BiggerPockets Real Estate Podcast - 646: Building Wealth Like Warren Buffett & Lessons Learned from Billionaires w/Trey Lockerbie

Episode Date: August 9, 2022

Every investor has wondered how to invest like Warren Buffett. He’s arguably the best stock trader of all time—preaching the fundamentals of investing in equities, something that most modern-day investors seem to forget. We’re seeing the same thing in the real estate industry. With a runup of home prices and stock prices over the past two years, almost every investing strategy has worked. But, as prices begin to plummet, overconfident investors are starting to see the errors of their ways and that making money isn’t always easy. So in today’s risky environment, we have to ask: what would Warren (Buffett) do? Someone who’s been asking that question for years is Trey Lockerbie. He’s co-host of We Study Billionaires, where he interviews some of the best and brightest investors on planet earth. Trey has lived an interesting life. He was a musician, went on the road for years, started a kombucha brand, and now reads everything he can on how to build billion-dollar businesses and billion-dollar wealth. With the aura of fear many of us are feeling in the investing space, Trey brings in some much-needed clarity on what investors should and shouldn’t be doing right now. And he got some of this advice directly from top stock investor himself, Warren Buffett. While we do go deep into the coming opportunities for real estate investors, we also hear about how stock investing isn’t so different, and why the massive drop in cryptocurrency prices could be an opportunity for investors who are on the fence about blockchain. Regardless of what you invest in, how much you invest, or whether or not you’ve started investing, Trey can enlighten you on how to maximize the decision you’re about to make. In This Episode We Cover: Secret investing lessons learned at a dinner with Warren Buffett Understanding the “human” element behind why markets rise and fall Fear vs. greed and whether or not to buy in an overly pessimistic investing environment Why Bitcoin is becoming more attractive to real estate investors even as its price drops Inflation, money printing, and how the world’s debt works How high will interest rates go and what investors should prepare for Starting a business that can sell for millions (or billions) and how to get there And So Much More! Links from the Show BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast Get Your Ticket for BPCon 2022 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area David's BiggerPockets Profile David's Instagram Rob's BiggerPockets Profile Rob's Youtube Rob's Instagram Rob's TikTok Rob's Twitter Listen to Our Past Episode with “We Study Billionaires” Host Stig Brodersen Check Out Our Episode with Ed Mylett on Investing Opportunities in 2022 How I Hired Warren Buffett as My Real Estate Mentor “We Study Billionaires” Podcast Connect with Trey: Trey on Twitter Drink Some of Trey’s Superb Kombucha Click here to check the full show notes: https://www.biggerpockets.com/blog/real-estate-646 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show, 646. If you look at building your own business, you're building your own equity. That's probably your fastest, best way to wealth. But it's highly concentrated, right? Like all your time is in this one business. You're putting all the sweat equity into it. You're growing it. But the payoff could probably be worth more than anything else.

Real estate, I think, is the next step down from that where it's like, it's definitely effort, more so than stock market. And it's definitely probably the second best way to grow wealth. But it just takes a little bit less effort than, you know, maybe running a day-to-day business yourself. What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate podcast here today with my good buddy and co-host Rob Abasolo. As we interview one of the hosts of the We Study Billioners podcast, Trey Lockerbie. In today's show, we get into the good, nitty-gritty and big-picture stuff about what the heck is going on in today's economy. rising interest rates, seller panic, people that aren't sure if we're going into a depression

or if this is a great buying opportunity, stocks, crypto, real estate, we get into some really good stuff by someone who makes his living, studying very successful investors. Rob, what are some of the highlights that stood out to you from today's show? I mean, Trey is quite the impressive fellow. Well, first of all, we should call him Trey, Mr. Butter Voice, Lockerbie, because very soothing. So this is definitely a very, very easy listening one. But, you know, very impressive fellow. I mean, he is a songwriter, a relatively established, it seemed like, from what we could

take, you know, pry out of him and used to tour with Lady A. Then he really got into the whole, you know, he casually found himself at dinner with Warren Buffett. And he's really made, I guess, a career, you could say, out of studying Warren Buffett's investing principles, broke down the four pillars of how he invests. And by he, I mean Warren Buffett. And really just a nice change of pace because we always talk about real estate. You know, that's what this podcast is all about.

But it was really refreshing to hear a new take as it pertains to the stock market, to crypto, and how they're all sort of interconnected by all these levers around the world and how they all play into each other. So this is a really, really nice little masterclass on economics that are at play at the moment. And, you know, I think the takeaway today is, How to invest, you know, how to invest consistently and how to diversify and all that goodness. Yeah, absolutely. We talked about properties I'm buying, a cryptocurrency that I just bought.

You know, you talked a little bit about some of the factors that led into your decision to get into crypto and what happened and the mindset behind, like, when we do well or when we don't do well, how we stick with it. So I thought this was fascinating. I'm already thinking we should have Trey back. But here's what I want to know. As you listen to this, did you like today's episode with Trey? Let us know in the comments on YouTube.

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That's Indeed.com slash rookie. Terms and conditions apply. Hiring, Indeed is all you need. And before we bring in Trey, today's quick tip is brought to you by Rob Abasolo. So if you like today's conversation and you're interested in investing even outside of real estate and wanting to diversify your knowledge on how to invest in stocks, I think their podcast is really great for just opening your mind to the world of investing as it pertains to stocks, crypto and everything in between.

It's a very, very, very interesting conversation to talk about how billionaires became billionaires and how they make their money. So be sure and give we study billionaires a download, even outside of the episode that we do with them. All right. Great job on the quick tip there, Rob. Let's get to Trey Lockerby. Welcome to the Bigger Pockets podcast.

How are you today? I'm doing fantastic. Thanks for having me on. Yeah. So for anyone who hasn't heard of you, which is probably quite a bit of our audience that has. Yeah, well, I don't know about that. Can you tell us a little bit about what your, what your background is with business and investing and then what you do for a living? Quick origin story is I actually got started out in the entertainment business, specifically music, really always thought I'd wanted to be a touring musician. I just thought people on the road looked free to me. They weren't wearing suits. They weren't in an office. They were playing music. It just looked like the dream that I wanted for myself. So I set out to achieve that right after I graduated high school. went to college, but started a booking agency out of my dorm room that kind of got me my first

gig with an artist going out on the road. That artist, uh, group, I should say, became Lady A. And I started doing some touring with them and some other songwriters. Ended up dropping out of school because it was so, it picked up so quickly and I got so busy. I dropped out, moved to Nashville with them, uh, started to become more of a songwriter. I made some of my first, uh, big checks, actually songwriting. And when I got my big checks, I thought, what do I do with this money? And so I called my dad. I said, hey, what do I do this money? He's like, I don't know. I called my uncle, you know, my uncle was like, put it in the S&P 500. And I was like, what is that? You know, I was just so clueless on all of this stuff. And it really, it's good advice, though. It was. Looking back,

it was perfect. I didn't know how to do it. I didn't know what it was. This is around the time, you know, right after the global financial crisis. So I was like the stock market, get out of here. Like, that's insane. But just kind of my personality, I was like, you know, this is like a whole, this whole global market that just exists in the background of my life is so prominent for so many other people. It's something I should probably have some literacy on. You know, like, I should probably know the basics of this. So I started going down the rabbit hole.

And I also kind of thought, hey, wouldn't it be fun to be, you know, on the tour bus sitting at a venue? there's so much downtime when you're touring. Like, I could just be trading or making extra money or, you know, generating stuff like that. And along the way, I had this opportunity to, well, I'll just actually pivot there. Basically, at a certain point, I realized that music itself, that lifestyle, the touring element of it, wasn't sustainable for me. It wasn't, I was missing people's weddings.

