Revealing My +$10 Million Investment Portfolio (#476)
text Sam's $10M Portfolio and the Psychology of Spending - July 20, 2023 (over 1 year ago) • 55:46
Transcript:
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Shaan Puri | I've lost more money than most people have ever made. But I'm such a good investor that I've lost more money than you can dream of making.
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Sam Parr |
Alright, I've got a couple of interesting topics today. The biggest one, and this is more what we're gonna do right now, is I want to do something that I only do privately. I'll do it publicly.
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Shaan Puri | I like it | |
Sam Parr | Yeah, that could go different ways. You could critique me, but basically, with some of my friends and some people in Hampton, I do this thing called a portfolio review.
In this review, I explain my financial portfolio, and you are allowed to critique it and challenge me in order to hopefully make me better.
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Shaan Puri | okay | |
Sam Parr | do you know you know what I'm saying | |
Shaan Puri | I know exactly what you're saying | |
Sam Parr | you don't have to keep asking I know what you're saying | |
Shaan Puri | you know what | |
Sam Parr |
I'm saying, follow me... You asked this question a lot to our guests. I think it first started with Ryan Holiday, and I thought it was just the most blunt, wonderful question. You go, "So, what do you do with your money?" and I thought that was wonderful. So that's kind of how I came up with the idea to do this, and so I figured today we can do that. Does that sound interesting to you?
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Shaan Puri |
Yeah, let's do it. Alright, the portfolio review. I guess I think we're gonna do this... like the other way I like to ask the question is:
If there was a pie chart, you know, roughly what percentage are you putting over here, what percentage are you putting over there, and why?
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Sam Parr |
And I'm not like one of those guys... Our friend Nick Huber sent an email out the other day, and he put like exact numbers of everything of his net worth. There's a bunch of people who do that. I'm not that transparent, so I don't particularly like that, but I'll be very transparent about some things.
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Shaan Puri | Yeah, we're not going financially streaking here, but you know, if we can go to the beach, I could take my shirt off.
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Sam Parr | Yeah, yeah, we're gonna go... we're gonna pop the top, but we're keeping the bottoms on, right?
Okay, so first let me say my strategy for this whole thing. The first thing is that a lot of this is contingent on my previous strategy, which started when I was like 21 years old. My goal was to start and sell a business by the age of 30. I thought if I did that, it would give me some financial security, which was basically rooted in being insecure about money for a very long time and wanting to have some type of security.
So, that's like a lot of people listening in the YouTube comments. I know they're gonna say, "But how did you get like blank?" Well, we talked about it a ton. But anyway, it was about starting and selling a company.
Another thing, unlike you, Sean, and I think unlike most of our listeners, I would say I am incredibly conservative. And so that is not the right fit for a lot of people. The reason I'm conservative is I'm gonna break it down into four different accounts, of which my big major account I consider my livable money.
So, I don't actually draw off any of it, but my game plan was to sell a business and have that big windfall. If I wanted to, it could just go into the stock market, and the gains could pay for the rest of my life without ever having to touch the principal.
So, that's kind of like the strategy on that. And then also, as of now, I currently live off of my income. We make income from this podcast and from our other companies. My wife works, so I live off that money. Therefore, I don't actually touch any of the other stuff.
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Shaan Puri | Explain, because I think without numbers it's hard. Let's pretend for a second that when you sold a hustle, you made $10,000,000 after taxes. Let's just pretend that's true.
What you're saying is you put $10,000,000 in a Vanguard index fund, and that's your basically like, "If I need it, that's there. I'm financially independent." But you don't want to touch it.
So you live and pay your bills off of things like this podcast or, you know, people buying your digital products or random stuff like that. That's kind of money in, money out. That's how you fund your lifestyle. You could do whatever you want, and then you have this nest egg that's there.
That's basically what you're saying was your kind of strategy from your twenties: live cheap, build a company, sell it so you have that nest egg. Now you're like, "I got the nest egg and I have this income source that's pretty strong that pays for all of my lifestyle stuff." What now specifically?
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Sam Parr | The way that I had planned on it was, let's say you had $10,000,000. You can draw out 3% of that per year, and basically your portfolio, that $10,000,000, would hypothetically—and mostly realistically, based on 100 years of data—continue to grow each year.
Some years it actually wouldn't, and some years it would, but it would average to grow each decade. Yes, and that number is 3% that I hypothetically would pull out. Of course, I don't, but I could.
Finally, my strategy is to reduce stress and to make income from my private companies. I am not an active investor, of which we are going to see. Also, this is not advice. I don't know anything, so don't actually do anything I'm saying. I'm just telling you what I do. Alright?
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Shaan Puri | Also, if this were advice, this is like the financial equivalent of "try missionary." It's like you're not even going to like this.
This portfolio review is not going to be some crazy backdoor sweep that's, you know, puts over here, some calls over there. I'm pretty sure what you're going to say is, "I buy the index, buy some bonds, and then I try to build more wealth through my private businesses."
Did I already exactly spoil your portfolio review?
Exactly. Let's talk about percentages. What index are you buying? Is it one? Are you buying multiple indexes?
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Sam Parr | What do you think? Alright, so I'm going to break this down into four categories.
**Category 1:** I'm just going to call it the "big account." I'm not going to say who I use because I don't want people looking after me or going after me.
The second thing is the big account, which is the earnings from my sale. There are other liquid accounts, which I'll talk about, non-liquid stuff, and private company stuff.
So, the big account: I have 79% of that in VTI, which is the Vanguard Total Index Fund. Another 15% of the pie chart is in short-term treasuries, which are currently yielding, I think, 4.9%. I believe it's like a 60-day term, meaning every 60 days, as of now, we're rebuying them. They could be 90 days; I forget.
Then, there's 6% in a real estate fund that buys Walgreens. I think it's called Oak... Oak Tree? I don't even know. It's just some boring thing that owns either 100 or 1,000 Walgreens buildings, and Walgreens leases the buildings.
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Shaan Puri | Year to date, VTI is up **19%**. The one-year chart shows an increase of **15%**, and the five-year chart shows an increase of **57%**.
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Sam Parr | That's fine, I'll take that all day. What's VTI historically over the last 30 years? I think it's like 8% a year, maybe.
