you, Sean... Investing in the market. Sean and I are almost complete opposites when it comes to money. Not complete opposites for everything regarding money, but our risk profiles are very different. Sean, do you invest just in normal index funds at all?
44:34	Shaan Puri	Yeah, I have some in index funds. I basically have a basket of technology companies that a few years ago I said, "Okay, what companies do I think over a 10 to 20 year period have an advantage today that's just going to compound for 10 to 20 years?" I'm happy to be wrong with that; okay, I'm wrong with that. But I'm going to have this basket of basically six companies that I think are positioned to do that. That was like Amazon and Google. So it wasn't like some... they didn't take a genius, right? It was just like, I think these companies essentially are monopolies that are riding this wave of the internet and mobile phones. They'll do well. So I hold that. I'd say about 30% of my money is in that selection of stocks. I have probably 1%.
45:18	Sam Parr	You can't import a camera, or the import tax on a camera that can record above 60 minutes is taxed as a video camera versus a picture camera. Therefore, you can't record for more than 60 minutes on a point-and-shoot camera.
45:33	Ramit Sethi	Are you kidding me? This is crazy! Well, Sam, much respect. I was very... now I just need you to tell me what to do about it. But we can do that offline.
45:41	Shaan Puri	that was impressive
45:42	Sam Parr	Yeah, yeah, that was... So basically what happened to listeners: Ramit's camera went off. This is like a weird fact, but... shoot cameras cannot record above 60 minutes because they would be taxed differently.
45:54	Shaan Puri	It went down even better. He goes, "I know what happened. We just hit 60 minutes, didn't we?" "Yeah, and you have a... shoot camera, don't you?" "Yeah, it's from Asia, isn't it?" And it's like, "Oh shit, Sam! What are you doing? How do you know all this?"
46:09	Ramit Sethi	sam was like mike wallace right there sam I look like a lot of respect for you bro
46:14	Sam Parr	Yeah, well, we went through this. So, Sean, you were saying that you have 30% in index funds. Where's the rest of it?
46:21	Shaan Puri	My investment portfolio consists of: - A handful of tech stocks (about 6) - Approximately 40% in crypto - A small amount (1-2%) still left in a Vanguard fund - The rest is divided between: - Cash - Miscellaneous random other bets I'm not counting investments in private businesses like startups, as that would be a different category.
46:47	Sam Parr	Is that crazy to you, Ramit? That's crazy to me. I'm not disrespecting you, Sean, because whatever floats your boat, floats your boat. That's so different from how I do stuff.
46:56	Ramit Sethi	I'm at... it's like a guy going to a buffet. Okay, you both go to a buffet and then you say, "Hey, let's just meet up at the table." So you get here, you get some rice, some chicken, and some vegetables. The other guy comes back with three different plates. Ninety percent of all the plates have chocolate cake on them. Then he has two pieces of white fish and one piece of lobster that he cut in half and threw on the floor. You go, "What are you eating, bro?" He goes, "That's what I like. That's what I like."
47:31	Shaan Puri	why because it's not vanguarded out it's not indexed out is that why
47:34	Ramit Sethi	it's not not even remotely
47:36	Sam Parr	it's not it's not
47:36	Ramit Sethi	The opposite of diversification. Now, again, if you want to be entertained, that's awesome. It's very entertaining.
47:42	Shaan Puri	No, I don't. I think diversification... there's a great, great saying: "Diversification is for losers." That's how I feel about diversification.
47:50	Ramit Sethi	That's how most tech founders feel, and the cost of their belief is vast. It typically costs them $1,000,000 and a million thoughts. They don't care though. This is what this is, my Sam.
48:00	Shaan Puri	it's it's not that they don't care
48:01	Ramit Sethi	they don't call I'm
48:02	Shaan Puri	gonna put them on my own
48:03	Ramit Sethi	business and I can unduly invest
48:06	Shaan Puri	I mean, for me, some of the greatest investors in the world take concentrated positions, not diversified positions. So, are you... are you?
