Escaping the Drift with John Gafford - Risk with Walter O'Brien Ep 86

Starting point is 00:00:00 And now, Escaping the Drift, the show designed to get you from where you are to where you want to be. I'm Jon Gafford, and I have a knack for getting extraordinary achievers to drop their secrets to help you on a path to greatness. So stop drifting along, escape the drift, and it's time to start right now. Back again, everybody. Welcome to an episode of Escaping the Drift. And today, man, I got a good one for you. I'm not going to lie. This is a guy that I've been lucky enough

Starting point is 00:00:31 to call a friend for a while now. And it is always one of the most interesting conversations that I get to have. And luckily with the new format, I can bring him in via Zoom to talk to you guys today. And if you're somebody that is worried about risk or you're somebody that has an issue with risk, this guy is what I like to call the ultimate insurance policy for some very wealthy people around the globe. This is a guy that hacked the NSA computer system at age 13, scored 197 on his IQ test, is the owner of Scorpion Computer Services, which the show Scorpion on CBS is based on. He actually had a cameo in that show and is an executive producer. He is an all-around super interesting dude. And man, I'm so glad and so pleased we could have you on today.

Starting point is 00:01:16 Welcome to the show, Walter O'Brien. Welcome, Walter. How are you, buddy? Doing good. Thanks for having me, John. Glad to be able to support the new format. I know scheduling-wise, we were never able to be available in Vegas at the same time. Yeah, but this way, that's why I did it, man, because I could bring amazing content like you to our listeners, and we're super excited to have you. So first of all, man, let's start talking about when you were a kid, right? So I always like to ask questions like, what would you attribute your – because obviously you're a very successful guy. And I would always like to go with what in your life, as far as your upbringing, do you think led to you being you, man?

Starting point is 00:02:00 Well, I think there's a few factors that are supported by most of the clinical psychology studies on this. I didn't have a safety net. So my parents were not wealthy, would not grow up with any kind of connections or contacts. So first, I had to figure everything out on my own. Secondly, I wasn't happy where I was. I didn't want to spend my life farming in the rain. My IQ would have made that a pretty boring life. So I had to get out of where I was at and I didn't have any safety net. So I had to go hard. What did your folks do? What do they do?

Starting point is 00:02:39 What do mom and dad do? Farmers, originally dairy farmers. And we lived in a village of 300 people, and to this day, there's still not even cell phone reception there. How did you find computers as a young kid? I stumbled across them at my school, but I'd always been playing with puzzles and mazes and Rubik's Cubes and other things that were logical my whole life. And then at the age of nine, I came across a computer class where I started learning to code. Turtle Logo is what it was called at the time on an Apple II computer.

Starting point is 00:03:13 And something clicked where I was like, ooh, this makes sense to me, and I'm good at this. And a teacher noticed the stuff I was doing was far more advanced than what they're used to seeing so um yeah that's what got me into it and then you know i had to save up and for a year and a half try and get my first computer so i'm guessing the first way that you made money as a kid had something to do with computers yes is that there were some yeah well after you got the computer yeah um it turns out other people, this was 87. So

Starting point is 00:03:45 in Ireland, people were just starting to get computers and people needed help. Stuff was broken. Things didn't work and, uh, they needed my help. And, uh, I, I charged a hundred bucks every time I fixed the problem. And that was, uh, you've been doing it ever since I kept me busy through until I started doing government work. So essentially you've been doing it ever since. I kept me busy through until I started doing government work. So essentially, you've been doing exactly the same thing. Just the problems have gotten bigger and the fees have gotten bigger as we go along. Yeah, we adjusted our prices slightly. So for those that don't know you, I mean, I hate, you know, one of the problems when you do this format, man, with somebody that I'm personally, that I know is I never wanted

Starting point is 00:04:24 to sound like an inside joke for our listeners. So I always have to kind of stop and take a step back and tell everybody exactly what it is that you do. Well, your intro was pretty accurate. I solve problems and now I solve bigger problems. So for my degrees are in artificial intelligence and computer science.

Starting point is 00:04:43 And for years, I attracted together the best technologists and programmers to work with me solving problems for government and Fortune 1000 companies. And a lot of it mitigating risk. So if you had a big company and a big bank or electric grid or pharmaceutical company, and you're like, I never want to go down. I never want to get hacked. I don't want my stuff to break. I don't want my own guys to accidentally break my own system. So I don't want downtime. And human error for a working professional averages about 3%. So if you're an air traffic control system at LAX and you crash 3% of the planes, that's really

Starting point is 00:05:24 bad. So sometimes you have to go beyond human error. Humans make 3% error and I can't afford 3% error. So how do I beat that? And that's where other humans, other technologies, other AIs come into play. Well, I know that what's funny, you mentioned the airport, because I know that on Scorpion, you have some influence with some of those stories. Is that something that happened? I saw an episode once, man, where it was like the planes were going to crash because their system was hacked. And did that happen? accurate in terms of the people those people work here the characters the the stories are all based on true stories but some of them match together obviously we don't always do it in 45 minutes between commercials but they'll change the name of the building or the place and then carry out the same story so um yeah but most of those who know me or track the press online the super fans have been able to match up each episode with real things