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Shaan Puri | I don't know what it comes up to | |
Sam Parr |
So that's just boring stuff. And then bonds, prior to when the economy was killing it like 3 years ago, I think bonds were like 1%. Now they're like 5%, and so I'll take that all day. I think a high-yield savings account is also like 3 or 4%, which is where I keep cash.
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Shaan Puri | Which is basically all a way of saying **wealth preservation** at this point.
This is not where most people are at. **Wealth creation** is where most people are at. **Wealth preservation** is where you're at when you're basically just trying not to lose the nest egg, the big account.
Let's say it's about just keeping up with inflation, maybe beating it a little bit. Okay, if the whole market goes down, I'm diversified. I will also go down, but less so than somebody who has concentrated bets trying to make a bunch of money.
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Sam Parr |
Yes, my opinion is that most people, if they are trying to make a lot of money, should try to make money through starting a company or owning equity in a company. Then, as their cash flow comes in - as long as they don't need that to start another business - they should mostly do what I'm doing. Which is what I've done before: I was just in Wealthfront.
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Shaan Puri |
And by the way, you said this on a different podcast. I think it's worth saying... You were like, "I wanted to be kind of rich by 30-ish," and you're like, "To do that, you basically have to start a business."
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Sam Parr | And not only that, I think the likelihood of selling a business and getting there is probably higher.
If you start a company at the age of 21 and you want to earn $10,000,000, you can assume that more likely than not, your first three years you're going to make minimum wage. In my case, I made $20,000 a year; I paid myself $2,000 a month for the first two years of my business.
So that gets you to around the age of 25, which means you have to average something like $2,000,000 or $3,000,000 a year in profit because you have to account for taxes. That will accumulate to about $10,000,000. I think that's very, very challenging, and I think it's a little bit...
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Shaan Puri | About selling... yeah, that's the differentiation here. It's about selling versus, you know, cash flowing your way there. | |
Sam Parr |
That's my opinion, yes. And the way that my "big account" works is I keep roughly $100,000 to $200,000 in my checking account or savings account... whatever I yield. Any number above that goes straight into my investment fund of this big account.
Alright, the second one: I got a sugar mama. Have I told you that?
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Shaan Puri | how is she | |
Sam Parr | What's her name? Her name's Sarah. I've been with her for 9 years, and she's my sugar mama.
My wife actually made money before I did. She went to Penn, a very smart woman who attended an Ivy League school. She got a job at Facebook and then worked at Airbnb. She's been there for like 6 or 7 years. Airbnb went public in December, I think, of 2021. We thought that they were going to go out of business; we didn't think Airbnb was going to work out. Turns out they did awesome.
I think when she started working there, the valuation of Airbnb was $10 billion. It could have been $18 billion; I don't remember. When it IPO'd, I think it was $100 billion. I don't know what it is today, but it's tens of billions. Her stock did wonderfully, so we own a bunch of Airbnb stock, of which we have sold none.
What are you looking at for Airbnb stock right now? $93 billion. I think it was like $8 billion during the pandemic, if I remember correctly. I don't remember exactly. We haven't sold a lick of that.
The other stock we own is HubSpot. When I sold to HubSpot, I was given a bunch of stock. I have not sold any of it, other than the amount that I had to take out to pay taxes, and that's like a legal thing; they automatically take that out. My intention is to not sell any of that in the next 5 years. Maybe I will, maybe I won't. As of now, I don't need the money. I like both Airbnb and HubSpot, and I'm not selling any of that at the moment.
I also have a 401(k) that I've always maxed out, and then I have Bitcoin that I bought in 2014 that basically has just sat there dormant forever. I don't even know what it is now, but I have not sold any of it. Have you ever sold Bitcoin?
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Shaan Puri | Yeah, I've sold Bitcoin at a couple of different points. Each time I sold was a poor decision. I don't know if I told you the first time I sold.
So, I bought Bitcoin back when it was like $300 or something like that. That was my original buy. I think $400 was my average, and it shot up to, I don't know, $3,000 or $4,000 at one point.
I go to a wedding, and my aunt—who's like, you know, an Indian auntie—I'm walking into a conversation she's having with her friends. She literally goes, "Oh yeah, Ethereum is very good." I was like, "My aunt's talking about Ethereum and saying it's very good."
I asked her, "Well, how come you say it's good?" She replied, "Oh, Ethereum used to be this price, now it's this price. It's very good." I was like, "Oh, it's good because the price is going up?"
I was pretty sure there were bubbles. I had read something about this. This is, I think, the moment when your Indian auntie, you know, on the East Coast, is talking about assets that are good because they go up and telling her friends they gotta buy. I thought, "This is gonna be a bubble."
And I was right and wrong. So, I immediately go and I try to liquidate everything. I try to sell the whole thing. I have everything on Coinbase, but there are limits... you wait.
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Sam Parr | was it really because of that | |
Shaan Puri | Literally because of that, I go to try to sell everything. Coinbase is limiting me because you can't just sell lots and lots of stuff at once. They're like, "You can only sell, I don't know, $15 at a time" or something like that.
So I'm just trying to max it out every day and try to sell. At some point, by the 5th day or whatever, I was like, "Okay, let me just leave whatever else is there. It's fine." It kind of wore off.
Bitcoin shoots up to $19,000 in like the next 2 months, and I was like, "Oh my god, what am I doing? I mistimed the bubble." Then it goes back down to like whatever, $3,000. I was like, "Oh, I feel good now."
And I was like, "This is stupid. I shouldn't just feel good and bad. I shouldn't try to time this." Basically, I either believe in this or I don't in the long term, and I should just...
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Sam Parr | Dude, I can't believe that you let your aunt's story sway or change your actions.
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Shaan Puri |
Oh, that's happened to me multiple times. I told you about the Tesla one too. I basically owned a ton of... like, the only stock I owned early on was Tesla. Back when Tesla was very... kind of like a young stock. It was maybe a $2 or $3 billion valuation, maybe $5 billion, and I...
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Sam Parr | don't what's it now like 600,000,000,000 or a trillion or something | |
Shaan Puri | it went up to basically close to a trillion now I don't know what it says | |
Sam Parr | I can't even do that math so what's a $1,000,000 in tesla what's $2,000,000,000 | |
Shaan Puri | I had a very small amount of money out of college. I made about $25,000 at my first job or something like that. I saved enough to invest around $25,000 to $30,000.