48:13	Ramit Sethi	one of the greatest investors in the world
48:15	Shaan Puri	I know what I know in my sphere. I'm an expert in my field, and so I feel confident and comfortable investing in it. I'm not saying I'm one of the greatest investors in the world, but I know that within the technology sector, I would bet on myself. That's what I'm choosing to do. Right within the technology sector, I feel like I have an edge compared to what I can get in the passively diversified index fund world. In the last 10 years, I've compounded way faster than, you know, the Vanguard ETF or the S&P 500 generically has.
48:49	Sam Parr	Your strategy, Ramit, I am the exact same as you. I'm looking at my portfolio now; it's basically 90% index funds, which includes HubSpot stock. While it's not indexed, it's still 90% publicly traded stock, most of which is index funds. What bothers me—or rather, what shocks and boggles my mind about you—is how you cannot see that there is another way to do it. There are the crazy people, like Sean. You and I both have tons of friends who are these crazy people that have made these ridiculous bets. For example, they only have $100,000,000, and they put $90 million into crypto, and it turns into $100,000,000. You and I know many of these people who have done these seemingly stupid things, and they totally work out.
49:30	Ramit Sethi	well there's definitely lots of different ways to achieve it so you know when I talk about in my book there's there's lean fire there's fat fire there's buying real estate there's passive investing and on and on and on so if you are optimizing for entertainment great if you're optimizing for concentrated risk great then that portfolio makes a lot of sense if you are optimizing for a diversified low cost predictable return and mitigating risk then of course that allocation makes exactly zero sense so we wanna know the game that we are playing and sean you you articulated it very well what I think the next question that a savvy investor would ask is what are the risks that I am incurring and this is typically where you get people especially a lot of crypto bros who go oh like what do I care I'm I'm swinging for the fences and you go okay that's cool what if it goes wrong now if you're 21 you know your risk profile is low right worst case you know you get a job etcetera etcetera etcetera if you're older if you have kids if you have a mortgage or if you simply do not wanna go back to living on ramen noodles then suddenly you start to think about risk differently now here's the catch most people doesn't matter if they're 35 or 50 they don't truly understand risk until something bad happens and when that happens they do not take a look in the mirror and go oh shit my allocation that I chose 15 years ago was poor they go fuck the government or they ripped me off I need regulation even though I called for no regulation for the last 15 years so unfortunately this is one of those things that cannot be taught until it is experienced and the market will go down tech will not always go up this is a predictable cycle the last 10 years have been extraordinary there's no doubt about that even an index investor made over 15% annualized returns which is insane but the music doesn't keep playing
51:35	Sam Parr	I agree with you I I strongly disagree with people with
51:40	Ramit Sethi	look look look
51:40	Shaan Puri	Hold on, hold on. There's no right answer without saying what are you trying to do, right? What is your goal? Because if my goal is to make X and your goal is to make Y, then we're going to have totally different strategies. A different strategy would work for a different person.
51:54	Sam Parr	what is your goal
51:54	Shaan Puri	I'll say I'm comfortable with this much risk, or I have knowledge about this industry. Maybe my answer would be different, or maybe my strategy would be different.
52:03	Sam Parr	you know so I think do you think our goals are different
52:04	Shaan Puri	yeah I think our goals are different for sure
52:06	Sam Parr	what's your goal
52:08	Shaan Puri	Not just the absolute money goal, right? Clearly, our goals are different because you intentionally avoid risk. You know the appeal of a lot of these investments, but you don't want to lose. Your risk tolerance is lower, and you... yeah, you would feel worse if you lost than you would feel good if you win. And I'm the opposite. I would feel worse if I didn't follow my convictions than if I [lost money].
52:29	Sam Parr	But what’s your goal? Like, is there a point where you’ll say, “I don’t want to take more risk”?
52:35	Shaan Puri	Yeah, of course, over time it'll shift, right? As the principal gets large enough, then you don't need to have so much concentration because you can play it safer. You can take a smaller, lower return that will still let you live the lifestyle you want. But if the principal's small and you're trying to live off 4% gains, or 5% gains, or 7% annual gains, you're going to have to sit there for 40 years. I'm just not interested in doing that. I think another thing is, what's your other situation? How much income do you bring in? I bring in a lot of income, so I'm not really worried about what happens if the market goes down, either temporarily or even permanently. If I'm bringing in a healthy income and I'm young, I don't really have to worry too much about protecting this investment asset. I can play riskier than my dad, who can no longer generate significant income and needs to play it safer.