I was missing events. I'd get home and it just felt like a whole year had passed and I wasn't really moving or progressing in my personal life. So I ended up wanting to pivot and find a different career. And it was around that time I met my now wife who was also a touring artist. She was a singer, background singer for Rihanna. She did that for about four years. And she and I both kind of come to the same conclusion, which was, hey, that was fun. You know, we're in our early 20s. We got to see the world, get paid for it. What an amazing experience. But how do, we move forward with something else. And my sister was diagnosed with breast cancer. And through that,

I actually got introduced to kombucha tea. And that's a living tea. It's a probiotic tea. And it's popular in the cancer community for multiple reasons, these health benefits that it provides. And so she told me that I should go start drinking this stuff because it was making her feel so great. And I went out there to the store and I bought some and I basically spit it out. I was like, this is get out of here. This is ridiculous. It tasted like vinegar and I kind of swore off of it for about a year. But she was so adamant that I drink it that I, after a while, I was like, well, you know, I grew up in the South a little bit.

I love peach tea. Maybe I could brew this at home. Maybe it could make it taste good. And I brewed up some peach tea kombucha. And I remember the first time I tried it, this light bulb went off from me because it was so delicious that I was like, oh my God, everyone would drink this if they just knew it's actually supposed to taste good. And there's a lot of reasons why it's manufactured in different ways and produces sort of a vinegary taste for most brands.

But my now wife and I, Ashley, she and I decided, well, this could be fun. We'll set out at farmers markets. We'll sell some tea. What an idyllic lifestyle. And that's kind of how it started. And much like anything else, it just snowballed. So we started a farmer's market, sold out quickly. Then it was like, okay, we got to show up next week, I guess.

And so it just kept going from there. Trader Joe's came along. You know, different retailers came along. and we had to keep being like, okay, are we doing this or not? And scaling. And then around that time I was starting the business, I had this really strange opportunity to have dinner with Warren Buffett. And at the time I was trading.

I was actually doing options and all kinds of crazy stuff like that, starting this tea business and had this three-hour dinner through a family friend with Warren Buffett. And he really changed my life. I mean, he made me look at everything differently. and after that dinner, I just was, I was just determined to read everything I could about him. I mean, I realized, like, the people I was looking up to who were trading, who were doing XYZ, he made more money in those three hours sitting with me than they had in their entire career. I mean, I just put everything in perspective to say, what he's, he's doing something right, right?

And so that got me thinking. And I got into, I became a Buffatologist, I said, you know, started studying everything about him. I found the show called We Study Billionaires, and they were heavily focused on Buffett Style investing and got to know the host of that show over the number of years I was listening through, you know, events they put on in Berkshire Hathaway meetings and stuff like that. And then they offered me a job to be the host of We Study Billionaires. So it's a really winding path. I apologize for the long intro, but music, T, now an investing podcast.

That's great. No, this is perfect because David and I probably have 17 questions to ask. And we're like, well, where do we even start? I think, all right, there's a lot of good stuff there, but I am curious. I got to know. You casually are like, yeah, and then I found myself at dinner with DeWaron Buffett, one of the most famous people in the world in the world of investing. How did that happen?

Because that is, that's nuts. I mean, a guy like that, you know, I've always heard of these really big people, you know, they're like $40,000 an hour just to hang out with like some of them. I got to imagine, you know, Warren Buffett. He's probably like a very, very difficult person to get time on his calendar. So how did that happen? Yeah. So, you know, it probably also makes me seem like I grew up in some wealthy family,

which is not correct. It really just came through this really amazing opportunity through a family friend where they were hosting him for this book launch he was doing. And I invited myself, quite frankly. I mean, as soon as I found out about it, I just called and was like, I'm coming to this dinner and I'm going to be there, you know. And so I kind of just peer pressured them to let me sit in on it. And so it was it was sort of like a six degree kind of opportunity that I just sort of

capitalized on. And yeah, I mean, looking back, what an opportunity. I just heard that, you know, he auctions off a dinner for charity. And this year it went for $12 million. So it was, you know, at least a $12 million opportunity that. that I took advantage of there and it didn't disappoint. Okay. So you met with him and then did you, was there actually any kind of like insider words of

wisdom that came out of that conversation where, you know, something changed in your life? Or was that just the spark where you then went to go on and effectively deep dive and study his investment style? A little bit of both. So, you know, upon like having dinner with him or right prior to that, I definitely did a little bit of research. and I kind of came to this conclusion that this value investing thing that a lot of people call it, you know, okay, that used to work maybe in the 50s and 60s when you didn't have the internet,

but now everyone's got all the same information. You know, there's really no arbitrage left in the market. Everyone's got real-time data. The market is fairly efficient. I mean, that's how I was operating, especially trading options. It's all built around the efficient market theory. And so that's where I was kind of coming from. And I wanted to kind of quiz them on this.

And looking back, it wasn't the worst. question I could go off from, but I have heard other people asking this over the year. So it wasn't a new question for him by any means. And he was very gracious. And he basically said, I'm paraphrasing, but something to the degree of, if the market was efficient, I wouldn't be where I am. And he went on to kind of explain. There's a couple chapters in The Intelligent Investor, one of his favorite books. I brought it with me. Actually, I had him sign my copy. And I think it's chapters eight and that are really about how the market is just backed by human behavior. And so I like this quote by Jim O'Shaughnessy that says like the last arbitrage is human

behavior because that's what's happening. Things either get overbought in the market or oversold. And the way you avoid that trap is doing what Warren Buffett does, which is looking at these numbers on a screen that are green and red and flashing and telling you to do something actually as businesses. And that's where people get tripped up a lot. They just, it's, you know, stocks are so intangible. They're just numbers on a screen and everyone gets caught up in the performance element of it.

But if you realize that that stock is a small fraction of ownership in an actual business and you actually look at the stock and what it represents for how the whole entire company is currently valued, you look at it quite differently. So for example, you know, Tesla, oh, it was at $1,200. Now it's at $700. That's a good buy. You know, well, what is the market cap of Tesla at $1,200 versus $700? At $700, is it still valued worth more than the entire energy sector combined?

Like, probably close. You know, so you have to kind of compare market caps, look at these things like businesses, and realize that human nature is not going to change. People will get either greedy or fearful, and the market will swing to your advantage just because of that. That's okay. So this is actually a very common quote by Warren Buffett and he talks about, I mean, it's going to be very awkward if it wasn't him, but I'm like 99.99% sure they says when people are being greedy, you should be fearful. And when everyone's fearful, you should be greedy. And we're sort of at this, this paradigm shift right now in the economy seemingly just based on all the, you know, all the clickbait and alarmist headlines and a lot of people coming in with their hot takes and everything like that. Right now, what is your read on that? Are we at the point where people are being fearful and we should be greedy or vice versa? Because I feel like we're kind of in the middle at the moment. Like there's a lot of investors that are saying, oh, yeah, I'm jumping in right now.

There are other investors that are saying, well, probably not. I think David and I are still investing pretty heavily. But I'm curious on your take here. It definitely depends on who you ask. I will give you my opinion. If you, I looked at a recent Bank of America research paper and they were showing this graph of, you know, imagine like a speedometer in a car where on the far left, It's fear on the far right, it's greed, and the kind of arrow goes either way.