I did the math once, and it's at $900 billion now. So, it would have been basically... I remember when I did the math, it was like, "Oh, that $25,000 would have been like $6,000,000 by now if I had just held."
Instead, I went on Reddit, and there's, like, I don't know if you know, on Reddit, there's all these groups. It's called "Tesla Q." It's basically a group of people who believe that Tesla is going to zero, or maybe it's, like, fraudulent. There are all these people sending...
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Sam Parr | say that they have fake cars right like like they're not fake cars images | |
Shaan Puri | Not fake cars, but lots of other things like that. There would be guys who'd say, "Gosh, there's this garage in Phoenix. Look at this." He would go to this garage, and there were only Teslas parked on six stories.
He's walking up and he's like, "They're stashing them here so that you can't tell where they are." Because if they just leave them in the factory lot, it's clear they're not selling; they're piling up.
He's like, "Dude, look at this. This one has..." and he puts his finger on it, "It's got dust. Look at this, this hasn't moved in months." And I was like, "He's right." Thank you, u/333kittykitty.
I was just taking all these signals from people on Reddit who were like, "Look at it." At one point, they had had like 15 different CFOs, and I was like, "That does seem fishy. Why have so many CFOs come, looked at the books, and left in a very short period of time? That doesn't sound right."
I basically took all these signals and I sold. I tripled my investment or quadrupled my investment, and I was like, "Yeah, I'm gonna get out at the top, boys." Then, you know, it went up like 100x since then. So, you know, it wasn't really very good.
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Sam Parr | The second time that's happened to you. The first time it happened was with Stripe when you had a job offer, I think, at Stripe, and it didn't work out. | |
Shaan Puri | I blew the interview. I didn't get the offer. The guy was like, "I only applied to one job. It was Stripe back in 2011 or 2012." So I would have been like employee number 20 at Stripe, which is like a guaranteed opportunity. If you stick it out and you're there for 4, 5, or even 7 years, and you kind of work your way up a little bit, even at a junior level entry position, I probably would have ended up making somewhere between $1,000,000 and $2,000,000 over those 7 years.
My mentor is the mentor of the guy who was interviewing me. That's his mentor, right? Mentors have a pretty big influence. If the mentor says, "Hey, this person's amazing," you're like, "Oh, thank you, sensei! I'll listen." My mentor had written a blog post saying, "I met this kid. He's 21 years old, he's an entrepreneur, and he's got the highest bias for action of anybody I've met in the last 10 years." I was like, "Wow, glowing 5-star review!"
I handed it to this guy, and he was like, "Wow, if John thinks this about you, let's do the interview." Anyway, as a formality, we had to do it, but he was like, "I'm so excited to talk." We talked, and somehow, I blew it like a 30-30-30.
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Shaan Puri |
Lead during the interview where he's like, "Okay, so... it's kind of like a sales position. You know, sell me a piece of software that you really like." I was like, "Sell me this pen," and...
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Sam Parr | I was like | |
Shaan Puri | I was like, so what I would do is I would basically just ask him a bunch of questions. He said, "No, no, no. Like, ring ring, hello. Just do it. Pretend."
I was like... I don't know what I said, but whatever I said at the end, he's like, "Yeah, that wasn't very good. I don't think this is sales. Probably not your thing. You're probably not that good at this. So, you know, maybe there's another position we could look for."
I was so embarrassed at that. I was just like, "Ah, this guy basically rejected me and said maybe there's some other role for you, like, you know, down in the basement. Yeah, maybe you could fold someone's laundry, one of the engineers' laundry."
I was like, "Alright, fuck it. I'm gonna go for this other job instead."
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Sam Parr |
And the interviewer... the guy was like, "So Sean, what do you know about Stripe and the banking system?"
And Sean's like, "Well, I like money. I would like... I would like to have some more of it."
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Shaan Puri | big fan of | |
Sam Parr | big fan of stripes | |
Shaan Puri | The White Stripes... yeah, crest wiping stripes. Those are stripes. Sorry, sorry, those are strips. Let's see... Adidas logo.
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Sam Parr |
"You ever been to Stripe's convenience store?"
"Love it!"
"Yeah, that's how that interview went. So... that blew it. You blew that one, but that's okay. You let emotions sway you, and I'm gonna give you a lesson here in that I never do that. So it's okay. Your weakness is my strength, so it's good because I don't sell anything."
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Shaan Puri | as I like to say I've lost more money than most people have ever made but my | |
Sam Parr | I'm such a good investor that I've lost more | |
Shaan Puri | Money than you could dream of making that I've... | |
Sam Parr | lost more money than you could | |
Shaan Puri | dream of making | |
Sam Parr | I can't find | |
Shaan Puri | This client info: Have you heard of HubSpot? HubSpot is a CRM platform.
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Hubspot |
So it shares its data across every application. Every team can stay aligned - no out-of-sync spreadsheets or dueling databases. HubSpot: Grow Better.
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Sam Parr |
When we sold HubSpot, I think the stock was $367. I think it went up to like $860, and that was amazing. Then it went down to like $250, and I remember thinking, "Oh man, is this right? Is this right? What do I do?" So that definitely impacts me. Like, I definitely want to sell... [pause]
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Shaan Puri | The way I literally did it with the HubSpot thing, I bought HubSpot stock right around when you sold. Then it went up, and it was like, "Oh!" Everything was going up during that time.
Then, when the whole market crashed, I was like, "You know what? I don't really want to be in the stock market right now. This isn't very fun." I don't know, like, there are all these warning signs about where the economy is going. I think I have a much bigger edge just like in my own businesses and in private businesses.
Let me just get out of public market stock picking, which I'm not sure if I'm very good or very bad at. But I just think generally it's a bad strategy to take for investing. And yeah, I basically sold almost at the exact bottom of the market.
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Sam Parr | like the literal bottom like I sold and there's a guy somewhere | |
Shaan Puri | In air traffic control, he's like, "The bottom's in, he's out, he's out. Let's go, pump, pump, pump! Let's move!" | |
Sam Parr | most people only hit rock bottom once in their life that's like the. Of the phrase right | |
Shaan Puri | I treat you... you've got it many times, the lead. Yeah, somebody was asking me this.