53:26	Sam Parr	I yeah I we have different we have different we have different goals
53:32	Ramit Sethi	Yeah, I think if you look at bodybuilders, for example, who are competitive, eventually all roads lead to chicken and rice. Why? Because when you look at macronutrients and where you're getting the highest bang for your buck, all professional bodybuilders essentially eat the same. Okay, I'm being a little general here, but that's the case. When you look at investing, if you look at the research, yes, you clarify your goals. But remember that in investing, a lot of people say, "personal finance is personal." Actually, most people are mostly the same. Let me say that again: most people are mostly the same. They mostly want to make good money, be able to travel a little bit, etc. So unless you are a wild outlier, then all roads lead to low-cost long-term investing. Again, there are outliers. Sean, it sounds like you've thought that through, but the principles of chicken and rice and low-cost investing are the same. Now, what are those principles? I talk about that in Chapter 6. You know, there are a lot of people tossing around these ideas about, "Well, I chose this because the market went down a little bit, so I put my money in here." Over time, all those timing-the-market strategies have been blown out. There are rare exceptions who win. Sam, you were referring to that. We know some people who have won, but we also know a lot of people who lost a lot of money, and they disappear. They don't brag about their Russian fund that they picked anymore. That's called survivorship bias. So it's important that we know the entire game at play, and then we choose. Otherwise, it's very emotionally tempting to think, "I'm a genius, I have an edge," etc. But we have to all remember we are individual investors. Even the pros who do this for a living, with a bunch of other smart people and expensive technology, fail to beat the market 80%+ of the time.
55:29	Sam Parr	what are your money rules you talk about you you need to have money rules what are yours
55:34	Ramit Sethi	I have 10 money rules I'll share some of them. The easy ones are things like: - Always have a year of emergency fund cash. - Invest 20% of gross income minimum. That's an easy one. If you can't do 20%, start with 5%. The important thing is to pick a number and automate it. That's critical. Then there are the different ones for me. My money rules are things like: - Never question spending on books, appetizers, health, or a friend's charity fundraiser. That's unlimited. I have unlimited spending on that. Why? Well, when I was a kid, we couldn't afford to eat appetizers. Now, when I go out and eat with a friend, I'm like, "Whatever looks good, just order it." We can get everything here. Then it gets a little bigger. For example, I have a rule for business class on flights over 4 hours. I don't have to debate it or think about it; it's just done. Also, I want to be able to pay in full for large expenses like a wedding, a honeymoon, or even a house. It doesn't mean I have to pay in full; I could finance it if the interest is low or whatever. But for the largest, most important purchases in my life, I don't want cost to be a factor. Now, if you're listening to this, some of these may sound totally bewildering, maybe even ridiculous.
57:03	Ramit Sethi	My money rules are mine; they are not applicable to most people. Most people don't care about appetizers, and most people can't buy a house all cash. That's okay. What I want to encourage you to do is to really write down your money rules. Instead of having to make a thousand decisions every month about money, boil it down to the things that are meaningful. You'll notice on my money rules, which you can just Google "Ramit's money rules," that the classic mistake people make is when I say, "Hey, what are your money rules?" and they all sound restrictive. "Never spend on premium this, never do that, never dah dah dah." I go, "Okay, okay, it's okay to have a couple of restrictive rules. You know you want to save, you want to invest." But let's also make some rules that are fun. Money is supposed to be fun! It's not about cutting back on lattes; it's about living a rich life.
57:50	Shaan Puri	sam do you have those yeah
57:52	Sam Parr	I have those
57:53	Shaan Puri	Have you written down your goals, or is it more intuitive? You know, I kind of live by these principles. Or have you actually sat down and said, "These are mine"?
58:00	Sam Parr	Well, when I was 25, I made a list. Maybe I was 22, but I made a list. I said, "Here's how much money I want to have by the age of 30. Here's how much I want to spend each month. Here's what I want to purchase." The budget I made each month was based on what I wanted to own and what I wanted to do. I had similar rules written down where it was basically anything health-related or in books. I don't look at the price; I just buy whatever I want. I did not have any rules towards charity, although that's changing. I need to get into that. But yeah, I worked backwards. I had a target number based on what I wanted to spend each month. I wanted to be able to hit that target or make that just off of my gains, like my passive income from index fund investing. I wanted to be able to withdraw only 3% of that per year in order to pay for my monthly expenses. I made that all up when I was like 22, 23, or 24. I forget the exact number.
