BigDeal - The #1 Investing Habit That Made Me a Billionaire | David Adelman

Starting point is 00:00:00 Two and five Canadians will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. You can be an entrepreneur in somebody else's business. Really?

Starting point is 00:00:33 There's this weird stigma out there that everyone has to either have a startup or their own venture capital fund. The world doesn't need another fucking venture capital fund. Let's get people who are willing to work hard in business and learn from other business, and then maybe you want to go out and do your own. My guest, David Edelman, is the billionaire co-owner of the 76ers, an investor in more than 90 companies. You're going to learn his exact frameworks to spot great opportunities. If you are building wealth from scratch, this episode is for you.

Starting point is 00:00:58 If you could go in as an entrepreneur into someone's old line business, they're all right for succession. Go work at a person who has an HVAC company that only has three trucks. AI is not going to replace the heater in my house. This is what people need to go to. As someone who owns 90 companies, if you were 25 again, what would you do to get your first million dollars? I think what you're looking for is. Philadelphia 76ers. You are a co-owner of this, and I hear you just signed LeBron James.

Starting point is 00:01:29 You heard about that. Yeah, just a few people. And I'm not even involved in basketball, but what does it look like in the room to close a deal like LeBron James or bring a big name to a sports team? It was a wild process because, you know, LeBron in his camp kept it quiet and rightfully so. He wanted to run his process. And, you know, I know his agent, Rich Paul very well. His business partner, Maverick Carter and I are very close friends. We're in some deals together. But that doesn't mean shit, right? I mean, you're like, you know, you're just up for grabs long with everyone else. And the real excitement around this was about we got a text on that Friday morning from Rich Paul to my partners, myself. And the, you know, you're just up. You know, you're just up. You know, you're just up. And the, you're just excitement around this was about, you. And the, you know, you know, you know, the guys I just mentioned saying, this was it, Sixers it is. That's how you knew? That's how we found out five minutes before they announced it publicly. Whoa. Yeah.

Starting point is 00:02:21 I have a mentor back in the day who kind of taught me how to do some of my first deals. And back then I used to think that it was always the price you paid for something, right? You're like, okay, if I go to buy something, I got it for this price, that's a deal, right? And he sort of famously, you know, said to me, well, that's sort of how amateurs do it. It's always about terms. Yeah. you know, I could pay you a billion dollars a dollar a day. You're not going to love that deal, right?

Starting point is 00:02:43 As much as a hundred million dollars in a week. So when you do a deal, you've done, you know, you invested in 90 companies. I'm sure you've done hundreds and hundreds and hundreds of deals across your lifetime. What is like your number one philosophy or secret or tool to doing a great deal? For me, the way I think about it is if it's going to be a great deal for me, it's got to be a good to great deal for the other person. Yeah. Very rarely do you get to a place where it's great for one side and poor for the other and everyone's happy, right? And so for me, I come at it, I'm like, what do I think I need to do this deal?

Starting point is 00:03:18 And will I do the deal under these terms? And what I always do is I kind of make a note, I'm a kind of a pencil and paper guy, what won't I do the deal at? And because what happens is emotion gets you very engaged, you know, the heat of the moment, the bidding, stuff like that, that becomes a problem, right? And so for me, I try to think about what are my willing to do. willing to pay. And to your point, the terms, well, what's more important? Price or terms, duration, if it's a real estate deal, you name it. And then more importantly, who's the counterparty? Can I trust them to deliver the deal that they might say they're going to do? So to me, all of those things come into play. Your mentor is right. Can you do a good deal with a bad guy?

Starting point is 00:03:56 Very hard. I've had deals with bad people, and I've been thankful when they're at the end. You can't do a deal with a bad person and keep them in the partnership. That won't change. you can't rehabilitate a bad person in my view. Yeah, I agree. My dad always says also don't fall in love with something that can't love you back. So I love that line that you said about, you know, you have to start sort of with what you don't want

Starting point is 00:04:19 in the deal, which is what, like, Charlie Munger's inverse thinking. Now, the inverse of that is, I've been negotiating deals where someone I thought was a bad person and I let my emotions get the best of me and I didn't get the deal done when at the end of the day, there's a deal I did. So I have a mentor also in the real estate business name, Alan Horowitz who taught me as a kid. And I'm negotiating my first real estate deal on 24, 25,

Starting point is 00:04:42 and it was in between two properties we owned. Actually, like, four, it would have solidified us owning a square block in Philadelphia out by the University of Pennsylvania. And I was like, I got this. And he had trained me well, so I felt good about it. But at the time, like I said, I was maybe 24. And I looked at that guy, as some old guy, was probably my age. But the guy was an asshole. Yeah. And just demeaning to me, talking down to me. And we kept going back with Price. I tried to keep my composure. And he kept pushing price and changing terms and all of that. And then, you know, I just went back and said, like, we're just not going to get this done. Like, I really want to tell the guy to go F himself, right? But we didn't get the deal done. And so what happened is he sold

Starting point is 00:05:28 it to someone else. And I went back to my partner and I was like, that guy was a real asshole. And he's like, well, you showed him now. He just sold it. He just sold it. And he's like, well, you showed him. with someone else. Like, why did it matter what his personality was? You were going to buy it. You would have never had to deal with him again. So it was a good lesson for me on the other side, right? There's going to be a lot of bad people, a lot of assholes out there, and you have to maintain your composure when dealing with them. And what is the mission? My mission was simply to buy that building, right? And I got, I let, you know, it's lessons you learn as you're younger. I haven't made that mistake twice. Really? Yeah. God, I try not to, but I do always get reminded.

Starting point is 00:06:00 My dad also says, like, do you want to be right or do you want to win? And I try to remember to win. more often. It's a little harder now. I'm hormonal as fuck. So sometimes I'm like, keep me out of the room. You know, you don't want me in this deal at this moment. We do. We want that mama energy to come, you know, change the dynamic. Yeah. Then you kick me out of the table and I have to beat it. So that's interesting because I think sometimes people think billionaires are just ego. They come in there. They're just pushing everybody around. But is it actually the opposite in a deal? Do you try to like, at least not show that you're the big guy or have ego when you're in it? You know, the way I describe it is

Starting point is 00:06:35 I think there's assholes in all shapes and colors. Okay? And so it doesn't matter if you're worth, you know, $10, a million dollars or a billion dollars. I think there are some people that are programmed to be really difficult, really argumentative, and that's their style. I have a different style. I am not a last nickel guy. I said this earlier, you know, when we were talking, like both sides should feel like they won. Or both sides should feel like they got the same kind of deal.

Starting point is 00:06:59 Like, you both don't feel great about it, but that means like it was kind of a fair trade. Yeah. Yeah. So how do you compare with like some of the other real estate grades, you know, a Sam Zell who was more of... So he's like my icon of like the Mount Rush more of real estate guys. Interesting. I always liked that he was a biker. I just liked that he was gruff and you'd be on any interview. You'd sit in the crowd and he would be like, fuck it. Right? And like, fuck that guy. And I was like, can you talk like that if you're, I guess if you're really rich, you can talk like that. Yeah. He's amazing. So he did more like what I thought of his grave dancer deals, or he kind of was famously called the grave dancer, would do these like crazy complex deals, turn them around. What I think about what I know about you, you basically took an industry and tell me if I'm misstating this. You took an industry that was kind of like, you know, campus housing, student housing. I think about animal house style, like just the wild west back then, not an institutional asset class. And you kind of were one of the key people in creating a real asset class out of something.