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Sam Parr | the other day | |
Shaan Puri | They were like, "Oh, so what are you doing with your investments?" I'm explaining what I do, and they're like, "So what do you do for your safety net or whatever?"
I was like, "Safe? You're looking at it." He said, "What do you mean?" I replied, "Am I still me? If I'm still me, I'm safe. What do you want? I could lose all this—who cares? I could lose all of it; I'd make it all back. Like, who? I am the safety net. A bond portfolio is not my safety net. My 401(k) that's locked up until I'm 65? I don't think of that as my safety net. I am my safety net."
And that's, I think, an approach. Honestly, if you're high caliber, I see so many people that are really high caliber who play it so safe with their finances. I would count you as one of these people. You never look bad, but I also think you leave so much room where you didn't need to. Like, have you spent a dollar? Or have you spent more than 10% of the money from the hustle sale? No.
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Sam Parr | way definitely | |
Shaan Puri | not 5% have you even spent a dollar from that account | |
Sam Parr | No, no, I've never pulled money out of my bank account. The most expensive thing I bought was a $100,000 car, of which I think you bought three like last month. | |
Shaan Puri | I'm not Persian; I'm Indian. I bought one car; it's a business expense.
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Sam Parr | you've got 3 all white g wagons that's all I'll say | |
Shaan Puri | So, the thing is, you know, this is one way I think about it: you worked for 10 years, every day, to build this company, and you sold it. You achieved the thing you exactly wanted, and not a dollar has moved in like 2 years, 3 years. You haven't moved a dollar from it.
It's like you spent 10 years to save up for this power tool, and then you just leave it in the case. I don't know if my way is right, but I also know that for me, my philosophy is that money is a tool to be used to enhance your life. If you're not really using it, and then you work hard to go get more money, that really doesn't compute for me.
What is the way you think about that to make that...?
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Sam Parr | I think that's an incredibly fair criticism. My joke is when Warren Buffett talks about the long-term view, and I'm like, "Dude, you're fucking 95. There is no long-term view; that doesn't exist."
To criticize myself, I am horrible at spending money. Ramit Sethi, who we have on the podcast, does a really good job of saying, "Look, you could earn income, and you should be good at that. You also have to get good at spending." I'm quite bad at spending. I think it's just rooted in emotional instability and being insane. These are just personality defects. Oftentimes, what makes you good at saving makes you bad at spending, and I think it's like a therapist issue that you need to work out.
So, I think that's an incredibly fair criticism. The truth is, it's not quite halfway in the middle. I think I should loosen up a bit.
What I've typically seen is that people who earn a lump sum, like a startup where they are poor and then suddenly they're not poor, tend to be more like me—really tightwad, frugal, and cheap. That causes a lot of anxiety.
On the other hand, people who earn a significant amount of cash flow throughout the years and get used to it tend to be a little bit more offensive and a little less conservative. I think it's definitely rooted in childhood trauma and stuff like that—just how you're raised, you know what I mean? Just like running out of money. | |
Shaan Puri |
I'm going to share, without sharing somebody's name, that a friend of ours sent me a presentation they made about their life. It was part of one of these peer group things... Don Hampton, but a different one. We don't plug any other names of any other groups on this podcast.
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Sam Parr | that's right thank you I appreciate that | |
Shaan Puri | So, he sent me this thing, and I thought it was really great. Basically, it's like, "Here’s my life story and here’s what I do with my money." He had a couple of slides that I thought were really good.
One slide showed a person who had sold their business for over $100,000,000. They had a nine-figure exit from their business. The next slide had a picture of them the day they sold for over $100,000,000. The following day, they bought this bike. This bike is a $2,000 bike; it's an awesome bike. It's the most expensive purchase and the most expensive item I've owned in the last ten years or something. It's like, "Whoa!" Until I recently bought a condo last year, this was the most expensive item I owned. I love this bike.
Then I was like, "Okay, interesting." There’s another slide that I liked. It goes, you know, one slide that said, "Top five financial mistakes that I've learned to cope with." I love that title.
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Sam Parr | oh | |
Shaan Puri | And there are five interesting ones about basically like, "Sold this too early," "Sold this too early," "Was gonna buy this and talked myself out of it because there was a fee associated with it." I would have made like $20,000,000 on that, you know?
So, I think that's just a great exercise to go on, which is like you can survive a bunch of bad mistakes. If you're going to play the game, any good startup investor has an epic anti-portfolio—a bunch of businesses that they passed on that they should have invested in.
That is part of playing the game. You can't play the game without missing shots. It's like being a basketball player, and you know that Michael Jordan commercial where he's like, "I've missed 3,000 game-winning shots" or whatever? It's like, yeah, that's what happens when you play. You're going to miss shots, and you can't...
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Sam Parr |
Everyone has... I literally know 15 people that have the same Uber story. That was like the famous one for years, which is "I passed on Uber." I passed on Uber, everyone said "I passed on Uber." I know a ton of people have said that.
I think Gary Vaynerchuk, like in the beginning of his book, he gives a compliment to Travis Kalanick, the founder [of Uber].
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Shaan Puri | calls him out as like you know | |
Sam Parr | Yeah, he's like, "Dude, I thanked my wife, my children, and Travis Kalanick," meaning I was super close with them. I still pass on that, and that cost me $100,000,000. | |
Shaan Puri | exactly | |
Sam Parr | I think that's like a famous story he says so yeah everyone has that story then let let | |
Shaan Puri | Me give you two other slides. He says then there's two slides called "My Effed Up Relationship with Money." I think I can read this. Let me see.
So, it says, "I work hard to make money, and I got good at it. But then I hoard the money I make. I put it in bank accounts and look at it constantly. Besides hoarding, I know that money is good for one other thing: making more money." You know, that's something I realized. It's like, I really put a lot of my own self-value on money.
Here are some things that I do that are dumb about money: I feel guilty spending on myself. My parents were the same way. They would spend on their kids or spend on other things, but they wouldn't spend on themselves. That's annoying. They did it, and now I'm doing it.