59:07	Shaan Puri	But by the way, when people say, "Oh, I want to withdraw 4%," do they actually withdraw? Do you actually, like Ramit, do you actually sell down 4% of your index funds or whatever to pay for your lifestyle? Or is that just a theoretical thing? Like, "I could fund this off just the gains, you know, just a portion of the annual gains."
59:27	Ramit Sethi	Well, I don't use a drawdown. I'm not in the deaccumulation phase, so I have an income. But eventually, one day, yeah. In fact, do people do that? Yeah, every retiree does that. Deaccumulation is done by tens of millions of people. They sell off a little bit every single year if they've got it, and that's how they fund themselves. That's why it's called a fixed income.
59:49	Sam Parr	And there are other ways you could do it. For example, I just invested in this real estate fund. What's it called? It's a big one called Oak Tree or something. And then there's BlackRock or what's it? Blackstone? What's the big, the big... yeah, you know, the big guy. It's like the $1,000,000,000,000 real estate thing that everyone has access to. Anyway, it pays, I think, a 6.5% to 7% dividend quarterly, and you can live off that if you put, you know, a fair bit of the...
01:00:21	Ramit Sethi	Sean, it's a good question. There are other ways too. So, dividends are one. Another thing that really wealthy investors will do is they'll simply take loans against their assets.
01:00:29	Shaan Puri	that that's kinda what I was talking about it was like that takes some hard decisions
01:00:32	Sam Parr	for a minute
01:00:32	Shaan Puri	Because you're not paying tax on the... like, you sell your assets or you take a dividend, you're gonna pay tax. So your 6% is not really 6%. But if you live off your loans, you keep your assets compounding. That seems smarter to me.
01:00:45	Sam Parr	The blown thing is the craziest thing that I've just recently learned about. It's taken me so long to grasp this because it goes against everything that I thought was true. So basically... it feels illegal. Basically, when you get to... I don't know what the number is, there's some number when you can start borrowing money from big banks. Right now, I think... what's the rate? Like, my rate is 1.1%.
01:01:10	Shaan Puri	1% yeah
01:01:11	Sam Parr	It's crazy! Okay, so the bankers were like, "Yeah, look." I built a widget so I could look at it. Let's just say that you have $10,000,000 in an equity fund. You could borrow, I believe, if you have an index fund, up to 70% of that. So, you can borrow $7,000,000. The way the math works is different for each person based on the stocks that you own. But basically, you can withdraw, let's say, 30% of your $7,000,000. The market would have to drop by like 68% to 70% in order for you to even have to pay back anything. Otherwise, you could basically have that true interest at a 1% rate. You could use that money to live off of, or you could use that money to invest in other stuff. It's astounding to me. Am I... am I right? You have a smirk on your face, so am I getting this wrong?
01:02:02	Ramit Sethi	Well, I was born with a smirk on my face, so let's just say I'm smiling inside, but I just look like this. In general, you are right. It is almost unbelievable. The average investor does not have the ability to do this. They have access to it; they just don't have enough money for it. But I do want to point out that a lot of these seemingly too good to be true things have sprung up and become popularized in the last 10 years. Is there anything else that might have been going on in the financial markets for the last decade that would have enabled these things to become popular? Such as record-breaking bull markets and historical low interest rates? Yes, we need to put this in the context of history. Yeah, you can borrow at a 1% rate, but if you go talk to your parents, ask them what their mortgage rate was when they bought a house in the eighties.
01:03:01	Sam Parr	Yeah, but these rates are based on what's called the London... What's it called? The LIBOR. I forget what LIBOR stands for, but I believe... I went and I think the LIBOR has only been around since the 1950s. But since the '50s, I think the highest it's ever been is 3.5%.
