My First Million - #116 with Kelly Erb - Tax Expert Breaks Down Trump Taxes and Big Businesses Ran by Few People

Episode Date: October 2, 2020

Sam Parr (@theSamParr) and Shaan Puri (@ShaanVP) are joined by Kelly Erb (@taxgirl) on the pod today. In today’s episode you’ll hear: Shaan introduces Kelly Erb and she gives her take on President Trump’s tax return (0:20), Shaan asks Kelly “what should business owners look at to minimize their own tax liability (10:30), Kelly gives some key tax points to focus on for business owners and how to think about expenses (16:05), Sam asks Kelly to explain QSBS for the listeners, Sam and Shaan riff on businesses that look big, but are actually operated by one or two people (32:30), Sam talks about what kind of guests he likes on the podcast (40:50), the guys talk about how involved a company should be in a political stand based on a letter from the Coinbase CEO (47:10). Check out this week's sponsor: Ourcrowd. They make it easy to invest in early startups. Go to ourcrowd.com/thehustle to get started. Joined our private FB group yet? It's a page where people share each others million dollar ideas or what they're already working on: https://www.facebook.com/groups/ourfirstmillion.  See acast.com/privacy for privacy and opt-out information.

Uh-huh. Yeah. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel, never looking back. Okay, sweet. So I'm here with Tax Girl. I'm here with Kelly Herb, who has a great handle and domain.

I got to give you credit. You've branded the hell out of yourself. So you have at Tax Girl on Twitter and you have TaxGroll.com. So already you're my kind of person for having this kind of pretty interesting self-branding plus most people who understand taxes don't understand social media and content, and you seem to do so. So am I right in that assessment? I hope so. Thank you for the same words. Yeah, no, I actually started out, I think pretty early on in the kind of the tax writing business. I was an attorney that just started writing about tax.

And at the time, I think a lot of people were writing really technical pieces. And I didn't think that made sense. So I was trying to be more accessible. So that's kind of how that evolved. And when I'm on your Twitter right now, it's showing me at tax mama and at tax tweet, as people I may like. Are these your rivals? Is it Tax Girl versus Tax Mama?

No. Well, so first of all, tax mama's awesome. She's amazing. No, actually, what's really cool about tax Twitter? which is our little sub-twitter, is that they're really great people. So we're not so much rivals as we are colleagues. Great. Okay, I love it. And you had this Forbes article go viral recently.

That was, I'll read the title. It was The Ordinary Taxpayer's Guide to the Extraordinary Story of Trump's Tax Returns. And I was looking at Forbes and basically I would say like you've been a contributor and I would say your normal post will get, you know, thousands of reads, of views, I guess. it shows it on the site. And this one has over 200,000 views. So this one definitely hit a nerve, which I'm guessing you kind of had an inkling it would or did this exceed your expectations? So the thing about tax coverage, that's really tricky, is that when you talk about views. If you were to look at my articles in March, you know, it's not unusual for

one to get a million or two views, right? But for this time of year, people don't talk about tax in September, just as a general rule. Like, you know, people are over it by now. So the coverage doesn't usually start up again until like December when people are thinking year end. So yeah, to have a lot of views on something that doesn't directly impact you as a tax story is pretty unusual, I'd say. I did expect some coverage of it. I think the thing that I got a lot of impact on social media, because actually I think it's probably been shared more than it's been read, is that people were interested in the fact that my, that particular article is more about the mechanics and not about the politics. And so I think that that was something that kind of

caught a lot of people's eye, because I think right now a lot of people feel like the information that they're getting is just so filtered that they sometimes just want to know the, you know, they just want to know the stuff. They don't want to know all the extra. And they don't want. When I read this perspective, this wasn't Trump is evil or Trump is the best. This was, hey, here's how you should think about this information that was released and what you can and can't draw from it, which I thought was a good kind of like just the information part that you're talking about. Okay.

So yeah, this got a bunch of views. It's like, you know, selling a Christmas tree in May. You sold a lot of Christmas trees in May randomly. So I think that's what's interesting about doing this article, not during tax season. So I think there's two things that I wanted to talk to you about. Number one was, you know, you say in this post, you're like, you know, I'm not going to kind of comment on, you know, this is not an opinion piece on, you know, to give you my take on Trump's tax returns because I haven't seen them. And you should go read the article. So I do want to get your opinion on it.

So even though in this thing you said, you don't want to talk about it, I am curious. Like, what was your personal reaction when you read the news, the New York Times article? So one of the things that's really interesting is if you've been following the Trump text story at all, and I've actually written about it as far back as 2015, you know, a lot of this information is not new to us. I think the thing that's so extraordinary about what the Times did is they have packaged it all at once, right? So I think a lot of the information, we've been hearing bits of this for, you know, years. A page or two leaks out and somebody talks about it on Rachel Maddow or people of, you know, Michael Cohen talks about it in his book. I mean,

a lot of this information that we're hearing isn't new. But again, I think what's extraordinary and what the Times did is they took other information. And that's what I think sometimes we lack, right, as just readers. You don't know if somebody, if I were to give you my 1040 and you would just look at it in a vacuum just for this year, you wouldn't really know a lot about me. You might could tell how many kids I have where I live. Like there are things you can glean from a tax return. But you might look at my business. What if my business last year was phenomenal on this year? It's not.