Starting point is 00:08:01 that people thought was a joke. Yeah, I think people like, what I did, and by the way, I wish I had let that kind of stigma play on. And I would have been even bigger in that space because we got too many entrance in it. But what I did is, I joke, I would go to these real estate conferences and you'd have, you know, the apartment guy, the retail guy, the office developer, and they wouldn't let me sit at the lunch table because I was just a student housing guy. And because to your point, like the stigma, that's shitty real estate, they turn over.

Starting point is 00:08:30 But you know what? What I saw early on and I was like, what am I missing? Colleges aren't going anywhere. Mom and dad are paying the bills. And, you know, it was just always a new tenant showing up. And so I was like, maybe I'm wrong or maybe I'm right and they just don't want to pay attention. Great for me. And so I was able to take campus apartments from a mom and pop local business and that's

Starting point is 00:08:54 why I went national because no one was really interested in that. It made, you know, in the beginning getting lenders comfortable and equity. resources comfortable with that, took time in education. But I think everyone was able to relate to the fact, when we did our first institutional deal in 2006, I raised $300 million. I had never raised a nickel before. Zero. I went on a road show to raise money. And back then, I was like, well, I want $300 million. And our bankers were like, why do you need that money? And I was like, I'll tell you afterwards. But every investor we pitched, all were sending their kids to college and all were paying rent to somebody like me. And so, like, they identified with the demand and the need. And so we raised

Starting point is 00:09:33 $300 million. And in real estate, you know, you can put down 30% equity, 70% debt. So if you have $300 million, that was a billion dollars worth of deals. So, you know, I was in my early 30s. I got to say that I created a billion dollar joint venture, you know, of real estate. So I was pretty psyched about that. Interesting. So is one of the keys then when you go to raise money from people? We've never done it before. This is an asset class people don't like. They're probably not taking you super seriously way back in the day before you've made a name for yourself. So you don't have like a silver spoon.

Starting point is 00:10:03 Like people might say now, oh, well, it's easy for David. He's a billionaire. But back then you don't have all that. What gets them to say yes? Is it that you already have to find somebody who has a strategic understanding of what you do? Do they have to like you? Like, why does somebody rich give you money? I think one, we had a track record.

Starting point is 00:10:21 So we could point to here's a building. before, after cash flow, here's what we did. It might not have been on the grand scale that we are today, but I could point to, you know, small wins begets big wins. That's the way I always looked at it. Number two, I thought that I could take people and say, like, we're not going to lose your money. Like, you know, this isn't venture capital returns or venture capital risk,

Starting point is 00:10:41 slow and steady returns. Here's what we can deliver. And then three, I think they have to believe in integrity. Like, I'm sure we'll talk because you're a big entrepreneur. Like, what's the number one asset you have? It's your integrity, right? And so if I could demonstrate that, that, that I was going to work hard, be a good steward of someone else's capital, be respectful

Starting point is 00:10:58 of their money, and I could deliver the returns. That kind of opened the doors. How much of what you did at campus housing was operational alpha versus leverage? The majority is operational. We had to execute. It's a very complicated business, very hands-on, and the hardest part was scaling from Philadelphia to going national, right? How do I take the culture and DNA of a small team in Philadelphia and say, now we have to do this nationally and have that repetition. You know, we didn't have the computer systems that you have today to be able to replicate those things. This is a people business. And most importantly, I am dealing with people's most prized possessions, as you're going to see soon. Like your baby, your child, that's it.

Starting point is 00:11:40 Like so number one asset that we had in real estate was filled with people's most important things in their life, their kids. And so how do you train and create a culture to make sure they understand that. I was just in a meeting earlier and someone's like, well, what's it like with kids paying rent? I was like, in the old days, we had to teach them how to balance their checkbook because they were writing checks. You know, now there's an online portal that they're just connected to. It's a lot easier. But, you know, this is their first experience living on their own outside of mom and dad. Yeah. I was looking up the numbers earlier and I think it's that you have to make like $1,300 a day since the day Jesus died. So like 2,000 years to become a billionaire.

Starting point is 00:12:19 it's not easy. And so, you know, it's, and it's not that common. I feel like I've been working that long. You're like, the hair doesn't lend itself to that. But I think people think that becoming a billionaire or making a billion dollars in value is really easy. And then when you look at the math, it's actually incredibly difficult. What is the key to amassing that kind of wealth? Is it, can you do that just with financial leverage? Do you have to have operational proficiency? And what do you think most people get wrong in trying to get rich? I think you need all of these things. I think you need a plan. You need to execute. You need to have good relationships for capital. And you need to like do the right thing so you can rinse and repeat and grow. Right. So somebody gave you a thousand

Starting point is 00:13:08 dollars. Now they'll give you 10,000 and they'll give you a million. Like you need to be able to prove that trust in all of that. You know, I think, you know, people like, oh, you're a billionaire. Like I didn't set out and I was like, oh, I'm going to make a billion dollars. Like, I just said, I'm going to set out on this journey. You know, I think it could be successful. But, like, you just keep going and you're in kind of the rat race. And, like, you know, it's not like, you know, there's some counter one day and it just went off and said, okay, here's a billion dollars, right? Like, it doesn't work like that, or at least not for me.

Starting point is 00:13:34 And so for me, like, I'm working harder today than I did when I was 25. My mentor taught me that if you love what you do, it's not work. And so for me, like, I just love this action. Do you ever have, like, dark moments of the soul, like a night where, you know, you remember you thought you might have lost it all and you had no idea how to fix it. I've had moments in time where we've had some tough gut punches and you're like, well, what's going to happen here? And, you know, my kids will tell you, they'll remember a family vacation in 2016 where I had some stuff going on and, you know, but like, you know, we got through it and I had a plan and I executed

Starting point is 00:14:14 on it. But I was prepared. I was like, well, what happens if this happens? What if we lose this or this deal goes bad. What, what do you do? But you can't, you know, I've watched a lot of what you say. You can't live in fear, right? You can't be afraid. My unique thing is I'm not afraid to fail because if you are, you won't take the chance. You talked about the sacrifice in the beginning. I don't think people understand a lot what you have to sacrifice to build anything big in this world. Like, if somebody's watching right now and they're like, what is it actually take to make it? What are the sacrifices you think they need to know about? Well, it takes a couple things. One, you know, if you're married, it takes a supportive partner. Like, I can't emphasize enough how lucky I am to have a

Starting point is 00:15:00 wife that was like cheering me on, giving me a heads up when she was like, look, I know you're busy, but like, here are the things going on with the kids. You should like, like, if you don't have a great partner, like, it's very hard to succeed because you don't want that internal pressure from home. There's enough external forces. Number two, I think it's, you got to decide what you're playing for. And for me, you know, I know people are like,

Starting point is 00:15:21 oh, there's never about money. It was about like building businesses and doing great things and building great teams. But you put those pieces together. There's generally a good outcome. And so for me, it was focusing on what's my,

Starting point is 00:15:35 I'm in a bunch of different businesses, which makes it hard, but it's good for me because I have ADD so I can kind of like bounce back and forth. But I think it's knowing that there's a team in place that I can build in each of these businesses. You know, you always talk about,

Starting point is 00:15:47 you know, when I read your stuff about, you know, can the business run without you? I think you always need to be the visionary and the North Star for the business. So I always say, like, I'm a great startup person and putting the pieces together. I am not a great long-term operator because I lose focus. I'm a great cheerleader for the operators and a great mentor. But so I think like those are the pieces where you like think about how the team gets built, what you need, how you solve problems, when you pivot into a different business or add on a business to that. Yeah, it's so good. I want to have you take this thing. We,