01:03:18	Ramit Sethi	I that's interesting I have to look at that I I'm not sure about that sam you might be is it fixed variable
01:03:24	Sam Parr	it's variable so that's why it's dangerous
01:03:28	Ramit Sethi	Yes, that's my... Sam, let's talk about the danger. So again, I don't know if it has to drop by 68%. The banks can call in their loan once it breaks a threshold. So all of this is amazing until it's not. I don't mean to be the sort of luddite here or the boring voice, and this is unfortunately what sensible investors get thrust into when there's an insane bull market. You have guys like me coming on and saying, "Hey, it's cool. You want to put 5-10% of your money in some alternative investment? Awesome! But remember, this doesn't always last forever." I've seen it myself three times in my life, and I'm not even 40 years old. I've seen it in the 2000 crash, 2008, and you could say March 2020 was temporary. But people are real tough until things go wrong, and suddenly you see people lose fortunes. When I went to Omaha to see Warren Buffett at his conference, one of the things that he and Charlie Munger said was, "We set up Berkshire so we can never run out of money." To me, that is way more inspirational than, "I eked out an extra 1.5% return at a much higher risk rate." So I want everybody to know the game they're playing. Do you want to get 10% or 14% compounded annualized return rates? You can; it's possible. You will take on a massive amount of risk. When you think about it, it reminds me of what my trainer said. We were starting to lift heavier and heavier, and I was like, "Oh, so like how heavy should we go?" And he goes, "You know, at a certain..."
01:05:06	Ramit Sethi	You really want to ask yourself: do you need to put on that extra plate if you're competing? Maybe, but there's a risk that you're suddenly taking. We need to not just think about returns, like 14%; we need to think about what can go wrong as well. For a lot of people, they have never done what you did, Sam. They never set out and plotted out how much money they want to invest. They don't even know what they want to do with their money. I want people to think a little more deeply. This is one of the most important things in your life. For most people, you will find that if they get a nice, simple 8% annualized return rate over time and they continue contributing, they actually have more money than they know what to do with. It takes time, yes, but I want to challenge people to really think about this sense.
01:05:48	Shaan Puri	Of yeah, I think one of the good things about what you do, but also one of the disconnects between what we talk about, is your message to help a mass number of people. As you have, it's a "most people" message. You're trying to find the advice that you can give that, if most people took it, would actually help them out. They may not have an outlier in either direction, negative or extreme positive. So you have "most people" advice. Our podcast is the exact opposite. Our target audience is for people who are trying to escape "most people" results. They are trying to figure out how to achieve a disproportionately outsized positive result, whether it's because you built a...
01:06:33	Ramit Sethi	I think that's a good clarification. I will say, I think you earn the right to have an outlier result. You hear stories about, "Oh, let's do this startup and we'll make $10,000,000 or $15,000,000." Great! Those are extremely rare. Instead, my approach is to layer it. As I talk about in I Will Teach You to Be Rich, it's not just about personal finance; it's about a rich life. Start off by getting your diversified portfolio and never worry about that again. I spend less than one hour per month on my finances. Then, if you want more, start a business. Make a huge, profitable business. Or, if you want to do a venture-backed business, great! But you earn the right to be an outlier. It is extremely rare and very unlikely that someone's just like, "Oh, I have this cool idea for a dog business. I'm gonna make $50,000,000." That's my personal philosophy.
01:07:22	Shaan Puri	Right, and I think the bodybuilder analogy you mentioned earlier is correct, but it's actually different from what you're making. Most people don't want to be bodybuilders. A bodybuilder's diet is primarily chicken, rice, and HGH (human growth hormone). There are going to be a lot of downsides to the amount of substances they're injecting into their bodies, but they need to do it because that is the game. That is a specific game. The same thing applies to venture-backed startups. Venture-backed startups are not just business; they are the Olympics of business. It's basically saying, "You're signing up for a $1,000,000,000 bus." That's why it's really easy to criticize it or call it out fairly, saying, "Hey, don't get caught up in the hype." There are many other ways to win that are often easier and more pleasurable. But that is the Olympics, and that's why it gets celebrated. We celebrate Michael Phelps, even though it took immense sacrifice for him to earn those eight medals. He swam six hours a day and ate 20,000 calories a day because that's what it took to compete at that level. I think it's important for people to figure out what advice they want to take. I always say this: most people don't have good results. Most marriages end in divorce, and most people are overweight. If you just follow what most people do, you will get the results that most people are getting right now, which are not really aligned with what people want—to be fit, happy, and successful. So, you have to kind of figure that out. I would say we're pretty aligned on that. I think what you offer is a path that will work for almost anybody. What we sometimes talk about is a path that won't work for most people, but for the few people for whom it will work, it will work in a big way. So, it's like two different ends of the same thing.