Starting point is 00:06:26 i've done like episode two was related to identifying the boston bombers for example the marathon bombers yeah you did that with you were one of the you were one of the pioneers of facial recognition if i'm if i'm correct by saying that no it wasn't facial recognition because we didn't know what their faces looked like, but it's motion flow analysis, which is basically how do I identify non-herd behavior when one person is not behaving like a crowd? So, if the box goes off and everyone goes down, and then everyone gets up, and then everyone heads in the same direction that they came from, then if someone didn't go down, didn't act surprised, and started wandering off in a different direction, they would stand out from the herd and that that's how to identify and so you just you just analyze the entire crowd to figure that out yes which then requires we have four thousand hours

Starting point is 00:07:14 of footage from everything from people's cell phones atms etc none of it standardized none of it from the same angle so the other little algorithm i had to have was one that eliminated all the footage where nothing interesting is happening kind of like this show narrowing down to what we didn't need to see yeah so basically what you're saying is if you had to analyze like this show was nothing interesting was happening it'd be pretty quick and easy no i'm just kidding no this episode good but anyway um so here's a quick we're very advanced in image recognition in general rather than just faces. But we do that for casinos and stuff. But just to finish your point, so when you ask, what do I do?

Starting point is 00:07:56 So that's your typical technology company, or maybe not typical, maybe a little better than average for cybersecurity and infosec and so on. And then our wealthier customers started asking us for help with non-technical problems. You know, their daughter has anorexia, their mom has throat cancer, they want to choose a winning racehorse based on its DNA, just all these different requests we get. And even though they're not technical requests, they trust us as a think tank to figure things out for them. And we approach it in a very standard engineering way. Gather the requirements, the budget, define what's done, remove single points of failure.

Starting point is 00:08:33 So whether you get married or divorced, we'll try and optimize the outcome. And that led to me. Yeah, because you had told me that everything comes down to an algorithm, essentially. Everything operates the same way. Like, are you going to get divorced? We can plug that into the system and tell you the outcomes of how that works. And I thought that was fascinating. There's ways of exploring every possible outcome.

Starting point is 00:08:55 We don't make any assumptions. So what citizenship are you? What citizenship could you be? Where are you located? How does that affect taxes and so on? And then the same questions around your partner and then figuring out, okay, how can we minimize the damage here? And one of the things we do offer, which as far

Starting point is 00:09:16 as I know, the public, the other company offers it to the public is PSYOPs, psychological operations. So that's where you put someone in effectively a Truman show for up to seven years. And they don't know that their neighbor is fake, that their business partner or the buddy they have coffee with at work is as a plant, that their mother-in-law is telling us everything that's going on with them and they are not aware of it. And that's useful for settlement strategies, punishments, rewards, whatever you need to have happen to other people.

Starting point is 00:09:47 Can you tell me, can you tell the story? Because I love this story. The Ukrainian gold digger and the billionaire son. Can you tell that story? Is that okay? Yeah. I never know it's okay. I don't want to put you on the spot.

Starting point is 00:09:59 Feel free to tell me it's not okay. If you've heard the story, then it's probably okay. Okay. Good enough. All right. Good enough. We got pretty good firewalls and what we can talk about or not but um yeah it was a billionaires who had been a client of ours his son fell in love with a ukrainian gold digger he wanted us to break him up before the wedding and not let him know that the father

Starting point is 00:10:20 interfered so we again approached him with our algorithm and profile the son. He liked to go partying on sunset, and show off to his friends and drive an Aston Martin and pretend he's jazz bomb. So we took another billionaire son was a client of ours and the son was an actor, turned him into an agent, had him rent a mansion down the street, drive a similar car, wear a similar suit, rent a similar booth. Within a month, the two of them were fast friends. Then we profiled the Ukrainian girl,

Starting point is 00:10:55 loves to work out in the gym every morning, go to the same Starbucks. So we had another girl stand two spaces in front of her in line, speaking loudly in her native tongue on her cell phone on the first day, but they didn't talk. Two days later, we had her stand two positions behind her in line, same thing, still didn't talk. But it built up some familiarity. And then we got an alert saying it was going to rain on that Friday, so we used LA Casting to fill the entire Starbucks with extras,

Starting point is 00:11:25 except for the one seat available next to our agent. Oh, my God. She couldn't go outside. She had nowhere to go. So she sat with the other girl. Well, our girl started telling gold digger stories and how naive Americans are. And eventually the other girl opens up and explains

Starting point is 00:11:44 that she was going to marry this billionaire son, get her I-94 and her greeting card coming, threaten to embarrass the family, get a huge settlement, and then use the money to bring her real boyfriend over from the Ukraine. Now our agent was wearing a wire, but that recording is not admissible in court. It's not for the father because he already knows. You can't play it for the son because then he would know he interfered because we have to be invisible.

Starting point is 00:12:15 So that recording was just for me because I have to know we're doing the greater good. If they were actually genuine and they're actually in love, then I would have walked away. But now the sheep fallen on the wrong side of my fairness algorithm. So all bets are off, which I hope I never do. You, you never know. No,

Starting point is 00:12:32 no, no, no, no. The less I say is better. Go ahead. You're just have weirdly bad luck for seven years. So she, so then we, we thought about it a bit.

