The Iced Coffee Hour - Billionaire's WARNING: The Housing Market Will NEVER Be The Same (Do THIS Now)

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Starting point is 00:01:26 What is the total value of all of the businesses you own? If you put them all together, at any given time were worth between 10 and 20 billion dollars. Canada's iconic Hudson's Bay Company is snapping up luxury American retailer, Sax Fifth Avenue. Richard Baker, the head of Hudson's Bay, has told analysts he plans to move quickly. And by the way, I bought each company for almost no money. I bought the companies and borrowed against the real estate assets that were inside the company.

Starting point is 00:01:54 Is recreating this harder in 2026 than it was 10 years ago? We're going through an unbelievable period in the next 10, 15 years where folks are aging out and these families are selling these properties. And Blackstone doesn't want to buy them. These are great properties and they can buy them efficiently. Where do you see the economy heading over the next 10 years? If you believe in a world that's going to have a lot of inflation, you want to buy as much real estate as possible with as much non-recourse debt as possible. And you're going to make a lot of money. Richard Baker, thank you so much for coming on the iced coffee hour. Nice to be here.

Starting point is 00:02:35 So you spent nearly two decades buying and reshaping some of the most iconic names in retail. You acquired Lord and Taylor for $1.1 billion. You purchased Hudson's Bay Company in 2008 and took it public in 2012. And you later bought Saks Fifth Avenue and Neiman Marcus together in one of the largest luxury retail deals ever attempted. What do you understand about money that most people do not? So I had a premise in 2005. The premise was that there were a whole series of operating companies that owned their own real estate, and the financial markets didn't understand or appreciate the value of the real estate that was hidden in these companies.

Starting point is 00:03:15 So in 2005, I literally put together a memo where I wanted to buy Lord and Taylor, Hudson Bay, Gallery of Koff in Germany of all places, Saxford Avenue and Neiman Marcus. And my goal was to buy all of those businesses because they were all dying department stores, but underneath hidden in those dying department stores were these huge real estate portfolios that were worth tremendous amounts of money. Why did no one else see what you saw? I don't know because I grew up thinking there was something wrong with me because I always walked around and saw things differently than everyone else saw them. And by the way, this didn't just happen in one day.

Starting point is 00:03:54 I bought them over a series of, you know, 10 years. So people knew exactly what I was doing, but for some reason, other people couldn't do it the same way I was doing it. And by the way, I bought each company for almost no money. I bought the companies and borrowed against the real estate assets that were inside the company. So what's the biggest difference between how wealthy people think about money and how everyday people think about money? I just work hard every day to figure out how to create value and, um, um, uh, I do look at things differently than other people. So I listen to your and watch your show all the time.

Starting point is 00:04:31 And a lot of the folks that are on your show are a lot of the folks that are out buying real estate today or buying on cap rates and are buying on returns as an investor. I don't think of myself as a real estate investor. I think of myself as a developer, someone who creates value, not someone who buys to get a return. And if you're teaching someone how to think differently like you, where would you start? Okay, so I think the average person is thinking about real estate as an investor and how do I get a good return. And I'm thinking about, and I'm thinking like an operator when I buy real estate. How can I make the real estate a lot better?

Starting point is 00:05:09 And that is very important because I'm less prone to the problems with interest rates and what's going on a particular market. So I'll give you an example. We were with someone this weekend and she had a yoga studio. So her yoga studio was doing great. She was able to move her yoga studio from Pittsfield, Vermont, to the next town over, which wasn't as good. And she was able to buy a building. And her customers moved with her to the not so good area. And she bought the building super cheap.

Starting point is 00:05:39 And she was able to create value with content and an operating company. And in terms of what you were doing, you said you bought with very little money down. how do you explain exactly what you do to someone who has no idea? I'm looking for situations where I can create value between the time I first see the property and the time I close. So, and that's done with relationships and that's done with knowing a particular area very well. I'll give you like a simple example. If I have a great relationship with Starbucks and I know that they're growing and expanding into, Western Massachusetts, and I can find a site in Western Massachusetts that I know would work well

Starting point is 00:06:26 for Starbucks. My goal would be to negotiate to buy the property. While I'm negotiating to buy the property, before I have to close, I sign a deal with Starbucks. So when I go and finance that deal, I finance it with a signed Starbucks deal. Tremendous difference. And I get more financing, put much less money or no money in and create a lot more value. I think my problem is that in order to capitalize on this education or the information you're giving, you need to already have a ton of money, a ton of resources. Totally disagree with that. You disagree with that.

Starting point is 00:06:59 Totally. You think anyone can just go out and buy and just buy a Starbucks. Every situation is different, but yes, I do and it happens all the time. And in fact, I still do deals all the time with no money. I know I have more resources and more relationships. but one of the things that we do is we coach folks on how to do a deal, just go back to the lady with the yoga studio. That's a great example.

Starting point is 00:07:20 Or think anything. Pop-up bagel just sold 250 master franchises in one day. They're going to open up pop-up bagels all over America. So if you're friends with someone who has the pop-up bagel franchise for Nevada, then you can work with them in order to figure out where they want to be and find a location. that they're going to be happy to rent from you because they can't do all of them themselves

Starting point is 00:07:45 and you sign a lease with them simultaneous or before acquiring the property and if that doesn't give you 100% financing it's going to give you a lot more financing What if you don't know the bagel guy? Yeah, the average viewer listening to this right now is like sitting in their room they're not living at their...

Starting point is 00:08:03 Maybe they're living at their parents... Maybe they should get out of their room and go out and meet people and go and walk around and understand what's going on in different communities. I was on the third. today was someone who was asking me about a deal. I was like, have you been to the property? Oh, no. I was on Google Maps and I looked. I said, don't ask me questions. Go drive around that property. See what the

Starting point is 00:08:23 neighbors are. See how the parking works. See how the stoplight works. See if it's a good piece of property. By the way, I bet you the future tenant for that property is probably within 200 feet of what's there. There's some car dealer or some bagel guy or whoever. it is who's looking for more space or a better location or a different location. So you have to go out and look at things. And you're right, it's not easy. If you want to create value the way I create value in the way millions of people create value in real estate, you have to have something called hustle. You got to like get ahead of it. Where do you meet these people? Because I knew a guy in Vegas who claimed that he knew the guy who was like in charge of the Starbucks, West Coast

Starting point is 00:09:07 locations, and he'd be able to buy like this plot of land, call up his business. And he'd be able to buy like this plot of land, call up his buddy, and then his buddy's like, yeah, we could put a Starbucks there. Then he builds it and he sells it at like a four cap. But if you don't know these people, where do you meet these people? It's a process. So I'll give you an example. Let's just say you have a job presently, and you work for a shopping center company and you're in charge of leasing. That would be a great place to start. Or you're in charge of construction at this shopping center company. I'm just using an example. You're meeting people.

Starting point is 00:09:39 that want to lease space in those shopping centers. So I'd be working my day job, leasing space in the six shopping centers that I'm responsible for. And as we're renting space to Dollar Tree or whoever it is, you're meeting those reps and you're getting a relationship with those representatives. And sometimes they switch to other companies and you stay in touch and you communicate. And then I'd be out looking to buy a vacant piece of property or a vacant building near one of those other buildings that I'm presently managing. because I have relationships with tenants already in that area. And that's how you do it. Yeah, I would say that's a pretty huge if, though.

Starting point is 00:10:17 Like, you know, let's say we have 300,000 people that are watching this, and 10 of them are in that position of, like, you know, they're already working leasing at some sort of shopping. Like, that's a very huge is. Okay, let's go to a different scenario. Fine. So multifamily. So there, and there's, let's use veterans for a moment.

Starting point is 00:10:36 So veterans have a tremendous advantage. multi-family, and they can live in one unit, they can buy a four-unit, multi-family project, they can get 100% financing, they can live in one unit. They can, if they're handy or capable or whatever, they can fix up the units and do what they want to do in the units. And that's a great way to create value. But I think that's also another huge if. Like, if we're only applying things to certain like small demographics people, you have veterans and you have other people working like shopping centers. So like, let's just say the average person out there watching this.

Starting point is 00:11:07 Maybe this isn't for the average person. So this is for people who want to create value and want to hustle and want to work hard. I deal with hundreds of people who do this. So you're right. Maybe it's not for three million people, but it could be and it's not that hard. And by the way, go to a single family house where they're buying a house and there's an opportunity to renovate. Let's go back for a second, how to do any of this. You need to be an expert in something.

Starting point is 00:11:33 So you need to have a plan. Like, I want to buy multifamily in this particular neighborhood, or I want to buy a single family in this particular neighborhood, or I want to buy retail or hospitality or whatever it is. And then you need to be really smart on what's going on in the prices in those particular areas. Because real estate, as you know, is super inefficient and everybody has a different price for a particular property. What I see as a price for a property might be something different than someone else has. Explain inefficiency. Why is it so important and why can someone use that to make a lot of money? Okay, so inefficiency is super important because if you're buying IBM stock, for example, IBM stock always trades. Everyone can buy IBM stock for the same price every day and it sells. Everyone sells it for the same price.

Starting point is 00:12:23 But a house or a commercial building, I might imagine I can do something with my vision and my creativity that someone else didn't imagine. someone else might imagine they can do something more. So I'll give me an example. We bought in Long Island a house that was like 4,000 square feet. It was 30 years old, but renovated kitchen, renovated bathrooms, had a garage with a big room over the freestanding garage, had a barn, had like, you know, an acre of land, and it writes half a block to the water and a rights on the water. That house was for sale for $1.4 million.

Starting point is 00:13:02 He had like a dopey above ground. pool that looked ugly, which I guess maybe freaked people out. He took the above ground pool away. The day he took it away, he dropped the price one four to one two. My wife saw it. We made an offer on it. We bought it for $1,175,000. Around the corner on the main street, no water access, brand new house, little driveway, lots of traffic, two new houses, $1.6 million, each of those two houses. So why should this house that we bought that was better in every way and bigger than the other two houses be selling for hundreds of thousands of dollars less? I'm not sure, but just, you know, inefficiencies in the marketplace. How do you know you're correct?

Starting point is 00:13:49 And how do you know that one two house that you purchased is just old that's got some, you know, issue? It needs to be renovated or a new house. To me, it was, it solved what it was we needed. To me, it was worth every cent. I look a lot at replacement cost. So I was in that house for 40% less than replacement costs. So to me, I'm very happy. I owned another house near it.

Starting point is 00:14:12 It worked for me. So that's all that matters to me. A lot of your folks listening or watching, they're looking at all kinds of things all over the place. I would say to them, focus in on a play. I was in Brooklyn, if that's your, you know, in a neighborhood in Brooklyn, but there was like 5,000 units within two blocks.

