My Plan to Make $100,000,000 In The Next 10 Years
Cash Flow, Capital Gains, and Building Real Wealth - March 24, 2022 (about 3 years ago) • 19:22
Transcript:
| Start Time | Speaker | Text |
|---|---|---|
Sam Parr | Can I ask you a quick question before we wrap up?
Getting wealthy, like we're talking 9 figures in liquid net worth, is it really hard to achieve just from cash flow? Or do you think you have to sell something—sell a business, sell real estate, or sell something else?
What are your thoughts on capital gains versus income?
| |
Shaan Puri | you're saying liquid so not paper not not not your paper net worth | |
Sam Parr | liquid which includes thing things that could be traded in 30 days | |
Shaan Puri | Very hard. Very hard to do just off cash flow. I believe, you know, it's just much slower, right? Because you can, I mean, just look at the basics. Right? Like when you sell something, you're going to sell it for some multiple of the free cash flow that it's going to generate for you, right? And so, just by definition... 10.
| |
Sam Parr | or 20 years where | |
Shaan Puri | Sometimes it's 5x, sometimes it's 10x, sometimes it's 20x, and sometimes it's 3x. There are different multiples for different industries, but fundamentally, it's a multiple which is a multiplier on how fast you're going to get the money, the value out.
So, let's say to get to $100,000,000, whatever number of years that would take you, then you have to divide that by 5. That's like how fast, at minimum, you could have gotten there just selling the asset and taking the 5x multiple.
So, you know, of course you can get there, but do I know ways you can get there with the same speed? I don't think so. Because even those are like, I take the cash flow, I invest it in the thing, and then that thing grows faster, and I can sell my stake in that. So, you know, because...
| |
Sam Parr | It's like you have a choice. You could spend your time building a service or some type of business where you can make significant cash flow—$2,000,000 to $3,000,000 a year—without working that much. However, it's not necessarily an asset that could be sold.
There are a few businesses like this. Or it could just be like the way this podcast gets paid. It's not like a particularly good example, but it's not, you know what I mean? It's not necessarily an asset.
For instance, your Maven course is not an asset that could be sold, but it could potentially make many millions of dollars a year.
So, do you prefer to say, "You know what? Screw it, I'm not doing that because I have to build a business that could sell," or do you think cash flow is more important? Or do you prefer an entity, an asset that is independent of you and can be sold?
| |
Shaan Puri | I don't know if "prefer" is really the right way to think about it. It's like you need both, right?
For example, you need both for two reasons. One is that maybe you're going to use the cash flow to invest. Perhaps what you're going to do is buy great assets and let them compound over time. Well, where are you going to get the cash flow to begin with?
When we had Andrew on last week, he said, "I took the cash flow from the design agency of Metalab and I used it to buy majority stakes in all these other businesses and then let those compound over 10 years." And like, boom! You know, he reached that goal and more by doing that.
So, you know, maybe you need the cash flow to make those investments. If you don't have cash flow, how are you going to invest in anything?
Secondly, I like to live a good lifestyle. Sometimes cash flow businesses are great because it's like, "Yeah, sure, compounding is awesome, but so is, you know, like, I don't know, Gucci shoes or whatever." Choose your thing you're into. Like, yeah, Gucci shoes! Sometimes those are better than this.
| |
Sam Parr | Yeah, dude. A 20-year-old asset. Whenever I hear Buffett talk about the long term and patience, I'm like, "Bitch, you're like 95!" There is no long term there. You shouldn't have patience anymore. You should immediately spend whatever you want to spend. There is no such thing as a long-term view for you.
| |
Shaan Puri | Sam Parr. Let's see, like the headline: "Sam Parr Cohen to Warren Buffett: 'Bitch, you're 95. There is no long term.'"
Alright, but I think about how he needs to pivot his strategy.
| |
Sam Parr | Well, I'm just like, you know, if you want to do it because it makes you happy, fine. But like, Bezos talks about this too. He's like, "A long time... I mean, you don't really... who cares? Just live life how you want to live."
You got it, yeah. And so I've thought, why are you delaying it? It always pissed me off. I'm like, why are you delaying having the best time of your life when you're old and don't even want to do anything? You don't have to do that anymore.
| |
Shaan Puri | Yeah, for sure. Some people are happy along the way, and that's fine. But I feel like you asked me this question because you had an opinion or a story. So let's just skip that part because I think you have a good opinion or story on this.
| |
Sam Parr | I don't have an opinion yet, but with my life now, I think that in a matter of six months, I could probably create a business from scratch that does $1,000,000 a year in profit. It would be based off of my image. I'm not saying I have that; I'm just saying I’m sure I could do that.