It was flatline to fear. It was like hitting zero, basically saying this could not be any more. People could not be any more fearful than they are today. And I definitely feel that, which is really interesting because I can walk you through a bunch of macro reasons why I think the market's actually going to go lower. But it's rare that you get this sentiment where everyone is so bearish that, they're actually right. Usually when the sentiment is what it is, it's the opposite that's really happening. I will say that, you know, the market corrected, right? It went down to about

past 10 percent to about 14, 15 percent. And I say the market, I mean the S&P 500, which is basically 500 of the biggest stocks in the U.S. And, you know, the 14 to 15 percent, that's like the hundred year average for a correction. So when it was sitting, right there, that was a really hard thing to kind of manage because you're like, okay, at one point this could go a lot lower. If you look at it this way, though, it's hitting the average so it could maybe bump up from here. It's now gone down about 22%. So that's bare market territory. And I'm of the opinion where it's actually going to get worse before it gets better, even though the sentiment is what it is and it's as bearish as it is. But,

you know, that would mean that this time is different and usually it's not. Yeah. So, David, what about you, David? Are you, would you consider yourself bullish or bearish at the moment? I would agree. Well, we're talking about the real estate market right now, or did you guys want to stick to the stock market? I think it all times the other stock market, but I mean, I guess just, yeah, personal, yeah, investment strategy. I would say, we just interviewed Ed Milet. I was trying to find the episode number, but I couldn't find it. Well, someone can look that up. We'll say it in a minute. And he referred to the collective psychology. And it's this idea that like you were saying, everyone in general, they kind of function, I call it flock of birds. It's the same thing, but like they all move in the same direction. Like, Bitcoin's going up, real estate's going up. I should go

buy. I'm hearing all these success stories of people that bought, and then they run in there. Real estate's going down. Bitcoin's going down. I should flee right now, cut my losses. And I think most people make decisions based off what they see other people doing and the emotions that that gives them. What I love about your advice that you were talking about, which comes from Warren Buffett is try to be objective, try to think what would that property be worth, what would that asset be worth, what would that company be worth, independent of the emotions that you get when you watch the stock price trending up or trending down. If you can separate yourself from that, you get a much clearer understanding of what the thing is worth. And that's very important.

When we were talking with Ed, he was saying those are the people that make good money. Because when you can kind of detach yourself from the frenzy of what you hear in the the news constantly and understand the impact that that has on you, you just make smarter decisions. So Warren Buffett's really good at seeing, hey, this stock is really low. That company is really good, right? Like that stock got pulled down for a bunch of other reasons. I want to buy a bunch of it and vice versa. That is not worth what people are paying for it, objectively speaking. So when I'm buying real estate, there's a part of it that says it doesn't really matter what everyone else is doing. It's going to cash flow this much. It's going to make me a return. I'm going to

hold it for a long time. So right up the bat, I have a foundation that's very safe. And then I add on to that where I'm sort of monitoring everyone else's psychology, not throwing mine in with it. So I put 10 properties under contract in the last two or three weeks. And a lot of it was because the sellers, I think, are panicking. They're watching Jerome Powell saying, don't buy a house. They're hearing news, interest rates are going up. They're thinking it's going to be a bloodbath. We have depression type event on the way. I got to get out right now. And I'm looking at it like, this house is in an amazing location. It's a very good property. It's going to make me money regardless of what the value of the house is. I went in there, like I'll give you an example.

I had one property I just bought was listed at 1.5. They were too high, sat for a long time. They steadily dropped it like 50 grand at a time, which is not the way to do it. So now they're chasing the market down. When I saw it, it was at 1.2. It had been a on the market for 70 days or so. So I know as a real estate agent that the psychology of the seller is getting into a panic mode. They're thinking terrible. Like no one's ever going to buy my house. I'm stuck with it. I'm bleeding on the mortgage because I don't have tenants in there and I got to get this thing sold. And so I wrote an offer at a million 50 with 35,000 in closing cost credit. So just over a million. And they countered me and said, we'll take your price, but not the closing cost. And I thought

there's no way that he's going to blow this deal over 30 grand. So I just held firm next day. he accepted where I was. There's no reason I should have got that house for a million dollars. It's like 1.2 to 1.25 in a normal market. That seller was watching too much news, right? Just to rebuild that house would cost way, way more. And you can't build in that area because they've like shut down a lot of the building. So when we're talking about what I'm buying, it's not real estate in general. I'm not just like by any house because they're all the same, right? It's more than I'm trying to tap into the human beings that. are overly worried because they're paying attention to what everyone else is thinking.

And I don't know if I made a good call or not, but I just bought my very first crypto ever two days ago. I watch Bitcoin. And of all the cryptos I see so far, and I'm not an expert, I just want to come out right now. I've listened to a lot of Michael Saylor. I thought that sounds like a smart dude. I like what he's saying. And so he kind of swayed me on Bitcoin in general, and it was about $65,000 a coin. And it dropped to 20, and I bought my first Bitcoin. Okay, so now I'll go in. Is it going to drop more? Yes, it dropped like to 19 the day after I bought it.

But I just don't really care. Like, is it going to stay at that point? Well, if it's a good asset, no. So I've learned to detach myself from the immediate results of what I'm seeing. And like, just shut down those emotions. I don't give myself credit for a win when it does good and I don't kick myself when it does bad. Now, I'm going to turn it to you, Trey, because I don't actually know if the way I'm going about it in your mind, because I think you study this stuff more than me is very.

why. So I'd love to hear what your take is on that. Yeah, I have a lot of thoughts on that. So first and foremost, to your point earlier, you're absolutely right. It deserves more nuance, you know, this conversation, sweeping generalizations like real estate, yeah, you should get in. It's prospect specific, right, to your point. And there's this thing happening. I was talking with my buddy who's in commercial real estate yesterday. And he's having the hardest time with investors. And he's presenting them with this opportunity that I think is, you know, easily yielding, let's say 25%. Whereas a week ago or two weeks ago was that, I don't know, 40%. It was something kind of whatever it was, his estimation was much bigger. And to me, what I'm seeing,

there's this analogy about being a monkey with two bananas. I don't if you guys have heard this before, but it's basically you give a monkey one banana, very happy, give a monkey two bananas, he's stoked. And then you take one of those bananas away and furious, right? He still has the one banana. And I think that's what's happening in the market a little bit, especially maybe with real estate. People are so used to these amazing opportunities with these low interest rates, but you can still find opportunities that are good and maybe even exceptional in some areas of the market, depending on where it is. And to your point about Bitcoin, I would just say, I look at Bitcoin personally like it is property. I very much look at it like that. I always have.

That's literally what bought me into it. Yes. That's exactly right. And there's the problem with it is so many people have different perspectives on it. Is it your new currency? Is it your new store of value? Is it your new X, Y, Z? The thing that made the most sense to me and what got me in was thinking of it, I think someone described it as New York, you know, and the property's on New York. And there's only X amount, and that's all there's ever going to be. And that's kind of what Bitcoin is in the digital space. So I dollar cost average into Bitcoin. I bought a big chunk a few years ago, and then I just have a set it and forget it weekly. thing. It's almost like a savings account for me. And I don't even watch the price, quite frankly, because in my mind, all I'm thinking about is how many sats I'm accruing. Right. So at the end of, you know, say 10 years from now, I think all that's going to matter is like, how many actual bitcoins do you own? Because there's only X amount and you can kind of corner the market for lack of a better way to say it. I mean, that's what's happening. If you look at some charts, the beautiful thing about Bitcoin is that it's an open ledger. And you can see actually all these

wallets that are holding Bitcoin and you can analyze them. You can see how long they've held the Bitcoin. And if you study those that was called on-chain analytics, you can actually see that the people who have never really sold their Bitcoin are accumulating more. And that number is only going up. So that's really interesting. You see these big institutions who may be bought in saying, okay, this thing seems hot. We need to stay relevant. We're going to buy a little bit of it. And maybe they panic sell because they don't really understand it. Or maybe it's just directly correlated with the NASDAQ because Wall Street doesn't really understand it. But the people who understand it understand it very well. And they're not selling. Isn't it so much more relaxing when you aren't

watching the Bitcoin counter all the time? I mean, I bought Bitcoin. Honestly, the majority of my Bitcoin was purchased in the all-time high, I'll admit. And then I bought, you know, some Bitcoin when I was at the 45 and the 40 mark. So I'm averaging down a little bit in that capacity. And I was just checking every single day. And then, you know, I was like, oh, I'm rich. I'm richer. Oh, I'm poor. I'm rich. I'm rich. I'm poor. And I played that game for three, four months. And then I just finally was like, you know what? I think I'm just going to like stop doing that. And then I stopped looking for, I mean, I haven't really looked in the past like three or four months. And it's just nice to know that I have it. I don't really care about the price that it's at.