Starting point is 00:12:46 We got a psychologist for the teenagers to write a speech of exactly the wrong thing for the father to say to the son. And then an acting coach to teach him how to say it. And then we text them a signal on a Thursday night to trigger an argument between them. And then the father delivered the speech. He did a good job. Son an argument between them, and then the father delivered the speech. He did a good job. Son got all pissed off, went to his room, packed his bags, went down the street to his new friend's house. His friend was empathizing with him, saying, this is terrible, you should get revenge, you should get back at him somehow. He said, I'm leaving tomorrow on the jet to the Dominican Republic. My friend's getting married, but you're welcome to just hang here.

Starting point is 00:13:27 So as he's packing his bag, it eventually dawns on the sun. He has a power of suggestion. That's it. He should grab his girlfriend, have no prenup, jump on the jet, go to Dominican Republic with him and get married. So that's what they did. So my friend had the first wedding happen, about 50, 60 people there. And then the other son asked a few people to stay and they went up and had their

Starting point is 00:13:51 own, the second marriage. And then while they're on the honeymoon, she's sending off the marriage certificate and filing for her green card and so on. And we let that settle for about six months or so until her her uh initial paperwork's coming through she then decides to um embarrass the son threatened to leak a bunch of embarrassing stuff about the family unless he gives her a huge settlement so the son's friend says I know a discreet um divorce firm that can handle this which was us so the son sends her down to us for a divorce settlement first time she's on time for a meeting in her life if I give her the contract she's

Starting point is 00:14:39 flicking through it she doesn't watch TV or the news so so she doesn't know who I am. And she says, this is an acting contract. And I said, I know. You recognize the name. She goes to the back page and turns white because it was the name of the priest. The first wedding was fake. The attendees were fake. And the second wedding was fake. The second letter I gave her we'd intercepted was from Homeland Security banning her from the US for 10 years for marriage for immigration fraud because she submitted a fake marriage certificate for an unlicensed priest. The Uber was outside with her bags packed. We had a gag order for her to never talk to the son again. And then we had a handwriting expert write a dear john letter in his hand or her handwriting and send it back to him saying she didn't want anything from him and never want to hear from him again

Starting point is 00:15:33 so he did a big few and he's rebonding with her father who had never interfered and that was that so this is i mean like this is like real i mean you see you see the stuff in the movies and you're like ah man this is a cool mean, like this is like real. I mean, you see, you see the stuff in the movies and you're like, ah, man, this is a cool story. This could never happen. And then,

Starting point is 00:15:48 and actually it does. It just goes to show that, uh, again, if you have enough money, there's a lot of creative ways to solve problems. If it's a funded problem where you have over 10 grand to put towards it, then we can look at solving just that.

Starting point is 00:16:03 You just have a realistic budget for whatever you're trying to do. You can't go to the moon for 10 grand, but maybe for a bit more than that, we can reunite you with your biological daughter who never got along with you or find your father, even though you were adopted or whatever it is. Yeah. Well, I think it's pretty funny. The first time I met you, I don't know if you remember, but I don't know if you probably recall saying this, but the first time I met you, I was in a lawsuit, which is wrapping up. Thank God. It's going to come to the end of it and we're going to win.

Starting point is 00:16:29 And I told you I needed help with probably recovery of those funds. And you asked me how sophisticated the person was that was going to owe me this money. And I said, not at all. And you said, I don't care if he dug a hole in his yard and put the money in it. I'll find it. Okay. Yep. This is our guy. This is exactly what we need to do, which I thought was exceptional. Let's get back to kind of a little bit about the topic of risk, man. If I'm your average everyday person, right? What am I worried about

Starting point is 00:16:57 the most or what is the unseen thing that I should be worried about that I'm not worried about? What is it, Walter? Scare the hell out of everybody. This is what you're good for. Your right brain. Okay. So when we're born, we're generally left brain, right brain, 50-50. The emotional side is the right brain. The logical scientific side is the left brain. Based on our environment, mother's nurturing, et cetera, over time, we start leaning towards one side is more dominant

Starting point is 00:17:28 than the other. And then depending on how your environment works, it becomes more and more dominant. So you could be 60-40, you could be 90-10. If you are right brain dominant fully, you have 97% chance of living below the poverty line in retirement, the less than 16 grand a year. If you're left brain dominant, you have a 70% chance of making medium income or above. So think about it on the left brain, if you're a dentist, doctor, lawyer, engineer, scientist, programmer, even if you're terrible, you'll make 150 grand a

Starting point is 00:18:01 year. Just because you're left brain focused. If you're right brain focused, you want to be an actor, a singer, a sound bath specialist. Liberal arts degrees. And you're hoping to be discovered one day and you have no understanding of statistical likelihood or backup plans or single points of failure or any of these basic concepts of statistical relevance, you're basically going through life as a delusion. You have no understanding of when does something become real. You know, if I know that the last 32 guys who graduated from my computer science class all made 150 grand, then my odds are beyond reasonable doubt that I'll do the same.