Starting point is 00:14:33 Focus in on those two blocks, get the information on every trade, get the information on everybody who owns every single piece of property and be an expert. I'm an expert on the neighborhood and the house I bought, so I know exactly that I got a good deal. Someone who was coming in maybe from New York City might not understand all of the anomalies, but I understood.

Starting point is 00:14:54 That's interesting. That's very similar to what Michael Zuber, who's a guest on this podcast says, which is establish what he calls a buy box of like these are the exact parameters that you're looking at. Anything outside of this area code, this size, three bedroom, two bathroom, two car garage, lot size about this, you know, 8,000 square feet. Don't even consider it. Totally agree with that. Totally agree with that.

Starting point is 00:15:17 And that's what I counsel people all the time, be an expert, something. And by the way, walk the streets. I get up every morning at 5 o'clock in the morning and I'm walking up and down streets. I get, I can't, I was up in Ithaca, New York, in Cornell, the police arrest, and they arrested me. They pulled me over, wanted to know what I was doing and all that, because you were casing. I was casing. I was casing. I was casing. I was casing. Exactly what I was doing. Exactly what I was doing. And by the way, I bought over 100 million square feet of properties in different platforms and very, very rarely I can count in one hand how many times I've used a broker.

Starting point is 00:15:51 I don't use brokers. Not that I don't look at all that information I do, but I walk around and I can tell what's for, I could tell what will be for sale because maybe there's no leasing sign. It's a little run down. There's missing a tenant. I have a nose and I can tell like anyone else can tell that maybe the person who owns it is, you know, advanced in years or they've died and their families got it and someone's not paying attention. And then what I do is I ask the tenants, because there's usually not a for lease sign even. And I ask the tenants, who's the landlord? I have a problem.

Starting point is 00:16:24 I usually get the landlord's name. I call the landlord. And, you know, certainly not always, but, you know, some, a low percentage, oh, yeah, maybe we would entertain an offer. I mean, I'm in the process. I'm closing next week on 250 beds of housing on Cornell's campus. Tremendous location wasn't for sale. So off-market deal. By the way, the seller is giving me 80% financing and I put no deposit down. That's really interesting. So what you're saying is that it's purely a value play and you think that if a place looks like it's run down, if something looks like it's not being tended to or taken care of, then realistically the owner isn't getting as much value they should out of it or they just don't care about it enough to hopefully, you know, you as a potential buyer can investigate and maybe buy it off their hands. It's amazing. For some reason, real estate, there's owners that age out and they and the market changes and they just don't pay attention in these properties. run down. We're, what's so exciting to me when I talk to folks looking to buy properties is we're

Starting point is 00:17:31 going through an unbelievable period in the next, you know, sorry, started the next 10, 15 years, where folks are aging out, they're passing on, their estates are getting stepped up values, their children don't want dad's old hardware store, dad's old four unit, multi-family or whatever it is, and these families are selling these properties. And Blackstone doesn't, want to buy them. So these are great properties for the folks listening to us today that they can buy and manage and buy them efficiently. Also, there's been so much inflation in the cost of materials that you can buy buildings in better locations at materially lower dollar amounts than what they cost to reproduce. A common theme that I'm seeing based off of everything you're saying

Starting point is 00:18:19 is that it seems like it's an effort problem. So do you think that that is the biggest obstacle in becoming wealthy today is people just don't want to go out, case the joints like you do, you walk the streets. I don't know. I work really hard, and I got a lot of money already, so I don't have to work that hard,

Starting point is 00:18:34 but it's my nature. I work very hard. I'm very creative. I put, I don't think linear, like, oh, I'm going to buy this and get a return. I have three plays going on at the same time. I'm going to buy that building and put the bagel guy in

Starting point is 00:18:51 that I have a relationship with. I'm going to redo the apartments upstairs, and I'm going to put a sauna and a cold plunge in the basement that's presently vacant. And I'm going to figure all that out before I close. And what if you don't? Then I don't buy the property. Then I don't close it. Then I don't do it. Every purchase agreement, by the way, I'm very good at negotiating purchase agreements without deposits, but every deposit's refundable.

Starting point is 00:19:17 And by the way, if people don't refund your deposit, you can always put a list pendants down. and people are happy to give you your deposit back. No one wants to have a fuss. So explain what do you put in the contracts that gives you such a big advantage? Here's the truth. If you're not creating content for your business, you're a...

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Starting point is 00:20:29 Again, that is opus.com pro slash ICH or just click the link down below in the description to try it out and get started today. So explain what do you put in the contracts that gives you such a big advantage? Every contract has a due diligence period, environmental, and title, and, you know, you do a good job at having the proper documentation and it. advance and you get a period of time to figure it out. By the way, often the purchase and it takes 30 or 40 days just to sign the purchase agreement. Then you have 60 days and maybe you have an extended period of time if there's environmental questions or environmental issues. You take advantage

Starting point is 00:21:06 the time between you see a property and the time you close. That's not a due diligence period to just check that the roof doesn't leak. That's your time to create value. So it's all about hustle and pace and that's what's missing. So the people who have hustle and you know who they are, you've had lots of them on the show, those people are making money hand over foot. The folks that, you know, are waiting and we'll figure it out later, that's not the way to do it. And what's your pitch when you give one of these owners a call and you want to buy their building? What do you say that convinces them to sell on good terms? Okay. First of all, normally I pay more than anyone else.

Starting point is 00:21:47 I overpay for everything. And I pay because I'm going to create more value or I'm not going to buy it. So it's either going to be worth it when I buy it or I'm not going to buy it. By the way, 99% of the time I buy it because I have a very good nose and understanding of what I'm doing. I'm not wasting my time and I'm not wasting the seller's time to do all this and not put it together. So I usually have a story. So I spent 17 years building Walmart stores across the East Coast of the United States and did all of it with no money and knew exactly what I was doing and closed on every single deal that we signed up with.

Starting point is 00:22:27 How does someone know when they know enough to be able to do something like that? I think the secret is to start really, really small. So I love little deals and happy to work on little deals. and happy to work on little deals and then grow the platform, grow the platform. Start at the beginning, have a buy box, and then do a smallest deal you can in that buy box,

Starting point is 00:22:50 and then keep going and keep going, as long as you know what you're doing. Is recreating this harder in 2026 than it was 10 years ago? Okay, so real estate is incredibly cyclical. So, for example, I started in real estate in 1988, and it was tremendous. boom times. And I had from 1988 to 2005, and I developed 100 shopping centers, 10 million square feet, spectacular growth. And then it stopped. Literally just stopped altogether. And I went on to do other

Starting point is 00:23:24 things. I bought operating companies that own their own real estate and then played that game out, if you will, for 20 years. But not a lot of real estate deals and great opportunities, as far as I'm concerned, that was sort of a slower period. Right now, I think, is a really exciting and dynamic period for a variety of reasons. Some we've discussed folks aging out, properties transferring, conventional financing being available. And also, of course, bonus depreciation in being a real estate professional is a super exciting moment and gives a lot more juice to the real estate professionals doing deals right now. Do you see any red flags in the market? Because a lot of people could say, well, there are a lot of people aging out. There's going to be more inventory coming on the market.

Starting point is 00:24:10 Interest rates are pretty high. A lot of retail is now going online. You just need big warehouses in the middle of nowhere that are pretty cheap. Okay, you're talking just broad. There is a jewel everywhere. So I'm in the jewelry business. I'm out looking for that little jewel and you can go anywhere. And some of the best jewels are in the most secondary tertiary markets in the country because people aren't there paying attention. So the interest rates don't bother me. The general economy doesn't bother me. I'm out looking for opportunities. When in your life has it been the easiest to make a lot of money?

Starting point is 00:24:48 I've had a pretty consistent long run, old guy here. For the last 40 years, I've been cranking it out. And to me, you got to change your play up. So if one play isn't working, I was building strip shopping centers, that ended. I had to do something else. I was doing operating companies. That ended. Now I'm doing smaller deals and bonus depreciation.

Starting point is 00:25:10 So I think you have to keep changing up what deals work in a particular time. What deal single-handedly positively affected your net worth the most? I bought a German department store chain in 2016 called Galleria Koff. and three years later, I sold it to our competitor and made a billion dollar cash profit. And that was sold in August right before the pandemic. By the way, the story is much better. The guy was this crazy rogue. I was running a public company.

Starting point is 00:25:40 I had to finish the deal. I had to fly in on a plane, land my helicopter on his yacht, finished negotiating the deal on his yacht. And then he finally closed in August of 19. By May, he went bankrupt. So he bought the business for three and a half billion euros. And six months later was bankrupt. The company went bankrupt three times. And then my son bought the company for one euro two years ago.

Starting point is 00:26:09 Wow. Wait, so you bought this company for how much? Gallery of Koff, we bought for $2.6 billion. Three years later, I sold it to Renee Banco for a, billion dollar cash U.S. dollar profit. And we closed in August of 2019 right before the pandemic. Unfortunately, the pandemic hit and the business went bankrupt six months later. And it went bankrupt three times. The German government took it over. By the way, Mr. Banco, unfortunately, is in jail right now. And the private equity firm that my son runs and our DC equity partners

Starting point is 00:26:50 bought the business out of bankruptcy from the German government in July of 2004. For one euro? For one euro. Why didn't someone else bid two euros? Because no one wanted it because no one wants these dying old department store chains. And I've been able to buy and sell and in and out of these businesses, but they're not for the faint in heart.

Starting point is 00:27:14 They're very difficult businesses. What's the risk, though? Because I feel like I would pay 20 bucks just to say, I own this thing for like a day. Well, next time I need 20 bucks, I'll call you up and we'll do it. Consider me. Well, I guess the most game-changing moment for me was when I went from developing shopping centers to buying Lord and Taylor the department store chain. So Macy's had merged with May Company. They owned Lord and Taylor. They didn't want to own Lord and Taylor. They wanted to sell it. And I sort of, before it went on the market, I got a win that it was going to be for sale. And I did a lot of

Starting point is 00:27:50 of analysis on it as a real estate guy. And I analyzed the real estate. What I found was 49 spectacular properties, including the Fifth Avenue Lord and Taylor Building. So I wanted to buy it for its real estate. Macy's wanted to sell it and they wanted to sell it for $1.2 billion. They didn't want anyone else. They didn't want to take anything less. And I made a deal, even though I wasn't a logic. I wasn't a private equity guy and KKR and all kinds of people who were bidding on it. They wanted me to buy it because they thought as a real estate guy I was going to liquidate it. That's what they wanted to happen. They wanted Lord and Taylor to go away.