Because I never intended on selling it anyway. So, you know, whether it's worth $100,000 or $20,000, I don't care because it's not, it's not something that I plan to sell. right now because my investment strategy was to buy and hold on to it for a very, very long time. So right now a lot of people are freaking out because they're like, oh, my crypto portfolio is wiped. And mine is a little bit, but doesn't really matter because, you know, I think what matters is to look at it from the, you know, the bigger perspective, the bird's eye view. And now, you know, I sleep a lot better not looking at, you know, the Zillow home appreciation prices and like my 401k and everything like that. because it's just, you know, that's not, investing should never be short term like that.

I absolutely agree. And if you look at property, if you look at it like that, you can compare it to some billionaires we study like Bill Gates. He's been buying $100 million plus dollars worth of farmland. Like those are just, I mean, that produces a yield. And we can say how Bitcoin actually produces a yield because it can. But that's where people are going and moving to right now as hard assets, real estate, Bitcoin I consider to be a hard asset. I think it's a really good way to hedge the inflation situation that we're all getting ourselves into. Yeah, and I'm a little nervous that I just mentioned I bought it because what I don't want is either everyone on bigger pockets to go say, David's buying Bitcoin, I'm going to go buy it. Or I can't believe he said Bitcoin,

that's heresy. So just to clarify, the reason that I, just like you said, Trey, it was explained by Michael Saler as not a currency, but more of a property. And what, in my opinion, has led to a lot of us crushing it in real estate for the last five, 10 years is quantitative easing and overprinting of money. So when they print a lot more money and that money has to find a home, it tends to find itself in different assets like the stock market, like cryptocurrencies, like especially real estate. And it gives you the impression that you're making more money than you actually are because

money is just becoming worth less. And that's what I don't like about keeping cash in the bank. my normal personality is to be super conservative, save, keep my money, like the Warren Buffett style, he doesn't pull the trigger very often, but when he does, he takes down the big prize. You kind of can't play the game that way when they're just ripping money off left and right. It forces you to be a little more aggressive, or at least proactive might be another way to put it, then I would prefer to be naturally. Well, with Bitcoin, there's a limited number of what they're able to make.

So when I stopped looking at it like a currency, and like you said, I started seeing it, as a property. That's where I felt better about buying it. Now, do I know it's going to go back up? Could it be replaced by Schmidt coin? I literally don't know, right? I'm not planning on using this to become wealthy. I do, however, think that it's very likely that wealthy people will start moving Bitcoin around to buy things to trade in. And as the dollar becomes worth less, Bitcoin becomes more valuable because it's set in place. And so I just kind of wanted to give my rationale behind why I bought it. And then I want to open it up to you. Is there any holes that you want to poke in that or a misunderstanding that I may have about it? Well, I want to touch on what

you said at the top there, which was, you know, don't just go buy it because we said so you have to really understand it. And here's, I can provide a backdrop, maybe a framework that could help some of your listeners. So I'm borrowing this from my co-host, Preston Pish, who is so brilliant when it comes to these macro themes that are happening right now. The way he describes our current economy is say you're imagine you have two monopoly boards two two groups playing monopoly and the only difference is they can buy property on each other's boards and every time they go around the board they collect $200 right so maybe that's your 2% annual inflation that we're all used to but if say let's say the global financial crisis happens and we don't want to go bankrupt so we

printed a lot of money we printed around $800 billion back then 2008 So that's kind of like one of those tables, instead of someone going around the market, instead of someone going around the board collecting $200, say they go around and they collected $700 because that money just was injected into the game. And so the people with that money start buying properties on the other board, right? And so the people on the other board, let's call it a different country, they start being like, well, where is all this currency coming from? And the other board just keeps doing it.

They keep injecting more and more money. That was our quantitative easing that we all went through, more injecting into the money. But the problem with that, there's this thing called the cantillion effect where the people who are getting the money, they're usually holding these billion-dollar bond tranches. They don't really need the money. So the Fed was buying bonds from these very wealthy people. And what are the wealthy people do? They go buy assets. To your point, they buy stocks.

They buy real estate. They buy XYZ. But there's not that kind of trickle-down element happening so that the values of, and by the way, because they're buying all these bonds, the interest rate stays down. So those low interest rates versus all these people buying assets, it creates this huge discrepancy where asset prices are going to the moon. Interest rates have been staying low. And it's kind of priced out the normal person.

And I think that's where people, everyone feels this. They know it's happening. They maybe can't articulate it, but they know it's happening. And they're getting antsy about it. They're getting, you know, maybe disgruntled about it. And you're seeing the social unrest that can buy. up here and there because of it, in my opinion. And so that's where things like UBI start becoming a conversation. Hey, let's forgive student death. It's just how do we take care of the little

guy who's getting the, you know, who's kind of the patsy at the game here. And so that's where people really, I feel like, discover Bitcoin because Bitcoin is sort of an off ramp to the currency we currently have. There's, it's, it's, you can't just keep printing more and more and more of it. And the reason I said earlier that I think it'll get worse before it gets better. Usually, what's happening globally on a currency basis is that, you know, we're printing, say, the amount of money we're doing for quantitative easing. Well, every other country is also on a Fiat standard, and they have to debase their own currency just to say competitive. But what's happening now is we're actually tightening. We're actually taking money off the table. We are raising

interest rates. We are selling those bonds that the Fed bought. We are basically taking money off of the table extinguishing some of that money that was created. Meanwhile, places like Japan and other parts of the world are still loosening. That's why you're seeing the yen just dropping precipitously versus the US dollar. That's why you're seeing the US dollar climb higher and higher and higher. If you look at the DXY index, which is the USD versus solid currencies, it's almost as high as it's ever been. I mean, it's at a 20 year high. So that's what's kind of happening in the background. That's what's leading to people to find, I think, a store value like Bitcoin. that in my opinion is an off ramp to that currency debasement.

So I kind of want a couple things here. David mentioned earlier about the Ed Milet episode. That's episode 620. This is very relevant to what we're talking about. So if you haven't listened to that, go listen to it. That is one of the more popular ones that has come out in the last like month, I'd say, month or two. A lot of views on that one because I think it just resonated a lot.

He talked about the little guy and making sure, you know, like how the little guy is going to be able to make their foray, their entry into the market because the playing field is evening a bit. And so you kind of mentioned UBI. So I wanted to dive into that just a little bit. And can you just define what that is and that concept just so we can unpack that a little bit and how it relates to the whole real estate market

and the correlations there? Most people will probably understand it the way that Andrew Yang was pitching it at the last presidential election, which is like everyone gets $1,000 a month. The government is just going to print you money. There's actually some interesting ideas around this. If you look at America like a business, think of it like a dividend, right? You operate and exist

in the most successful country of all time. Therefore, as a shareholder, if you will, you get a little dividend. It's an interesting idea. The problem now is that versus back then, we didn't have inflation back then. And actually, why that was kind of a good idea is we couldn't really figure out how to get inflation. And the only way to raise interest rates off of zero is to get some inflation going. So at the time, it kind of made a little bit of sense. Now it's unfeasible to, in my opinion, because we have inflation now. And the inflation came mostly from the COVID policies that went into effect where they printed like $3 trillion. They did PPP loans. They did EIDL loans for businesses. They actually literally sent checks to citizens, you know, to say, here's what we're going to do.