Starting point is 00:16:20 we surveyed like 15,000 entrepreneurs and some high-level executives that didn't run their own business, but, you know, worked within other businesses. And basically we're trying to come up with entrepreneurial profiles. We call it the owner's score, so I'll have to send it to you after this. Because I think what I've found, and you tell me if I'm full of it or not, but is that, like, there's a lot of generalized advice for how to run a business or, do whatever. But man, if I was to take Elon Musk's playbook or Mark Zuckerberg's, I would fail. Because I'm kind of like you. It sounds like you were more of an innovator than I was because you created an entire campus, you know, institutional asset class. But I'm really good to like,

Starting point is 00:17:02 this exists. I'll make it better continuously over time and I'll continue to iterate on it. And I will do it long past the point somebody else gets bored. So I know I'm what's called a workhorse. But I realize if we have, you know, we only have 30 companies that we own part of and really five that we operate real time. But those operators are not all the same. So if I gave the same advice to, you know, Stephen as to Bobby, they'd fail because they're different types of humans. So I'm curious for you, as you're looking at all of these companies that you sort of own a part of invest in, if you could only pick a few things to look at each week to see if your operators or founders are winning or losing, what would be like the three to five things you'd look at every Monday

Starting point is 00:17:44 to be like, I can tell this thing's on track or not. Well, you know, one is when you pick managers and leaders, one of the things I judge for is will they tell me the bad news? Yeah. Right. So like my big saying around all the different companies is bad news doesn't get better with time. That's good. And so I appreciate it.

Starting point is 00:18:02 Like punch me in the face of the bad news. And so the managers that tell me what's like, it sounds bad, but I kind of want to know what's going wrong first than what's going right. Okay. Like I expect things to be going right. tell me what's going wrong. And so we start there. You give me your challenges first because that's like,

Starting point is 00:18:18 let me use my thought power to help you solve those. I may not be able to, but let's, or I can help find somebody who can. Then it's like, hey, here's the business, here's how it's doing.

Starting point is 00:18:27 How do we make it better? Okay. So for me, that's like, are they, to answer your original question, are they a good communicator? Like,

Starting point is 00:18:33 how do they communicate the information, number one? Number two, do we understand how the consumer, if it's a consumer product, or is it a business buy, you know, how are they accepting the product?

Starting point is 00:18:44 Are we user-friendly? Are we solving their problem? Are we asking what their problem is? Right? So I think those are the things that are really important. And three, like the blocking tackling, like how do the financials look, things like that that you would expect in any business? Yeah. It's such a good point.

Starting point is 00:18:58 I read the other day somewhere that Elon said, leadership is just understanding a series of compounding lies inside of your business. And it actually made me feel better because it's like that's half the job. I'm like, wait, I thought this, but really this. Does that ever go away? Or as a leader, are you always just looking for the truth? I think what you're looking for is, to me, like, what you could call it the truth, I think I'm just looking for, like, the evolution. Because I think what was right for that CEO, what they were doing last quarter might not be right

Starting point is 00:19:29 for this quarter. And I think sometimes managers just kind of stay on the treadmill. And, like, your job is kind of an entrepreneur is to look much bigger, take a step back and see if you're missing anything. Okay, you're going to hear me push, David, on how he built his mastermind. massive empire throughout this episode because I'm obsessed with understanding on how do we scale, make way more profits, but also enjoy our life. Because as it turns out, 65% of small businesses die inside 10 years and the survivors share one trait. They get out of the way of the business

Starting point is 00:19:59 and let the business work for them. Every great business in history runs on systems that allow for more money with less pain. I wrote owner be owned to hand you this exact playbook. This book is anchored around a framework I call the 12 piece that's going to give you the ability to understand and score your business, find your weakest qualities, and fix them in 90-day sprints. I sat in a room in Austin with 100 owners running this exact system, and in one weekend, that room found another $7 million in revenue, which is wild. So we're launching this book with a free live virtual event. We're doing massive giveaways while we're there, a million dollars in cash and prizes.

Starting point is 00:20:36 Register at ownerbook.com. This one's going to be wild. It is for you if you want more profits and less pain in your career, in your business, and in your life. What do you think is the difference between leading or building a $1 million, $10 million, $100 million, billion dollar, billion dollar company? How does it change? Getting to the first million dollars is really hard, right? Because that's a term as if your business is going to win or lose, right? And so, like, to me, that first million and 10 million are much harder than the $100 million to a billion.

Starting point is 00:21:07 People won't believe that, but I'm telling you it is way harder. right because like you're trying to validate a business you're trying to get people to believe in something that maybe it's a product that doesn't exist or isn't widely known and so you're creating you know kind of a new thought on how this gets sold and all of that once you've gotten adoption it's a different sales cycle it's a different leader right startup is one thing you know growth is another and then like that exponential growth different all different leaders right because some of them need to be really good managers to put the infrastructure in to make sure that you know the wheels don't fall off that you're meeting your sales targets or if you're manufacturing, whatever that is. Yeah. How many people do you think you've hired in your career? Directly, hundreds. Yeah. And how many people do you think you employ across the companies that you own?

Starting point is 00:21:57 Over time, tens of thousands. So at any given point, something's going horribly wrong, like even right now. Always. Yeah, I'm sure. Yeah. Of course. And I won't know about it until whenever. Or hopefully they'll try and fix it before it solves a problem.

Starting point is 00:22:09 I mean, I think if you, if you. involve people in a business, you will have a problem, right? HR issues are like paramount in every company, whatever they are, right? People aren't showing up to work. People are like, you know, people are being rude to each other, like whatever it is. Like, you got to get those issues right. And generally a good manager handles those, right? You know, customer issues. Okay, so you're in the apartment business, okay? Like shit happens. Like pipes break. It's no one's fault, right? Well, did we respond quickly? Did we do things? Like the thing that drives me nuts is if I'm walking by one of our offices and I see someone saying like, well, they're not going to renew their lease.

Starting point is 00:22:47 And I'll, I'll pull them. Like, how come? Well, we had these issues and then I'm like, did you tell us about it? They're like, no. I'm like, well, you didn't give us a chance to try and fix it. And so like I always want to know why in any business, why people stop doing business with us. If it's not renewing the lease, if it's not completing a sales function, a season ticket holder that didn't renew their tickets. What is it? Yeah. Do you almost not even care as much about the good news as the bad news as a leader. Yeah, it's a problem, though, right? Because, like, you know, you feel bad because, like, the team wants to come celebrate all

Starting point is 00:23:17 this great stuff. And you're like, yeah, well, what about these two things over here? And it's like this. It's like this. And like, the problem is I also tend to do that at home with my family. It's not good, right? Like, you, uh, so, but I do think you get better that way. Like, when I tour our properties, I still, you know, I don't do it as often as I'd like.

Starting point is 00:23:36 I go in and I tour the fire escapes. in the back of the house, right? Because that's where you know, like, where the pride is, right? Your grounds can look great, but are the prides in the back of the house, right? And I can tell a really good property manager and maintenance supervisor by how clean the other areas are. How organized is the maintenance shop, which no consumer or customer is going to see, but I'm going to see it.

Starting point is 00:23:58 And they're going to know, well, these guys are so organized that the maintenance team could come in and do whatever they need. So, like, for me, that's also, I told you I have like ADD. I also have OCD. And so like all those little things out of place drive me nuts. It's so good. You know, it's interesting because we own a lot of these home service franchise companies. And so painting companies, roofing companies, window cleaning.

Starting point is 00:24:21 I love that. The anti-AI apply. Yeah, exactly. Well, people thought I was really lame and boring five years ago. And now they think it's a lot more interesting. I love boring businesses. Oh, there we go. That's why we'll be buddies.

Starting point is 00:24:31 But one of the funny things is I could tell the good operators by the status of their cleaning vans. Yeah. And so you open up the doors. And if it's a mess, I know that guy's not going to be on time. They're not going to hit their quota. And they're definitely never going to be in management. And then the ones where it's super organized, it's not always a total indicator, but it makes a big difference. Correct.