Starting point is 00:28:25 They just didn't want to get their hands dirty that they were guys. Because their name was still attached to it. Yeah. They didn't want to be the people firing all those employees and liquidating the business. So I went in and I negotiated a deal with them to buy Lord and Taylor for $1.2 billion. So now me, my real estate attorney, we're negotiating with federal. this many billion dollar company and we're turning papers negotiating every day. And my father starts calling me every day. It's like, what are you doing? We don't buy $1.2 billion companies. They're going

Starting point is 00:29:00 to ask for a deposit. They're represented by J.P. Morgan, Scat and ARPS and Goldman Sachs. your entity I had just done a hundred shopping centers with single purpose LLCs and so with no money I had gotten purchase agreements and then I had gotten approvals and closed after I had done all the work

Starting point is 00:29:24 he's like they're not going to sell you a $1.2 billion a dollar company that way I said relax I have my entity NRDC Equity Partners Fund 7 which was a single purpose entity and when they figure out or when they want to see a deposit or that there's money in the account, I'll go to one of my friends and I'll get someone else to do the deal and I'll manage it and get a

Starting point is 00:29:47 promote. So we're doing the papers. We're doing the papers. And of course, you know, we're fairly high-profile people and whatever. One day, at midnight, I call my father from Times Square because the lawyer's office was in Times Square. And I say to them, they signed the purchase agreement. And so all the consultants, all the best lawyers in the world, and no one had asked to see the financials for my single purpose entity. And they just kind of assumed that we were some fund. So you created an LLC or like some sort of like an LLC like every time, every deal we do. I have, I have 200 LLC. And you just created a random one. And I put a name on it, NRDC, which was the name of our private equity firm, NRDC, equity partners fund seven. There were no ones through six. I just, by the way,

Starting point is 00:30:34 I tell people all the time, have a landing page, take your baseball hat off, wear a jacket and a white shirt, you know, look the part. So I looked the part and they entered into a purchase agreement with me. So now my father says, well, that's great, but we're going to come up with the $1.2 billion. I said, I'll work on that tomorrow. So hung up the phone, went back to my office, my little team, and we created on a piece of paper on a white board a holding company called Lord and Taylor holding company. The operating company had $120 million of Abidah. So we created an operating company and a property company. The operating company paid $80 million in rent to the property company. And so now I had a property company that owned Fifth Avenue and Scarsdale, New York, and Stanford,

Starting point is 00:31:27 Connecticut, and Manhasset, Long Island, 49 properties. It was 2000. 2006, the beginning of 2006, markets were very great and bubbly. I went to these three nice institutions, Bear Stearns, Lehman Brothers, and CIT before they went bankrupt the first time. And the three of these firms lent me $1,175 million to buy Lord and Taylor. So I now had to go back to my father and my two partners, Bill Mc and Lee and Ibar, and the four of us, and I had to pitch them, this was the hardest sell of my life because in my family real estate business, we don't put money into deals. Like, if you're not smart enough to figure out how to do it without any money or almost no money, then it's not our deal. So for them, for my family and my gang to put up $25 million was a hard

Starting point is 00:32:18 sell, but to control a $1.2 billion company 100% for $25 million, everyone agreed. My father was a little grumpy, but we all put it in. And now we owned Lord and Taylor. The idea was to liquidate the whole thing as fast as possible, get all our money back and go. But a crazy thing happened on the way to the closing, which was Macy's was rebranding all of the May stores and everything Macy's, instead of Marshall Fields and instead of Filings. And some of the customers were like, I don't want to be a Macy's shopper. And the Lord and Taylor sales, even before we closed, started going up by 10%. Wow.

Starting point is 00:32:57 So I was like, oh, how hard could it be to run a department store chain? I'll run it instead of liquidating it. I'll liquidate it in the future when the time comes. So I ended up operating as a chairman, this Lord and Taylor business from 2006 to the, kept running to the pandemic, a business that would have been bankrupt or closed three months later in 2006. And we did very nice. We sold the Fifth Avenue building to first to Wework and then to Amazon, who paid $1,200 million dollars just for the Lord and Taylor Fifth Avenue building. Just for one building? One building.

Starting point is 00:33:36 And you bought the entire business for $1.2 billion. So you got all back from one building? We made money. That doesn't even include hundreds of millions of dollars of inventory and properties. We did fine. But more importantly... Fine. We did okay.

Starting point is 00:33:51 We do okay. Yeah, yeah. We got by. We do. We got by. So, but more importantly, I used Lord and Taylor to buy Hudson Bay Company, which was a tremendous company and totally screwed up in every way you can imagine. Explain Hudson Bay Company. There is literally always that one part of running a business that you keep meaning to

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Starting point is 00:36:43 Explain Hudson Bay Company. Hudson Bay Company was the longest continuously operating company in North America, founded in 1662 by King Charles II, who signed a charter giving all the lands a drain into the Hudson's Bay to his cousin Rupert, who was the first governor of the Hudson Bay Company. So I unfortunately was the last governor of the Hudson Bay Company. So I took over this company. Actually, I bid on buying it. I got outbid by this other fellow, very talented entrepreneur named Jerry Zucker. And he was running the business. I called him up and said, I'd love to be your partner. I did all this work on it. I'm the chairman and owner of Lord and Taylor. I can help you

Starting point is 00:37:30 in Canada. So we made a deal and I bought 20% of the Hudson Bay company, but I needed $100 million. So I wasn't going back to my guys. So I went and I borrowed $90 million against the $100 million investment on Hudson Bay. So now I was short $10 million. So I went back to my father, my partners and said we need another $10 million. My father said to me, this is the last money you ever for the rest of my life or your life taking out of this family business. I said, all right, relax. Last money ever. Relax again. So we took the $10 million. Now we own 20% of the Hudson Bay company. Now it's March of 2008. My phone rings. It's Jerry Zucker. I've been on the board. we've been working, didn't make much progress.

Starting point is 00:38:22 And he says to me, Richard, I have a brain tumor and I'm going to die in the next three months. I'm like, oh, my God, that's terrible. You know, what can I do? And he said, I want you to buy the balance of the company. And I said, okay, we'll look, you know, we'll look at it. Got his people on the phone, talk to him, hung up the phone, never spoke to him again. He died three weeks later. Wow.

Starting point is 00:38:43 So we bought from the estate, the balance of the Hudson Bay company in and closed in July. of a July of 2008. The world was about to blow up. It was that, you know, the world blew up in September of 2008. So how did I come up with the money to buy the balance? Well, I needed $500 million because I needed to buy, I needed $200 or $180 million Canadian to buy the balance of that deal. But my other deal had a lot of debt and I was getting nervous. So I needed $500 million. So my partner, Lee, introduced me to these wonderfully nice people from Abu Dhabi, and they flew in, and I showed them all the real estate and everything that we have. They loved it.

Starting point is 00:39:29 And I went back to the whiteboard, created a new, so I remember I had Lord and Taylor Holdco, Lord and Taylor Real Estate, Lord and Taylor Propco. I now created Hudson Bay Trading Company on top that would own the Lord and Taylor Holding Company and the Hudson Bay holding company. And I sold the nice folks from Abu Dhabi for $500 million, 49% of the Hudson Bay trading company, the holding company that would own all of it. So inflows $500 million.

Starting point is 00:39:59 I pay down my debt. I buy Hudson Bay company. But now I call up my father and I say, well, dad, you know, we put $35 million in and we own half of this thing. and these nice people from Abu Dhabi put in 500 million. So I guess our 35 million is now worth 500 million. Plus 50%. Well, if half the company was worth 500 million, our half was now worth 500 million.

Starting point is 00:40:27 So my father says, and my father was wonderful and we had a great relationship, but it was a little angsty. It was 2008. He's like, just because you found someone stupid enough to buy half of this department store business that is heading for God knows where. doesn't mean that our half is worth $500 million, which is, by the way, true. You never, you know, just because one person sees one thing.

Starting point is 00:40:50 Anyway, so long story short, we close. The great financial crisis hits. But I had merged these two companies together. They were so screwed up. So I had run this real estate company with 40 employees and we were great. We were building a million square feet a year of shopping centers. I now had 75,000 employees. I was the chairman and the governor of this thing.

Starting point is 00:41:18 I'm a real estate guy, not an operating company guy. I had a great guy by the name of Don Watros, who was chief operating officer. He cut $500 million of expenses out of the business between October and December of that year and basically saved the enterprise. as we fired 97 of the top 100 executives. People say, oh, how do you change the culture of a company? Well, you fire everybody. That's one way to do it. And we broke the company up into pieces,

Starting point is 00:41:53 and it survived and did fine and grew. And then a little less than two years later, Walmart contacted us and said they wanted to buy a division we had called Zellers, which was like the Kmart of Canada, which was kind of a crappy, least valuable of the companies and the things that we had in Canada. And they came to visit me. And they said, Richard, we've heard that Target was interested in buying Zellers. And we have all these stores in Canada. I said, well, if you want to pay for it, you can buy it. Sure, we'll sell it.

Starting point is 00:42:30 And they said, well, how much do you want to sell it for? I said, well, we don't look at it as an operating company. We look at it as 400 leaseholds that are five. $5 a foot under value. And if you take the dollars under value and put a 6% cap on it, we'd like to sell it to you for $2.2 billion. Of course, we just bought the entire business for $1.2 billion, you know, two years before that. So they said, oh, that sounds a little steep, Richard. I said, it's going to be terrible if Target comes in and takes $5 billion a business. So I said to him, this is what's going to happen. No brokers. Uh, CEO of, of, I'm going to speak directly to Target and I'm going to speak directly to Walmart.

Starting point is 00:43:15 Whoever signs a purchase agreement first with no outs can have it. And I'm going to tell each of you what the other guy is bidding. They're like, okay, I guess, you know, do we have a choice? No. So they left. They had come to my office. I pick up the phone and what do I do? I call Target because I wasn't talking to Target at that time.

Starting point is 00:43:35 And I said to Target, I said this is your last chance if you ever want to come to Canada because this is the last set of boxes available. And they had looked at it. We had talked about it over the years, but we weren't talking. So my contact, the head of real estate, spoke to the CEO. He said, we're interested. Come and visit us. So I flew up to Minnesota and they said, well, we're very interested.

Starting point is 00:43:57 We'll take your best 50 stores for $500 million. I said, that doesn't work for me. And I got other people. And if you don't want to come to Canada, no worries. And I flew home. So then I got my first. bid from Walmart. They would take 80 stores or 90 stores for 800 million. And I said, that doesn't work. Then Target came up to a billion dollars. And then Walmart came up to a billion two.