He said, "I bought a business that was a cash flow business, and I said, 'Okay, this is my cocaine fund. All the profit from this, I must spend on something hedonistic. I must spend; I can't save this money.'" It didn't work; I still saved it.
He goes, "I'm comfortable losing $500,000 on an investment just like that. But if you said, 'Spend $500,000 to improve your life, and I guarantee it will improve your life,' I can't do it. I can't get myself to do it." | |
Sam Parr |
I'm the exact same way. I've been looking at... I should be helping you with that company. Well, I've been looking at your company, Shepherd. I think it's like $3,000 a month for an assistant, of which I desperately need, but I'm like "$3,000 a month?" But well, the... it's not a fee, whatever the payment is for a person if...
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Shaan Puri | You hire somebody, you pay 30% of their salary as the headhunter bounty. Once that's it.
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Sam Parr | so it'll be like 3 | |
Shaan Puri | it'll be like $3 for the year is for most people that's like let's say an average | |
Sam Parr |
But I mean, I have to pay this person's salary, and I'm like, "Well, that's $36,000 a year." But if you do that over 5 years at the rate that we're growing right now, that's $90,000. Like... I'm ruining the accounting.
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Shaan Puri |
She might really be valuable, and that might be a 15-year relationship. Now I'm talking about a $500,000 investment, but I could also put that in VTI and it would compound 8%... and now you've talked yourself out of it.
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Sam Parr |
When I was buying my wife's wedding ring, I was like, "Man, this is the most expensive thing I've ever bought. That's a lot of money." But I guess if we're married for 80 years, because we might live to be like 110, that means it's only $800 a year. And like... that's okay.
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Shaan Puri | do you know | |
Sam Parr |
What I mean is, there's all these weird mental gymnastics that crazy people like me have to do. So this guy... is he an immigrant? Is this guy an immigrant that you're talking about?
It's 100%... Most immigrants that I've been around have... or not most, but many... This sounds like a very much an immigrant problem, right? Of which I'm the exact opposite of an immigrant. But that's why I like those guys. I identify with them.
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Shaan Puri | You know, we had this funny experience yesterday where another friend, who is also mega wealthy, when we met him in person, said, "You know what? I really want to shift into family mode. I'm ready to meet somebody, have a kid... I want to do that part of life now."
We were like, "That makes total sense! Good on you! You did the money thing, the business thing. You scratched that itch; you proved you could do it. Now you're in your thirties and you're saying, 'You know what? I don't really have a partner. I don't have kids. That seems fun. I do see myself as a family guy. I want to do that.'"
So that was where we left the conversation. Now, my business partner, Ben Levy, he's the man who checks in on everybody. He always provides me with a stream of updates about what people are up to, and it's great.
He said, "You know that friend? He's doing something new." I was like, "Not just doing one thing new?" He said, "He's got these four projects he's cooking up." I was like, "Oh, that's interesting! What happened to the whole 'I want to actually focus on finding a partner or starting a family'?"
He said, "Oh yeah, he still wants to do that." I replied, "It's like we start four companies. I mean, that doesn't seem like it's going to be very conducive to putting your focus on something, right?"
And it's like, "Yeah, I agree." I asked, "How come this keeps happening? We have so many smart friends." I said, "There's a big difference between smart and wise, and I think that's what we're seeing. We have a lot of smart friends who are not that wise about decision-making. They're intelligent for sure, but they make decisions that don't really make sense if you zoom out a little bit."
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Sam Parr | how old's this person | |
Shaan Puri | I don't know like I don't know mid thirties or something like that | |
Sam Parr |
I think some of that will come with age. I think that we're in a weird situation in which many of the listeners to this [podcast] have a higher income than most people their age. And I think that sometimes maybe your earning power is ahead of your brain power or wisdom power. Do you know what I mean?
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Shaan Puri | What I'm saying is, I'm not telling you that you have to go get married and have kids. But if you told me you wanted to get married and have kids, and then instead you're spending all your time doing these other things that are going to completely keep you busy, I would ask, "Why hasn't this happened already?"
It's like, "Oh, I was so heads down in my company." That's cool, but why are you getting heads down in four companies now? That doesn't make sense either.
I texted Ben and said, "Man, I'm guilty of this in other areas of my life." Right? Because again, if you spot it, you got it. So anytime I notice something in other people, I ask myself, "Where in my life do I make the same stupid mistake?"
I realized, oh, it would be like yesterday. I canceled something I very rarely do. I almost never cancel my workout. I canceled my workout because I had two doctor's appointments. I thought, "If I do this workout in the middle of the day, then I'm just not going to get any work done today."
So I canceled my workout, but my number one goal right now in life is to get fit. I would get more value out of becoming more fit than making another dollar.
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Sam Parr | you have 54 days left I think right | |
Shaan Puri | yeah monday no I'm on 49 I have 49 days left | |
Sam Parr | yep you have 49 days left to get abs | |
Shaan Puri | I'm 8 weeks away from being that guy. But I guess the issue is that this is an area of my life where I make a stupid decision. It's an unwise decision to say, "Hey, on one day, this is my main goal," and then, 3 days later, I'm prioritizing something else above my main goal. That doesn't make any sense.
In the same way, this person is doing that with their relationship. Their main goal is to get married and have kids, but they prioritize a bunch of other stuff. I realized that that's not intelligence; that's wisdom. It's basically having good judgment.
I realized that wisdom, or good judgment, is the thing that's most short in supply and the most valuable. It's like a lever. You don't have to be that hardworking or that smart if you have great judgment. If you pick the right things to focus on, the right people to work with, and the right place to live, you don't have to have a 9,000 IQ. You don't have to know everything about everything, and you don't have to be the hardest worker.
But if you have poor judgment, no amount of hard work or intelligence really saves you. You kind of screw yourself. So, it just really emphasized that. | |
Shaan Puri | To me about like you know smart does not equal wise and the goal is why is not smart | |
Sam Parr | I think that's a good one. I like that.
It's like when you're driving and you say, "Everyone's such a horrible driver." It's like, dude, that is you too. There's some weird emotion and logic that don't make sense there.