And once that faucet is turned on, it's really hard to turn it off. And so I think what you're going to start seeing now is UBI. but it's not how you think of it. For example, I highlighted earlier, let's say debt forgiveness for colleges. I mean, that's a form of UBI. That's putting more cash in your pocket, but they're not actually sending you cash. But I think, and you're seeing this in Europe and other places as well, they will be getting more and more creative, I think,

in finding ways that will help keep people playing the game, keep them in the game, because otherwise they're all going to fall too far behind. Yeah, the point you're making about how if you forgive debt, that is the same as giving someone money is very, it's noteworthy because that's the same way. I say things like we printed a bunch of money. That's not accurate. We didn't actually print money. We bought bad debt from people. They use fancy accounting principles to take debt out of the economy and push money into it that they can then lend. And the result is the same as if they had printed more money. And that's often how it, how this stuff plays itself out. You combine that principle with if you want to get voted in as a politician and people are scared, the collective psychology is worry, fear, what's going to happen and you're the person that comes and says, well, all give, that's why we did that during COVID. We're shutting down the economy and everyone says, what am I going to do for money? Don't worry. We'll give it to you. That principle, at least this is just my personal opinion, is probably not

likely to change. I don't think we're going to see the entire country of America turn around and say, no, no more of that. We want everybody to just, you know, eat beans out of a can and go through hard times when this happens. But what's very interesting to me is how those policies or the impact of them affects real estate, investing, building wealth in general. The way that I tend to look at this is that we're probably headed down that road. I've said before, I think at some point we'll see an expansion of the Section 8 program and the government that people will be complaining about the price of housing because as inflation goes up, landlords charge more for rent, but many people are not in a career or have a job where their wages are keeping up with that,

especially if it's something that isn't sort of like cutting edge improving. So if you're the person renting a house, you may very well you find yourself gas is more expensive, food is more expensive, rent is more expensive, but my wages are the same. When those cries rise themselves up, you'll see, okay, this person's eligible for Section 8, we need to put more money towards the Section 8 program. Oh, we need to create more money to be able to fund that. And I see a world where less people are able to own homes. And that's one of the reasons why I've been a bit of a sense of urgency with, like,

I don't go out and buy stupid properties, but be more intentional about finding good deals because they may not be there forever. The same would be true of Bitcoin, right? If it takes off, there's a limited amount of it. There's only so much to buy at a certain point. It's incredibly expensive to get it because it's a finite resource. Really, that understanding of what we're investing in are finite resources and the U.S. clearly not that because they can manipulate it is why we're wanting to exchange the dollars

into the finite resources. Is that similar to how you're seeing stuff outside of just the real estate market? Absolutely. And to what I was kind of highlighting there earlier about the dollar going higher, my simple framework, and I think why it plays into what you're saying, is it has an impact on the rest of the world. It's hard to kind of wrap your head around the global. I mean, it's over my head for sure. But my simple framework is as the dollar goes higher, everyone's debt around the world gets more expensive. You know, if you're operating in a different currency and that currency is losing value to the dollar, because we have a world reserve currency, most of this debt out there is in US dollars because, you know, say they have to buy oil or something. A lot of oil is priced in

US dollars. So all this debt is getting more and more expensive. So the way you do that is you either debase your currency to come up with more of your own currency to buy more dollars, or you liquidate your assets, right? So a lot of people may have, you know, say they live in China or elsewhere, they probably have some U.S. assets. And so that's why I think you're seeing a lot of liquidation right now. The dollar is going higher. The stock market is selling off. A lot of real estate is selling off. People are liquidating. They need to come up with capital to extinguish some of this U.S. dollar denominated debt around the world. And once you turn on the spigot, as I was of saying with this printing money, it's really hard to turn it off. And so that's where the Bitcoin,

to your point, comes in because if your thesis is that at some point, we just won't need to print more US dollars, then that's a different scenario. But if your thesis is that this trend is going to continue and we can only kind of operate in this world where everyone's going to keep debasing their monetary currency, then Bitcoin stays the same. And it becomes a store value. It's going to be very very volatile, you know, for probably many more years. I want that to be clear as well. But say over 10 years, it's a piece of property that you're going to own and it's part of only 21 million. I was just having a conversation with someone yesterday and they were asking me, why are you buying if we're heading into a depression? We're going to go over the cliff. The whole thing's

going to fall apart. And it was the first time that I had to articulate like kind of how my gut feels or what thoughts are going on in the back of my head and turn it into an actual conscious conversation, which is why I think it's good that we talk about these things, because sometimes through the process of talking about it, you get more clarity than what you had before. And the way I'm seeing it is that the market, whether it's a stock market, the real estate market, the crypto market, whatever it is, is sort of like a big basin in a field. And as money gets pumped into it, the ground can absorb so much of that water at a time. And if you pump in more water than what the market can actually absorb from supply and demand,

then the tide will start to go up. The amount of water goes up, which creates people thinking, I'm making a ton of money. Bitcoin is skyrocketing. Real estate is going up a ton. There wasn't enough supply for the demand that was created when we just created all this money, right? Well, what we've seen when interest rates went up, talks of the war with Ukraine and Russia, overall bad news, quantitative tightening, like we said, the big players have pulled their money out of that pool. they are like okay we're selling off the bitcoin we're letting the prices go down i see a lot of people

putting real estate on the market and selling it quite frankly people that bought real estate in the last two years that were uh not they didn't do it very wisely they're probably going to lose their properties or have to sell at a loss but in my mind i see there's still water out there it's just been pulled out of that basin it didn't disappear we haven't lost that actual money or that wealth and it has to come back in at a certain point. And I'm not saying to just, it's not like you're buying an index fund, just buy it all, sell it all right. Like you mentioned, it's individual pieces. But that's how my mind is working. I'm looking at, do there's so much money that has to find a home at some place? They're not going to hold it in cash, especially with this inflation forever.

And it feels like more of a like sort of a temporary correction that we're having that, frankly, we're long due for. What's your thoughts on that perspective? My perspective is that they can only raise interest rates so much before something breaks. And the thing that breaks, as I kind of mentioned earlier, is how all this dollar liquidity needs to get out into the market and where other third parties are going to struggle to come up with the capital they need. And it's just going to get worse before it gets better. This has been a 40 plus year trend. So if you go back to the 80s, interest rates have just gone down more and more.

And every time they inch them up, it goes, they can't get as high as they did before. So the last time we did a, I think it was 2018, we raised interest rates. We got to about two and a half percent. So I'm of the belief as of this moment that two to two and a half percent is going to be kind of the high end of what we see before things start to get really ugly. And then the Fed is going to seemingly reverse course and lower interest rates again. And there's going to be this period, hopefully, where things have sold off, things have gotten really cheap, and then they lower interest rates again.

And that is going to be. And then what are we going to see when that? happens. Yeah, well, I think that's the time to buy. And not that you can time that kind of stuff. So to your point, if you find opportunities along the way, you've got to take them. But that, I think, is going to be a very big buying point for pretty much any asset. If you own a short-term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather, and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short-term rental.

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Head to cost segregation.com before April 15th. Yeah, so I guess we've sort of covered a little bit here on crypto. We've covered a little bit on the stock market. We've covered a little bit on real estate. I sort of want to bring the conversation back to our good friend WB, Mr. Buffet. Just kidding. Mr. Warren Buffett. Sorry, Warren, if you're listening.