Starting point is 00:44:23 And then I went back to Target back and forth, back and forth. By the way, I was the Walmart guy. So I was kind of shocked that I hadn't, you know, that it was going this long. Finally, I get a call from Target saying, we'll take all of it for $1,800. $150 million. We'll give you $900 million at closing and the balance 90 days later. So I said, okay. So I flew up to Minnesota. By the way, Walmart at this point, it kind of like just stopped.

Starting point is 00:44:54 And, you know, I don't think they believe me that I had really gotten that much money from Target because I told them billion $8.50. It's your call. And so I fly up to Minnesota with my small little team and the entire management team of the Target Corporation and 25 lawyers all in conference rooms. And we spent four and a half days. This was the HR conference room, the logistics conference room. And we went and negotiated a purchase agreement. Imagine selling a division, you know, this large to Target. And by the, by Friday morning, we had a completed purchase agreement. The Target board meeting was on Monday.

Starting point is 00:45:33 and the closing would have been on Tuesday, was scheduled for Tuesday if the board approves. I get on a plane, fly back, go to my office. I'm sitting in my office Friday at 5 o'clock. My assistant comes in and she says, the CEO of Walmart and the CEO of Walmart International, Doug McMillan, is on the phone. They want to talk to you.

Starting point is 00:45:55 I'm like, oh, this is, you know, your worst nightmare. So they were very gracious. They all knew what each other were doing. by the way, they all have spies at each other's offices and whatever. So they said, Richard, we are so sorry, we screwed up. We have to own that company. You cannot sell that business to Target. I'm like, and it's our fault.

Starting point is 00:46:19 We are prepared to pay you another $100 million. I will send a team to your office this weekend and have it done and signed by Sunday night. So I said, guys, I'm heartbroken. because I'm a Walmart guy, did all this business with you. I had known Sam Walton and Rob Walton, and I have this great relationship, but I shook hands with Target. Thank God they didn't say they would pay me $200 million more, but for $100 million, my word was still good. And I said, I'm going to finish with Target. If for some reason the board of directors of Target Corporation turns me down, votes it down, I'll be back to hat in hand.

Starting point is 00:46:58 but I can't I can't back out of the deal and they said we respect you Richard we understand and click the phone Monday on needles Target approves the deal the next day

Starting point is 00:47:14 $900 million in cash gets wired in and then another $900 million the nice folks from Abu Dhabi got their $500 million back plus another $250 million during 2010. There wasn't a lot of people

Starting point is 00:47:31 getting their money back. All my investors got lots of money. My father, who was the loveliest, smartest guy ever, had a smile on his face till the day he'd never fussed with me, never raised his voice, never looked at me sideways

Starting point is 00:47:44 to the day he died. And so that was that story. How much money did you make on that deal in total? It's complicated all of these deals because, you know, you reinvest back in the stores and you renovate stores.

Starting point is 00:47:57 But basically, from 2006 to this January when Saxonemans went bankrupt, we bought and sold and bought and sold and did a whole series of transactions. And we did fine. We would have done better if Saxon Eamens hadn't come bankrupt. That would have been a good move. But we did just fine. So in doing some research for this podcast, I just Googled it. I'm like, okay, Richard Baker net worth. Google says $5 to $10 million. Chat, BT says conservative estimate, 7.000. $750 million. And then you have other things that are saying like $1.2 billion.

Starting point is 00:48:33 Explain this discrepancy. I guess we shouldn't be looking at those Google and those places for people's net worth. They seem to be wildly incorrect. To me it seems a little bit reminiscent of like war dogs, if you've ever seen that, how they're like selling government contracts and they end up in this room placing a bid on something that they have like no business doing. But they're up against a team of probably 20 lawyers and executives. and yet they end up closing this deal.

Starting point is 00:49:00 That kind of reminds me a little bit of what you were doing. I mean, you were like stepping foot into places that you had never thought you would be in doing deals that were completely unimaginable. Do you think that there's some credit to like fake it till you make it, not saying you were faking it, but like you were kind of in a deep end. I would say this and how this translates to all the folks that are listening. You have to have conviction in what it is that you understand. I had spent my entire life in retail, real estate. so I understood the value of the real estate inside of those operating companies. The people that ran those operating companies didn't understand the real estate,

Starting point is 00:49:36 and a lot of other people didn't understand the value. And I was able with great clarity and surety to buy those companies and finance those transactions because I understood what the real estate was worth inside those companies. Now, the world's changed and markets go up, markets go down, but we bought SACS in 2013 for $2,600 million. Six months later, we got a financing against the Fifth Avenue building, and the third-party lender did an appraisal on the building of $3,650 million,

Starting point is 00:50:13 six months after we bought the entire company in a public process. The largest shareholder was Carlos Slim, at the time, the richest man in the world, and he sued Goldman Sachs for seven years that why did Goldman Sachs sell us the business when the one building was worth a billion dollars more than what they sold the whole company for. What do you currently own? I'm in and out of all kinds of different assets. So last year, on my spare time, I created another real estate company called ROIC where we built a portfolio of 10 million. another 10 million square feet of West Coast real estate, and I sold that to Blackstone last year for $4 billion. So that's sold. I'm out of Sacks and Neiman's. Right now, I own a,

Starting point is 00:51:06 I own 10 million square feet of super high quality East Coast Walmart anchored shopping centers, which is great. And I have a private equity business with a variety of different investments. and I'm playing around with new investments and doing new things. Now, a lot of people are taught to avoid debt, but you really embrace it. Where do you define the line between taking on smart debt and just being dumb with it? Let's call smart debt non-recourse debt. So we should all take as much non-recourse debt as we can get our hands on. For folks who don't understand, non-recourse debt is debt that's only recourse to your LLC.

Starting point is 00:51:48 see. So if for some reason the property goes bad and doesn't pay the interest or doesn't pay the amortization, all the bank can do is take back that one property. So my business model is to put as little equity in every deal as I can and to take as much non-recourse debt as possible. If you believe in a world that's going to have a lot of inflation, you want to buy as much real estate as possible with as much non-recourse debt as possible, and you're going to make a lot of money. where do you see the economy heading over the next 10 years and where do you see the biggest opportunities? First of all, I think we're on the brink of a revolution of entrepreneur activity. I think that corporate America is going to deconstruct. We've already begin to

Starting point is 00:52:34 see it in the last 10 years, but it's going to go dramatically faster. And a lot of people are going to get pushed out to the curb. And I think those people aren't just giving up. Those people are going to become entrepreneurs, many of them real estate entrepreneurs, and they're going to replicate the money that they were making in corporate America or do better. And so I think that that's going to be good for the economy. So I'm really bullish in the United States that there's going to be growth, and that's going to create tax revenue and all the things that we need to have a good society and make sense here. By the way, I don't believe that's going to happen in Europe and in certain places in Asia because in Europe, they have laws that protect employees and require companies

Starting point is 00:53:19 to give very long, you know, periods of coverage when they exit people. And they also have a big safety net. So I don't think there'll be the same motivation for people to become entrepreneurs like they will be here in the United States. What's really interesting about that is the investor Jeremy Grantham just went on Diary of a CEO and said that he's actually not bullish. for the U.S. economy and says that emerging markets and international markets will outperform and the U.S. economy will crash. What are your thoughts on that? I totally disagree with that. And the risk reward of investing in the United States versus international, so much safer, much better returns for the risk that you're taking to invest the United States. I think the answer

Starting point is 00:54:05 is really you've got to know what you're doing and you've got to be thoughtful and smart. And now when I look at the landscape of all the things that I could invest in today, securities and AI and all of these things, I'm actually very excited and motivated to invest my money in these below the radar real estate opportunities that we're talking about, you know, Main Street retail, little unanchored strip shopping centers, multifamily. But I like it to have a theme or a play, if you will.

Starting point is 00:54:36 So right now I'm very excited about branded. university, you know, college housing, multifamily college housing. I like that as a play. I'm focused on that. Jeremy Grantham, I know you're listening to this right now on YouTube premium, because there's no way you don't pay for YouTube premium. As a member. Come on, as a member of the Ice Coffee Hour as well, paying a few bucks a month.

Starting point is 00:54:57 Come on the Ice Coffee Hour podcast to debate Richard Baker. That would be really, really, really interesting. I'm there for it. Bring it on. If you're bullish on university housing, that would, would suggest that you're bullish on just broader education in general? Well, I'm bullish on the top 10 universities in the United States. The top 10 universities. So I wouldn't, so or maybe top 20. So by the way, I think the other universities will play out in different ways. There'll be consolidation and mergers and all

Starting point is 00:55:27 kinds of things. But for a moment, I'm investing heavily at Cornell University. Cornell University has an incredible graduate program and they're growing their applicants every year and they're building new facilities and research, I don't have any worries about investing in a place like that. How could you be wrong about your thesis of the United States economy over the next 10 years? Oh, well, lots of, you know, Mayor Mondani, Mondani. Mayor Mondani could become your next president. That wouldn't be helpful. But, I mean, none of us know really what's going to happen in the future. But to me, I'm in the economy on a, you know, everyday basis, and it feels very strong. And all the concerns about labor, you know, AI, people losing

Starting point is 00:56:17 their jobs, still not enough labor in this country. And so I think people will have jobs and have incomes and, you know, I stayed at hotel last night. You could barely check in. There were so many people. In Las Vegas in July. What's the impact that Mom Donnie's had in New York? So, you know, I've been calling it for a while and it looks like it's happening. So the Trump story has pushed everything way to the right. So obviously the risk in the next election or in seven years from now or six years, whatever it is, the risk really is it can go way left. And that would be, I'm not a fan of way right, honestly, and I'm not a fan of way left. It's very unfortunate in this country. We don't have any middle movement. But I think it would be terrible for our economy to have the sort of policies that our mayor in New York City has been talking about. What are the real world implications that you have seen since he's taken office? You know, this tax on the Pieditaire, you know, the second apartments and all that. But meanwhile, I haven't seen any of my friends selling their second apartments.