Now, my final accounts, of which you can have a lot of opinions on the last one, or the second to last one, is my non-liquid stuff. It's roughly $3,800,000 in real estate, of which I have a mortgage on my house. I think my house was $950,000 when I bought it, and I have a mortgage of about $550,000 left.
I own a ranch, some vacant lots in Austin, and I'm a small owner in some storage deals, a Brooklyn building, and one or two small things.
The other non-liquid stuff is angel investing. Now, here's what I do, and you tell me if I'm wrong. I value it at the principal sum that I put in, and I even put a large discount on that. That would be around $500,000 of startup investments.
The way that I see it is I've done roughly 50 investments. I think 40 will probably not work, 10 will work, of which 3 might pay back everything plus a little bit. I've reduced the principal by a significant amount just in assuming future net worth. Anything above that, well, maybe it will work.
What do you think about that? Yeah.
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Shaan Puri | I think basically startup investing has a long time horizon. You have to assume that these investments are going to take **7 to 10 years** before they pay out. So even if they are worth **X**, they're not really worth **X** to you yet. They're these little eggs that are going to be hatching.
I'm with you. When I calculate, I never calculate net worth because I think that's kind of useless. It takes into account illiquid things that are either going to go to **$0** or go way up in value. My own businesses are going to either go to **$0** or go way up in value, most likely, and they're illiquid. So what does it matter? I can't do anything with them right now anyhow.
I basically only calculate liquid net worth when I do my calculations. This doesn't include any of my own businesses, and I also don't include any startup investments because they're not liquid yet. That doesn't mean they're not valuable, but they're just not liquid yet. So I don't even apply the discount because it doesn't matter; it's not in my calculation.
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Sam Parr | And that's my last category, which is private companies. These include any course I do, this podcast, and speaking fees, which is called Parr Media. I assume that has $0 equity value. I live off that income.
The next big company is Hampton. As of today, I assume that is worth $0. I've taken $0 salary from it. I will likely take a dividend at the end of the year, but until that business hits like $40 or $50 million in revenue, in my head, I assume it's worth $0.
I do not include any of the private businesses that I operate or own as part of my net worth. So we are totally aligned on that part.
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Shaan Puri | like my ecommerce I don't I don't I don't include it in the calculation | |
Sam Parr | even though that business is doing great you you include that as 0 still | |
Shaan Puri |
Yeah, well, I just don't mark it as 0. I'm not calculating total net worth; I'm only calculating liquid. If I tried to calculate total net worth... yeah, I didn't include it. I'd put some conservative number there, but I don't even really bother because what's the point?
In fact, I think the whole net worth thing is not a great thing to optimize for. I'm kind of in search of a better metric.
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Sam Parr | well there's earning so income do you so there's income | |
Shaan Puri |
But then income is like... only things that are, you know, it's going to bias way too hard towards things that are only generating cash flow today. So it's not going to count really any assets that you [have or are building].
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Sam Parr | I mean, do you measure your income on a monthly basis? I measure mine every month. I do a report where I look at, "Alright, what was my income this month and where did it come from?"
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Shaan Puri |
Yeah, not religiously, but it's mostly steady. I kind of know the one or two things that are variable. I'm like, "Oh, that's what that was at this month." Plus, you know, it's in the same range roughly.
So yeah, I know what's coming in every month. I know roughly what's going out every month. I don't really keep track of spending too much. I'll kind of calculate spending every couple of months just to be like, "Am I... did I add anything significant here?"
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Sam Parr | what's your spend right now I think I spend maybe 25 or $30,000 a month yeah | |
Shaan Puri | I think I'm at 30:30 k a month of burn life life expenses | |
Sam Parr | and I and I and I feel that that's a lot | |
Shaan Puri | that sounds like a lot to me that sounds insane to me | |
Sam Parr | We have a friend who told us that they are currently spending **$300,000** a month. I was gasping; I was like, "I can't comprehend that." Then they listed it all out, and I was like, "Yeah, that definitely adds up." But that's just like...
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Shaan Puri | you do need the jet I mean what what are you gonna do without it | |
Sam Parr | It was insane to me. I've got another friend that spends $80,000, and I'm like gasping, right? But I guess everything changes when you get to different levels.
So anyway, that's kind of like my portfolio. I want to say that, "Hey, this isn't advice," but also I basically do the most simple, conservative stuff. I use Tiller. Have you heard of Tiller? I think the website is tillerhq.com. It's like a plug-in, and I track this in Google Sheets.
What do you do? Do you track anything, like your accounts and the other place?
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Shaan Puri | These apps... because I'm like, I'm not connecting my stuff to these random startup apps. You know, I don't want to put all my information into these apps. I'm not that concerned with it in general. You know, the fewer things that you're concerned about, the better. | |
Sam Parr | yes but you just like surely | |
Shaan Puri |
I do occasional checks and balances. Every 3 months, I sit down and by hand, I write out with liquid stuff where I'm at income-wise and where I'm at monthly burn-wise. I do that every 3 months.
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Sam Parr | But there's like a logistical problem. Let's say your wife has a 401(k) from her job from like 8 years ago.
Yeah, and you have one from each job that you've had, and you haven't combined them. That's like 6 accounts potentially, or 5 accounts plus a checking and a savings.
Let's say that you each have like a Robinhood account or an E*TRADE account, plus her previous checking or savings before you were married. I mean, it can kind of accumulate, whether you have money or not. You could have 8 or 10 accounts.
And like, what happens if you die and she doesn't know about all of them, or vice versa? Do you know what I mean?
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Shaan Puri | Yeah, we do have that problem, which is if I die, I don't think she's going to be able to know, find, or access a bunch of stuff, especially the crypto stuff. How she could get to that... I've told her three times, and I'm like, "You're not really paying attention enough to remember this like nine years from now if something happens." It's like, I don't know what's going to happen with that. I am a little bit concerned about it.
However, the rest of the stuff, again, I just do it by hand, and I make a day out of it. I treat it like a spa day. It's like, right? I think you talked about this concept of "worry time." You're like, "I just schedule some worry time in the future." That's what I do with this. I don't call it worry time because I'm not trying to feel worried during it, but it's the same thing.