Starting point is 00:24:49 Interesting. And you call this back of the house. So for somebody listening, it's basically always like, you're looking under the rug anywhere in business. It's like, where's the part that people are not going to usually look at? Correct. Because if that's clean, you know, the rest of it is probably clean. Interesting. In your world, you're having to hire all these different people.

Starting point is 00:25:06 You're having to, I mean, how many hundreds of millions of dollars do you think you've allocated over your career or invested? Oh, between real estate, the other companies, our asset management firm. You know, we have an asset management business future standard that manages $95 billion. So we're allocating billions of dollars at a time in different cases. But, you know, in the real estate business, you know, hundreds and hundreds of millions of dollars in capital improvements, construction, renovation. You know, in the last seven years, we've done a billion dollars in new construction. So, I mean, you know, in Philadelphia, I'm going to build a $2 billion arena. Okay.

Starting point is 00:25:42 So that's, you know, so like it's a big number. I think every business, like I'm building this new arena right in Philadelphia. And I want to change the live entertainment experience, period. Because you think about people are spending a lot of money on tickets and a night out, babysitters, you know, all of that. Like you need to give them a great pregame, game time and post game experience, right? And so what I'm talking about as we're designing this with the architects, And with people who are going to run the food services, think of yourself in the hospitality business.

Starting point is 00:26:10 And no one does that. Right. So again, that's me putting a twist on an age old offering to say, can we do something that just feels different. Yeah. So in order to have the capital really be efficient and come back to you and bring friends, like, you know, you've talked about it. You've got to invest in the right people because those are people that are going to do the outcomes. How can you tell somebody is going to be an A player or if somebody is not going to be an A player?

Starting point is 00:26:32 How do you tell the difference between the two? A couple ways. One, you know, the number one quality to me is I would rather have somebody that's an eight in intelligence and a ten and work ethic than a ten in intelligence and an eight and work ethic. So for me, like hard work. Like, I am like, look, I went to Ohio State at a time in college where like I just needed a pulse to get in there, right? So like I like I know like I was a low SAT, low GPA guy in high school. But like I knew that in, business known was going to work harder than me. There are a lot of people smarter than me. And like most of the people who work for me or work with me are smarter than me.

Starting point is 00:27:10 Why do you think that most people are not as successful as you? Do you think they don't take enough risk? I think not everyone is meant or programmed or willing to take the risk, which is okay. Like I say to a lot of people, you can be an entrepreneur in somebody else's business. Right. And so some people are meant to be that number two or number three guy or gal to run a business and not be the forward facing and not taking their risk capital. And those people make the business successful. So like I think there's this weird stigma out there that everyone has to, you know, like, I digress from your question for a second, but everyone has to either have a startup

Starting point is 00:27:48 or their own venture capital fund. You know, like I would tell your listeners, the world doesn't need another fucking venture capital fund. Okay, like enough. Okay. But like, let's get people who are willing to work hard in business and learn from other business. And then maybe you want to go out and do your own thing.

Starting point is 00:28:03 Yeah, I think you're right. It's also pretty miserable running the place, you know, because when payroll isn't there, I mean, how many years in the beginning, you invested in your first deal, I believe, when you were 13, right? I mean, how many years did you not pay yourself in order to just invest in deals instead? My mentor taught me a really great thing that I think about all the time. He's like, every dollar you spend on yourself is a dollar you have less to invest. And that is in my mind even today, right?

Starting point is 00:28:30 And it doesn't mean I haven't bought some really nice. things and extravagant things, but I think about that. I'm like, oh, if I didn't buy a plane, I could buy that building, right? If I didn't do this, you could do that. And so capital is like really important. I think it's, you know, you always hope, and my uncle used to say, he would be like, hey, you know, you just hope after all this money comes in and you pay everyone that there's something left for yourself, right? But in the beginning, capital allocation is really important, but it comes back to that risk. I was willing to take risk. I'm willing to fail. I'm willing to fail every day.

Starting point is 00:29:02 Like, a lot of our startups fail. Like, that's okay, you know, but I'm also willing to, like, try and build new businesses. Yeah. Yeah, it's super, super interesting. I think a lot about what holds back people from taking whatever their appropriate level of risk is. But you're totally right. I mean, Cheryl Sandberg, incredibly successful, very rich, never ran a company, you know? And I think she's probably, I read the average entrepreneur makes $46,000 to $65,000 a year.

Starting point is 00:29:27 Like, that's not really winning. No. as much as being one of your executives at any of the 90 companies. But they're playing for the equity. Right. Yeah. You must get pitched daily for people to invest in your stuff. We do.

Starting point is 00:29:40 And you got people to give you money early on. Yeah. You know, somebody listening today is like, I want somebody to invest in me. I want capital. How do I get it? What are the things that you look for that maybe people would be surprised by? You know, one, what problem are you trying to solve? Like, if, if, you know, if, you know, if, you look for you look for, that maybe people would be surprised by.

Starting point is 00:29:58 Like, if 10 people are doing what you're doing, like, why are you going to do it better? Like, just tell me, what's the mode around your business? Like, can the next guy start up your thing and do it for the same cost or less? Like, what's the differentiator? Problem you're trying to solve. Track record is an entrepreneur. And how big could this opportunity be? The problem is a lot of times people are creating these startups and they're playing small ball.

Starting point is 00:30:25 And like, if we're going to put risk capital to work, like, we want to know that there's the potential for a big outcome. Yeah. What do you usually bet on the jockey or the horse? Like the, you know, guy running the thing or the opportunity? So the way I, here's part of what we go through when we're, my family office, when we're looking and investing. If the deal fails, would we do a second deal with that person?

Starting point is 00:30:47 And I have a handful of people that we've backed a second time or a third time. Because if it didn't, if it failed because like the timing wasn't right or like, like, As long as they weren't like crux or bad guys nefarious, bad attitude, whatever it is, like not all these things win, but it's not always their fault. Yeah. Yeah. It's a really good point. I think about that a lot today. There's so many people pitching like AI for small business stuff or SaaS companies left and right, but there's no moat.

Starting point is 00:31:17 Right. And the jockey isn't that impressive. You're just like, oh, there's this huge opportunity that it's easy to build SaaS now. I'm like that seems like an anti-sell. Yeah, I agree. What would you absolutely not invest in today? Like, what comes across your desk? You're like, oh, my God, I don't ever want to see another one of these again.

Starting point is 00:31:34 God, there's so many. I know restaurants are on your list. We don't get as many restaurants anymore. But, and I'm in some restaurants. Do you think I'm wrong on the restaurants? You know, it depends on the operator. So I have a couple of investments. I'm partnered with a guy in Philadelphia, Michael Shulson.

Starting point is 00:31:49 And, you know, I learned very quickly that his operating margins are 20%, which is some of the highest in the business. And so I'm like, this guy knows how to run a business. And I bet it's a restaurant group, isn't it? Not an individual restaurant? He has multiple restaurants, yeah. But he was a great chef. It's interesting, a couple things in business. Chefs generally make poor business people. Doctors are very poor business people, right? And a lot of time, lawyers don't translate into being operators. Like, that's just something I've noticed. This guy made the transition from chef to CEO. So he understands food, costs things like that. But all in all, I rarely do restaurants. I think what I also don't like, software companies are too hard to understand today with AI. I have no idea if you're solving for something that couldn't be solved now by just putting into chat GBT, right?

Starting point is 00:32:40 Like so, and we're not going to spend the time to differentiate that. So, you know, software is a very tough put right now, I think. You know, I think that anything in the, you know, you're going to have lots of bets in AI, hard to know which ones are going to win. So sometimes we're kind of like, all right, we're going to spread it out a little bit and get educated. along the way. You know, I think for me, it's easier to know. Like, and the problem also is we're getting all these funds that are coming in looking for stuff.