01:09:05	Ramit Sethi	Yep, I think that's an interesting approach. It's a different and interesting distinction to make between the two approaches. Sam, what do you think? You've been in both worlds.
01:09:15	Sam Parr	Yeah, I kind of do this thing where I... I like to have... I don't even know what I call it, but basically, "If everything goes to shit, I'm okay." So I like to have this base of security, this fortress of "fuck you". I like to have that, and then anything above that, I go incredibly balls-to-the-wall, totally risky with.
01:09:43	Ramit Sethi	Sam, we're the same. I have what I call the tripod of stability. Right where I work—or sorry, where I live—these sort of basic fundamentals: health, relationships, that's all dialed in. It's relatively conservative, but then it allows me to be risk-seeking on certain things. Like, "Oh, let me try this random podcast with no business model whatsoever," or "Let me try this experimental program," etcetera, etcetera. So, I like that. But again, we need to know what game we're playing and who we are, right? All things... you know, what does Mike Tyson say? "Everybody's gotta play until they get punched in the face." Everyone's an investment champ until the market goes down. In order to see evidence of this, all you need to do is go to any investment forum, including Fat FIRE, Lean FIRE, AnyFIRE, even the Bogleheads forum, and cycle back to what happened in 2008. Cycle back to what happened in March 2020, and you will... or my favorite is go to the crypto subreddits. You'll see people, all the bravado fades away, and they go, "Oh my God, I just lost my kid's college fund." You do not want to be in that position ever. On the other hand, you can make a lot of money if...
01:10:51	Shaan Puri	you have a
01:10:52	Ramit Sethi	sensible investment or even a risk seeking investment so
01:10:55	Shaan Puri	but I think you you own crypto
01:10:56	Sam Parr	I think we're
01:10:59	Shaan Puri	no none
01:11:00	Sam Parr	Wow, I think where you and I slightly differ, or go different paths, is... well, I don't know if it's entirely true, but basically, I see I have so many friends that, if I told you what they do, you'd be like, "You're in the world, so you know." But if I told my parents what they do, they'd be like, "This is fucking nuts!" They would be like, "What are you talking about?" Like, Sean is like that. A lot of me and Sean's friends, the guy Sean used to work for, Michael Birch, was like that. They'd say, "You are fucking crazy! This is nutty! This is not gonna work!" I have so many friends who have made it work, and I understand that in order to have outsized results, you have to do some wacky ass shit sometimes. I accept that you have to be weird. The other thing is, I also accept that I'm not like that.
01:11:48	Shaan Puri	The other thing I'll point out is that it is not always true that to get more reward, you take more risk. There are moments in time, and a wise, good investor eventually identifies these. It takes time to develop this judgment. There are times where you can take low-risk bets that have disproportionate rewards. They're not often, and it's easy to talk yourself into thinking that everything is like that. However, sometimes there's this myth that, "Oh, if you want rewards, you have to take massive proportional risk." It's not always proportional. Those are actually the best opportunities. Those are the ones that you should be pouncing on. Maybe to others, it looks like you're doing something crazy, but if you have accurately assessed it, you may find that it was actually not as high risk but still high reward.
01:12:33	Sam Parr	The way you do stuff, Sean, I think is just crazy. But I accept that your returns might be massive.
01:12:43	Ramit Sethi	Yeah, that's a good way to put it. I mean, everybody's playing their game, right? But to assess it, you need to evaluate it over the correct period of time and with the correct goals in mind. Sam, you might be like, "You know, let's fast forward," maybe two kids, not gonna do that. Sean might say, "I don't care," or "I put some money in the bank," etc. There are a whole bunch of ways to evaluate it. But I appreciate that, Sean. There are definitely different perspectives, and I appreciate hearing what game you are optimizing for. I think that makes sense.