With a couple of other side projects, I think I could very realistically have $2,000,000 to $3,000,000 a year in cash flow easily. But yeah, easy. And maybe I do already have that. I'm not... I don't even want to say I do or do not, but I...
| |
Shaan Puri | But, like, if you did that, it would have been a weird way to say it. It would have been weird. I'm ecstatic! I'm like, "Okay, let's continue on."
| |
Sam Parr | I got some cool things going on, I'll say. But I'm thinking about where I spend my time, and I'm like, is it actually worth it? Should you just not care about cash flow and build something that's much bigger that you could sell? I don't know. I'm just trying to figure out where you actually spend time. The real answer is: what gives you the most joy?
| |
Shaan Puri | Yeah, exactly. Whether you don't work backwards from, "Do I want cash flow or do I want long-term capital gains?" that's not the starting point of a decision. You kind of just need to make sure you're winning in one way or the other.
Don't be weak in either area, or like, don't be weak in both. Basically, that's the way to do it.
For example, you could buy a home in San Francisco. You're going to have terrible income from that property. It's not a good income property because, in most places in San Francisco, the rent you could charge somebody is not going to outpay the mortgage.
| |
Sam Parr | it's gonna take a 3% cap cap cap | |
Shaan Puri | Cap, go buy some home in, you know, Houston or something like that. It can cash flow $1,000 to $2,000 a month, and it's a good income property. But it's, you know, gonna appreciate super slowly.
Whereas the San Francisco home, you know, in 10 years is gonna have, you know, whatever, more than doubled in value. So, you know, there are appreciation properties and income properties.
Same thing, like I think you just do whatever gives you the kind of... whatever gives you juice today and you think might give you juice going forward.
Then you gotta say, "Alright, before I do this, I gotta make sure it's gonna be strong in either one of these." Either it's gotta be awesome for cash flow or it's gotta be awesome for appreciation.
If it's awesome for cash flow, basically I'm just gonna use the cash flow to buy assets that are gonna appreciate with somebody else doing the work instead of me doing the work. You kind of end up at the same... either way.
| |
Sam Parr | Yeah, I don't know. I've just been thinking about how to spend time. You know who's killing it and has done a really good job of putting off making cash? Our friend Nick Huber.
I am an investor, and so I get to see some of the numbers of his storage deals. I don't think he crushed it in terms of personal cash flow for a long time, but the way that things have compounded, I'm like, "Oh, holy moly!" If you just eat shit for like 6 or 7 years and pick the right asset, things look really cool.
| |
Shaan Puri | Yeah, I think he's done great. Also, I think he personally has great terms with his investors, meaning it's quite favorable to him. Incredible! | |
Sam Parr | not in | |
Shaan Puri | A bad way, but like he makes sure he gets to eat right. Whereas at the beginning, if you have no capital, you're like, you know, you sort of make a deal with the devil in a way where you're like, "Alright, I'm gonna take no management fees, no acquisition fees, and a low carry."
Now he's like, "Look, I'm good and I know it, so I'm gonna take a higher fee, a higher acquisition fee, and I'm gonna take my healthy carry."
So, you know, good on him. I think a lot of people in real estate are able to do that pretty well. I know somebody who's crushing it in real estate, and they do just that. They have like a, you know, a 50% carry on the deal or something crazy, and they're like, "Yeah, because my deals are awesome."
| |
Sam Parr | hits | |
Shaan Puri | and I win so like it it doesn't make sense for me to do this at any less than that and I'm like | |
Sam Parr | there's this | |
Shaan Puri | That’s like next-level winning!
Alright, and then I forgot to tell you this, but this is the most important thing. I can’t believe we didn’t talk about this earlier, to be honest with you.
If you’re listening to this and you like what you’re hearing right now, and you haven’t gone and subscribed to the *My First Million* podcast wherever you get your podcasts, then that’s the thing you’ve got to do. There’s nothing more important than doing that right now.
And don’t do it because I said to do it. Do it because you want to do it. Do it because that’s who you are.
| |
Sam Parr | There's this awesome... you know who the Foo Fighters are? You know, Dave Grohl? Dave Grohl's the lead singer of the Foo Fighters. Yeah, and they've been writing hits forever. Before that, he was the drummer for Nirvana. So he's just written hit after hit for a long time.