Starting point is 00:57:28 And, you know, it's not tenable in the United States for people like Elon Musk to be a trillionaire and not give him. back to society. Pugetti is a genius and we love him and he's giving back because he's so clever and so good for the economy. But how much money did he give to charity last year? And what is he doing for people who don't have resources? And he's making a terrible mistake. So is Bezos and so is a lot of that gang. They're not giving away nearly enough money to the people who need it. By the way, giving money or investing money in rocket ships and their passion projects don't count. So in this country, there's a lot of risk that if the rich spend too much money and don't give back, I mean, just think what Elon Musk could do for the housing crisis in San Francisco or the

Starting point is 00:58:18 housing crisis in New York. I mean, he could allocate $200 billion to San Francisco in New York for low-income housing. Think what that could do for those cities and for people who don't have resources. And I think the resentment. Is it a money problem? though. It doesn't seem like the housing problem is a money issue. It seems like more of a policy issue and the people in charge are maybe more to blame than throwing money at it. It's everything. Believe me, a couple hundred billion dollars would certainly help and it is certainly a policy problem. Easily fixable. They have to take large chunks of land and approve very dense housing and they got to build it. They got to pay for it. Logistically, how is that even possible, though? If like everyone always

Starting point is 00:59:03 says we need to tax the rich more that and I'm not necessarily saying I disagree nor agree, but they're saying that we need to tax the rich more. They need to give away more money to charity when in actuality, how much money does Elon have sitting in his JP Morgan checking account? Like we don't necessarily. How much money do you think Elon gave away last year? I have no idea. Someone here could figure it out. But my understanding is it was something like he built a not-for-profit school for $200 million on the campus of SpaceX for his employees. Yeah, but isn't he also paying like $400 million a year in taxes? Or it could be more than that.

Starting point is 00:59:37 I don't think he's paying $400. I'm not the expert. But how is he paying taxes? He's not getting income. He's just creating value. So he has nothing to pay taxes on. You would then suggest that it makes sense for him to borrow against his companies or like, how would he get the money in order to?

Starting point is 00:59:52 I'm suggesting that, uh, that we're going to have problems in this country. If we have a class of very wealthy people who live extravagant lifestyles. and don't contribute enough to society to do good things. Do you live an extravagant lifestyle? I live a very comfortable lifestyle. Where do you draw the line between comfortable and extravagant? I'm not here to judge how other folks live. I'm saying you asked a question about politics and society,

Starting point is 01:00:23 and I'm telling you in this country that if people don't participate, I'm spending a lot of my time and energy, helping to teach people about real estate entrepreneurship, I give huge amounts of money to different types of charities and different types of organization. So do lots of other people. Tremendous sums of money, you know, the Gates Foundation and Warren Buffett and a lot of these folks do. I think it's important for society that there's a balance. And I'm all for, I'm not for taxing the rich and I'm all for, you know, people being able to

Starting point is 01:00:56 enjoy the sweat of their labor and the benefits that they make. but I think we're living in a very dangerous time and we have to be careful. I completely agree with you that I think when the rich keep getting so rich and the poor are really struggling to get by, I agree that that's that that is something worth addressing, but I also tend to think that my gosh, it's it's more of a spending problem. And it just seems like just the entire country. Like when you look at the deficits of like individual states too, it's just like. It's insane. And even like the California rail line, how many tens or hundred billion dollars that is wasted there? And it just seems like, you know, why tax rich people more when there are so many problems? Like when you, when like you ever look at an individual. The pressure to tax rich people will go down if rich people continue to be responsible members of the community and participate proportionately to whatever needs to be done.

Starting point is 01:01:57 See, I just tend to think that if you were to solve someone's individual problem, let's just say that someone has, you know, they're not saving enough. The first thing you'd look at is how much are you spending. And if the spending is going to be out of control, it really doesn't matter how much money they make, because just as many people are living paycheck to make $200,000 is like $70,000. So it's obviously not an income problem, it's spending problem. So we solve the spending problem first, and then we work on everything else.

Starting point is 01:02:23 So it seems to me like, why don't we solve spending issues and the deficit, then see how much you really need and then try to bridge that gap. I'm all for it. Who do I vote for? Tell me who to vote for. I'm all for it. I wish we had an answer on that. It's kind of similar to your philosophy on investing in the first place because you say you don't pay attention to like the macro economy. You just consider on like a day-to-day basis

Starting point is 01:02:44 and what can you do not even with respect to what's going on out here to better your position. And I think Graham's kind of saying the same thing with the average person. It's like they can say that I'm not wealthy because Elon Musk has a trillion dollars. But in actuality, that's not going to change their financial situation. What will change their financial situation is taking all of that thought, all of that belief and putting it in their mind of like, how can I make myself better today than I was yesterday? Anyway, I think that there's a lot of entrepreneurial opportunities for folks, whether it's, you know,

Starting point is 01:03:16 on one end driving an Uber car or another end, creating a real estate venture or a small business or it's a great country. We have a lot of ability in order to create new businesses. And I think people who have that entrepreneurial energy and desire, we have opportunities for that. I'm curious about this one.

Starting point is 01:03:36 Do you believe in diversification or do you think that most fortunes come from concentration? That's a great question. So intellectually, I would say diversification is very smart and intelligent and I have very smart friends who are well diversified.

Starting point is 01:03:52 I can't seem to ever get myself there because I'm so, you know, when you're a real estate person, you're illiquid and you have to keep, in order for me to get bonus depreciation, I have to buy more real estate. And so I just keep getting more and more concentrated in real estate. And when I had a large real estate portfolio, what did I do? I went out and bought operating companies that owned real estate. So I guess I tend to do what I know, and I wish I knew more about, you know, AI companies and that type of thing and diversify my interests that way, but I don't. How are you currently investing then? If you were to divide up your portfolio, what does it look like? You have like, you know, this in, you know, department stores, retail stores. You have this in like stocks, bonds, treasuries. I would say, you know, 80 to 90% of my net worth is in real estate and, you know, 10, 20 and and liquid assets.

Starting point is 01:04:56 What is a liquid asset to you? You know, liquid asset stocks. So stocks, and is it like real estate based stocks or like, I'm curious, a realty group? How dumb would I be to be buying real estate stuff? I know, that's what I, but I thought it was funny. Having said that, my story. Having said that, my very clever son recently put some of my stock into Vornado stock, because there you go. So how dumb?

Starting point is 01:05:23 So that's back to your point. You know, now, of course, we have all Elon stocks and SpaceX and all those kinds of things, and that's been great. But, yeah, occasionally we're, you know, we have a lot of respect for a guy like Steve Roth who runs Vornado. By the way, it's up 30% since we bought it. So it's just fine. So it's, yeah, concentration. There you go. It seems like everything U.T.T.ch is doing well.

Starting point is 01:05:44 That's not true. What's the biggest loss? Oh, my God. I've had so many failures and so many losses. And I hope the people that are listening don't for a minute think that me or any of the other people that are on that come on and talk win, win, win, because that's not the reality of the world. The reality is that life is one miserable failure after another. And what you have to do is try to make your failure small and you need to be resilient and able to bounce back up and go do something else. and I'm very entrepreneurial energetic

Starting point is 01:06:17 and I do a lot of different things and a lot of them don't work and I fail small and I've had all kinds of failures and when I win I try to put myself in a position where I can win big. What's the largest amount of money you've ever lost?

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Starting point is 01:08:59 What's the largest amount of money you've ever lost? I've lost $200 million in a company called Gilt. We bought Gilt. It didn't go the way we wanted it to go. What happened? Where did you go wrong? So we bought it because they had good technology or so we thought, and we thought that the good technology would be good for our bigger business. And maybe we got some benefit out of it. But in the end, the culture of the folks that worked at guilt didn't work well with the folks that worked at Sacks.

Starting point is 01:09:28 And so it was not a successful acquisition. How did you lose the money? Was it a sale? We bought it for $200 million. and then over time it became worth very little. Then we sold it off. I sold it to Michael Rubin and Fanatics. What did that feel like losing $200 million?

Starting point is 01:09:46 It sucked really bad. And I still wake up in the middle of the night and go, oh, what did I do? How dumb was I? And by the way, I've made billions and billions of dollars, but it keeps me up at night. And I've lost $100 million here and $100 million there. It's not my only bad thing.

Starting point is 01:10:03 I've lost plenty of money inside of some of these operating companies. and you second guess yourself and you try to rethink what you did. But as a general rule, I'm really a small-time entrepreneur where I put a little bit of money and create value. And I do everything in a separate company. This SAC's global thing, I invested $6 million, which I had taken out of a refinancing that I had done the year before. And the $6 million turned into a $10 billion company.

Starting point is 01:10:35 and I sat there on top of this $10 billion company, oh my God, what am I doing here? I like my little deals where I could not put a deposit down or figure out my little deals, and I was trapped in this monster. But we accomplished a lot, and I don't regret it. So a question that I asked Michael Saylor was, you know, back when we filmed the podcast with him,

Starting point is 01:11:00 I think his net worth was publicly like $4 billion. And micro-strategy and business, Bitcoin would fluctuate one, five percent, you know, like quite a bit per day. And so his net worth would swing, like if he just checked, you know, his Schwab portfolio, Robin Hood portfolio, or whatever, like he could see maybe $50 million just on a given morning, a hundred million dollars gone like this. And I asked him, how does that put into perspective other problems that you exist outside of finances on a daily basis? Like I asked him, for example, if your house floods, It's like, does this not even bother you at this point?

Starting point is 01:11:37 Because your tolerance has gotten so high for what you have to deal with on a daily basis. If you, you know, if you freaked out every time you lost $50 million, you'd be freaking out or gained $50 million. You'd probably be freaking out 10 times a day. And so I'm curious, how is this affected your overall problem-solving tolerance or just things that you encounter on a daily basis, having these huge financial swings, $6 million to $10 billion, losing $100 million because of a phone call. call, you know, stuff like this. Okay, so you have to keep life in perspective. So when it all boils down, you have your spouse, you have your kids, you have your family, you have your friends.

Starting point is 01:12:17 And I recently lost two friends who, and that so trumps whether your net worth goes up 5%, 10%, 20%, and I think you get to a point in life where you have to really keep things in perspective. My grandfather was a great entrepreneur, great real estate guy, and was very successful, and I remember going to his funeral. And to me, he was like a king. And I went to his funeral and this horrible, ugly cemetery in Brooklyn on the side of a hill, with the highway there. And, you know, at the end of the game, the king and the queen go back in the same box with the pawns.