And I know that you're an expert in all things, Warren Buffett. So I'm kind of curious, based on what you're seeing right now, like, how is he investing? You know, because I think that's the big question right now. You know, what are, what are, is he diverging a lot from his philosophies and his POVs or is he, you know, right on brand for how he's enacting his investment strategies? No, so Buffett at 92 years old keeps surprising everybody. You know, for many, many years, for example, he was saying that he didn't understand technology. His best friend is Bill Gates. He owns Microsoft, but yet Warren Buffett never bought Microsoft, right?

I mean, how do you explain that? But, you know, he claimed that he didn't understand technology. And then a few years ago, he buys Apple. He surprises everybody, buys Apple. He puts $30 billion or so into it. It's now the best performing investment, I think, of all time. I think his, you know, maybe before the correction, it had gotten up to something around $130, $150 billion. So just an incredible return dollar for dollar.

And so lately, he's also over the years gone back and forth on things like oil. And he's actually taken a very big position in Occidental. And that's really interesting to me as well. It's always the same old Buffett flavor. But sometimes he pivots on exactly what he says he's a specialist in or not. What's in what he would call his circle of competence. So him buying oil companies, he's, actually, to be quite honest, never had much success with in the past.

I think he's kind of broken even at best. But he's taking a big position there. My theory on that is because when we did all the EIDLs and the PPP loans and all those things, the $3 trillion or so dollars that we printed during COVID, a lot of businesses took those, rightfully so. But unfortunately, you saw a lot of businesses just turn around and buy their shares back off the market. They didn't take the money.

They probably still let some people go. They bought their shares back, and they didn't invest in infrastructure, the things that's needed to continue to create supply. And that's, I think, what you're seeing in oil and the thesis behind it, why oil will probably continue to go higher because as of right now, the supply is not meeting the demand. And it's been volatile. Don't get me wrong. It's down today. It could go either way. But my thesis is that over the long term, say the next couple of years, it'll probably continue to go higher.

which, by the way, is one of the biggest factors in the CPI inflation number, which means that if oil continues to go higher, inflation will theoretically be higher, quote unquote, however you define inflation, which could also create lots of its own different issues we can get into. So I digress. Buffett is, I think, doing what you would expect him to do. He's been more active this year, surprisingly, than he was even when the COVID drop happened where we went down 20% right in 2020.

I thought back then, okay, this is his magnum opus. This is his opportunity to sail off into the sunset. He's going to eat up all this cheap equity. And, you know, that's going to be his huge return for years to come. And he really didn't do that, which was very surprising. And so more interestingly, he's been more active this year. He's been buying more companies. He bought Allegheny. He's buying Occidental. And so in some ways, Buffett's the same old Buffett. In some ways, he's not. So, yeah, okay. So, I mean, if he's the greatest investor of all time, it would make sense that evolves a little bit. But like you said, he's on brand. A couple things I wanted to call out here. You said CPI earlier. Can you just define what that is? I know what it is, but just for David's sake, just in case he doesn't know. Yeah, CPI is the consumer price index. It's like the shorthand. I mean, it's what a lot of people look at or define how they define inflation because it's made up of all these different parts. It's the way our government has, it's their best ability. to capture all these price increases across multiple products and industries, and it all kind of rolls up into this CPI number. And you can just Google it. You can actually see how it breaks down. You can see how much of oil and energy in general is contributing to the overall number. But when you see something like inflation is at 8.6 percent, that's the CPI number. And it's important, it's really important, I think, on that note, to understand that the biggest asset in the entire world is the bond market.

And that's a hundred plus trillion dollar market. And the way bonds are supposed to be priced is at a premium to inflation historically. So right now that's not happening. It has been happening for a long time. But as interest rates kind of climb higher, the value of the bonds goes down and that can create its own issues. So lots of macro things here to potentially have things get worse before they get better, as I said. Right. A lot of levers being pulled in a lot of directions, I'm sure. So I guess we've like, you know, kind of understanding his Warren Buffett's investment strategy a little bit talking about how he's changing it up and he's investing in more oil and gas oxidant, all that stuff. Can we talk about, you know, maybe a few actionable tips for people that are wanting to

invest in stocks and how, if we were wanting to diversify a bit and if now is really a good time to buy because of the dip, I know obviously it'll be even less at some point. But, you know, can we talk about some actionable ways that you can evaluate a company and if a stock is worth putting your money into at this time? Let's just take the Warren Buffett way. It's kind of important to understand how Buffett got started. He basically was under the tutelage of Ben Graham. And the whole idea with Ben Graham's method was that back then, you could find businesses that were trading below the value of if you bought the entire company and liquidated all the asset. So let's say you had a factory worth a million dollars and the stock was representing the

price of the whole company, you know, at $500,000. That would be kind of what they would be looking for. That's very rare these days. So to your point about Buffett evolving, he definitely did. So he's gotten away a little bit from that. Now he says, instead of buying a fair company at a wonderful price, he wants to buy a wonderful company at a fair price. So, you know, Apple might be a really good example of that. Something that's going to continue to compound and maybe overpriced, but you know it's going to compound into the future. So those opportunities are happening right now, in my opinion. If you look at a lot of the tech companies, for example, tech has just gotten absolutely crushed.

And I think these are companies that have been compounding at 20 plus percent a year and continue to do so over decades. They're total unicorns. I think that's a really interesting area right now. Like I said, could go lower. But as it stands right now, fundamentally speaking, they're priced very cheaply. by almost any metric you can come across. A lot of people look at things like price to earnings. That's one of the most common ways to look at a business and see how it's cheap,

how cheap it is. So basically you're looking at the stock price over the amount of earnings that the company is making. And right now they're at near historic lows. So that's creating incredible opportunities. If you're Warren Buffett, though, you have to make sure it's in your circle of competence, meaning you understand what the business does, how it actually makes money. be so surprised if you ask people about a certain business, maybe they own or not how it makes

money and they don't know. And so it's important to understand the business, find something you can get behind. And so for the example, I own actually a lot of like food and beverage companies, food distribution companies, grocery stores. That's an industry that I really understand because I operate in it on a daily basis. So it's a really good place to start somewhere like that, that you can actually understand. You can look at things like the PE ratio, and there's other metrics you can check out to see if it's at a fair price historically or not.

And there are other metrics to see if there's good quality of management. So you could Google something like the interest coverage ratio that will basically tell you how much debt the company has, how they've been managing that level of debt if they can afford the debt. That's a big indicator for me about how the management of the business perform, So those are basically, if I want to break it down and simplify it, the four pillars of Warren Buffett are basically great management, something that compounds over time, something that is stable and understandable and at a cheap price. Those are the four pillars. And price probably should

come last, in my opinion. I think you want to start with what you understand. Make sure it's a good team, make sure it's something that's compounding and growing, and then check the price. And a good way to do this, like how you can be proactive right now is you can just start there with that universe of stuff you understand, start doing your own valuation of it and create a watch list. And there's so many stocks out there that I've been looking at and you say, okay, this is an amazing company, but it's just too expensive. And so, but hey, the stock market does it, you know, does a favor for you and shows up. offers it on sale, then you can step in and buy it and you're prepared. You're not irrational.