Someone asked him about his process, and a fan was asking about old music. He stopped and said, "Wait a minute, let me cut you off here. I don't write deep cuts; I write hits." He was just like, "Everything I write, I write it to be a hit. Sometimes it is, sometimes it isn't, but it's all meant to be."
And that's like your real estate friends. He's like, "I write hits." That's why he gets that 50% carry.
| |
Shaan Puri | Exactly, exactly. And respect. I respect somebody who's like, "I'm playing the game, and I play to win the game." You know, I'm not playing something else. I'm not going to tell you I'm not playing the game; I am playing the game, and I'm playing to win.
That's actually something I really respect—people who just clearly play the game and are open about it. They're like, "Yeah, I play the game, I'm playing to win." And here's the thing: if you dislike the game or dislike me, that is your choice.
I actually dislike people who are the virtue signaling types, where it's like they are playing the game but will do anything in their power to make it look like they're not playing the game. There's a lot of that, like in Silicon Valley.
Here's how that plays out that I see: a person starts a company and bullshits about why they're doing the company or why this problem is the problem they decided to spend their life on. It's like, "You know you're doing this because it's good business, not because you really wanted to help small to medium-sized enterprise businesses save money on whatever." Right? Like that wasn't your actual intention. You probably like that you have happy customers and that you're helping them, but let's be real: if I take away the money, you'd stop.
| |
Sam Parr | Cloud, have you ever seen "Silicon Valley"? We're saving the world one cloud processor at a time or some bullshit.
| |
Shaan Puri | yeah yeah | |
Sam Parr | it's like yeah | |
Shaan Puri | so and | |
Sam Parr | Then they're like... someone calls them out. They're like, "Dude, this is all rich guy stuff." Like, Kid Rock just was the singer for the show, and he's the poorest guy here.
| |
Shaan Puri | Yeah, exactly. So, I think in Silicon Valley, you see that a lot. You'll also see that with the origin story about, like, you know, why they decided to do this. You're like, "Oh, are you sure you decided to do this because your cousin got diagnosed with this rare thing?" Or was it that you ran paid ads on five different products and this was the one with the highest click-through rate? Because I'm pretty sure when I was talking to you, it was this one with the highest click-through rate. Alright, cool, that's my company, right? There's a lot of that.
| |
Sam Parr | So, the other one is the guy who started Dollar Shave Club. I saw an interview with him, and sometimes he's like, "I started Dollar Shave Club because I was just sick of going to Walgreens and having to ask them to open up the razors."
In another interview, he said, "Man, my father-in-law is crazy. He likes to buy random stuff, and one time he bought a shipping container full of cheap razors. We just had to figure out a way to sell them all."
| |
Shaan Puri | Yeah, exactly. And that's why we did it. Exactly. You know, I'm in the 2% of the population—I think you are too—where we're like, "Oh, sweet! Respect for trying to flip the storage container and then realizing there's a business there."
Versus, you know, the kind of "Shark Tank" version of the story, which was like, "We were just so fed up with our options." Right? And like, I get it. Again, I've done that. I might do that again. But am I a little bit disgusted by it? Yes.
Same thing with... I'll do that usually when I have business partners, not when it's my own business. When I'm the only one, when I get to just be a cowboy on my own, I'll just do what I want. But like, yeah, I don't care if this is bad for the business. It's fine.
| |
Sam Parr | The other day, I ate an entire jar of peanut butter in one sitting. It was the Jiffy cheap stuff, and I just felt so bad about myself. But I didn't regret it, and that's kind of how you feel. | |
Shaan Puri | but I wanted to do hill rush stuff for my friend | |
Sam Parr | Mission statements are like a pint of Ben and Jerry's. It feels good doing it, and you may not regret it, but you feel guilty about yourself.
| |
Shaan Puri | The other version of this is like people who on Twitter are called "shit posters." They basically try to signal, like, "I'm not one of those investors who blogs about content and tries to..." | |
Sam Parr | I'm a cool model | |
Shaan Puri | I'll tell you the real deal. I'll make jokes, blah blah blah. It's like they're the ones trying to carefully curate their brand more than anyone. If you actually meet these people, they're so conscious about their brand, you know? They worry about how many followers they're getting and how viral their stuff is going. They are so meticulous about that while trying to give off their appearance.
It's like bedhead, right? It's like, "Oh no, I just woke up like this." But are you sure you don't use a product called Bedhead that makes it look slightly messy? You know, like you're actually caring about where every strand of hair goes.
I have more respect for people who are straightforward. Like, you know, Pomp or Sahil. They're like, "Yeah, people really like to hear about this, so I just tweet Bitcoin stuff all the time. It's great! I like Bitcoin, and they like Bitcoin, so I'll just set up a calendar and tweet Bitcoin stuff."