Starting point is 00:33:08 And I'm just like, stop with the funds. Like, what's your differentiator? You know, you ran a company for your 10 minutes and now you're going to go launch a fund. So like, we say know a lot to those. Yeah, that's really good. What about the opposite of that? Like, when I look at how you made your first big pile of money, to me, it's like, okay, you had sort of this ugly, super, you know, non-popular asset class, highly fragmented, you know, not a ton of major players in the space, and an ability for both operational proficiency that just wasn't there at all, plus leverage. Like really neither of those things existed. Do you see a space today that you're like, God, I wish I could find amazing jockeys or like, why isn't somebody doing it in this world?

Starting point is 00:33:52 So the thing I talk about often, and it seems like you've dabbled it in it. I'm a lot. I think these service businesses are the future. Because if, you know, like, so I tell everyone, I'm like, go work at a person who has an HVAC company that only has three trucks. Yeah. And they're still doing work orders by pet and paper or maybe some shitty computer system. Like, AI is not going to replace the heater in my house. We're short two million electricians in the country. Two million.

Starting point is 00:34:21 Okay. Electricians are making almost 200,000 a year right now. And so I look at all these kind of like hands-on skills, all these service businesses. And I'm like, this is where people need to go to. Now that also changes education. Maybe you're going right from high school to a Votech school to learn these trades. But if you could go in as an entrepreneur into someone's old line business and make that business better and you work out some deal, and none of those businesses have succession plans,

Starting point is 00:34:49 right? You have the entrepreneur who's, you know, pushing 70 as kids aren't in the business, the heating in plumbing or, you know, whatever business. And like, they're all right for succession right now. Yeah, I totally agree. That's why we buy them. It's also kind of fun because, to your point, I love competing in industries where you don't have to be that smart.

Starting point is 00:35:10 Right. You know, I don't profess to have a crazy IQ like some of these guys. But guess what? I've never had a plumber that had me on a recurring plan that I thought was really useful and a text message follow-up system that is right, that asked for a review that looks sharp. that looked sharp when they showed up at my house, that I could remember the name of the place and the van and branding was good.

Starting point is 00:35:29 It's never happened to me. It's the same thing kind of the way I look at student housing. We're having people's kids. You're letting somebody in your home. You are trusting them in your house with your family. Like show up and look respectable. Be considerate. A lot of times you feel like they're doing you a favor

Starting point is 00:35:47 by coming out and fixing something in your house. Right? Like attitude changes the outcome here. It's really good. You know, I have to imagine this has happened to you. But one of the lines from one of my very first investors, he told me, he was like, all right, if you're going to do this thing of business, because I was in finance back in the day. So it was like, finance, you're doing this financial arbitrage thing. You're not actually really creating something. You know, you could have some deals go sideways, but it's not going to feel that personal to you because it's not your baby, right? You're just, you're just trying to buy low, sell high, you know, if we want to like hyper simplify it. He goes, but if you get in business, you're going to be lied to. You're going to be stolen from. you're going to be cheated. And you're probably going to be sued. And it's not just going to be one time. It's going to be many times on that.

Starting point is 00:36:29 So I'm curious, like, in business, does that always happen? Are you going to be lied to stolen from cheated? And how can you tell who is going to do that to you or not? You know, hopefully you get the benefit over time to choose who your partners are, right? And choose who you do business with. So you can fin the hurt out on those issues. But like, we get frivolous lawsuits every day from our properties. from our businesses every day.

Starting point is 00:36:55 We literally just got a lawsuit about our website not being compliant for something. I didn't even know what that means, okay? But like, you know, if there's something we need to do, we should do it. But like, we're being sued over it. There was no harm, no damage, no foul. Like that someone's going to try and just grab some money. To me, that's like un-American. It's just, you know, bullshit.

Starting point is 00:37:18 Yeah. Yeah. And so you just, at some point, you just go, this is normal. And this is the game of business and just deal with it. Yeah. And you have to have, you know, back to our point about the social media and the comments, just have to have to have a thick skin. Yeah.

Starting point is 00:37:30 Like, the bigger you are, you become a target, period. Have you ever had somebody go after you and say you weren't doing enough and you weren't successful that was more successful than you? Or does that hate or whatever always really come from below? I've never had that happen. And I think it does come from below. And it really stems from jealousy, right? Yeah.

Starting point is 00:37:51 Yeah. Yeah. I think so too. And I think it's a lot of energy, too, to hate somebody so much. You don't want to build. You want to tear down. Right. It's really sad, actually. It's like, God, what could you do if you actually wanted to build something instead? I'd love to see that because you're spent a lot of time on me. It's supposed to time on you. Let's do what happens. What is the best investment you've ever made? Like, is there one you're like, God, we just were so clever on this and we saw something nobody else did? There's a couple. I mean, one was our company Future Standard. It's been 18 years since we've started that. And we were trying to solve a problem, which was how do you bring alternative investments to the masses? Instead of just being, you know, wealthy people being able to, you know, you can invest in hedge funds or whatever, but, you know, you're, you said your mom was a school teacher, right? But she couldn't because she could only get stocks and bonds, right? Because she was not accredited or wealthy, right? So we were trying to solve that problem. And so I'm proud of the

Starting point is 00:38:43 business we built. And today, you know, we're running $95 billion. And that started from an idea I had about how we could do that in a democratized way to, you know, make it accessible to others. Interesting. So the best investments you've typically made are the businesses that you build yourself. Yeah. Now, listen, we've had the answer is yes, but I'll also say we've certainly had some venture capital bets where we wrote a great idea, great operator, you know, checked our boxes of different problems they were solving. And going from there, you know, we just had a great exit on a, you know, I'm in the alcohol business, so I know a little bit about it. We invest in a great company called Beatbox.

Starting point is 00:39:20 Okay? And Beatbox thesis was we were going to be kind of the party drink. And they did it in a box like a tetrapack instead of like a bottle or a can. And, you know, the founders, they built. We were then in there early. We tried to add value during COVID. They needed capital. So we gave them kind of a working capital line, which I've done to a bunch of our portfolio

Starting point is 00:39:39 companies. And they crushed it. And they sold to Anheuser-Busch. And we made like a 30x on our money. Sucks is a terrible deal. Right, terrible deal. And I couldn't be happier for the founders, right? Like, they're going to make a fortune.

Starting point is 00:39:55 They busted their ass. Like, it was great for everybody. So, you know, every now and then you get a couple of, like, monster hits in some deals that you've done. Some are because you were, you know, like I consider us being part of the answer there because they needed a working capital during a time where they couldn't get bank financing. So we stepped in with a couple million dollars of financing. And it worked for them and it worked for us.

Starting point is 00:40:16 Yeah. It's so interesting. You know, I always like to do the opposite side of this because I think sometimes people here wins. Right. They don't talk about it. It's like in the casino. Your buddies only tell you about when they won. They don't tell you about the five losses for.

Starting point is 00:40:30 It drives me nuts. We do. There's like those guys on the streets that go around and say, what's the most amount of money you've made? And I've refused to do it because I'm like, ask me how much I've lost. I know. It's a lot. You know? So I'm going to ask you that question.

Starting point is 00:40:42 Like, what's the most money you've ever lost on a deal? We've had deals go to zero where we've lost. millions. I mean, so like, you know, I've, I've had several venture bets that, you know, we've gone into and they've, you know, they've gone to zero where I've lost, you know, several million dollars. Now, one of them was because the person was a bad person, is ultimately in jail. And we learned a lesson, right? And so, but then that's my point. Like, good people, bad people, you know, all of that is something important. No one likes to lose. Like, I'm very competitive. I know you are.