You're not going to know that from that one tax return. So I think that what the Times did and looking at so many years and then also looking at additional information and comparing it to FEC filings and SEC filings, it was a lot of information that they digested for the reader, which I think is really something that we haven't seen before. And, you know, to the point about a lot of people have said, well, why do we need to see it now? you know, I don't know that that's a personal decision on your part, but I will say that usually when you are evaluating presidential candidates, you'd like to know what the economics and what the finances are, not just in terms of, are they successful, are they not, but, you know, where are

their business interests, what kinds of money do they owe? You know, who do they owe that money, too? And we've seen that from other candidates and we haven't seen it from this president. And so I think that's what's really, you know, both interesting and extraordinary about what the Times did. And were you surprised, okay, you know, the kind of the catchy headline was Trump paid $750 of federal income taxes or federal federal taxes in that year. I forgot what year it was, 2016, maybe, 2017, something like that. Was that a surprise to you or you were like, no, that's not shocking? No, actually, the only, I will say, the only thing that I read that actually truly triggered a, and again, this is probably from a tax geek standpoint, but truly triggered a

hmm from me is, you know, we've known, I mean, the business loss is nothing new, right? We've known this. Good years, bad years. We've known this. We've known there's a lot of bad years. You know, no matter what has been portrayed. We knew there were a lot of bad years. But I think what was really interesting to me is when you look at the refund piece, which is kind of what everybody's talking about right now. There was one year in particular where the president was able to take advantage of Obama era bailout provisions to extend what's called carrybacks, which is where you can recover. If you have like a really good year when you're, that you've had a couple of bad years, you can balance those out so that you can either lower your tax bill going forward or you can get

a refund based on years previous. The fact that he did that isn't the part that I found interesting. What I found interesting was he was entitled to a large refund, which he got in 2010, according to the times. Right, the $72 million one? Yeah, yeah. And so that's based on several years from he got a refund based on some losses to recover from years that he had done well on the apprentice. He had paid some taxes in 0506, 07,08, and then he has a bad year.

he can kind of apply that bad year backwards and get a refund. And that part didn't surprise me either. But the part that I found really extraordinary when I was reading is that he, that went to a joint committee for review because the number is so big. That's actually by statute. Once refunds hit over $2 million, they go to a committee. So people are like, let's look at this and make sure it's legit, right? So that's what happened.

And that was kind of the crux of the audit that the president kept talking about every year when he says he couldn't release his returns because they were on audit. Now we know that that's what triggered the audit was that year because that's separate from the piece about, you know, presidents get audited every year because he wasn't president. Right. This is unrelated. But when you get audited, you know, sometimes that can go on for a while. But it's extraordinary for it to go on this long. And according to the Times, that's because they were unable to reach a deal. And the president kept consenting to extend the time to assess, which is like a move that

you can do for all kinds of reasons. But the thing that's interesting to me is they say that in 2014, at least the Times says, that in 2014 they were close to a settlement. And that's what I found extraordinary because as a business person, and I run my own show as well, you know, you don't typically like to have that kind of uncertainty, especially on the financial side, go on for that long, right? So that was the piece, I have to say, out of the entire report and the follow-up, it wasn't the losses of the depreciation or any of that.

It's the idea that as a business person, you would be close to a settlement in 2014 and then six years later still be hashing that out. And, you know, we don't know why it fell apart. we don't know the details. I'm not going to speculate, but I will just say, again, as someone who runs my own show, if I knew that I might have to pay back $100 million, I think I would, I think I'd want that resolve sooner rather than later. I see. Okay. All right. So that's sort of the Trump tax side of things. And the other piece of this is just, we have a lot of people that listen to this, that have their own businesses, that, you know, taxes tends to be your biggest

expense the more successful you get because it scales up with success in many ways. And I know for myself, I've spent the last six months trying to figure out how do I reduce my own tax burden because, you know, it's large and I want to be smart about it. And I started from a place of completely zero education around it. And now I'm like, oh, can I go buy a building, put solar on the roof to get some credits, to appreciate the bill? you know, I'm trying to think through what are all my options here? You know, should I be living in the Caribbean type of thing?

And so I just wanted to get from you kind of like, I don't know, is there a 101? Is there a dumbed down version of it that you could sort of walk people through of things that they should be thinking about or looking at if you are business owner and you're trying to think about, what, trying to think about tax strategies that you think work well? So, well, first thought, there's two things. So the first thing is that I kind of just to tie back to the Trump piece as well, you know, as you mentioned, taxes are a big part of being a business owner. It's rare that you're going to have a $750 tax bill. I mean, no matter what you do over and over and over. So I think the one thing people need to think about is not to compare their tax liability to other business owners because your circumstances are very different, right? even if you have two website owners, it's still going to be very, very different, what you do, how successful you are, how you spend your money. So the first thing I would say is just be careful about comparisons. But then one of the other things that you said, which I thought was really interesting,

you mentioned solar credits. I'm like, yeah, like as you're talking, I'm like, absolutely, those are things you can do. Yeah, because there are definitely things that you can do depending on the kind of business that you have that will reduce your tax liability. But you shouldn't, as a business owner, be too quick to focus on. lowering your taxes because as a business owner you want to maximize your profits, right? Not necessarily just focus on taxes and a lot of times to lower taxes you have to spend money. So you want to like those solar panels, right? So you need to figure out is that going to be a return on investment that makes sense? Am I going to earn enough tax credits to make up for the outlay

of the funds in the beginning? And I think that that's sometimes where people get stuck because they start thinking to themselves, I'm going to buy a car from my business because somebody told me if I get a I can write it off. I'm going to buy a new printer and a third monitor and they start adding all these things because they're deductions. If you could see me, I'm doing like little air quotes. I'm like productions. But those are also spending money. So you shouldn't get so lost in the idea that you want to lower your tax bill that you go down the road to spending money. What you should do, and this is I think where you are going, is that you should think of things that will make your business better that are also a tax beneficial. And that's where I think people get sometimes confused. Does a third monitor make

your life easier? If it does, then that's a really smart expense because it helps you be a better business owner and it's a deduction. So that's, I think my big takeaway would be to think of areas where if you spend the money to get the deduction or the credit, you're also getting a benefit to the business. It shouldn't always be focused on just lowering that tax number. This week's episode is brought to you by Our Crowd. Do you wish you were early in some of the best performing IPOs of 2019 and 2020? With Our Crowd, accredited investors have access to invest directly, easily, and most importantly, early. Our Crowd investors have benefited from OurCard companies IPOing like Beyond Meat or being bought by companies like Intel, Nike, Microsoft, and