Starting point is 00:18:43 But if I have no concept or definition of risk or measurement, then I'm just going to float around based on crystals and astrology and wonder why things aren't working out. Astrology, which honestly, man, there's so many people that do that. I mean, you look at… Not successfully wealthy people that do that. No mean, you know, you look at- Not successfully wealthy people that do that. No, no, no. Well, they were talking about what is the average income level of someone that buys lottery tickets, and it's very low. And I think it's that level of thinking, you know, that

Starting point is 00:19:15 what's got to happen to somebody, maybe the dream happens to me instead of doing something to actually fix it yourself. It's just one of those things. Well well the lottery is a tax on people who are bad at math okay explain that well the people who are good at math wouldn't play it people are bad at math they're spending money on it and losing on average so it's a tax yeah well let's get back to the left right brain thing is there a way that you can control which one becomes more dominant or is that just genetics dna that usually happens before you become aware of it it's not genetics because you're born at 50 but if you're aware of it um and you have enough brain plasticity left because some of us can change after the age of 24 then you can be aware of it so if i was an actor for example when i'm in front of the camera i

Starting point is 00:20:04 should be all right brabrained all day long. But as soon as I step out from behind that camera and I have to deal with selecting my agent, managing my social media when I don't feel like it, analyzing my contracts, coming up with my tax strategies, figuring out what I'm going to do after 40 when no one hires me anymore, et cetera, et cetera, that's all left-brained. And if I use the appropriate brain at the appropriate time, then I'm going to be much more successful than if I'm just stuck in right brain mode and

Starting point is 00:20:30 I'm going through my life with half a brain. See, I think that's interesting because you look at some of the really successful actors out there, like Ryan Reynolds, who's made way more money with like Boost Mobile and the gin he had. And now the new, uh, the mountain thing where you can buy, uh, ads on Roku. I mean, he's making, he's a billionaire based on those brands that he leveraged. And I think if he was just worried about the quality of his next script, instead of being able to turn that on and be a good businessman, there's no way that happens. Well, I don't know him personally, but I'm guessing that he has staff, assistants, managers, someone running his schedule for him, the agents at CAA and whoever's repping him. And you guarantee their left brain.

Starting point is 00:21:15 Yeah. So if you win the lottery and you get lucky and you get picked out and then you get surrounded by a left brain crew that compensate for your right brain. Yep. Then you can afford to be a rock star consistently over time. It's a lot of the same reason people hire us. They hire us to be their left brain. I mean, how many companies and friends of ours do we know where they,

Starting point is 00:21:36 their marketing and sales people who got lucky company, 30 million, 50 million, whatever it is, 900 million. They know they're going to lose it unless they suddenly kick in on operations, compliance, protecting themselves from disgruntled employees. Like, as soon as you make money, the hard part is keeping it. Yep, no money, no problems.

Starting point is 00:21:59 Those people hire us to come in and be the adult supervision and discipline necessary to stay in business because otherwise they won't. The likelihood is that it'll take them down at some point. Yeah. I have a phrase for that. I call it failing. I call it failing. What did I say?

Starting point is 00:22:20 Jesus, I forgot what I was going to say. I just absolutely, for the first time in the history of this, say, I get you on here and I'm trying to be all intelligent. And I just completely spaced what I was going to say. But it's like failing forward. There's a lot of people that do that. They're failing, but they're failing profitably. That's what I say. There's a lot of people in business that start stuff and they fail profitably. They make money, they're doing the right things, but they don't realize all of the things that they're lacking in. They don't realize all of the problems. They don't get it. Well, they don't calculate the opportunity cost

Starting point is 00:22:53 of what they're missing. So even in where they move to, they might be like, oh, here's the nice house and a nice garden. I'm going to move here 50 miles outside the city. And then realize that the entire network of people they accidentally bumped into that made their career in the first place has been cut off now. So calculating opportunity costs is something they don't factor in. And there's a great book called Fooled by Randomness that talks about this, that you can get lucky a few times and then think it's all you

Starting point is 00:23:26 and it's all skill and it's all talent until it runs out and you're fooled by your own randomness. Yeah. I tell people living in Vegas, I tell people that all the time that move here, whatever. Vegas exists based on that. You know, people who walk on a roulette table or look at the odds on something and say, well, it's due to land on red now because it landed on black three times. And it's like, well, it's not due anything. It's random every single time. Doesn't care. Yeah, I tell people the worst thing that can happen to you moving to Vegas is go to the casinos the first couple times and win. It's like the worst thing that can happen to you.

Starting point is 00:24:04 Because then you're like, oh, this is easy. This is great. I mean, one time my sister and I stopped in Shreveport, Louisiana on a long drive for the night because it was just the best place to stop. And there was, you know, we stayed at the casino because in Shreveport, it was the nicest hotel. And I'm like, oh, come on, I'll teach you how to play craps because it's just to have fun, right? Just whatever, goofing around. And we didn't, you know, playing low stakes, whatever, goofing, but she just was killing it. She was she was like oh my god we should come back every weekend i'm like oh it's not oh this is like a fluke it's not like this this is just for fun and i think that's the problem is those right brain people just start to assume well it's just me i'm lucky well i don't know

Starting point is 00:24:40 if you remember or not one of the biggest computer conferences in the world used to be comdex in vegas where all the software people come together, Bill Gates and Michael Bell and Steve Jobs and Larry Ellison. He's speaking at it, and I presented a couple of times there. And the hotels would compete over who gets that business, who gets to host the conference, because you get all these dot-com, very wealthy people in the late 90s and um the hotels are offering the rooms for almost free just to attract all of these millionaire programmer dudes

Starting point is 00:25:11 and i'm talking to the manager at a hotel afterwards he's like biggest mistake of his life because they all got up every morning walked straight through the casino all of them knew math so nobody gambled went to the turned around went straight back in the evening maybe they watched a magic show or something, but the casino made no money because they all understood math. I'm not doing that. Is there any game in a casino worth playing? Any of them?