Starting point is 01:12:59 So don't over, you know, don't over imagine a little. all this stuff. In the end, we all do. And it doesn't mean anything. So keep it all in perspective, try to have fun, try to work with good people, take care of your family and your friends, take care of yourself. That's way more important. You've always been good at spotting opportunities. Do you think that's something that you learned growing up or something that you're just intrinsically good at? Like you're born with this, like, way to see. I think it's, I think it's, I think it's both, honestly, but I've identified a key factor. So I was very blessed as an entrepreneur to be able to have my father to talk to,

Starting point is 01:13:42 and I have my son to talk to now. My son talks to me. We talk all the time. And what I recently set up was this conference, we call it office hours, where anybody can come on the office hours and ask questions. What's happening in this country is there's all these entrepreneurs, and they're sitting at home on their computer and they're looking and they're thinking

Starting point is 01:14:01 and they're watching this or other things. They don't have anyone to talk to or ask questions, simple questions. And these lawyers and consultants cost a fortune. So I'm doing these office hours. I'm doing these boot camps and these kids and these folks are asking great but pretty basic kind of questions

Starting point is 01:14:20 and I give them the answer in two seconds because to me it's like nothing. And that's really valuable. So living in a box by yourself, not having someone to be able to communicate with and ask questions is a big disadvantage. Trying to figure out how to get these folks who are working on real estate deals to be able to have groups to talk to and ask questions is a huge advantage. What do you say to people that would claim nepotism on your end, saying that you grew up in a wealthy, real estate, knowledgeable family, and so you had access to certain resources that. Look, everyone should take advantage of every single opportunity they have. So if I was opportunistic to having grown up in a real estate family, I'm going to take, I'd be stupid not to take every advantage I could. And period. That's it. I'm going to take every, by the way, if there's a deal down the street as I drive out of here that I see that, you know, I'm going to take advantage of that opportunity because that's America and that's what we do. Having said that, I think everyone has a responsibility to participate in the community and give back and be responsible. And that's how the world goes.

Starting point is 01:15:28 I'm a responsible citizen. My wife and I support Cornell and all kinds of charities. I'm here talking to you in order to help entrepreneurs figure out how to be real estate entrepreneurs and what have you. And we all do what we do. Do you have access to investments that the average person does not have access to? This is like a big argument that people have that are not where they want to be financially. They say the rich people are able to, you know, buy a business or,

Starting point is 01:15:55 something that the average person can't or like leverage their money in other ways. What would you say to that? I suspect certain people do. That's just, I don't see a lot of that. I have regular securities that anybody can buy, nothing special there. And I go out and I buy real estate assets and create value because I'm on the ball and I know what I'm doing. So it's more of a knowledge thing than it is like an access thing. Having access to knowledge is really important. And I think we're in a very interesting moment in time. It used to be the people who were the smartest. They were the winners.

Starting point is 01:16:33 So, but now I have this friend of mine, Claude, who sits in my pocket all day. I talk to Claude two hours a day until he cuts me off or whatever the problem is. And I now have all the knowledge in the world in my pocket. So creativity, effort, desire now trumps knowledge. and so I think that's a great equalizer for a lot of people who don't have as much knowledge. Now, what's really important

Starting point is 01:17:02 is being creative and having that hustle to get things done. One thing I've noticed is that you seem to be very good at negotiating. What tips do you have to negotiate that the average person is unaware of? I would say that I overpay.

Starting point is 01:17:20 How did I get all those deals done? I must have been willing to pay more. than anyone else. But I don't overpaid to buy every company because I only bought a handful of companies. So I think the issue is that I see value where other people don't see value. Yeah, but you also oversell.

Starting point is 01:17:39 Like you get these companies to like, you know, pit against each other and then you sell for these like incredible prices. That's a ballsy move saying, hey, look, I'm just going to shop exactly what you offer me with this one other company. Because like you said, all these companies have spies in the other companies. And so they could have just gotten in cahoots and said, hey, how about we just split the difference, you know, we don't want the other person to have this company.

Starting point is 01:17:59 Coin flip it. Coin flip it, you know. And we'll just make sure that we can not overpay for this asset. Well, just, you know, intelligent, careful guy, you know, that's, I handled that process well. And what tips would you give someone, though, who's coming to you? It would be like, listen, I want to know how do I negotiate? How do I get my way on this deal? Boy, I'm never going to make another deal if I give that to you.

Starting point is 01:18:23 I don't have to give us everything, but can you give us 20% of it? Yeah. Look, I think, and we read about this all the time, I think a good deal is when both sides feel happy that they got something good. And understanding what something is worth to the other party. So I understood that both Walmart and Target, the prize of having that asset was big bucks to them. And I had a partner that was a little junior kind of partner who was.

Starting point is 01:18:53 working for me when I was doing that deal. And when I offered the asset to Walmart for $2.2 billion, the other fellow wanted me to offer it to Walmart for $900 million. And yelled and screamed and big fuss because the EBITDA was only $90 million. He wanted me to chart, he wanted me to look at it as 10 time multiple on EBITA. And I said, what does that have to do with anything? We're doing a multiple on the cap rate on the rent savings. So, you know, I was, it was thoughtful, thoughtful, a good thinker. That's interesting. So if you reframe your brain and you have like an actual light at the end of the tunnel,

Starting point is 01:19:36 like an exit strategy, maybe it's knowing what other people that have more money want and then knowing it before they know they want it and then getting that. Yes, you said it exactly. I don't know. You said a lot of words. But yes, you said it exactly right. Another way of saying it, they accuse me of creating a reality distortion field, which I don't really think about.

Starting point is 01:19:56 But I have my way of thinking about it. So I guess you're right. I'm analyzing what it's worth to them. And I'm trying to get closer to what it's worth to them when I'm selling something. Okay. That is fascinating. I've never, I've never, when you buy assets, do you already have someone else in mind that you know will want to buy it?

Starting point is 01:20:15 As I told you earlier, everything I've ever bought, I stalked and worked on for years. So in 2005, I had identified all five companies that I wanted to buy during the next 20 years. I spent 20 years finishing this one memo. So it wasn't like I woke up. And that's why a lot of these kids that are out and young folks and all kinds of folks looking at real estate deals, they're just randomly looking at listings. Stop. Go back to your box.

Starting point is 01:20:45 Have a box. and live in that box and be the expert in that box. I had a box. I wanted to buy those five companies. I wanted to just do Walmart deals. That was my box. I have a box now that I'm playing with and you need to have a plan and execute that plan. And this can be applied to like any business. Like if you know that there's a certain guy who's very ambitious and he wants to run all of the power washing in a certain city, you're like, okay, well, I know that there's this one other person that could be operating better. And I know this guy will eventually want to buy out this person, but they just don't know it yet. You should go on my Instagram, Baker House, 1921,

Starting point is 01:21:19 or my website, and we have all these principles. We have 10 principles that work for every business you can imagine as an entrepreneur and understand those principles and you can buy anything. How much variance can you get out of a sale price based off of sales strategy? Like 100% variance? Because that's what it seemed like it was in this case, 900 million to 1.8 billion. It was worth to us 900 million and it was worth to them 5 billion. And I sold it for a billion, $8.50. That's how I think about it. This is the other very, very important detail at all this.

Starting point is 01:21:54 It can't be a commodity asset. It has to be a blue diamond. It's not like there was three other chains to buy in Canada. It was the only chain left in Canada that you could buy if you were Target or Walmart, primarily Target, to come into the country. The Lord and Taylor building that I sold to Amazon for that Amazon paid a billion two for, that was the only building of its kind in that area that they could buy and they wanted to be in that area. So constantly looking for unique assets is different than buying a commodity asset.

Starting point is 01:22:29 How unique do you go, though, because I understand getting that one-of-one property, but how do you know it's not too unique so that you don't find anybody? It's like maybe it's too specialized. It took me a lot of years. I spent a lot of time. I found the one guy, this nice guy, Adam Newman from WeWork, and he wanted it. And he had a plan and an idea and he wanted it. And that was the one guy.

Starting point is 01:22:53 And then they had troubles and it got sold to Amazon. But, yes, when you buy unique assets that have one-of-a-kind buyers, it can take a while to sell it. So I'm curious. What's the biggest mistake the average person is making right now when it comes to being successful. Yeah, I think they're sitting in their home office or their computer or their phone, and they think they can do it all from there. And I had someone today I was talking to about a property, and I said, did you drive and did you walk around the property? Oh, I've been looking at it on Google Maps. Well, you got to get out there and look at these properties. You can't do it that way.

Starting point is 01:23:32 So if you turn down places 5%, 6%, you know, 10% cap rate, whatever it may be, I'm concerned. I'm What, like, rate of growth do you strive for on a year-to-year basis? Like, how do you know if that year was a success? I'd like to cover all my expenses, so I in lose any money. I'd like to cover all my living expenses, so I in burn cash. And I'd like to make deals that I think are going to be accretive and make money going forward. I don't look at it that way. But I think that this could be educational for the viewer watching this right now,

Starting point is 01:24:02 because that's kind of the language that they speak. And so if you were to talk to them, communicate with them in the language that they speak, they think, oh, well, my portfolio grew 15% this year. You know, it grew 5% this year. It grew 100 and 80% this year. My international allocation. 6% this year. You know, 50%, Jack.

Starting point is 01:24:21 So I think. Are those liquid assets or those real estate? Yeah. But that's not real estate. So sure, for liquid assets, we can talk about that. But it's very hard to mark to market every year your real estate assets. So you don't really see real estate as an investment. You see it more as like a career, like a job.

Starting point is 01:24:37 Like, and if you treat it as an investment. Maybe it's better. I don't look at it as an investment because my goal is not to leave cash behind. So my goal is to put little to no money in a real estate deal and then to refinance and get the money out. So to me, it's not an investment. It's my craft. And in terms of people becoming either wealthy or successful, how much blame would you put on individual choices versus the economy? Look, I think the government and the economy and the education system and there's lots of

Starting point is 01:25:08 things that you could look at that could help people live a more productive and profitable life. But in the end, it really comes down to each individual. How do we live in a world where some people are constantly creating value and getting things done and making money? And other people aren't. So I think we need to embrace and figure out what the successful folks are doing and whatever that means and try to train yourself to mimic that and create value like they do. How do you instill those values in your children growing up in an environment where they don't need to necessarily make money? I think that falls into a couple of buckets. One, I think folks are born with a desire to create value or to be successful and to strive, and some people perhaps aren't.

Starting point is 01:25:55 So that's one characteristic. Secondly, I spent a tremendous amount of time with my family, my kids, my nieces and nephews, teaching them and spending time with them talking to them. When your kid is in the back of the car, that's code for talking to them and getting their brain to understand what to do and how to do things. And every child is different. I have an artist. I have a business person.

Starting point is 01:26:23 I have a daughter who's getting her advanced degree. Each child is different. And I think you want to put them in a position where they can be successful and whatever it is they want to do. If the average viewer were to follow these exact steps to become wealthy, what would you say they are? I would say if they want to be a real estate entrepreneur, they should focus in on a category that they really enjoy, whether that's retail or hospitality or multifamily. And they should focus in on a very narrow category or location, build a plan, a business plan, if you will, for how they want to execute. and then they should work really hard to execute that plant.