Starting point is 00:41:21 But like if I know that like some of these bets are going to lose, if none of my venture bets lost, it means I'm not trying hard enough. Okay. Now, if I ever lost money in real estate, which is supposed to be a slow and steady busy, I would be nauseous. Like that would, I wouldn't be able to handle that. That would be tough for me because that's not what that business is supposed to do. Yeah.

Starting point is 00:41:40 That's a really good point because I think, I think about it the same far, but are like, quote unquote, boring businesses, the cash flowing businesses. I mean, that failure rate should be below 10. 10%. For sure. It should be really, really low. The only thing you should be subject to is maybe a regulatory change, right? that's beyond your control and you need some new licensing to Waha making us up to wash windows, right? And like, you're not able to get that. Yeah. And I think people don't realize, like, it's really hard to figure out risk when you haven't done this before.

Starting point is 00:42:09 So, you know, I know a lot of people would be like, well, buying a business is really risky. And you're like, for sure, like business is risky. But the SBA loan default rate is less than 13% on average. Average is about 8%. That's actually an incredible risk return. Because those people are working in their business everyday hands on. They can't afford to fail. Yeah, that's true. And they could never really even get a real loan. So like it makes a lot of sense. So what did you learn? Like for somebody who who wants to go out and do a deal, what did you learn from the failures of losing millions? Like what would you never do again? People, right? I really, you know, I didn't do. In the case of the one where the person went to jail, they were very good at being warm and affectionate type of like, you know, very gregarious and all of that. And we just missed some things in our diligence. Yeah. And, yeah. And,

Starting point is 00:42:55 But, you know, others, you know, I think that we learned, oh, you know what, we made a bet in an industry that was too, had an ability to be replicated too easily. That was a mess, right? So, like, always trying to understand what went right. You know, one, we lost. There was a regulatory change. Just put that business out of business. Can't predict that. No.

Starting point is 00:43:13 It's really hard also to determine fraud up front in a lot of these businesses, even if you do forensic accounting. Like, have you learned any ways to figure out if somebody is going to defraud you steal from you? It's really hard to. Especially if you're a minority investor in someone and another company, right? And it's all minority investors and you only have, you don't have, like, reporting rights. So we try to determine based on the size of the investment, how involved we want to be. Right? Because, like, that's the key.

Starting point is 00:43:42 Like, if it's a business we're active in and then when your employees is doing something wrong, you need to know that. If it's, you know, if you are a passive investor in a business that goes bad and all that, you wouldn't have been able to do anything anyway. No. Yeah. It's interesting. We were talking about this in the beginning. How do you decide if a business is worth your time and attention or not? Because sometimes, yeah, maybe you could make another billion dollars, which sounds amazing, but it's going to take every single moment with your family, tons of your personal guarantees and capital. Like, what is your, do you have some sort of framework for saying, like, this is worth it? This is not. Yeah, especially now because I have too many businesses, right? Too many things I'm doing in time as a commodity. I continue to try and get better. It's. saying no. But like I love the puzzle of business. And so for me, like I am, my next frontier that I'm really getting involved in is like longevity, okay, peptide stem cells, all of that. Like I think that is the wave of the future. Like I think that is going to change the scope of people's lives.

Starting point is 00:44:43 And so like I'm intellectually interested in about it in it. I'm learning about it and all of that. So then now I'm actively like putting capital in to try and really, you know, follow the lead there. So if it's going to take up a bunch of your time, you better be interested in it. Yeah. And what I also say is I'm sure you get asked in some of the companies you invest in that aren't your main business. Will you be an advisor? Will you do this? And like at some point, the juice needs to be worth the squeeze, right?

Starting point is 00:45:08 And so like I'm only going to allocate personal time versus our team's time if the outcome is really worth it for us. You know, unless, you know, the caveat to that is sometimes I've just taken a liking to a founder, really like them. and I'm like, I'm going to help this young person and really do it that way. Yeah. Yeah, it's interesting. I'm sure you get this a lot. Sometimes I get that, will you be my mentor? And I think that is a big role.

Starting point is 00:45:33 Like, I'm like, I don't know. You shouldn't listen. You should question everything I'm saying. Yeah, it's very hard. And I get a ton, like you inquiries, you know, I'm looking for a mentor. Would you be my mentor? You know, this stuff. And we just have to say no.

Starting point is 00:45:43 Like, I can't give you what you would need. Yeah. What's the way that they could sneak in? Like, for me, I'll share first. Like, I always say, here's, here's, you know what, I don't have time to do that right now. Read this book. This is a good first start. 99% of them. A hundred percent of them don't read the book. It's pretty wild. And then I might say like, okay, here's like one answer to a question. And like they might sneak in if they ask me one really

Starting point is 00:46:06 smart question and then go execute on it because nobody executes on anything ever. Like what are you like, you know what? I want to bet on this young person. Because I think a lot of young people listening are like, ah, you guys have made it. Why won't you help? It's like, no, no, no. We will. The problem is It's real hard to figure out who actually will take action. Well, and the effort, right? Like, so, for example, and it might be somebody in your own company that wants to be mentored. And this is why, like, this whole work from home bullshit kills me because you can't meet somebody in your business if you're on a behind a screen, right? Like, whether it's at your own business or I remember, like, you talked about Samsell, okay?

Starting point is 00:46:44 I used to go to these real estate conferences and just wait in line with the hopes that I could just say hello to him and introduce myself. right and you need to show up right and so like people need to show up and reach out and try to make that effort and so for me like my assistant who's kind of like the gatekeeper and i have a chief of staff they'll be like hey this kid you need to talk to this kid they're like you know handwritten notes like following up like real grit like and so like sometimes if you trust your team around you to like kind of be the funnel a little bit that helps as well two and five Canadians will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk

Starting point is 00:47:32 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. Yeah. Yeah, the work from home thing is fascinating because we'll get ridiculed online. I say the same thing. I think it's a tragedy, actually, unless you've made it. If you've made it, work from home. Maybe. You want to work from the beach? God bless you. Like, you know, like, it's not for me because I actually need the energy. Like I'd much rather sit here with you than be us do this by Zoom, right? No, no, that's where James go to die. Yeah, it's terrible. And so for me, I'm like, be around people, create energy. Like a junior person is not going to suggest an idea in your company.

Starting point is 00:48:15 if you walk by the hall and I'll walk in someone's office like, what are you working on? And like, well, we have this crazy idea. They're not going to call my assistant, make an appointment to do a phone call with me to tell me that idea. And what if that's like the next billion dollar idea? Like, so like, don't be afraid to show up. So my advice to all your followers is like, show up in person, make that effort, get in front of people.

Starting point is 00:48:38 I think people like appreciate it. Yeah. And I'd be curious your take. Like, how hard is it to find? find really competent people who want to get after it. It's really hard. And especially like, and I hate like feeling so old like this generation. I'm like, I feel like a grandfather like drives me nuts.