Starting point is 00:25:34 If you're going to play for entertainment, what's the game? There were some I could consistently beat because of the flaw in the machines, but they've replaced most of those machines by now. If I say, Walter, just for fun let's go play a table game where we can play for a while maybe not we're gonna get rich but we're not gonna get beat up quick what's the game well your two options are the biggest uh odds would be playing blackjack and always holding

Starting point is 00:26:01 on 16 or just bet it all on red or black which you don't have 50 50 chance of because of the other squares is there 49 but if you bet big once and then you either walk away with a lot or or you don't that's it that's the only so you have a 49 chance and that's the best shot you got she said hold hold on 16. 16, yeah, because there's more than 50% chance of getting above a 7 in the next card, which means you go bust. Because most people stand 17.

Starting point is 00:26:33 They don't stand 16. They'll hit a 16 against a face card. Most people will. I don't know. Weird, interesting, wild things. Back to risk. Back to risk that i'm walking around now i know the right brain left brain stuff is stuff that you can't really control but in life in general what are some things that we can do to be less to help manage risk on a day-to-day basis

Starting point is 00:26:58 not necessarily the giant problems but on a day-to-day, like if you had to give somebody a real quick 10-minute risk seminar, what would it be? Well, understanding philosophy on risk, first of all, only an idiot repeats the same mistake twice. A normal person will learn from their own mistakes. A smart person will learn from someone else's mistakes, and a genius will avoid the mistake in the first place. Now, you want to decide where do you want to be on that food chain? I think I know where everybody wants to be, but do they have the ability to be there? Well, being aware of it is a good start. Yeah.

Starting point is 00:27:36 The next thing that's useful then is post-mortem analysis. So let's say I make a mistake and I lost my keys to the car. So for some people are like, okay, well, you know, I should have had spare keys. And maybe they'll get spare keys, maybe they won't. So that's the first level of correcting the mistake. If you got spare keys, I take that further. I go, okay, that's the mistake. Now, what are all the sibling mistakes of that?

Starting point is 00:28:09 Well, I should have spare keys to everything. All my cars, all my houses, et cetera, make sure I have spare keys. But then what's the lesson behind the lesson? Well, the lesson behind the lesson there is don't have a single point of failure. So now let's look at my life and see where else I've got single points of failure that may not be keys. So now I've not only learned from my lesson, made sure it didn't happen twice, made sure all similar issues don't happen twice, but then step back philosophically and went, what did I learn from this that could apply to the rest of my life? Yeah. I think that extra step is where most people don't do that.

Starting point is 00:28:45 I'm being honest with you. I probably don't do that. That's great to look at that. I think that single point of failure is what gets so many people in trouble because how many people are single income? How many people are so dependent on a single account for their business or a single everything, you know? Or married. Or married. Well, Walter, look, I know your feelings very well on the institution of marriage. I know they are. Oh, correction, not my feelings. Your feelings, your feelings. The statistics from the Census Bureau on two million marriages.

Starting point is 00:29:21 Not a feeling. Not a feeling. Okay, then I know the statistics on that. Luckily, at this point, I've been lucky enough to buck those statistics. There you go. But I understand, man. Sometimes just if the chances of drowning are pretty high, stay out of the pool. I get it. I get it. But yeah, having that single point of failure in people's lives, I think is eliminating as many of those as possible, I think is a great lesson to go forward. I think that's awesome. Well, how many people, how many of you have a company where you've got one tech guy

Starting point is 00:29:58 who's got all the passwords, knows how everything works, knows everything's installed, nothing's documented. And then as we got triple the size during COVID because that one guy got brain fog or got COVID, and then the whole company ground to a halt. And then we had to go in and unravel or rehack or figure out how things used to work with no documentation. So, yeah, it's worth applying that to your business too who can you not live without why aren't they backed up yeah i think the best thing i tell people for business is any employee that you have and this is a good good good exercise for them if you're paying them ask them

Starting point is 00:30:40 to write a manual about their job and just say look look, I need this because what if you get hit by a bus? You know your job better than anybody in the world. So, God forbid something happened to you. I want to have this manual so I can just pick up and run and have all of your employees, anybody you're paying, do that, I think is a good idea. It's a good idea. Would you like the better one? Yes, please. So, we provide a service for customers called Code Escrow.

Starting point is 00:31:08 And that's where once a month or so, we'll take a copy of all the source code in the company, move it into our own area in the Amazon cloud, and try to reproduce production. So reproduce your website, your podcast, your structures, get everything up and running, your shopping cart, and so on. And only if we get it working, this fake copy of everything, do we know that we have everything, we're not missing anything. Because you can back up all your code, but no idea how to restore it, you can restore it, but no idea how to install it, you can install it, but no idea how to set up your firewall. So how do you know that that person's manual they wrote is correct, isn't missing anything?