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the rapidly growing multi-billion dollar robotic surgery market. You can get in early on Mimic and other opportunities at our crowd.com slash the hustle. If you're interested in investing, you need to join Our Crowd. The Our Crowd account is free. Just go to OU-R-C-O-W-D.com slash The Hustle. Great. And by the way, welcome Sam. Sam. Sam just joined. And so Sam, we're talking to Kelly about all things taxes. She is at Tax Girl on Twitter. And I think you have a podcast, right? Tax Girl podcast. Is that right? Yes. Okay. So if you like this, you can get more there. So I'm a big fan of this rule called the 80-20 rule. And the 80-20 rule, for those who don't know, is basically, you know, how do I get 80% of the results with 20% of the effort? And if you look at any project you do, it tends to be that 80% of the outcomes come from about 20% of the inputs. It's a common pattern you'll see you. If you invest in your venture capitalists, you invest in portfolio companies, it will tend to be that 80% percent.

of your returns will come from 20% of the companies. So I'm curious, Kelly, is there 80-20 if you were, if you're talking about, you know, if you're somebody who's looking for, what is the 80-20? What are the 20% of efforts I would take or, you know, what are the first few things that come to mind when you, when you're talking to somebody about their tax strategy, that if you, you can't learn the whole tax code book, but if you really just looked at these, if you focused on this handful of inputs, you can kind of get, a reliably large chunk of results from it in terms of, you know, being smarter about your taxes. What comes to mind if you're talking to a business owner?

Where do you point them to first? What's kind of one, two, and three? So I think first is business expenses, which is something that people are talking more and more about right now. And they can be, you know, office supplies. They can be new cars. They can be lots of things. But I think that one of the things, it's funny because when we talk about taxes, a lot of people assume that, you know, people overdeduct.

This is, I think, a myth, especially amongst business owners. I find that business owners are so worried about being audited that they actually under deduct. And to qualify, though, for business owner, you're referring to LLC, or can that include C-Corp as well? So all of them, I think. I think LLCs, I think, but I think especially on the LLC and the SOUPrect-2, so somebody who is filing like a Schedule C on their tax returns. Because I think when you have a corporation, and I have an actual corporation as well, mine's an S, but still, when you have a corporation, I think that you think about things a different

way in terms of how you separate home and business. When you are a smaller entrepreneur, maybe you have an LLC or you're filing on a Schedule C, I think the fear, at least amongst my clients, the fear is a lot greater because there's more, it feels like there's more at risk, right? You can, you could lose your house if something goes wrong as opposed to just the assets inside the C-Corp. So I typically talk about LLCs and pastors and schedule Cs because those are the most common.

Probably if you throw S-courts in there about 80%. Not a lot of people anymore do C-Corps just because of the, they're actually tax disadvantages and more tax planning required, if that makes sense. Yep. But yeah, like a business person, I'm thinking somebody who owns their own company again, usually as an LLC, like they use it as pass through because that's an easy way to do your taxes. And you talk about expenses. That's another example. Something, if you're a single member LLC, for example, just by ticking a box, you can actually eliminate an entire tax return, which saves you money because you don't need another, you know, step along the way. So you can eliminate an extra return. So I think a lot of times, business owners, again, especially smaller businesses, worry a lot more about, because they're looking at the numbers a lot. I think that people who are more involved in the day-to-day, they're looking at the numbers more. And so they're worried, they're the ones who are wondering whether or not

that printer, because they also use it to printout their kids' homework, really was a business deduction, so they don't claim it. So in terms of what I would say yes, too, I would say look at the ways you spend money and see if they could be recharacterized as business expenses, because I do think that more people under deduct than overdue. I would imagine, and Sean, what do you think, that most of the people listening are C-Corp people? It'll be a mix, right? So anybody who's kind of venture-backed will be C-Corp, but I think-in-for would be because of the issues with transfer. Right. But I think for the majority of listeners, I mean, of course there are venture-backed founders listening to this, but I think most, most people are, I own a roofing company. I'm a

consultant. I have an agency. I, um, you know, whatever. Like I have an e-commerce store and those will not be C-Corps typically. Yeah. So can you kind of quickly say what the, you kind of gave a good 80-20. I mean, basically you said that most people under deduct. What about for C-Folks? Well, I think that the difference is, and again, this is a, a, of its semantics, I understand, because it's really sort of all the same pot of money, although my corporate lawyer has been what argued with that characterization. But when you have a C-C-Corp, the difference in separation is a lot more, right? You typically don't use your personal credit card for your C-corporation.