01:13:15	Shaan Puri	Yeah, and what I would encourage anyone to do is to actually start with your stuff and learn the fundamentals. It's like, okay, yeah, I sometimes do some street bullshit, but you can only do that once you first understand the fundamentals. You do them for a while, and then you start to identify, "Okay, where do I want to stray from the path?" If I am going to not play by the book, I better have a really strong reason to do so. I better have some real conviction, real knowledge, or a real point of view that I'm willing to stand by. I need to understand what the heck I'm doing and the risks that I am taking when I take those risks. So, you want to start there, not with, "Oh, I saw this dude on Reddit did this thing, and so I'm going to go YOLO that same trade," when I don't even know what the hell I'm actually doing.
01:14:01	Ramit Sethi	Yeah, whatever you see on Reddit, you should immediately close that window and never listen to any financial advice on that site. Listen, you need to be able to answer some basic questions if you want to do all this risk-seeking stuff. You know, what does diversification mean? What is the typical asset allocation for a 40-year-old and why? Where does this 8% return per year come from? What is that? What's the rule of 72? When is my debt going to be paid off? What do I actually want to do with my money if I have $500,000, $1 million, or $5 million? If you can't answer these questions, you are not ready to begin taking all this astronomical risk. Again, none of this matters because none of these people are listening to me right now. They shut this off two hours ago. They're like, "Fuck this old guy. Risk? I'm a risk seeker." No, time will tell. But I would strongly encourage you to be able to answer some of these basic questions before you choose your own path. Many times, what I find is that people start off really gung-ho. They get into this, and they're like, "Oh shit, this is actually really easy! I spend less than an hour a month, my money's growing like crazy, and I don't have to worry about it ever again. We're going to be multimillionaires! Let me go live my life." That's way more exciting than optimizing some bullshit 0.5% return. And Sam, you know I've been telling you about this too. That's why I told you to stop talking about your 3% drawdowns. Like, that's all great when you're 21, and it's cool. Now, let's talk about where you're going on vacation. That is way more interesting.
01:15:29	Sam Parr	You told me where to go. I booked my tickets; I had my European trip planned. It got canceled because of Delta, but I do what you say.
01:15:35	Shaan Puri	By the way, let me share your side of the story on the engagement ring. You gave Sam some advice on the engagement ring. What were you...?
01:15:41	Ramit Sethi	Okay, so you know Sam? Sam is a very good listener. Sam, I have to say, I appreciate you. You ask for advice, which is rare, and you listen. So I'm always like, "Yeah, let's talk." He comes to me, telling me how he’s going to propose. You know, I got married three years ago, so I went through the whole process. I got very deep into the whole wedding thing and all that stuff. People are like, "Oh, was your wife like a bridezilla?" I was like, "If anyone was going to be a 'zilla, it was going to be this groomzilla right here," because I knew I was loving it. Just a couple of context points: part of my philosophy is to save for the big things before you need them because you know they’re going to happen. Most people are going to get married, so I started saving and putting money away for my wedding and my honeymoon in my twenties, before I even met my wife. Why? Because I knew it was going to happen one day, and I wanted to have an awesome wedding, an awesome ring, and an awesome honeymoon. Again, my own philosophy for important things in life is that I don't want to have to look at the price. A lot of people are like, "That's crazy! Why would I start saving when I'm not even in a relationship? That's weird." I go, "What's weird is to get to your wedding planning and not have enough money or to basically have to make all these short-term decisions." Some people go into debt for their wedding. I don't believe in that. I want you to have an amazing, extravagant wedding if that's what you want, or a beautiful honeymoon, or whatever. I want you to start planning early. So, Sam comes to me and goes, "Hey, I'm thinking of getting this thing." I said, "Oh, cool! You know, how are you thinking about it?" And he tells me, "Yeah, I have this budget in mind."