Starting point is 00:31:50 They didn't make assumptions going, oh, well, I assume they knew how the firewall works that I set up 10 years ago. How do you validate then that that manual they wrote is up to date and works? And the only way to do that is reproduce production. So once a month we'll reproduce production and then we'll shut it down. But you're doing this with online business, anything that's online. You can't do this with a brick and mortar. You can't do this with what? Can you do this with a brick and mortar business? Like all my businesses are brick and mortar. Yeah. There's versions of that called BCDR, business continuity disaster recovery. So if

Starting point is 00:32:22 it's a brick and mortar business, it's a case of, okay, once a quarter, everyone stay home. Now you have each other's cell phone numbers. Can you reach each other? Can you dial in to get whatever you need? Let's pretend there was a terrorist attack or chemical spill or an earthquake at the brick and mortar business. How much can you salvage and operate and work without getting into the business? Can everyone reach each other and contact and come up with a plan and know what to do?

Starting point is 00:32:46 And if you practice that every quarter, then when it really happens, it's a hell of a lot smoother than if you talked about it once and then never did it for 10 years. Which is what most people do. And they don't even have each other's cell phone number because they always saw each other at work. So business continuity, that's a big part of what Scorpion does. Those plans, those systems, that's a big part. Yeah. So if you think about the theme of what I'm talking about, quality assurance, business continuity, compliance, avoiding liability, avoiding single points of failure, it's all the defense stuff.

Starting point is 00:33:20 The problem with right-brainers is they're all about offense. And nobody wins the Super Bowl with only only offense. So where did defense? It's so funny. You're only taking a step backwards. Yeah. It's so funny you say that because I think that in my opinion, right? I think most great businesses that are people businesses that involve other people. You've got most of the people at the helm that are good at that are salespeople. They are very heavy, right? Brain. There are very, very charismatic, very salespeople, blah, blah, blah. They're that people. And I always call that. And I literally, in everything on my coaching, everything I do, I refer to that as offense.

Starting point is 00:33:58 And I always talk about defense being as important. Like you've got to make sure your defense is strong there as well. And I think a lot of businesses like do, do, do that. You talk about get spun up and these guys have an idea and they get very excited and they put it up and then it happens and then boom, it hits. And then before you know it, it's snowballed into this giant business without a lot of those fundamentals that should have been built that need to have somebody come in the back door and do. Well, there's a few reasons to do it. If let's say you have spun up that business and then you want to, what are you going to do? You're going to sell the business at some point. And if you're going to sell it, then the business is the product. And that product can't be just your charisma and you're a good salesperson. You need actual intellectual property, actual

Starting point is 00:34:38 operations, process procedures, manuals, flow code. They have to buy something. So your valuation of the business will be sorely hurt if they turn up and all it is is tribal knowledge in staff's heads plus one charismatic salesperson. That business is not worth much. So we come in and fill in the business so they can actually buy an operating factory that pumps out money. And since we're the ones usually used to do the due diligence on that, we know exactly where all the bodies are buried or what to look for, the skeletons in the closet. We effectively audit you from the inside and then fix our own audit till you're looking good. Yeah. You know, it's so funny because you talk about

Starting point is 00:35:22 business people. And one of the biggest problems, I think, that successful people have that are failing profitably, I like to say, is they don't really realize they have these problems because ego gets in the way. How often do you bump in with people that you're like, you can look at this in like five minutes and you're like, bro, I see all of these problems that you have that need to be rectified, but you're their ego gets in the way of being able to say, wow, I need help. How often does that happen? A lot. So there's a standard conversation I have with them. I mean, I, I will ask the CEO, do you believe it's possible? You could be wrong. Now, if they say, Nope, I'm always right. Then I'm like, nice to meet you, best of luck, and then I'll go short the stock. But if they say, no, of course, I could be wrong,

Starting point is 00:36:13 then my next question is, who in your life is actively motivated to tell you when you're wrong? Your family's not going to, your staff's mortgage depends on it, your board don't really know what's going on in detail. So who's around you to tell you when you're wrong if you know you could be wrong? And those self-aware CEOs understand the value of that conversation. I'm like, I'm going to form a group in a governance structure of the smartest people in your company, and their job is to veto you and tell you when you're wrong and say no, when you,

Starting point is 00:36:47 when you're trying to do something dumb and either you think you're smarter than your top six people, or you're humble enough to realize you're probably wrong. If they all think you're wrong. Yeah. Well, you become a real consigliere to them, like strict godfather style.