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Sam Parr | I just schedule a little | |
Shaan Puri |
A day every 3 months, I'm like, "Today's the day." It's basically like having a little financial picnic. I open up some of these baskets and see what's inside, and I take stock of what's going on. I think once a quarter for me is the right amount of energy I'm willing to spend on this. I just don't really want to think about it otherwise.
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Sam Parr | Do you know anyone who's crazier than you? I mean, I view you as being quite crazy. I've got one friend who made like $150,000,000, and they invested the majority of it in only two things: their next company and a house. They're like, "I basically don't own any bonds or equities. I've got very little savings."
So, I consider that person to be crazier than you, right? Or a similar amount of crazy, but potentially at a larger scale. Are all of your circle of friends like you, or do many of them say the same thing that I'm saying, which is, "Man, you're not conservative enough?"
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Shaan Puri |
When you say "crazy," do you mean like, "Oh, this bum on the street's a little crazy," or is it more like, "Wow, she's hot but she's crazy"? Which one am I? Am I "hot girl crazy" or "bum crazy"?
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Sam Parr | More like bet it all on black, like tuition money or this game of roulette.
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Shaan Puri | right I don't view myself as that crazy I think that I think I have a pretty healthy view on money I'll explain it to you in a few sentences number 1 money is a tool to enable a better lifestyle that's what it's for that's how I use it so that's the first thing that includes spending on lifestyle but it also includes learning things my angel investments I don't view as the absolute optimum way for me personally to make money but I love them because I learn so much about where the world is going from startups and I like being around entrepreneurs that's those are my people so abusing money as my tool to like make my life more like how I want so I use money as a tool that's the first thing money as a tool to enable a better lifestyle I think I abide by that law the second thing is money's no fun when you're stressed about it so there's basically like a strategy that just says I don't need to I don't need to be stressed about this so what is my amount of money that I know is my like safety net so like you know basically can I have 2 to 3 years of expenses put away that's just in like it it could be in nothing it could just be literally sitting in a a bank account doing absolutely nothing but it's not doing nothing it's enabling me to be free with the rest of the money because I know that if I lost everything if somehow everything went to 0 I would still have 3 years of runway and again I'm me I am my own safe if I if you give me 3 years of runway I'll have it all back and more by then like you know if I needed to to make money a focus and so I do that so to me I'm like if I have 3 years of life expenses put away what what am I worried about right so I do that the third thing is I know if I'm in which gear am I in wealth creation mode or wealth preservation mode so well I view myself still as in wealth creation mode you know when I sold my company it wasn't for as much money as you sold your company for I think if I had sold my company for as much as you did I might do things slightly differently but I still view like most of my investments as like more on the aggressive side more concentrated bets in things that I believe in and I know I'm gonna make mistakes I'm gonna have some things that go to 0 I'm gonna sell some things at the wrong time I would say the only leak in my game is really just that I sell things at all I really just shouldn't sell like the the only investment mistake I've made is just selling | |
Sam Parr | Okay, but are you actually going to? You've just acknowledged, and we'll go... well, we can make fun of me after this, but you've acknowledged that. So, are you making that?
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Shaan Puri | yes exactly so I made that but | |
Sam Parr | okay so you're not gonna sell ever or often | |
Shaan Puri | I'm buying things that I basically have. I default to saying, "This is only for breaking glass if you're going to sell this." So, basically, you have to really have a reason. Either you need the money and you have to sell the thing, or something in the world has changed that caused you to re-underwrite this.
Now, I would argue I kind of did that the last time I sold. Basically, with the post-COVID situation, with all the money printing going on, and what's happening in the economy, everything crashed. I thought, "Okay, we've had a 13-year bull market. We're probably not just going to have six months of bad times and then back to the good times again."
I still kind of believe that that's true, but I should say I wasn't in a place to re-underwrite those investments because I was now thinking about macro stuff. If I'm spending 30% of my time on Wikipedia, that means I'm not informed enough to be making an intelligent decision about this. You know, I'm learning about it.
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Sam Parr | But where do you get the information from? Do you get it from current people?
For example, I prefer to get information from books that are at least 30 or 40 years old. I try to learn about stuff—what's it called? The Lindy effect. I focus on learning about things that have been repeated many, many times and aren't exactly new.
The counterexample of that is when biology said all the crazy stuff about... what was his argument? That Bitcoin's going to $1,000,000 because of this reason? That shit scares me. I don't understand that; it's so new, and it legitimately scares me. Here's what...
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Shaan Puri | I don't try to do that because what I find happens is that I already have an opinion in my head, and then I just go find evidence to support it.
I already want to hold the stock forever, so then I go find the Lindy effect that says, "Ah, the Lindy effect says that this thing's going to stay valuable because it's been valuable." I'll cling to that evidence, but it's really just reinforcing some bias I already had in my head.
So instead, what I do is this: You can't learn everything, right? You can't just say, "I'm going to go learn the world of finance." It's too broad; it's impossible to do.
Here's what I do: I go through and I say, "What are people that I consider to be smart saying and thinking right now?" I try to line up contenders. It's like, "Here's thesis A about where the world is going right now. Here's thesis B. Here's thesis C."
Then I basically say, "Inherently, does one of them just intuitively make more sense to me? Does it resonate in my gut that one of these just feels more true than the other?"
Okay, let me... that's the first test.
The second test is: What evidence do they have that backs up their belief? Let me now stack the evidence.
Now, which one appears to be the strongest thesis? So instead of going and trying to learn about the topic, I take people who already have strong opinions about this topic, and I go try to find what the spectrum of opinions is about this.
On one hand, you have Balaji, who's like... | |
Sam Parr | you actually talk to them or just consume information | |
Shaan Puri | Not always, sometimes, but not always. Like, you know, Balaji, for example, he's just very public about his thesis. So you don't need to talk to him, right? It's like he's publishing every day what he believes to be true.
He's like, "I moved out of America. I got out of the dollar, and here are the sources I'm citing that I'm tracking that basically say the banking system is insolvent, that the money printing is out of control, inflation is higher than they're admitting, and that this is what the result of this is: it's X."
Then you have Ray Dalio, who says, "Look, I've been studying empires, and all empires come to an end. Here are the cycles that they go through, and I think that America is at the tail end of the cycle."