You're going to have the C-corporation credit card, even if it's in your name. So even if it says Kelly Herb and then it says tax girl on the bottom, it's still probably registered through the corporation. It's a lot more tricky when it's an LLC that you run yourself. Maybe you're paid as a consultant or a freelancer or gig economy and the money comes to you directly. I think that that's where kind of the difference, where you see the difference, because it's a lot, if you have an American Express card that you only use for your C corporation, you know, and you buy things in the name of the corporation, the separation, the separation is a lot more apparent. So when you go to put things on your tax return, you see, here's the credit card. Now,

I advise my other business clients who are in LLCs or Schedule Cs, solo practitioners, all of those folks' partnerships, to also keep things separate. But I do think it becomes a lot more tricky, especially now in a COVID world, right? Because a lot of us are working from home. So all of the sudden, you know, I have a microphone set up in my office because that's the work that I do. my husband, however, hasn't been able to go into his office on a regular basis. So now he has one, too, even though that wasn't his deal. So that's where I think it gets tricky. I think it's where when things kind of overlap between home and business, you know, how do you draw those lines? And I think that that's where, when I say that I think C corporations probably deduct more reliably than other

kinds of businesses, I think that's sort of where I'm going is that I think it's that when there's not as clear as separation, it can sometimes be really easy to say, oh, I don't know. I drive my car for home and business. I'm just going to say it's personal rather than deducting those miles. But if the company was a company car, of course you're deducting it. So I think that that's where you see kind of the shades of gray. And so, Kelly, let's say, here's my experience. Here's been my experience. So I have, I've had people who just kind of like do the company books,

have an accountant who, you know, helps me with my taxes every year. I've done turbo tax on my own in prior years. What I really want is I want somebody who I could say, hey, I'm paying a million dollars in taxes in 2019. How do I not pay a million dollars in taxes in 2019? and I want, you know, who's Trump's guy? I want Trump's guy to come to me and basically be like, oh, here's what you need to do. You need to, you know, blah, blah, blah, blah, blah, blah.

Establish some domicile somewhere else. You need to buy this piece of heavy machinery and you'll get paid for it every month. Plus, you're going to be able to write it all off for this year and next year we'll do something else. Where do I find that person? Is that a tax strategist? Is that a pipe dream? And do I have to be 10 times richer than I am today? What should I do?

So it could be your accountant. It could be a tax planner. It could be a tax attorney like me. I think that where people, especially in when you're getting started in business, kind of fall down on that is that you don't want to spend a lot of money, right? So you do the turbo tax. You do the accountant. And what you do is you see that accountant one time a year. You see that accountant in March or April. And then you never see that person again. That's kind of like going to the doctor when you're sick. but they're never going for anything else. Like you've had a, you know, you've had a cough, but you didn't really want to look at it because it's not a full-blown cough yet and you're thinking you'll get it looked out eventually. That someday isn't a good thing to do.

It's the same kind of thing with business. You know, the person who knows who sees your books probably has a really good idea of areas that you could possibly get a better deduction, you could recharacterized into a credit, you might qualify for a deferral, they might have all kinds of things, of suggestions for you. But if you're only seeing them when you're handing up your data and signing

your return, you're not really getting the benefit of that. You should, at a minimum, be meeting with your tax person once a quarter. And let them look at your books and say, you know what? Turns out that because of COVID and the CARES Act, you may qualify for PPP money, which is the paycheck protection program, which also not only for people that had employees, but also for self-employed persons was applicable. That money was a loan, but it was a forgivable loan. So it's tax-free to you. So it's income tax-free. You could have gotten paid to keep running your company during COVID and not have to pay that back. You might not have known that or whether you can qualify for it without talking to your tax person because you're not going to get that in

term by tax. And so I think that when you say, like, who's Trump's person? It's not that he has a person, is that he has a team. He has accountants. He has an accounting firm, I think it's Mazers. He also has tax attorneys. I happen to know one of them is William Nelson, because I always remember that his tax attorney was Willie Nelson. So there's lots of, you know, he has people. And I think that that's sometimes where business centers skimp,

because they don't want to pay for people. But just like any other thing, like you talk about efficiencies and how you can spend money to get a benefit, those that people, that team, could maybe help you figure out strategies. Think about, and actually to Sam's question earlier, should I be a C or should I be an LLC? Does it make sense? You know, again, generally a C corporation is less tax advantageous, but the reason people do it is because they're, like you mentioned, venture, they're going to sell or they have foreign

investors. Like there's reasons why that might happen. But if that's not you, if you're listening and you are the roofing company that you mentioned, maybe you want the LLC. And you need to have somebody give you that information. Sean, do you know what QSBS is? I do, but I'd love for Kelly to say it better than I will. I would love that as well.

Kelly, and here's how I, I mean, this is how we've been thinking about it. It's this magic pill you take it. You don't have to pay $10 million in taxes. Yeah, I mean, basically you have, as long as you own a small business stock for four years, five, five years. you don't have to pay federal capital gains tax up to $10 million, of $10 million of the gain, correct? Well, I mean, sort of.

I mean, there's a lot of rules. And it's actually a relatively, it's funny, it's in the tax world, it's actually a relatively new rule because it's only been around since the 90s. So that actually makes it a bit of a new rule. But yeah, so it basically allows you to recharacterize stock that you have so that you can get a tax benefit for it. And it only applies to small businesses. The QSBS part of it obviously is qualified small business stock. But you have to be a C-Corps for that, which is I guess we were going with that.

So there is ways to, it is a way to reduce your tax liability. you want to go, you know, down the C corporation route. Yep. I have friends who have done this, and it's amazing. And you just look up the rules of if you qualify or not. You don't have to do anything in advance. I think you do it sort of at the end when you do have those gains. The other thing I thought was interesting,

there's the last thing I wanted to ask you about. I had heard the story that there's this guy, Peter Thiel, he was the first investor in Facebook. He was the former founder of PayPal. And that his investment, he put 500K into Facebook. and he put it in through like an IRA or something like that. Like he's been investing out of a retirement account so that his gains in Facebook were tax free essentially.