Starting point is 01:27:04 And the best way by far to create value is to create value before you close on the transaction so that you can get the largest amount of non-recourse debt or purchase money mortgage possible. And that's the best way to create value. What percentage of the time when you get into contract on a deal do you actually end up closing? 100%. I mean, 99.9%. Oh, really? Yeah. Okay. So I was kind of under the impression that you would do like a shotgun approach and get like a lot under contract. And then from there, that's the time where you kind of want to do all the due diligence and negotiate hard. I'm a shotgun looking at a lot of things. And then, and I might put in offers. But by the time I sign the purchase agreement, I'm usually pretty sure that that's a property I want. So I don't want to waste my time or the, or the seller's time. unless I'm really sure. Now, something could change, a tenant that I thought was coming could go bankrupt or something could happen, and I might adjust my thinking. But once I sign a purchase agreement, I feel pretty good about what I'm doing. How do you divide your time up now then? Because it seems like

Starting point is 01:28:14 you've made a few Hail Mary plays that ended up making you a ton of money. And now you could be, like, sorry, I didn't mean to diminish it down to like a few Hillmerie plays. A few very calculated, but crazy. I would pause you for a second. I see. spent 17 years and I built a portfolio of 10 million square feet of Walmart anchored shopping centers with no partners, not a lot of debt. So that's a tremendous chunk of value. So that was long, hard, grinding out work. And then I segued from that into buying a series of unusual operating companies and owned real estate that turned into kind of crazy situations. That's how I look at it. It's like the slingshot analogy, which I keep thinking about as of late, which is like it only launches because you pull it back.

Starting point is 01:29:03 And so like this part was just as important as the launch, all of like the 17 years that you did prior. But I am curious after having a few deals make tremendous amounts of wealth. How do you choose what to spend your time on now when it's like... Ironically, I'm spending my time on these types of deals, these small starter kind of deals that the general population is sort of very enamored with. doing and because I think this is a roadmap to a lot of value going forward. And I think there are deals that anybody can do. And I'm not working on big, complicated, multinational corporations. I'm working on buying, as I said to you, 250 beds of housing.

Starting point is 01:29:48 I'm closing next week on. And why does that excite you? I think the whole process excites me. It's amazing. So I'll just give you a little more detail at Cornell University. I bought, I used to belong to a fraternity. They were having problems. I was sitting in on the meetings, and I ended up making a deal to lease the property for 99 years.

Starting point is 01:30:12 So beautiful Greek Revival Mansion. It's going to be called Baker House, a private club and think tank for entrepreneurs. And it's going to have a Nordic spa and a gym and a restaurant and all kinds of event space and tons of content. Then I was with my lawyer in the house, the local guy, and he's like, you know, you really should buy some of these housing developments around the house. I said, I'd love to. Are they for sale? Oh, no, but I know the guy. He's kind of an older fellow, and, you know, maybe he'd be interested. I said, call him up. I'm interested. So he called him up a beautiful pre-war building right across the street and then like a whole bunch of housing right

Starting point is 01:30:57 next door. And he called up the guy and the guy said, sure, I would sell the properties. So off market. So I did the analysis and the properties were doing terribly. And they were 40% vacant on Cornell University's campus. How could this be? Well, because their graduate housing, the guy's 83 years old. What happened over the year, years at Cornell is a large percentage of the graduate population of foreigners. They need furnished apartments and they want washer dryers. This project, these projects, he wasn't putting furniture in them and they didn't have washer and dryers in the apartments. So I made a very, so I said to them, I'd love to buy your property, but they're unfinanceable because you have 40% vacancy and no bank's

Starting point is 01:31:44 going to lend. It's like, all right, if you give me my price, I'll loan you 80% of the money at four and a half percent interest, non-recourse, no brokers. So I said, okay, so now I entered into a purchase agreement to buy the properties with just 20 percent money, no deposit, and I'm going to renovate them and make them beautiful bonus depreciation for a real estate professional. So that's great. And I'm going to brand all the housing Baker House. And now you can be a resident, you can be a resident member of the club if you live there. So imagine the value per month increase that the apartments are worth after the renovated furnished washer and gyres, fantastic real estate entrepreneur content. So I'm having fun. We're renovating buildings and it's all good. What do you think is the biggest

Starting point is 01:32:37 mistake successful people make after they've already made money? There's this terrible thing called ego. And I think that successful people all of a sudden start to believe that they're important and successful and they don't want to make mistakes and they get scared to fail. So if you clutch and you're scared, I'm not scared to fail because I'm used to, you know, failure is my friend. I fail and I fail small. But if I thought I was such a big shot and I would be embarrassed to fail, then I wouldn't do anything new. And I think that's the biggest problem I see with my very successful friends. Is it failing or is it losing money?

Starting point is 01:33:21 I think publicly looking like they failed at something. They might have tons of money, but if you have tons of money and everyone's laughing at you because you failed at something, some people have an ego problem. I'm more curious about what to optimize for next. Well, Graham, do you have a spouse? Do you have kids? Yes, spouse. Okay.

Starting point is 01:33:41 So, it's one day. Okay. So is that spouse? kicking you in the ass and, you know, I need a house at the lake and I need this and I need that. No. Well, maybe that spouse needs to give you a little more of a kick in the ass. That would upset. That would really upset me, though, because I don't like being pushed either.

Starting point is 01:33:57 Well, look, I think all of us, many of us, you know, want to live better lives or give more money to our favorite charities or take care of our parents or take care of our siblings or whatever it is. And I think that's part of what drives some of us to create more value for ourselves and do more. But that's also just not real because at a certain point, you don't need to continue making money to actually take care of people. If anything, if you continue trying to make a ton of money and spending all of your time and energy on that, that must mean that that energy is coming from something else, like spending time with people. Have you been talking to my therapist? I don't know what's going on here. So, yeah, so I don't know. Yeah, I'm driven. I have plenty of money. I don't ever need to work again.

Starting point is 01:34:38 And I like working. I like doing things. And I have people on my team that I'm looking to create value for and that's important to me and I'm just not ready to go hang out at the beach. Are there any true tears to wealth? It's a great, it's a great question. Last year I flew around 500 hours on a private plane because I was running a $10 billion company and it was exhausting and that's made sense and that was very logical, logical expense. This year I'm working on very small all deals. It's hard to justify to fly on a private plane to go look at a little deal. The plane costs more than the, you know, whatever. It's like my, it's, it's mine bending. So I don't know the right answer. I kind of, I kind of spend money based on, you know, what it is I'm working on. So I came

Starting point is 01:35:37 to see you nice folks. I flew commercially on this nice airline called United and it was great. And They served me lunch when I came over yesterday. I thought that was great. And that was perfectly suitable. I wasn't going to spend, you know, $100,000 to come and visit you guys, as charming as you are. And though I certainly could afford it, it just doesn't seem to make sense. So it is a debate. How much do you spend?

Starting point is 01:36:03 We were in Beverly Hills a week ago and we stayed at the Beverly Hills Marriott. It was very nice. And I think it wasn't cheap. by the way. And I think spending based on what's going on in any particular situation, if you're taking your spouse and your family on a vacation and you might choose to spend more. But I think in business, I try to be as thoughtful and careful on spending what's appropriate for the situation. Do you fly economy? I often fly economy because I'm like, this is first class is so bad at such a waste, but not if it's a long, long flight. I'm finally getting to the point

Starting point is 01:36:45 where if it's a long flight or it's international, I'll fly, I'll fly first class. When do you fly first class versus economy? Is there like a number of hours or a, or well, is there a net worth? Nothing to do with it. So it's purely value. It's purely like, you know, I'm flying to Boston. Like, who cares? Like from New York to Boston, what, what do I care? But if I'm flying to L.A., I'll either fly private or I'll fly first class. So it's more of a value of what you get for it. I don't know. These are warped.

Starting point is 01:37:15 I'm sure these are all warped kind of response. We were all a little weird. Like, you know. Well, I'm just curious. Because I always fly economy, no matter what. And it's only recent. And if you fly to Europe, and if you fly to Europe, you'll fly. It was always premium economy.

Starting point is 01:37:29 Right. Always. Right. And it was just recent that we had a guest on the show who said, you're flying back from Europe, get first class. And I've resisted it. And I was like, no, a premium economy. I spent the extra money. I spent the extra money. But still in the back of my mind, I think,

Starting point is 01:37:45 was that really worth it? I'll tell you a funny story. So when I was starting out building shopping centers, I had a travel lot and I bought a little Cessna and I had a pilot and I'd fly from place to place and the plane went up and down and I'd get sick. It was horrible. And one day I sat down and I said, I am going to do bigger deals so I can get a bigger plane because this is making me sick. So it motivated me to do bigger deals. Then I did bigger deals. I got a bigger plane. And I kept doing bigger and bigger deals and getting a bigger and bigger plane because the business could afford, if you have a bigger business or a bigger deal, it can afford the costs related to the plane.

Starting point is 01:38:26 So a lot of my motivation for all those big companies were to be able to fly in a better situation. Now, here's what I'm really curious about. Do you get the plane before you could technically afford it as motivation to then do the deals? or do you do the deals first to pay for the thing that you want it? I think you fly in a plane that's a little less than what, you know, the next deal is going to get you. By the way, now, you know, if you have a spouse and you're like, and your spouse will be like, you know, you were fussing with me

Starting point is 01:38:55 on redoing the deck for $10,000 and you're flying to L.A. on a private plane? I don't think so, honey. So, you know, if I'm going to keep control over the rest of the family, you have to be, you have to show some discipline also. To me, it's very funny because I'm, just trying to understand the way in which you make decisions, like the decision-making engine that dictates how you're going to approach a problem. And for me, if I see, okay, well, you need to build another business in order to afford a bigger plane. And with this bigger plane, you can

Starting point is 01:39:25 then travel to these businesses. That's sort of like a circular problem. And if you wanted to, like, if you actually wanted the plane, then you technically probably you could have afforded the plane. You didn't need that as a motivator to build a business. I know, but it just sounds so wasteful. And so... But that's not tied to reality. That's just an emotional... You're asked, so I'm telling you. So I want to be efficient.

Starting point is 01:39:46 I do a lot of travel and I take helicopters, boats, planes. I had a boat. My office was downtown. I live in Connecticut. Every day I would... A car would drive me to the marina in Terrytown. I would take the boat down the Hudson River to my office and then back again. And I would save 30 minutes in traffic on a high-speed boat.