Starting point is 00:37:04 Like I'm going to tell you where you're screwing up. Yeah, I end up in a lot of mentoring situations. It's not necessarily that I'm always right. It's that let me take the people in your business that you don't talk to very often, what I call the boiler room folks, the folks on the ground, the folks who've been there 10 years, the ones in the stocking room and doing inventory in the back, the people everyone else goes to when something comes up that wasn't in the training manual. Let me put those guys in a room, set up a retaliation bubble, which means you can't fire them for the next five years, no matter what they tell you. And then set up a structure where they can tell you what you're doing that's dumb. And you can't be mad at them for it. And that's the most, and when a CEO embraces that,

Starting point is 00:37:45 it becomes the most valuable thing ever. And what ultimately happens is the CEO will attend a few of those meetings and watch the decisions those people make about running the business and realize that those decisions are superior and better thought out than the CEO could do on their own. Yeah, because they're doing the work. They ultimately feel relieved then and they're like, wow, I could go on vacation for two weeks. And the chance of all these six people being wrong is lower than the chance of that person being wrong on their own. Yeah. So they have to get more sleep, get to relax, get to think, get to be strategic and get to move away from micromanaging the business once they know this other virtual person called governance is managing it

Starting point is 00:38:25 for them. And, you know, for people that go through that whole rehab program, they're very thankful to me at the end because they have a valuable business. They're not stressed running it. And if they wanted to sell it, it's actually worth something. Yeah. Wow. Let's say I've got a small business, right? Let's say I have a business. What is the most, in a small business, I'm going to say like, let's say I'm an independent contractor. I'm a realtor. My own business, I'm selling stuff. What is the number one place where you think I should focus my energy into figure out where I'm leaking in my business or the controllables that aren't there or generating new business?

Starting point is 00:39:10 Neither, because both of those depend on you. Okay. So three priorities, there's 22 priorities in life to be successful and have to be put in the right order. But for the sake of this podcast, let's just focus on three. Okay. Number one, don't get worse. Don't go backwards. So don't lose your business, your contacts, your money in the bank, your friends, your laptop.

Starting point is 00:39:31 Don't get hacked. Don't have your place burned down. We have fire insurance. Don't have a car accident. We don't have car insurance. Just protect yourself to not get worse. Number two, seek and motivate validated sources of wisdom go out and find people who've done better than you in whatever area they're advising you on and come up with a way whether you're paying them

Starting point is 00:39:56 or being friends with them or whatever to motivate them to want to talk to you and be around you and number three then go make the most money possible with the least amount of time from three unrelated sources. So when COVID hits, it only takes out 33% of your income, not 100% of your income. One can be your passion business, and two can be what we call dumb businesses. Something, you know, parking lots, coin-operated laundress, something that doesn't require people, hopefully. Yeah. I love those simple businesses. I think they're great. I was trying to buy a – yeah, I love i love those simple businesses i think they're great i was trying to buy uh yeah i just i love simple businesses i think

Starting point is 00:40:29 if a smart person runs a dumb business that it can be very effective yeah um so my point in all of this is seeking wisdom with your time and getting that right consultancy around you is what will tell you whether you should increase sales, outsource it, quit the business, sell it quickly, fix it, put operations in or whatever, because you should only take advice from those you would swap lives with. So find some people you would swap lives with. If other people are making more money with less stress, then your first priority should be how do I learn from those people? Because otherwise you're just guessing where, at which area you want to work harder in. Right. All right. Let's, let's do a, let's do a real world deal. So like,

Starting point is 00:41:20 let's say you built your business up and then I'll give you, let's play real world with me. I'll be, you know, my, my, my honors, my listeners know I'm honest. So like our real estate company is, is a behemoth, right? It is a, uh, it's, it is, it is very high ranking, very successful, very big numbers. And when you score as high as we do on the chart, when, when you, when you hit the top of the charts, like we have in this, I feel like we become bulletin board fodder for every up and comer. Like they're just like, that's the company I want to go for. I want their people. I want their culture. I want their stuff. So it always kind of feels like these other companies are kind of nipping at our heels, right? Kind of nipping. Like you lose a couple of people here, they go

Starting point is 00:42:02 to there and you're like, oh, okay. Lose a they go to there and you're like oh okay lose a couple people there and you're like huh so how do you bulletproof when you get to the top of whatever it is you do how do you bulletproof your company in a way that you stay there well depending on the longevity if you wanted them to stay there for 999 years. There's a way of doing that. But if we look at it shorter, what if you promise them there's a few ways to do what they call matching trusts. So let's say I'll double everyone's salary, but I'll pay it to them over three years. So if you're making 100 grand a year now, I'll pay you 200 grand a year, but the second 100K will be paid out over the next three years. If you're making $100,000 a year now, I'll pay you $200,000 a year, but the second $100,000 will be paid out over the next three years.

Starting point is 00:42:50 So anyone who tries to get that person to leave your company would have to pay them over 200% of what they're worth, because they're already promised that other money to be paid out over the next three years. And you just roll that every year? Yeah. You do the math on it, and you roll it over. And if you just roll that every year? Yeah. You do the math on it and you roll

Starting point is 00:43:06 it over. And if you roll it over every year, then they're walking out on guaranteed money at any point if they ever leave. Yeah, but at year three, aren't they actually making double what they were going to make? Well, no. Well, year three,

Starting point is 00:43:22 they're collecting what they made three years ago. They're collecting. So they're making a third more each year than the $100K they had. So you have to pay them $33,000 more. So you just keep replicating this out over to the future? You keep pushing it out over time. So the second year, they still made $100K, but you doubled it to $200K, but you pushed it out. So essentially, you are paying them, you're just incentivizing them to stay.