Starting point is 00:48:58 But like it's true. There's just this like, like, yes, you should have a work life balance. Okay. Like I think that's important. Enjoy your life and you know, you're developing and all that. But like, you know, you got to pay your dues too. Like get to fucking work. And so like to me, like if I see somebody who's like grinding and doing it, it makes me want

Starting point is 00:49:16 to put more in. Yeah. Yeah. It's so wild. I think, like I remember when I first started at Goldman, everybody that was smarter than me. I was a public school kid. I went to Arizona State, you know, and I was not, I called it Harvard to the West for party. Like that was not, we were not, this was this was not Harvard. And so the only thing I could figure out how to do was being there earlier than everybody else and stay later than everybody else. That's literally all I had. But damn if that wasn't enough. And, you know, of course, one of the MDs sort of, you know, saw me there and then we got a relationship going and I got an opportunity because of that. And I wasn't even in that much earlier or that much later, which is crazy. It was like 10% more

Starting point is 00:49:54 work almost. And I think that still exists today. Like if you had, like of, I don't know, of your employers, those are the people you've seen overall in your career, how many people do you think are like giving the extra 10% or 20%? Is it so competitive that, you know, know, anybody could try and they won't be able to do it? Or is this still pretty rare? I think it's still rare. What about your kids? You have how many kids now? Two kids, two daughters. And they have a lot of resources, obviously. I think America in general, we have more resources than we've ever had. Is it hard to keep your kids grounded with everything that, or how do you keep them? Yeah. I'm going to come back to having an awesome partner, my wife Haley, the number one.

Starting point is 00:50:39 She tough? No, she's just kind, right? And she's really, You know, she guards her kids like a mama bear. Yeah. But we were fortunate that my kids, so I have two daughters, 22 and 24, my 24-year-olds and middle school art teacher. My 22-year-old just graduated and just started working. And they just have great values. I mean, I think it starts, it doesn't matter how much money you have

Starting point is 00:51:03 because people who don't have a lot of money can still have spoiled entitled kids. Yeah. Okay. True. And so I think it's about making sure your kids aren't entitled. Like, teach kids to be nice people. Teach them to contribute. Right. And like and then teach them the value of a dollar. And how do you do that though? Well,

Starting point is 00:51:18 because like what I'll say to my kids when they were younger like, well, you know, you know, we live in a big house or whatever. They're like, well, we're rich. I'm like, you're not rich. Mom and I. Like, you haven't done shit. Okay. And like, and so like I would say that. And my wife think I was a little too harsh. But I'm like, I'm like, you've got to earn it. Right. Like I'm doing you no favors. Like now, listen, you graduate. You want to start a business. Like pitch me on your. plan, I will line up to be your first investor if it's a good idea. Yeah. How do you teach them money? Like, is there, like, did you make them have allowances? I mean, I give you a great story. So my younger one from the time she was a kid, her name Sage, she loved apples. Okay.

Starting point is 00:52:01 It still does. And I would cut up the apple into four pieces and I would only give her three. And I would eat one in front of her. And she'd say, why are you eating? And I'm like, that's called taxes. Okay. And I literally would do this her whole career, okay? So the whole career. I mean, her whole childhood. And she's like, does everyone have to pay taxes? I'm like, yep, get used to it. Okay. And then like my proudest moment, she's like 10 years old

Starting point is 00:52:30 while walking. She's like, can you explain what a mortgage is to me? I like, I thought I was dying, right? Like, so very inquisitive and all of that. And my older one, so like when we invest in a venture company, first thing I do is I send it to my girls. I'm like, what do you guys think about this? Like, they know cool way more than me. They know stuff, like, way better. And so, like, they've been really valuable on, like, I'll tell you, like, there's a company called Coconut Colt, okay?

Starting point is 00:52:57 It's this new yogurt type of blend that they're making. And they pitched us on it. And I sent it to my girls. And my daughter was in college at the time. She literally opened up a refrigerator. So, Dad, I have this here. Is it glass? It's a glass jar.

Starting point is 00:53:10 I think I eat. It's so overpriced but delicious. Delicious, right? They're crushing it. They are, I knew it because it gives me. And their margins have to be huge. Maybe you probably can't say, you invest it. I can't speak to their margins because it's a, you know, it's a fresh product that's made, right?

Starting point is 00:53:23 So, but I was like, all right, my kids know this. All their friends are eating it. I'm like, I'm good, right? So we made the investment. It wasn't a huge amount of money. But like, that was a good demo for me to prove that this thing was real. And so I really do try to, you know, understand that. And my older daughter is very challenging.

Starting point is 00:53:38 She'll be like, you know, well, I looked up that company, their social media is horrible. And I'm like, so she's like, maybe it's a good product, but you better make sure because their social media sucks. I love that. Right? And so I'm trying to get my girls engaged to think about how you invest in what you do. So is that the key to having kids that understand money in business as you just bring them a lot?

Starting point is 00:53:58 I think you talk about it. Yeah. Okay. I think you share it with them. You know, you talked about allowance. So my wife had this thing. And when they were little, like we had this checklist for them when they were little. Like to earn your allowance, okay, here's your checklist.

Starting point is 00:54:12 look good, feel good. It meant like brush your hair, brush your teeth, and look good each day, right? Make your bed, okay, things like that. And we had this list. And then we were like, okay, how much of your allowance has to go into savings and how much is for charity, right? And so we would like have those discussions on that. And so like it was a small thing and it was, you know, a very small amount of money, but we wanted them to think about all these things are earned and you have to work towards it. Now, it's so good. I mean, when I was growing up, I'm Latina and I didn't come from very much money and you didn't talk about money. You didn't, you didn't talk about it. We pretended it didn't exist. You didn't ask for things. I had no idea what a credit card was until I was well in college,

Starting point is 00:54:51 you know, so I didn't have credit. And I thought that to talk about it was kind of gross. I was like, oh, that's, that's not a good thing for us to talk about. We don't talk about. We don't talk about that. And in retrospect, what you realize is rich people talk about it all the time, because it's just a tool. Yes. And so, you know, I think that's really nice to hear for people who maybe didn't grow up with it. Yeah. Because if you don't talk about it, how can you ever get more of it? So that trigger something to me that I think is the number one thing we didn't talk about,

Starting point is 00:55:17 asking questions. So one of the things that drives me nuts about people is, let's just say I was just pontificating about something and you didn't understand something I said, and then you didn't ask me about it. And so because I'll say, like, so like I'm proud of the fact that if we're talking about something and I'm going to say, well, can you explain that to me? Most people are embarrassed to say, I don't understand or I don't know. Huge mistake. Like, I respect when I'm talking to our interns or whatever it is that, can you explain

Starting point is 00:55:45 to me? I'm like, thank you because none of you understood that. And you were brave enough to ask. Right? And sometimes I'll say things in a group and I'll stop and say, did you all understand what I said? I'm like, why didn't you ask? And so whether it's learning about money to ask or learning about business or learning

Starting point is 00:56:02 about anything, people need to not be shy and not into this group think and not afraid to ask questions. for fear of looking dumb or anything else. So many people are self-conscious. Yeah, it's a great point. I also think it's so important with AI today. Like, I had one of my employees the other day. We're doing a big book launch in September 18th.

Starting point is 00:56:21 We want to sell a million copies. It's like kind of a ridiculous goal. People don't buy books to the same degree. It's sort of hard. Anyway. And one of my employees came to me and was like, well, this other person, I won't say who, not a big name, not a well-known book.

Starting point is 00:56:36 She sold a 100 million copies. And I said, hold on, just think about how many copies that would have to be. Wow. Is it J.K. Rowling or Jesus? Right. Because unless it's one of the two, that doesn't make sense. She's like, no, I got the result from AI. You can see it here.

Starting point is 00:56:50 I'm like, but you got to ask the next question, which is like, is this reasonable? Right. And so for whatever reason I do, I remember when I was younger, oh, like, yeah, I totally get that. Because it is scary to look stupid. Right. But that's where you lose all your money. I think it's brave. Yeah.

Starting point is 00:57:05 Interesting. Yeah, it's a good point. Because you probably say often, explain that to me like a six-year-old. I don't understand what you're talking about. More and more now, because I, like, especially when it comes to AI and certain something, I'm like, I don't understand what you're saying. Yeah. And because you don't think that has any bearing on your intelligence.