You're not reacting emotionally to what the market's doing. You've done this very stable research ahead of time when you're, when you're, you know, more calm or, you know, so I think that that's something people could be doing right now. Yeah, that's great. David, do you invest in any stocks, by the way? Are you mostly, are you just a crypto bro now? It's very, very little. I sort of look at like the Bitcoin purchase and the stock purchase was everybody is panicking. They're all selling. The stock market is plummeting. That's the only time I go in and buy. And it's not a size. It's not a not a not a noteworthy position. It's like kind of throw away money that I'll buy. My theory with stocks and crypto, like basically investments that you push a button on a computer

to buy are like part of their benefit is that they don't take as much time or knowledge. you need knowledge to know what to buy. I'm not saying that, but you don't have to have knowledge of how to run a company if you're buying stock in the company. Like Trey was saying, you're looking at the management of the company. You're buying real estate, there's like more elbow grease that goes into it. You have to have a plan in place and knowledge of how to manage a property or how to market a property. There's specific information that makes real estate investing. I think you can make more money than other things, but that's because you did more work up front. It's not really a comparable investment to a stock or when I bought Bitcoin that took me like 14 minutes to set up an account

and buy it. Now I can buy it in three seconds. So I tend to put much more focus on real estate, but the principles that Trey is saying here are exactly the same. Like people worry way too much about price. It location matters way more. They worry way more about ego and like, hey, the seller told me they wouldn't fix this thing and they get really upset about it versus is looking at, is this area going to grow and do I have a management team in place that's going to run this profitably? I think so many people get tied to the spreadsheet. What's the ROI going to be?

And they have no plan how to operate that asset, especially in like the multifamily space or the short-term rental space. The way that Rob runs a short-term rental versus the way that Joe Blow runs, it could be incredibly different and literally make that a great investment or a terrible one just by the management. And that's, I just, everything you said, Trey, it applies to real estate, absolutely. But the reason I don't buy more of that other stuff is because I feel like that's for people who don't know how real estate works. That's the way that I tend to look at it.

If I knew nothing about real estate, I wouldn't be looking to jump into it either. It's very scary. You can get hurt really bad, treating it like a stock. There's a saying that I love where you stay concentrated to grow wealth and then diversify to maintain wealth. And I think that's relevant here because as I look at it, and I can speak a little bit from my experience, when I think about building wealth, which is probably what a lot of people are interested in listening to this show, I look at it, unfortunately. Yeah. Yeah. I really believe that it's sort of high effort, high return. Right. So if you look at building your own business, you're building your own equity. That's probably your fastest, best way to wealth. But it's highly concentrated. Right. Like all your time is in this one business. You're putting all the sweat equity into it. You're growing it. but the payoff could probably be worth more than anything else.

Real estate, I think, is the next step down from that where it's like, it's definitely effort, more so than the stock market. And it's definitely probably the second best way to grow wealth. But it just takes a little bit less effort than, you know, maybe running a day-to-day business yourself. And then you have the stock market. And unfortunately, I think that of the three is the worst way to grow wealth. But I do think it's the best way to diversify and maintain wealth once you have it.

And so I was always operating for this philosophy, like, even when I was poor, I was like, yeah, I don't have money yet. But one day I'm going to have money and I'm going to want to know how to diversify and manage that money. So that's why I started learning about the stock market because I think it is, it's great for that kind of thing. Well, we need to get you into real estate, man. Well, we'd love to. My wife and I just bought our first home. It was a great opportunity. It was a two-bed, two-bath.

We made it a three-bed, three-bath pretty quickly. It's gone up 50%. I mean, I live in L.A. This is a little bit ridiculous, but we have, we have three homes in our neighborhood that have recently gone a million dollars over asking. I mean, it's just, it's, it's really ridiculous here. Whoa. I mean, fortunately, we got in in 2019 and we kind of rode this wave and who knows where it'll go from here. But that's my one real estate experience so far. And we'd love to do more rental kind of stuff. But again, it's that opportunity cost of like, you know, I'm growing equity in a T business right now and taking time away from

that to put something in on a on a cash flowing business. It's a it's a whole it's a different calculation. And that is a great point when it comes to why some people are better off investing in stocks or in in cryptocurrency or in whatever asset that doesn't take as much time and elbow grease and attention. You click a button and other people are doing the work because if you're really good at making money and other things, you can actually lose money in business by making money in real estate. And I think for those of us that are just hardcore in love with real estate, it's easy to miss out on that. You're just thinking about, oh, this duplex could get me another 500 bucks a month. And if I get 700 of them, I'll finally be wealthy. But most people that are doing

really well in real estate are making money in other areas. And that's why they take the Buffett approach. They're wanting to be in the best area, the best location, the best management. They're not overly excited about getting the best price or the best deal like when you're new. And this is a great transition before we get out of here to ask you about your business. Like, can you share some advice at a general level to why you think that this business took off and you did well or what you've learned through it that you wish you knew in the beginning? It's funny because what you just said there, that framework, I really do think it applies to everything, even your own business. So for example, you could argue that my T business is in real estate because the way my

business operates is we're fighting for shelf space, right? Say it's in a grocery store or what have you. A grocery buyer is looking at every single slot on their shelves as an investment. right what's going to what what am i going to put in that slot that's going to give me the best return and you have to they look at it basically a dollars per linear square foot so what i'm finding for my home business even though it's tea is real estate i'm buying for this real estate on that shelf and i have to come up with the story too in a way to acquire that real estate so that's something i kind of wish i learned early on to your point um we were very naive when we started um and the the best advice i like to give to people just starting out.

If you're going to start your own business, begin with the end in mind, which is such a cliche saying perhaps, but it's so incredibly important because when we started, we kind of just started to say, hey, we just want extra income. But if you're good at what you do,

that can snowball and get you into these situations where you're like, well, hang on, now what? How deep are we going down this rabbit hole here? And so when you're starting a business, it's important to say, is this going to be a family-owned business? Is this going to be something that we want to be profitable, that we want to be stable and grow slowly and maybe hand off to our kids or whatever it might have you? Or is this something we want to grow and sell? So one way to frame that is like the speedboat versus the sailboat approach, right? If you're taking the speedboat approach, you probably want to think through it and say, okay, who might acquire this business?

What revenue do I need to get to in order for them to even consider buying the business? And how am I going to get to that revenue? revenue. And oftentimes it requires a good amount of capital, whether you're a startup software company or a T business or what have you. Oftentimes it creates a lot of money to go fast. And so that means you have to take on outside investment. You have to bring on partners. You have to raise money. And we've done all of that. But over the years, I'd say we were kind of starting down the sailboat approach. And then when we saw the potential in our product for real, and it became achievable in our minds of how far we could really take it. We shifted and said, okay, now we're going to take outside capital. And now we're going to go the speedboat approach. But you have to know

that that was a big decision. It was a big transition to go from one to the other. And it's simpler if you understand it, I think, from day one. And that will help frame your decisions a lot easier. So smart. In fact, I don't know that I ever, when I started a business, had that conversation. And I've definitely had those thoughts. Once you get into it, there's sort of this wolf by the ears phenomenon where the business is doing good and it's making money, but that's because you're involved. And if you want to step out of it, it can then lose money. So you don't want to step out of it. But then at the same time, this isn't why you did it. You didn't do it. So you just have a job all the time. And it's often a problem that you don't realize as a problem until you've already

got the wolf by the ears and you're kind of stuck. I'm going to have to borrow that wolf by the ears. I've never heard that. It's great. Yeah. The idea is if you let go of the wolf, it's going to bite you. So as long as you're holding it, you're safe, but you also can't get away. You're like stuck in this standoff. And many times I find myself with that same feeling when you're in business. And that's very sound advice. So as far as your personal skills, Trey, can you share how you've changed as you got into

the entrepreneurial space and the business has done better? This is kind of where Warren Buffett, I think, ties into my T business. So what I learned from Warren Buffett over the years is that he is the greatest capital allocator to ever live. And what I mean by that is he's at the helm. He's got this pool of money. He's deciding where to put it and expecting the highest return. What's going to give me the highest return? And I don't think a lot of people, when they think about entrepreneurship and they think about, say,

just even being the CEO of a company, I don't know if it's the first thing they think of at least, where that person's role is being a capital allocator. and it could be, hey, are we going to hire so-and-so? You know, because they're going to give us a return. You're doing it for a reason. Is the marketing team proposing a $300,000 budget for this year to you? Well, you have to kind of understand, well, I'm going to spend $300,000. What am I going to get out of that?