Do you know about this? Tax deferred. Yeah. I've had people do that with our company through IRAs. Yeah. So I think it was probably, I'm guessing, a self-directed IRA is my guess. And yeah. So, and there's actually, it's interesting because I haven't done.

as much right now because they those kinds of plans have been under attack from the IRA because a lot of the, I'm sorry, IRS, because a lot of them were perhaps being used in ways that they weren't intended to be used. But I actually used to represent a lot of folks who did that with artwork. They did and real estate. That was also self-directed IRAs were being used. It was art and being funded by art and real estate. But what you're talking about is when you have a retirement plan, and the reason I jumped in and said tax deferred, not tax free, is because when you have a retirement plan, the growth inside the plan isn't taxable to you until you pull it out. And so you can absolutely put certain kinds of assets inside the plan that might be appreciating quickly. And it doesn't

even have to be your company. It could be something like Amazon, you know, if you had bought Amazon back in the day and it was in your retirement account. It doesn't get taxed you as it grows. It only gets tax to you when you take it out. So it is a really good way to invest long term. Now where it gets tricky is like when you mentioned if you're going to be there are rules and this is where the IRS is looking. You know there are rules about the kinds of assets that can be contributed,

whether or not there are other people in your company and what kinds of contributions they're also making. And then you have to be careful about exchanges, like whether or not you're exchanging one asset inside the plan for another. So there are a lot of rules that govern them. But yeah, they're absolutely, people who are also doing this with crypto. They're doing it with gold. There's a lot of, you don't have to have a Vanguard account to have a retirement account. There's absolutely ways that you can fund them on your own.

And again, the particular thing I think you're referring to is it's called a self-directed IRA. Gotcha. Okay. Well, Kelly, this has been great. I appreciate you coming on and drop in some tax wisdom on us. As you can see, we are pretty novice. You know, what's before a white belt? Like, we're just signing up for the free seminar right now.

We don't even have our white belts yet. But I appreciate you coming on. And I love, I love, I love that you took expertise in one place and then built an online presence around it. Like if I was going to learn one thing from this, it actually wouldn't be anything about tax. It would be about, wow, look at this. A tax attorney created an online person. around tax girl. And I've seen doctors doing this too and they're making YouTube channels

breaking down sports injuries and getting millions of views by being a doctor who creates content. And I think that there will be more content creators who are specialists and professionalists in other like verticals that do this. And you're a great example of one. Thank you. Appreciate that. And if I could leave one piece of wisdom now just would be absolutely kind of going back to the thing that you mentioned before is just if you have tax questions, whether it is a well, website or whether you go to YouTube, it pays to get good information and no matter how you consume it. Because I do think that using those kinds of strategies is what can make you successful. Because again, you don't want to focus on paying the least amount of taxes.

You want to maximize your profits. Right. Yeah. And free tax advice is expensive. Yeah. Absolutely. Okay. Sounds good.

All right, Kelly. Thank you so much. Thank you. Sean. Okay. I've got something I want to ask you about. Yeah. Okay. So I was thinking about this course thing we're putting together. There are a significant amount of companies that look like they are one thing on the outside,

but behind it, it's just a bunch of people doing all the work. And I wanted to give you three examples. Go for. The first is I found a website online that you pay $150 and you get a cartoon dog canvas. And so what you do is, it's like, and I made a website to test it. All it is is you upload a photo of your dog. They send it out to like fiverr.com. They get the cartoon made for five bucks. And then you can get it put on canvas for like $25. They sell for $150.50. The second one is, you know pitchbook.com? Pitchbook. Yep. Okay. They do like 150 million a year in sales. A lot of their data they get because they hire these guys in India to like just, go out and cold call people and ask for like that's all it is i mean at this point i think it's a

little it's far more sophisticated than i'm dumbing it down to but that's like i believe how they made a significant amount of money and the second one or the third one is summarizing books so we're well this is a two part one we were talking about this company called card much and the way it started was this guy would he built this really simple app where he would take a picture of a business card and then on the back end there was human beings that would transcribe that business card and upload it to your contacts. Same with summarizing books. So like, OKCupid started this way where they just outsourced it.

And they just had someone summarizing all these books for like so cheap, like 50 bucks. Okay, Cupid did that? What do you mean? I'm sorry, the guy who started OKCupid had another company called SparkNotes. Okay, gotcha. Yes, spark notes. Sorry, yeah. Anyway, what else have you heard of that was like that where it's?

Well, we have a friend who did this in the textbook summary space. Yes. So he did the same thing. one of the one of the one of the I will ask him afterwards if we can run any of this I'll cut it out otherwise but one thing that you know you go by a textbook you it's a math it's calculus book for your your college class and then there's like at the end of every chapter there's these like problems with and they typically the textbook has like a solution at the back right you go look up the answer in the back see if you got it right but the answer is like one line it's like you know

the answer was C but you don't know why it was C you don't know how they arrived at C and so he got a bunch of smart people in India to like go through and actually hand solve all the all the chapter one two three four five all the questions in there with the actual show your work and people would buy these like course note solutions based out the textbook solutions that were actually like fully written out which they could either use to just like fill in their homework without doing their homework or to learn and be like oh that's how you actually solve that problem cool this is like a tutor but way cheaper um And so that was, I thought, a really good hustler solution to that problem. What I think someone can do, and I think I personally, I don't want to do this. I think I could do this in a matter of 30 days is build a company by going to Fiverr.com finding one of two things. One, the most impressive $5 bit of work. Right.