So you go read that book, you go watch his talks, and you're like, "Alright, that's one thesis." You have some people who say, "No, you know what? This is going to bounce back because even with all the problems America has, the dollar is still the best thing we've got out there. When all the countries in the world get weaker, they'll actually flee to whatever this relatively strongest currency is, and maybe that's the dollar. The dollar's going to drink the whole milkshake."
Basically, it's like, "Alright, cool." I didn't make... there's something I forgot what it's called, like the straw that drinks the shake or some shit like that. People don't talk about this.
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Sam Parr | From *There Will Be Blood*, he goes, "If I had a long straw all the way over there, I drink your milkshake. I drink it up."
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Shaan Puri | So, you basically line up a bunch of arguments and then you kind of litigate them like a lawyer. You're like, "What evidence do you have that supports this? What examples do you have?"
Then you basically say, "Look, okay, even if I don't know what's totally true, can I hedge?" It's like, "You know what? I don't think this guy's right, but he might be. And if he is, what hedge would I wish I had in place just in case?"
This is the most likely thing to be true, so then let me allocate things that way. That's generally how I try to approach things.
I do like that. However, I know my Achilles' heel in this is that I do get drawn to a bit of the sexy underdog opinion, the conspiracy opinion. The kind of like, "This is the most contrarian opinion," appeals to me inside because I'm like, "Oh shit, this could be a mystery that we're onto that nobody else really fully believes." And that makes me want to believe it more.
I think that's led me to make too drastic of a decision in the past, like selling all of my Tesla or selling, you know, 70% of my stocks or whatever. It doesn't have to be that dramatic. I should just put into place smaller hedges in those and track them.
Be like, "Cool, if that's true, then six months from now I might be seeing more of this. Let me check in at that time and see if the signals have grown stronger or faded."
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Sam Parr |
Right now you're in a little bit of advice-giving mode because I'm asking you questions, but to swap it: Who do you look up to where you're like, "I need to be more like them when it comes to personal finance"?
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Shaan Puri |
I wouldn't say there's somebody on the personal finance side for managing your own money, but there are a lot of people that I look up to or find I talk to to get ideas on what game they're playing to generate more money. So I don't really seek, or I'm not that interested frankly, in like...
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Sam Parr |
Well, who manages... who are those people? You obviously like Andrew, our friend Andrew Wilkinson from Tiny.com. He took the company public, so you can actually go and see the numbers. So you like Andrew?
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Shaan Puri | yeah I like andrew | |
Sam Parr | you like xavier | |
Shaan Puri | I like Xavier. Yes, Saeed Balky, I think, had really interesting things to say about what he does.
I'll give you just a funny example.
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Sam Parr |
So Saeed, by the way, he owns this thing called WP... it's called Awesome Corp. He started as a blog called WP Beginner, which was a blog on how to use WordPress. Now he owns tons of WordPress plugins. I don't know how big it is, but I bet it's worth half a billion dollars, of which I bet he owns most of it. And it probably does many, many tens of millions in revenue and probably tens of millions of profit, right?
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Shaan Puri | and yes as in directionally yes I don't know the exact numbers but he basically has a business that's amazing it's a monopoly it prints cash and then he does interesting things with his cash like he owns like I don't know 40 gas stations or some shit like that it's like why do you own gas stations dude is that a good idea bad idea does that take up a bunch of time or not he's like no these are triple net leases I just own the buildings that the other people operate in and they pay for all the maintenance so I was like oh okay interesting so so I did a call with him once and he's like he's like yeah my he said my mentor taught me one thing which was okay you wanna you don't spend it's kinda like I don't know the math I'm not I'm gonna say a math term even though I don't know math he's like you don't spend like the first derivative money he's like basically what most people do is the cash comes in from the business then they spend that money on life expenses no no no you only spend the second derivative it's like cash let's say $1,000,000 comes in from your business you don't get to spend that million is not spendable the million has to be invested into something and then the income from that investment that's what you get to spend you do that you'll never go broke and and I was like oh that's interesting he's like yeah so like I wanted to have a kid before we had a kid I bought a gas station gas station makes $6 a month that pays for this kid I was like wow what and that's how his brain worked and I was like interesting again thesis line it up say does that does that seem like a way of life I'd like to do maybe maybe not but like I want I I find it interesting because he says different things than most people and he does different things than most people and how he runs his life and how he runs his businesses and what he does with the money you know he was the one who was like you know what I love buying businesses he's like but there's another strategy I do where I buy these like 30 to 40% minority stakes in businesses that I can help in these 2 specific ways and they're they're gonna keep running it so they get a little liquidity they get to retain control and I'm gonna help them break through the plateau to get to the next level he's like I love doing that I I look for those deals and so when I invested in shepherd it was exactly it was I've exactly that mindset I was like what's a great business that I already believe in and am a customer of that I can buy a minority stake let them keep running it but then help them get to the next level by doing these two things and | |
Sam Parr | Has your contribution to that already... Do you think that your contribution has paid dividends in their business yet?
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Shaan Puri |
Yeah, of course. The last 2 months have been the highest 2 months of the business in the history of the business, so it's great. And for me, that's great too, right? I've already paid back, I don't know, 3-3.5% of my money or something like that on that investment. So, you know...
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Sam Parr | wow | |
Shaan Puri | That thing's gonna... you know, in terms of, "Oh, could I put my money in the stock market and try to get 8%?" Or, "This thing's clearly gonna do 200% a year." Basically, I don't know unless something bad happens.
So that's like, you know, a great use of... okay, yes, I maybe sold my whatever Amazon stock or whatever stock, HubSpot stock, whatever it is. I missed the kind of like a little bit of the bounce back, but I put that money to work in a place where I felt like I had a little more control and could see a path to a much greater return, with more risk, of course.
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Sam Parr |
This episode is like the personal finance episode. I'm very curious to see if you, listeners, actually enjoy this stuff. Next time we've got to get back to the business-building stuff because I think that is interesting to more people, and it's also interesting to me and you. But I'm very curious to see if this is useful for people.
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Shaan Puri | I like it | |
Sam Parr | sick I think this is a good one what do you do we wanna wrap here | |
Shaan Puri | yeah let's wrap it up | |
Sam Parr | alright we have a bunch of stuff next week let's add some pot |