I figured if I get a big Bitcoin following, that'll be really, really good for me. Or like, you know, Sahil's like, "Yeah, I put out these threads about finance topics because I think I'm good at it, and they go viral. Then it gives me all these dope connections."
Versus, you know, I just want to feel that knowledge is accessible for all and free, and that's... | |
Sam Parr | why I democratize knowledge | |
Shaan Puri | Yeah, I want to **democratize financial knowledge**. I used to work on Wall Street, and the insiders know things that the rest of us don't. So, I quit my job and started writing Twitter threads about finance to democratize it.
It's like, "No, no, no, no, no. You didn't do any of that. You wanted followers, and so you did what it took to get followers."
| |
Sam Parr | have you noticed how the word democratize is the new disrupt | |
Shaan Puri | democratize is like you know what is democratize | |
Sam Parr | it's the new disruptor | |
Shaan Puri | Is the new... like, no offense, but that's "democratize." Democratize is like about to fool you. This is good for me and not good for you, but I'm gonna fool you by saying I'm democratizing something for you through my service or my product.
Yeah, and by the way, I do all this myself. I again, I know it. I spot it because I got it. Alright? I've done all this before with my e-commerce brand. I've done the origin story thing with my fund. I do this too.
My fund is called the "All Access Fund" because I wanted to give access to everyone—to be able to invest in the deals I do. Do I feel good that other people get access to good Silicon Valley deals? Yeah, sure. Is that why I did the fund? Fuck no, that's not why I did the fund.
I did the fund because I was writing checks and I wanted to write bigger checks and more checks into more companies. That was more than my personal bankroll would allow. So, I raised money from other people to do that.
And now I get to write more checks into more awesome companies. That's why I raised the fund, not because I wanted to democratize access to, like, you know, angel investing for a middle school teacher in Tennessee. | |
Sam Parr | I can't stand this idea of "democratizing" things. We're going to democratize this by only charging you $50,000 for this piece of clothing instead of... I'm like, I've seen people say, "We're going to democratize knowledge," and it's like a $5,000 course. I'm like, not really, dude.
| |
Shaan Puri | could you tell you could democratize these nuts it's like we're ratchet | |
Sam Parr | What do you think, Ben? Was today a hit or what? I thought today was a huge hit. This is, yeah, other than like the Steph Smith episode, "Robbed Your Deck," this is in + territory.
| |
Shaan Puri | Great! Are we going to have to cut out my "democratized deez nuts"? No, no, don't do it to us!
| |
Sam Parr | Yeah, and then we have to plan the MFM Summit. I agree that making it a destination is cool. I have a thing that I... oh, you're going to have to bleep out what I'm about to say, but only...
| |
Shaan Puri | I know the thing I know the thing yeah | |
Sam Parr | yeah I got the guy I got a really like famous house that person might be interested in hosting us I don't know if that | |
Shaan Puri | just gonna be a dinner right like that's gonna be like a dinner | |
Sam Parr | We might be able to do a proper thing there, but I don't know if the logistics are going to work out.
I think we could do something outrageous. You know, we have to think about what "outrageous" means, but I do think we could have something outrageous.
I think a cruise ship would be a good idea. That's not a bad idea! A cruise ship or some type of famous venue. Or, we could just go to Hawaii, you know, like on the beach in Hawaii.
We can figure something out, but we do need to do a summit.
| |
Shaan Puri | Fly out... If people are going to have to travel for it, I think to get the value, again, the easiest hack is to first make it a couple of days where people get to hang out and meet each other.
So, do it as a two-day event. Secondly, just make it already fun. If it was just a vacation, if there was no content on top, but it's like then you combine some content, getting to meet us, and getting to meet other people in the community. Plus, it was already a good, kind of vacation-type experience. Then that's cool, right?
I don't know, let's bring a fitness component. Let's bring all the components of the stuff we talk about, where there are experiences beyond just sitting down and listening to people talk. It's like, why not do a group workout? Or let's get an MMA guide to take us through a session or something. I don't know, like something like that.
| |
Sam Parr | That damn! Alright, let's schedule it. Do you like that $500 price mark?
| |
Shaan Puri | This, I mean, we should do this as an NFT. No doubt, we should make this an NFT, and then only NFT holders can attend. They could flip their NFT to somebody else if they want to, but let's make it a limited number of NFTs for this. | |
Sam Parr | yeah alright that's it alright that's the episode |