Something that like I would see this and be like, are you kidding me? This is only $5. Then I would make my own website and make it look amazing and sell it at a massive uptick and then just manage the contractors to get it done. The second thing that I would do is find talents on Fiverr. Fiverr, for those listen, it's a, a marketplace for jobs that cost $5. Of course, now they do like more than $5. Now nothing costs $5. Everything's $20. Right. So it's, but it's like, like someone's like, oh, I'll narrate your 30 second commercial. Right. I'll make your podcast intro. Yeah, which is I think how this one was done.

or at first maybe but um i would find a fivered job that was positioned poorly and i would reposition it and market it just like that so for example i found this guy who would do cartoons i would just say oh i'm just going to make it strictly dog cartoons send me a picture of your dog like you know what i mean or i will narrate this thing for you i'm going to turn it into like custom voicemails by the guy who sounds like blank right or like donald trump impression voice mails. Right. Yeah. You take impression guy who does a good Donald Trump impression. You're like, okay, cool. This is Donald Trump wishing you happy birthday for $35 as a service. Exactly. And so you just fix the positioning. Right. I'm looking through Fiverr right now and looking at the popular

categories. So a lot of them are on like basically some kind of either, it's a lot of like creative arts. So design, music, video, things that people typically don't have the skill set. to do themselves. So it could be like packing, like coming up with your brand packaging, fixing up your personal website, your portfolio, creating a logo for your brand, right? That's like one of the most common fiber jobs ever. And so there's a bunch that are like that. There's like hand illustrated portraits of you. There's voiceovers. There's impressions. There's, I think there's a lot of these. Somebody called this, I think productized services. Basically, it's something that's traditionally done as a service, but you productize it so it seems like, oh, I click this button and I receive

this product back. I received this end output. And underneath the hood, you're farming it out to Fiverr and Upwork and you're just connecting the dots for people that don't know that that's where they should go look. They don't want to take the time to go find the right person and write a brief and all that stuff. And you sort of automate that workflow. Yeah, and it's not like a scammy thing. I kind of presented it as a get rich quick, kind of lazy way to do it. But of course, there will be work. You have to vet the people. You have to make sure it gets done in a timely manner. If there's revisions, you've got to handle it. Basically, but the vetting the part, vetting the person. I remember Ryan Beagleman was the first person who I heard talking about this. I forgot what he

called it. But he had a great example. He had an example of some businesses doing like millions of dollars a year that was literally just what you're talking about. I like, I didn't, I, I definitely oversimplified pitch book, but I was like reading about it. I'm pretty sure they just have a team of like literally 300 guys in India who are just scraping massive amounts of data. Right. Scraping it by cold emailing and cold calling people and then like writing things down. And also probably just like aggregating. It's an actual scraping, yeah.

Which is a technical skill, but yeah. Yeah, actually I think scraping would be a great one for this, which is like, oh, I need a list of this number of, I need leads about this. And it's just like, cool. Just describe what you need. and if you pay me $200, I get you a list of 150 people that are like that. Or if you want a thousand people that fit that criteria, great. And it's just basically saying, I can go scrape this for you.

You don't know how to do web scraping, but I do. So you only have a few minutes you said, right? Yeah. So I was, I did something the other day. I asked people how they would describe the podcast. On Twitter, I said how I hate the name of my first million and how it's stupid. and how I hate explaining to anyone who I don't know about what I do and like how I co-host this. Yeah.

But for the rare person who like is like you and I, it's like an addicting thing, which is what we hear consistently. Yeah. And I said, so how would you explain the podcast? And I got maybe 200 responses in the short amount of time. And one bit of feedback you and I got. And I rarely give it to this shit, but they are totally right, which is we have had almost all dudes on this podcast. We definitely need to get different types of people.

Have you noticed that? So yes, I've noticed that. That was feedback. We got pretty early on. We made an effort to try to balance that out as best as we could, but also we got rid of guests. I mean, literally on this episode, we had a female guest from a totally different background, right?

Tax attorney, very different. So I don't know. I think yes, the feedback is valid, but also, yes, we're aware of it and have tried to make strides on it. And yes, we probably also have a long way to go. And yes, I also am kind of exhausted by it and don't even like having guests on anyways. So I don't know how I feel about it overall. I like having guests if they're like huge, interesting people. Like the Thai Lopez thing, like we got so much.

Can I read your conversation from this morning? out of Slack. This is the Sam Parr experience. Okay, so Sam goes, where is it? This is what it's like to work with Sam. So Abraeu says, good news. We're about to sell out of ads for the rest of the year and into next year. Sam just goes, well, how much money? Also, we need banger guests once a week, like the founder of Shopify, Google, famous people. And then Abraeus says how much and then says who's buying it out. Sam. That's fucking bullshit. That's way too low, period.

No solution offered. Oh, very you. Well, okay, also for guests, we have the founder of Lambda School and the CEO of Shopify coming on next week. Those are getting interesting. But how about bigger? Like fucking Hillary Clinton. A period is like, I don't know, dude.

Talk to sales. I think the rate we're getting is pretty good. We just need to blah, blah, blah. And then he says, by the way, today we have a tax. video on who's going to talk about Trump's returns. I just thought it was so funny. I was like, man, working with Sam is like, it's like working with the weather. It's like some days, it's sunny and bright and you're like, I love the weather.

And then some days it's like a thunderstorm and you, but you don't blame the weather. The weather's just the weather. You don't get angry at the weather. It's like, I'm not, the thing about me is like I'm not actually like, I'm like one of those guys who I'll yell. And then it's like, good? Yeah. What's going on? You know what I mean? Yeah, for sure. You're not actually angry at anybody.

I just thought it was really funny the way that you reacted. Actually, let's bring a brayu in. A brayu. What was that like to be the receiving end of that response? This is now an intervention for Sam. I'm surprised you brought it up because, like, I just thought that was like normal Sam. Like, if he had responded a different way, if he had responded a different way, I would have been surprised. You'd be concerned?