Starting point is 00:43:51 You're just paying them slower, and you're incentivizing them to stay. So you're paying them better than they would have been paid, but you're paying them slower. You can also set up a matching trust in the business. So there's things called a dynasty trust, which I think is legal in Vegas as well, which can be a 999-year trust. And that way you can set up all kinds of matching incentives to imagine 100% commission where they'll get double whatever they brought in. Because if they bring in 100 grand, you give them 100 grand. But again, paid out over time. If you have a board of trustees who run the business after you've,

Starting point is 00:44:32 you passed away and you want the business to run as a legacy forever, then you take out life insurance on those trustees. As each of them pass away, the life insurance pays back into the pot that everyone's pulling from. And if you're not there, then the margin you would normally take, if you're taking a 30, 40% margin or whatever, you don't need it because you're not around. So that margin is used to retain the staff.

Starting point is 00:44:55 So again, it just depends on the goals. On the particular situation. I mean, by longevity. Well, cool. Well, give me, as we wrap this wrap this up we're about 43 minutes right now but give me one more one more walter story that i would normally get over a cocktail it's like this one time this happened this people would just think is crazy give me one more well um

Starting point is 00:45:20 let's say you needed to choose a winning racehorse or horse racing if we took the DNA from seven years of winners and seven years of losers and then compared that DNA you could figure out what the winners have in common called statistical regression. If you study them biomechanically and figure out that the thigh bone

Starting point is 00:45:52 is basically what drives the horse for speed, then the DNA that leads to a stronger thigh bone is what's important. If there's 34% injury because of the front legs, then you want to be able to reinforce the front legs or have the horses run at an angle so that if they're running uphill, the front legs are less likely to be injured. If they're born at a higher altitude, which is why Ethiopians win so many marathons, then their lungs will process oxygen more efficiently. So when they're then brought to a race and running on the flat, the air is richer and it's easier for them because they train by going uphill.

Starting point is 00:46:34 So effectively, like the movie Moneyball, you can take any situation, break down all the variables, isolate them, compare them, and then start optimizing. And yeah, any money we don't make on the project, we can make betting on the horse. And then you probably make more money betting on the horse than working. Did you bet the horse? Well, there's no limit on how much you can bet. That's a good point. There is a limit on how much you can make. Well, if you guys have a problem, if you're out there and you have a problem, more than $10,000 that you can bet. That's a good point. There is a limit on how much you can make. Well, if you guys have a problem, if you're out there and you have a problem more than $10,000 that you need solved. And literally, as you heard from today, any problem, anything you got, uh, Walter,

Starting point is 00:47:14 how do they find you, buddy? How do they find you? The shortcut is concierge up.com. Okay. Normally your concierge down. Things are too easy for you to do yourself. Or scorpioncomputerservices.com. But you just go there and you type in a little paragraph on your problem. You select the budget range that you have available for it. And you hit submit. And we'll have somebody get in touch. And that's as easy as that. And that's how we work.

Starting point is 00:47:40 I mean, you don't know what your problem costs. We don't know what your problem costs. So that's why we work on a retainer basis, like a law firm. You put down a deposit and then we'll work together every week transparently. And if there's no tricks and no tie-in, you can hire us today and fire us tomorrow and get your deposit back if you don't want to move forward. But if you think it's going somewhere and you like the intelligence of the people you're talking to, then you just put in enough deposit to get the job finished. And that's it. All right. Last

Starting point is 00:48:08 question before we get off. Hey, I got to kill us and when's it going to happen? Well, you don't have to answer that if you want to. I know you know. Go ahead. Go ahead. Well, if you look at the way things are headed, we have atomic level MRI scans now of the brain, and Elon's doing some good work with Neuralink on being able to access the brain directly.

Starting point is 00:48:37 Some of you may have seen the chimpanzee playing Pong without the joystick being plugged in. They're just reading it straight from the brain. That's the beginning of a computer brain direct interface. So eventually we'll be able to map our brains and upload them into the cloud. And if we do that, our brains become the learning corpus for AI like we've seen with chat GPT learning from the internet.

Starting point is 00:49:03 I think it's less about it killing us. It'll make us redundant and maybe 47% unemployment. But what would happen is ultimately we become the corpus for the AI and we merge. We merge. Yeah. Because if you upload the brain, if you can back it up or download it into stem cell clones,

Starting point is 00:49:23 then there's no concept of kill or dying or mortality anymore. Because you would just exist. Yeah, we are just electricity running on a biological computer. If you move that to running on a silicon computer, then you don't have to die. So we're all going to the matrix. So we're going to the matrix is what you're saying. We're going in the matrix.

Starting point is 00:49:42 If we're not already in it, but yeah, at least this time we'll be sure oh my god okay look walter brother thank you so much man it's it's always such a pleasure not just to see you but to hear your interesting stories and talk to you and i look forward to seeing you again soon thanks for having me thanks for the good question thanks buddy we'll see you soon what's up, everybody? Thanks for joining us for another episode of Escaping the Drift. Hope you got a bunch out of it, or at least as much as I did out of it. Anyway, if you want to learn more about the show, you can always go over to escapingthedrift.com.

Starting point is 00:50:16 You can join our mailing list. But do me a favor, if you wouldn't mind, throw up that five-star review. Give us a share. Do something, man. We're here for you. Hopefully, you'll be here for us. But anyway, in the meantime, we will see you at the next episode.

Escaping the Drift with John Gafford - Risk with Walter O'Brien Ep 86

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