What's the return on that? So almost every single decision, it could be small decisions, too, like really, really small decisions. Every decision when you're running your own business becomes capital allocation in my mind. That's how I kind of think of it. So the natural thing to do would be to study the best capital allocator who ever lived, in my opinion. And Buffett's actually not only a great investor. He's an amazing operator.

Most people don't give him enough credit for that as well. But that's what I've kind of learned over the years and how I've kind of evolved from just kind of winging it to kind of like gripping the wheel, getting at the helm of the ship and being like, okay, this is, you know, I'm controlling the controllables. What I can control is, are my decisions, how I'm going to lay out capital to get a bigger return. And that could be, you know, again, do we expand into this region or that region? It's really everything. And so that's the framework I operate from. And I really encourage people. I mean, it's a very dry read.

But Warren Buffett has left all these sprinkles of, you know, what do they call it, like crumbs to success, right? He's written a letter every year for, I think, 50 years. And he basically talks about that last year. what he learned, how they're changing, how they're making different decisions, and you get to go back and read it. It's totally free. And that is probably better than a college degree, in my opinion. So if you're starting out, I highly recommend that. Yeah. Well, before we close out, Trey, I mean, this has been a really, I mean, a very nice change of pace for us because, you know, we're always talking about houses and stuff. But I wanted to kind of ask you one final question here.

And it's, you know, if you could give some tangible advice to someone investing right now, do you think, you know, if people are looking to get invested, you know, even outside of real estate, do we go all in now that we're kind of at this, you know, all time low, you know, for the past year or so? Do we, do we just consistently invest? What's your final thoughts here as far as, I mean, I like that. I like that I'm asking you a giant lofty question to close us out. But what do you think? Consistently invest here for, you know, until we kind of see this whole thing play out? Or should we just hop in and make some equitable stakes in the companies that we want to invest in?

Yeah. I mean, I think it goes back to that other quote about it's not timing the market. It's time in the market. And if there's one regret I have, it's that I didn't start sooner. I mean, I'm in my mid-30s. But like the difference of starting your early 20s to your early to mid-30s is millions of dollars potentially. returns over that compounding. The magic of compounding is just something that isn't taught enough, isn't appreciated

by most. And those years, that extra time you have in the market, smooths out everything else, smooths out all the volatility. So depending on your time horizon, I definitely think, to your point earlier, it's not timing the market. I mean, I think getting in a little bit of the time, whether it's contributing to your 401K, whether it's dollar cost averaging into something like Bick's. which in my mind is like real estate.

Is it finding an amazing real estate opportunity, even though the market could go either way? I mean, no one has this crystal ball and no one knows, really no one knows nothing. And if there's anything I've learned from hosting this show and I have experts from all over the world talking about investing, they all are so confident and all have really different opinions. And they're all highly intelligent. So it's just like you kind of, that alphabet super sorts, you kind of come to this conclusion. in a wild, like, man, really no one knows. I mean, they're very smart. And I would just say,

I'm definitely not as smart as they are. So I certainly don't know. So the best thing I can do is take the bird in the hand. If I see a good opportunity, I'm going to take it. Yeah. I mean, arguably, I would say if there is one thing we know, it's that time in the market beats timing the market, except for like a very small, minuscule set of people that got very, very lucky or are extremely smart, smarter than us. But I think that's kind of like the big thing that I've been hearing over the past two, three years from just a lot of people on TikTok, on YouTube comments. My students, like, one thing that I always hear is, well, are we at the top of the market? Like, should I just wait for the crash? And, you know, at that time, interest rates were two, three, four percent,

really into threes. And now, yeah, okay, maybe there's going to be a little bit of a dip in the price. But now our interest rates are going to be five, six, seven percent. And so I honestly would have rather just overpaid a little bit a couple months ago and lock into three and a half percent versus some of the seven and a half percent loans that I'm closing right now because over time, over the course of 30 years, the amount of time that I plan on holding these properties, I would have saved hundreds of thousands of dollars in interest. So, you know, it just really goes to show that if you just consistently invest, if that's always your idea to just invest every single year, whether it's stocks or real estate, doesn't really matter. That's ultimately what's going to

make you a wealthy person, not putting it all on the proverbial, you know, I don't know, roulette table, black on roulette. And then, you know, hitting it big on one of these stocks or real estate investment. So with that, man, thank you so much. David, you got anything? I'm trying to drop my mic, but it is frozen in space. That was really good line. Probably Rob's best line as the co-host of the podcast here. Way to go with that. Probably. Probably the best line Never. Yeah. Trey, I thought your piece of advice was awesome too. When you were saying that, what it made me think about? I appreciate that. We're often asking the wrong question. We're asking what's the market going to do because we think it's so simple that it's going down. I'm going to

buy. It's going up. I'm going to wait or whatever. But it never works that simple, right? Like, Rob just said, yeah, prices may have come down some, but interest rates went up. So it might overall be more expensive and we don't think about that. So I thought, Trey, you did a really good job of highlighting what questions we should be asking as opposed to, is it going up or is it going down? What are all the factors that play together? And then how do you use that information to make a decision that's wise for you? I was going to say, can I end with one more question to that point, which is you should be asking yourself, what is enough? Because to your point, Rob, about people asking, hey, should I do X, Y, or Z? They have to determine for themselves what enough is. And enough

might just be putting your money in the S&P 500 at 7% annually or whatever it is for over 30 years. You know, depending on your income and whatever else, that might be enough. So a lot of people don't do that first step. And I would just highly recommend starting there. Yeah, I'm doing it backwards. I've never really done the whole stock thing. I did my 401K match when I worked at my 9 to 5 about a year ago. And then I just went all in in real estate.

And now, honestly, I'm putting a lot in the SMP 500 and really nothing else. I just set up a retirement account, maxed it out with my S-Corp. It's all SMP 500 because I'm just like, nope, they figured it out. They're smarter than me. I'll just go with that. Circle of confidence, man. I get it. Trey, if anybody wants to follow you or get a hold of you, where do you recommend people do so?

Yeah, if you want to find me, I'm on Twitter at Trey Lockerbee. I'm the host or one of the hosts of we study billionaires, which is another podcast where we interview billionaires, mostly people who have made their money in investing. And you can check that out at the Investors Podcast. or simply search any podcast resource or platform. And if you are curious about kombucha and or just a refreshing tea, you can always check out Betterbooch.com. And there's every social handle behind that as well.

And where can people listen to your music? One of your smash hits. I'll never say. Is that a songwriter writer thing? You let the artist take the credit. Exactly. Exactly. All right.

Well, you're a classy man as well as an intelligent one. That's awesome, Trey. Yep, you can find me at David Green 24 online or David Green Realty on YouTube. And then Rob, your Rob Built pretty much everywhere except for TikTok where it's Robbilto, right? Yep, that's right. You can find me at Raw Built. Well, thanks, Trey. It was great good to know you.

I really appreciate you sharing your expertise. It's not every day you get to talk to someone who studies billionaires and then puts that information out there for everyone else to hear. I'll get us out of here. This is David Green for Rob dropping that mic, Mike Abasolo. Signing out. Thank you all for listening to the. The Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other

podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calicoke content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.com.

The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.