No, I'm like, yeah, this is the reaction you got. I know, but yes, this is the normal Sam, but is this the normal of what you are used to? Or do you like it? Do you dislike? Because some people might be like, yeah, I'm fired up. I like that. Just straight talk and tell it like it is and don't, you know, don't sugarcoat it. So where do you stand?

How does it feel to be others? No, it feels normal because I think I get Sam's personality. So like when he says that, I'm like, yeah, that's normal. And I know how he would say it. I know how he would react to it. So it's not like, I'm not like, oh, Sam's yelling. I'm like, oh, yeah, Sam. We were recording this course yesterday, and like, midway through, I'm like,

I don't, I don't fucking have it today. This is horrible. And so we just had to end it. So, yeah, I would say I'm, I've up and down, ups and downs. But it's very transparent how Sam feels. Like, I don't like people who, like, kind of hide or, like, their personality changes. It's like, right? You hate to guess how somebody's feeling about something, about your work, about you, about

whatever. And I would say, Sam doesn't make you guess. Do you want to, I don't want to make this about me, but this is for anyone who's like crazy. So, and I know you got to go. So I'll make it quick. I'm hiring what I call as a C-O. In reality, this person is going to be my CEO of the company. Why don't you just call him CEO?

I told them, I go, I'm going to call you C-O at first so I can fire you really easily if you suck. And then after a while, we'll transition you to CEO. Frankly, it's going to be a CEO. And the job description says, like, don't take this if you. And I like, it's the job, the job description is literally just reasons why you should not take this job. And people have liked it. And one of the things that it says is you just got to be like the straight woman or straight man to like me being nuts. And this, the whole interview, I'm just like telling these people. I'm like, so I'm like kind of crazy.

And you're going to have to like just figure out how to handle that a little bit. And I was like, I'm not like actually like an ass or I'm not actually nuts, but like, I'm, creative and whatever. And so it's being... I don't know. What do you want to call it? It's just like, I'm just like high energy and... Very humble. I was super good looking and I...

John, you missed the best part of that Slack Exchange, which is the picture that you posted on Twitter. Like right before you started reading, the picture that he posted on Twitter. Oh. I thought he was going to get roasted for that. I didn't even see this. Oh, what is this?

Who is this? What are I looking at? it's a photo from a conference so I had a fly somewhere to speak at a conference and it was like it was in a different country and I was exhausted in the morning and they're like all right come take your picture and I was like I don't want to do this and so they took a picture of me and I looked like a grown up Bart Simpson okay yeah okay so yeah there's a headshot of there's like a professionally done photo of Zab and then Brayu says you look like a bootleg carl lents and you're about to drop the worst gospel album of all time and then this is what I missed this whole exchange and then Sam posts

a topless picture of Carl Lens where he's just absolutely ripped. He's like, you're right. Super similar. The whole slack that people should pay to just be in the slack. I think that's ultimately whatever. Either way, slack, I've decided is a cancer to my business. I hate Slack. I hope they're not sponsoring it. Whatever. Sorry, guys have the bag. I think Slack is the worst. It has ruined my work life. Do you like Slack? I love Slack. I think it's great. Oh my God. I don't want anyone talking to me. I have people who message me on Facebook Messenger, Twitter DMs, text message, Slack, email. What else is there? That's it. It's the worst. It is the worst. It is horrible. I hate all these messages. And in Slack, six. Right. Well, to the future CEO of the hustle. Good luck. Dude, we're interviewing a bunch of ballers. We're interviewing all these people. And I'm like,

why is this guy talking to me? That's great. I love it. Okay, one last thing about CEOship. You saw this Coinbase letter memo that went out. What was your reaction to it? Totally on board.

Okay, so I'll explain it for those who didn't see it. So just go look up Coinbase memo or something like that. You'll find it. The CEO of Coinbase basically emailed out like, kind of a confusing little email, but like what he was basically saying was... It was definitely poorly written.

It's poorly written, but he was like, hey, at work, like Coinbase is not going to like take political stands around causes and also like when you're at work just be at work. I don't want to be debating politics and social issues like that's kind of a distraction from our mission. And if we do put resources and donations and we do care about causes, it's causes related to our mission, which is let's say I don't know, like an open financial currency system or something financial system, which is like, you know, the crypto world.

So like we're all about growing the crypto economy. that's what we're going to focus on. That's what we're going to do at work. That's what we're going to talk about at work. Those are the causes we're going to support. And everything else doesn't have a place here. If that's not a place you want to work at, like there's a meeting with your manager

where you can go and get another job. And so that's kind of what he said. And people were really split on this totally polarized. So I would say like there was like Paul Graham and who's the founder of my combinator who was like, pretty much anyone who's libertarian, like probably me, definitely me, probably you. I don't know what you consider yourself.

was like, oh, yeah, this guy's awesome. And then anyone who's liberal, or I'm generalizing, was like, you know, how dare you not support X, Y, and Z? Right. But there was like a bunch of, you know, prolific people chiming in. And it was just interesting to see how split the opinions were. You know, Dick Costello, the former CEO of Twitter was like, this is not good leadership. This is like, this is basically saying, you know, shut up and dribble to your employees.

and there was other people that were like, like, yeah, dude, I want work to be about work. And I don't want it to be about all these other things. And I don't think that we should be taking these stands. And I also just, I don't want that. It's already in my world everywhere else. I don't want an infiltrating work. And I want work to be about performance.

Shut up and dribble analogy is actually stupid because he didn't say he doesn't want his employees to mention anything. He just said the company, like the company is going to not stand for anything, but you can do whatever you want. And don't say, don't talk about it at work. Yeah. And so I don't think that's the same as shut up and dribble because it's just says while you're on my time, shut up and dribble. While you're on your own time, I support you as a human. You can do whatever you want.