01:17:25	Sam Parr	so 5 grand
01:17:25	Ramit Sethi	Thank you! I was like, "No, you're going to spend more than that." Now, why did I say that to him? Because I know how much money he has. I know that there are certain benchmarks and certain numbers. If he were a school teacher and told me $5, I would say, "Oh my god, that's amazing! She's going to love it." Then I went a little deeper because Sam got very quiet. Sam knew he was being cheap, but he didn't know how to articulate it. He had a lot of emotions running through his body. I said, "Sam, let me ask you a couple of questions." He started off with this utilitarian Silicon Valley perspective. He goes, "Well, you know, you guys already know the arguments. Oh, I don't believe in diamonds. It's all made up. It's so fake. Why don't we just get this bullshit?" I said, "Okay, Sam, let me ask you a question. Does your fiancée care about rings?" He replied, "No, no, no, she's not that kind of person." I said, "Oh, okay, okay. Hey, out of curiosity, does she have a Pinterest board?" He goes, "Oh yeah." I asked, "What's on that Pinterest board relating to rings?" He said, "Oh, she's been tracking rings for like the last 15 years." I go, "Sam, have you talked to her about this?" He replied, "Well, she did mention that she kinda wants..." and then he breaks down the entire thing of what kind of ring she wants. I said, "Sam, you can afford it. This is important to her. This is not about you and your dumb vision as a 21-year-old utilitarian. It's about what your future wife wants for the rest of your life." And Sam was awesome. Sam, you listened. You were like, "Oh." He never thought about it like that because it's all tech bros who talk to you. So apparently, he came to someone who actually, you know, is like, "Let's talk about the softer side." It was awesome. Sam, take it from there. What happened when you went to get that ring?
01:19:07	Sam Parr	Yeah, I'll say... I was gonna spend $5, and I was like, "I can't do this anymore." I ended up, I think, spending a lot... $28,000-$29,000. I bought a...
01:19:19	Ramit Sethi	it's not about the money sam it's not about the money what why do you need that bro
01:19:23	Sam Parr	do you want the details of the story people wanna know
01:19:25	Ramit Sethi	you're ready right
01:19:26	Sam Parr	They want the details of the story. I've given the details of the story, and looking back, the money didn't matter at all. She was incredibly happy, and I felt so proud.
01:19:37	Ramit Sethi	Dude, my man! I'm happy for you and your wife. I actually appreciate that you've mentioned the numbers. You guys are awesome on this podcast; you're always mentioning numbers, which is very rare, so I love it. But what I want to emphasize is that, at a certain point, it's actually not about the dollar value. People, particularly entrepreneurs and especially tech guys, are obsessed with monetization. They're always talking about numbers. Yes, you should know your numbers, but a rich life is so much more than just your numbers. Just think about this: when you went home to visit your parents and you hugged your mom or your dad, did you think about, "Oh, how much is this costing me in my hourly rate?" or "Oh, how much did my mom pay for that chicken because we could get it cheaper at Costco?" No! The most important things in life are actually not quantifiable. What I want to emphasize is that we are taught from day one. I started a Silicon Valley tech company, we raised money, and I've done all this stuff, so I know what I'm talking about. We are taught that quantifying is the most important thing you do. What are your metrics? What's your attribution? What's your conversion rate? That's all we talk about. And yet, in the most important things in life—sitting outside on a picnic with our kids, being able to extend your lunch on a weekday with your friend from college who just happens to be in tech—tech money is irrelevant. The number is irrelevant. Being able to do it is what makes you rich. So for Sam, I fucking love it! You did it. The money part is irrelevant. You had the money, and you could do it. More important was recognizing, "My wife wants this; it's important to her." I'm going to rewrite my old story from when I was 21 into a new man and a new partner, and I'm going to use some of my resources to do it. That is connective and amazing.
01:21:28	Sam Parr	Well, thank you. And we'll have to end with that beautiful little monologue there. You're the man! What's the name of the podcast again?
01:21:37	Ramit Sethi	I will teach you to be rich with ramit sethi
01:21:40	Sam Parr	And I'm looking it up now. We're going to link to it. Thanks, dude, this is awesome! But you have a link that you can go to too, right?
01:21:47	Ramit Sethi	yeah you could go to iwt.com/podcast or it's on apple or spotify
01:21:53	Sam Parr	thanks man this is awesome what do you say sean
01:21:55	Shaan Puri	yeah thanks for coming on sam I think you and sarah should go on his pod and be one of the couples
01:22:01	Sam Parr	oh that's sweet I'm down I'm down I you
01:22:04	Ramit Sethi	guys would be amazing
01:22:05	Sam Parr	that that would make me uncomfortable but I would do it

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Why You Should Have a Diversified Investment Portfolio | My First Million #214 with Ramit Sethi

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