Starting point is 00:57:18 You're saying, I don't understand this one thing, which is no reflection on me. How do you learn if you don't ask questions? Like, I want to learn every day. I want to learn about business. Yeah, interesting. What about, you've talked a lot about your wife. Yeah. And I wasn't thinking about asking about this, but I work with my husband.

Starting point is 00:57:32 He's brilliant and amazing. And I think you said in the beginning, you really can't be successful if you don't have a successful partner. How do you find a partner that is going to back you? You know, I think I was pretty open and transparent with my wife when I met her that like I love work and I love business and, you know, this is a very important part of what I do. And so like I felt like she might disagree, but I was like I laid out the disclaimer, right, like that this is really important to me and I love this.

Starting point is 00:58:04 I can love you too. okay but like this is my energy and it does it feeds me like and I think I'm a better husband and a better dad and a better friend to people when I'm like inaction and it's also because my mind won't settle down so like I just need that energy and so the key is kind of one you got to be honest I say this is what it's going to be yes and then what response are you looking back from your partner how do you know if they're just paying you lift service and going like yeah yeah sure buy me the Bentley but be on vacation yeah I mean I think one um She had her own great values the way she was raised.

Starting point is 00:58:39 Two, she was a really hard worker. She was a teacher, then became a college professor, and then got her Ph.D. And then, you know, now she does documentaries and writes children's books. So she has her own business. But I think, you know, for that was, and I'm not an expert here. Okay, I've been married 20, she got this right, 26 years. We'll edit it out of his off. Yeah, I'm right.

Starting point is 00:59:01 Okay. And I'm still like a student of this, right? like where, you know, my wife, I'll be like, hey, like, you know, the pendulum is a little too far, like, and we'll talk about it. Yeah. Yeah, I know. I always, I chuckle. Every time I give some piece of advice about relationships on the podcast, I'll immediately

Starting point is 00:59:18 fight with my husband. I'm like, I got to not do that anymore because I can't pretend like we actually know what we're talking about. But I think it's really important because I don't know what happened, but at some point we stopped thinking it was reasonable to do business with family or to bring family into business. And I can see why. It's really hard to set expectations. Things could go very sideways. But Lord, I mean, how many hours a week do you think you worked in the beginning and even now?

Starting point is 00:59:43 Oh, 70, 80, 90, 100? So like, what if you couldn't talk to your significant other about any of that? Wouldn't that be hard? It is. That would be really hard. And so my wife has done a good job of being interested. Not all partners are interested, right? And so I find out, you know, my friends who are in business, not all their partners are interested. Mine is. I'm trying to get my kids interested as well. But to your point about family and business, so I have a hard and fast rule that if you're a family, you can't work with me unless you work someplace else for three to four years. You got to pick up those habits somewhere else, be trained by other people. And that's kind of the way I've thought about it for my kids, my nieces and nephews, you name it. Yeah, because probably a lot of them just want to come and work for

Starting point is 01:00:28 one of your mini companies. I mean, the 76ers would be pretty sexy to like, step right into. Interesting. And so you go, no, you have to, is it just three to four years somewhere else? Or do you have to have that? And again, like, that's directly for me. If it's like a portfolio company that I'm not running and all that and they're getting there, cutting their chops there, that's great. Like, I'm okay with that. And if there's great management there and great mentors there, I'm fine. But like, you know, if it's certainly for me in the real estate office and some of the family office, you have to work someplace else first. I think that's, that's smart. I remember I got to chat really briefly with Charles Koch and he was the same way about his kids.

Starting point is 01:01:02 And I remember Junior was telling me about one time he had to, his father made him go to one of the ranches that they owned. And he had to do some things with a cow and a glove that really I don't think anybody would ever want to do. And I thought, that's probably the right way to bring somebody into the mix. I think you need the appreciation. So literally, in the real estate business, when it snowed, I showed up there and was shoveling the walkways along with the maintenance crews. Interesting. Right. And I think you have to have that appreciation of hard work.

Starting point is 01:01:35 You know, I've painted apartments. I've done all of these things. I can't tell you I'm a master painter. But I think if you don't have an appreciation for the work your people are doing, it's hard to relate to them. Yeah. So I think that's really important. This is kind of a weird question. But one of the reasons I really liked your background is you are an operator and have like, you know, when I looked at your business,

Starting point is 01:01:56 and I was like, yes, there's financial arbitrage here and leverage and all of that. But man, you know, campus housing, that I, that's 24-7 service, which is like, you want to do, that's worse than any of my businesses. You know, you don't, I guess some of the plumbing companies you call in the middle of the night, but my painters aren't having to go fix something at two in the morning, right? So that's really intense. But I was curious, like it feels like a lot of real estate is so competitive and could be even gnarly because maybe the margins are tight and it's just so much financial leverage. Why is so much of the real estate industry seem to be so. competitive, whereas a lot of these other industries are more collaborative. You know, I don't view really competitive.

Starting point is 01:02:35 You might be competitive with someone else in a market, your apartment complex against theirs. Yeah. But, you know, in our industry in the student industry, I would say a bunch of the owners, like our chief operating officers all get together twice a year and they share best practices. Interesting. We've tried to bring people together to do that. So I think like, you know, you can be like friendly competitors too and, you know, want what's best. It's like, you know, I'm friends with a lot of lawyers.

Starting point is 01:02:57 They compete, but they're all kind of collaborative and friendly. and, you know, do that. So I think it depends on the personality. Yeah. So do you think you always have to compete to win or annihilate somebody else? Or can you collaborate with your competitors? I don't believe that I don't try to win at the expense of somebody losing. Okay.

Starting point is 01:03:16 I kind of pride myself on that. And so, but there are people that do. And it's winner take all and all of that. Not my thing. And maybe I would make more money if I did that. But I also want to like set a good example for the people I work with and my kids and all of that. And so for me, it's like, it's exciting to win the right way, share the wins with your team. But don't get me wrong, I'm really competitive.

Starting point is 01:03:41 I just don't want to win, right? I just think it's how you play the game. Yeah, well, that's what I heard about you from a few people that know you. That was kind of their saying is that they would do deals with you, which I think is one thing people don't ponder as much. As if you're always trying to beat somebody else up, then they're never going to bring you opportunity. That's for sure. And so I think it's cool. And it's also important because these days people are crazy about rich people.

Starting point is 01:04:02 They think we don't. I mean, how many, a different way, I guess you could say is like, how many billions of dollars in value and like assets do you think you've created in order to have to become a quote unquote billionaire? Wow. A huge multiple 20x, 50x, X, 100 X. It's a huge multiple more of, you know, again, it's kind of like build these businesses and hope something's left for you, right? And that's kind of what's happened over the years and that piece fortunately has gotten bigger over time. Let's say you had to go back. You're somewhere between 13 because you're a crazy person and 25 with no money, no network, no reputation.

Starting point is 01:04:44 Where would you go looking for your first million? What would you do? In my mind, it's not looking for the first million. and it's looking for what education can I get that'll lead me on a path. Okay? So I would show up and we talked about this. If knowing what I know today,

Starting point is 01:05:00 I'd go back to somebody's operating business and say, can I be an entrepreneur in your business, learn your business, and then ultimately become like so valuable that you want to give me equity or tie me up or do something that I either can make a huge part while I'm there. I mean, you worked at Goldman, right?

Starting point is 01:05:15 A lot of become hugely wealthy working there and getting a piece of the action. So could I become so invaluable to this organization after learning that you can't live without me, or did I learn enough to go out on my own and do it with a few people, and hopefully you can gather some money to start small and get big. All right, David, you're the man. Awesome.

Starting point is 01:05:32 Appreciate you. Thank you. Thank you. Two and five Canadians will hear the words, you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer.

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BigDeal - The #1 Investing Habit That Made Me a Billionaire | David Adelman

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