Right. I think that my thinking is if you have shareholders other than one person, you should try to your only job is to make your shareholders your shareholders wealthier. And all you should care about is business. And if you only care about business, you'll likely have happy employees because they'll feel like they're succeeding and things like that. If you own the whole company, I think you should make it as political as you want. You know, like this could be your vehicle. This could be the Sean vehicle to do anything he wants. And so the other argument is, no, we live in a society and like companies should basically be helping society.

And if there's societal issues, like we should have the courage, we should have the backbone to stand up and say when something's wrong. Kind of like that old quote, I don't know the quote exactly, but it's sort of like, you know, they came for the Jews, but I, you know, but I'm not Jewish so I didn't say anything. They came for the for the bankers, but I'm not a banker, so I didn't say anything. And it's like, they came for me and there was nobody left to say anything. It's sort of like that where if, if there are wrongs happening and a company, you know, people and companies, people of power, which are in some ways organizations, don't say anything, don't do anything, don't use their platform and their influence, then that's a shame.

And I don't want to work at a place like that. That's another take that people have. it's going to get split. I think you're going to get two types of companies. You're going to get companies that lean into the activism and people work there because they're like, yeah, that aligns with my values. And then you're going to get other people who are like, I don't want my work life to be so political or like to take a social stance on everything. I want work to be about business. I want, you know, I want it to be about the actual mission of the business. And I think it's going to get split. And then people will self-select where they want to work. And by the way, I think that last

argument you made is actually a really good argument because in my head I'm like, well, we would hopefully know like what's actually serious and what you should like say no to. And then maybe a lot of people will be like, well, this is serious. Like, why aren't you saying? And I'm like, I would have to actually walk through that exercise on how to figure that out. Right. And the other interesting thing was the sort of rumor mill was basically, because it was like, why did you get, why did you post this like really weird thing?

it was sort of weird because it was like this is something he was saying to his company but he published it and was like I want other leaders to learn from what we did and everyone else was like so split that it wasn't like this great example of anything and then some somebody on Twitter and her name's Erica Joy she's a black woman on Twitter and she was basically saying by the way the inside scoop of this is that he was like you know his hand was being forced the engineers walked out because he wasn't saying X, Y, and Z. He wasn't saying Black Lives Matter. he wasn't the company did nothing when all the other companies were standing up and saying something

and so he was being pushed and then this was his like tantrum back about like okay uh you forced me three weeks ago because the weird thing is like three or four weeks ago he posted on Twitter I want to unequivocally say black lives matter and here's you know here's why that's here's what's wrong in the world and how we should work to fix it um and so she was basically saying like he didn't want to say anything. He was being pushed to say it. Engineers walked out. So then he put that statement up. But this is like the retaliation weeks later of like, look, that's not going to happen again. Like that's not how our company is going to run. If that is true, and I'm going on glass door right now and going click on most recent. If that's true, then that's awesome. I think that's baller.

I think that like, what of him? Yeah, of him. If like someone threatens you like, you know, if you don't do this, I'm out. In most cases, you should say, all right, bye. Right. Like just for that, just like that. I would say that's kind of the point I agree with you the most, which I think we both believe you should run your company the way you want. And then you should deal with the consequences of running your company that way. Rather than this general idea of everybody needs to run every company the same way,

which is the right way as dictated by the mob of Twitter or the mob of, you know, X group. And, and then people doing shit that they don't actually even believe to be the right way to do things. It's not even actually what they want to do, but feeling like they're going to get canceled or fired or whatever if they don't. So I think the better world is people do what they actually think they should do and then let the chips fall where they may. And then people will self-select around joining companies that are the type of company they want to be, you know, the type of company they want to join. And by the way, I don't entirely buy that story simply because I'm on glass door is like the one of the best place to get information on and learn all about a company. typically the reviews are too good or too bad, but so you got to like divide by half to get the middle.

And anyway, I looked at the reviews. I don't see a thing on that. This is a type of thing that an employee would quit or get fired over. And that's the first thing they would complain about. And I don't see one thing since March that relates to that topic. Well, I think some of it's definitely true. I think there definitely was a walkout.

The question is, did he do this because he learned, oh, the company feels this way and made it made some decisions or is it truly like a kind of a retaliation or response to that? I don't know that part. But I think the walkout part was sort of confirmed by lots of people who work there. Now, I also would say, you love Glassdoor. I never use Glass Door. I don't know anybody who writes on Glass Door. I'm sure, obviously, people do. But I don't know how on the pulse, glass door is, let's say. I'm not sure it's like in the same way that I don't think Yelp is, I don't agree with Yelp most of the time. And I know what it's like in our company and I don't know if I would agree with the glass door reviews of it either. It's a signal. It's

a signal. Right. But what you're saying is if nothing's there, then it's a lack of signal. Yeah. Yeah. I mean, like it's a signal. Like for example, if something on Yelp has 10,000 reviews and they're all positive and something has only three reviews or rather 10,000 reviews and it's only okay versus 10 reviews and they're all like perfect. You're like, what's going on here? Like this 10,000 thing actually might be pretty good if it's so popular. You don't look at the number. You look at a variety of factors. And that's how I use Glass Door. And I think that it's like a fantastic way to do, figure it out. Very cool. All right. I got a run, but interesting episode. It's going to be a very different episode. We got the tax thing and then we got just kind of random shoot the shit at the end.

Well, I think we kind of crushed it in the last episode, although I didn't get a ton of feedback. It just went out today. Okay. We're going to get. I haven't got any Wap blow over, which is what I was expecting. Yeah, where are the tweets? Okay, I got to go. See ya.