Starting point is 01:40:09 So I'm very efficient. I count my time and I like to be thoughtful of the value of my time. So that decision impacts, you know, what I do a lot. Do you think that that is the most productive decision engine that you could be running on? The product, my time? Yeah, I suppose you could say it's your time, but it's also more than that because your time value is not consistent. up until very recently I was tremendously busy. So for me, every hour that I was able to be home earlier or whatever to have the time to do other things was super valuable to me. So whatever I spent on transportation, the last decade, well worth it. I'm very efficient. Now I have more time. So, you know, do I need to save two hours to come here and, you know, four hours and fly private to Las Vegas? Absolutely not. I had plenty of time. I came early. I'm staying We're having a good time, and I'm not stressed about it.

Starting point is 01:41:13 What's the first thing that comes to mind if I ask you, what does money mean to you? I think money means security and ability to take care of your family and do good things. What are the best things to spend money on? Okay, remember, I'm a guy that just came off of mind-boggling travel schedule. I was in Africa three times last year. I was in Paris four times traveling around like crazy. So I am so happy this summer. I have a beautiful place on the North Forca, Long Island.

Starting point is 01:41:46 I'm not going anywhere this summer. Other than you, you're my last, I'm not going anywhere. I'm going to be at my office in New York City or I'm going to be in Long Island and I got my dog and my kids and my family and it's going to be great. So if I have to go somewhere, I'll either fly private or I'll take a commercial flight depending on the situation. Are there any purchases that you found were 100% worth it and contributed to a life increase? Let's just say like for me as examples, I'll just say like the eight sleep.

Starting point is 01:42:23 I sleep way better having the eight sleep. They're not sponsoring. And they're not sponsoring. But I will say an eight sleep. I also think that having a peaceful place to come home every night is really, really, really important. And I really like the Tesla because I could pre-cool it before I get in the car. Like, little things like this. You know, what's interesting is there is a scientific answer to like the best way to spend money to get like a return on happiness. And everything that you've said

Starting point is 01:42:53 is actually in accordance with the most scientifically correct way of spending money. For example, one of them is having a quiet home. If you live in an apartment near a bunch of road noise, that actually decreases happiness according to the science. What's also really interesting, the biggest decrease to happiness is how longer commute is. Yeah. And I think it was a commute of more than 45 minutes

Starting point is 01:43:16 saw significant life dissatisfaction. I don't collect watches. I don't care about cars. I live nicely in nice, quiet, great communities, safe and all of that. So I'm very lucky about that. The more you talk about it, I value efficiency and travel.

Starting point is 01:43:36 So that is probably my number one thought about spending money in a year is how many hours did I save so that I could be home in my quiet place with my family and my, you know, whatever my situation is. What are the worst things to spend money on? Like things that you've tried and you just said that's not worth it. Well, maybe I'm too clever to try some things. But, you know, people, you know, people have boats and all kinds of. of cars and watches and all kinds of crazy things, clothes.

Starting point is 01:44:08 And that's what makes them happy. I think everyone should be able to do what they want to do. What are you working on now? I went away for a month and first time I got a chance to have a full break in like 20 years or longer, 40 years. And I walked 40,000 steps a day and I thought about where's the world going. And as I said, I had,

Starting point is 01:44:32 I believe that there is going to be a revolution of entrepreneurs in the United States where companies are going to exit all kinds of very high quality capable people and these folks aren't just going home to do nothing and they're not going to another company. They're going to start their own businesses and they're going to scrape a little bit from the company they were at. So whether it's newscasters at CBS who start their own podcasts or whether or it's a law firm who exits half of their lawyers or whatever it may be,

Starting point is 01:45:08 those folks are going to be entrepreneurs. And what I wanted to do was I wanted to do something that I thought would be good for the world and good for that I would enjoy, that would be fun, and something I've done my whole career, and that is helping entrepreneurs and coaching entrepreneurs. As I told you earlier,

Starting point is 01:45:26 my wife and I sponsor this program at Cornell for real estate folks. It's a two-year master's called the Baker program at Cornell. And it's awesome. So people who weren't born in a real estate family could have the opportunity to learn about the real estate business. And they reached out to me and said, Richard, could you build us a two-day real estate entrepreneur program for credit? And I said, that's a great idea. And I built it.

Starting point is 01:45:57 And it's awesome. And we have done two practice sessions. We did one this past weekend, sponsored by Joe DeSenna from Spartan Races up in Vermont. We had 51 people show up. They flew in from Brazil and Japan and kids from Stanford, Wharton, Cornell, Babson, local people from Pittsfield, Vermont. And we spent two days talking about real estate entrepreneurship. And people pitched deals and we dissected deals.

Starting point is 01:46:30 and so very exciting to me, very great opportunity for folks to be able to have this two-day boot camp. And really, I have a book. They take the book and they learn everything there is about real estate entrepreneurship. But the most exciting part, I think for me, is the opportunity for women to be real estate entrepreneurs. We talked earlier about, yeah, there's lots of women of brokers, but being a broker is a totally different thing than being a real estate entrepreneur. the opportunity, there's so many women in the United States and the military are all parts of society where they've left their career to raise their family, take care of the house, take care of the family, whatever it is. And then those kids leave and there's the most dynamic

Starting point is 01:47:15 and credible workforce in this country and they're looking for something where they can be creative, be fulfilled, make money. And we have it. It's all of these deals we've been talking about being a real estate entrepreneur is perfect for women and all kinds of folks in the United States. I know this because my grandmother, who came here in 1921 from Poland, didn't speak any English, arrived on the 4th of July at Ellis Island. By 1933, she had married my grandfather, who was a lawyer, and they were living in Hoboken, and all the big mansions on Hudson Street were vacant and the kids were breaking the windows because the stock market crash, the rich families lost all their money, gave their mortgage, gave their properties back to the bank. She went to go

Starting point is 01:48:05 visit the bank and said, you guys have to clean up these properties. They're breaking the windows. And they said, there's nothing we can do. No one wants the properties. And my grandmother said, well, why don't you break them up into multifamily units? And we can, and they said, because it's not approved by the planning board. So my grandmother made a deal with the bank. Her friend was the sister of the mayor. She went to the planning board and she got the properties rezone. She bought the properties from the bank with no money, fixed them up with the help of the bank and then kept them, managed them,

Starting point is 01:48:40 eventually sold them and did more. And a woman from Poland barely spoke English, spoke English by that time, spoke no English when she got here, and she was an awesome real estate entrepreneur. and four generations later, her grandson, my son, is still doing deals similar to her. So there's no reason that any capable, thoughtful man or woman in this country can't do, be a real estate entrepreneur at a very basic starting level and then work their way up from there. It's been going on for over 100 years. What's the harshest truth about money that you've learned over the past 25 years?

Starting point is 01:49:20 Money won't make you happy. make you more comfortable though. And so you used to think that it would. I don't know. I think I worked very hard to make money because, you know, good things would happen when you had money. Then you have a lot of money and you're like,

Starting point is 01:49:37 you know, that's not the good thing in your life. The good thing in your life is relationships with your family and your spouse and your kids and what have you. The most important lesson is don't blow your relationship with your spouse or your kids while you're on this epic journey to create more money. That's a mistake. You'll be very unhappy if you make all the money and then you don't have the way for kids at the end. When do you think you learned that? And how often do you reflect on that now? My father was wonderful and we had a great relationship, but he was a flawed guy sometimes.

Starting point is 01:50:13 So I was able to learn from his mistakes so I didn't have to make his mistakes. So my father and my parents got divorced when I was and I got to live through that. And I'm like, oh, that's not such a good idea. So I was able to sort of learn without having to make the same mistakes. What advice do you have for people in a marriage to keep the marriage happy? It took me a long, long, long time to figure out the answer. I spent a lot of time arguing with my wife. My wife would say, go left, go right, go up, go down.

Starting point is 01:50:45 And I'd say, well, why go left? You know, the right, go right, and go down, go up. and by the way, she was usually right. So I just eventually said, okay. And we call that the power of yes. So sometimes the right answer is just yes. Okay, let's do it. How do you know when to let her win?

Starting point is 01:51:06 Like, you know, you're not married, obviously, right? No. No. So you'll know when they, you'll marry, you'll find the right person or whatever. And the right answer is always yes. No, when you say the right answer is always yes, what are we talking, are we talking like, anything? Are we talking like, hey, what's for dinner? Where do you want to go and just like, you just say yes to what? Like, what decisions are talking? My guess is you were the very thoughtful

Starting point is 01:51:31 guy and you married someone who's very thoughtful and appropriate and logical and whatever. And I'm sure there's not a whole lot of conversations where that person is asking you to do unreasonable things. And it's not worth it. Yes, dear. Just that's it. That's it. Yes, dear. What about the idea of like, you know, you give them an inch, they take a mile? Is that a thing? Not if you married the right person. I'm still trying to figure out what the yes dear is. Is it like, hey, don't go into work this weekend?

Starting point is 01:52:00 Because you got to be doing this instead and it's like, yes, dear? Or is it like a, hey, this deal that you brought, I don't have a good feeling about it. Don't do that. Life got much easier when I learn the word yes instead of the word, no. I'm not allowed to use the word no at home. It's a very painful situation. So if she comes to you and says, hey, we got to redo this whole closet. I literally was, I was going to say for example.

Starting point is 01:52:24 That's a great, a closet. That's a great example. That's a great example. I have a very good, you want to hear what you say? Yes. What if you don't want to redo the closet? Oh, that's really good. Know what you do that?

Starting point is 01:52:39 Yes, you suck it up. Okay, but, okay, here's another example. Let's say you redid the closet a year ago, but she wants you to redo it again. Is your wife irrational and difficult? No. I don't think no. No.

Starting point is 01:52:52 So she's not going to tell you to redo the closet unless you did up dramatically or whatever it was. So it just took me a long time. By the way, I'm much older than you. It took me like 25 years to have this epiphany. And the epiphany was it wasn't worth it. So you want to know why I'm still working so hard. I'd rather go make more money than worry about whatever money is getting spent on the other side of the. What made it not worth it?

Starting point is 01:53:15 Because if I say no, then there's a discussion and an argument and why. It just wasn't worth it. It was easier to let her go do whatever it is you want. How important, though, are those disagreements and discussions to, like, set certain boundaries in a relationship? Or is it just like, if it's so mean. You guys are so young. It doesn't matter. And by the way, I'm only yes, 99.9% of the time every one out of 100, I lose my mind and I say no.

Starting point is 01:53:42 When's the last time you've said no? I still can't control myself. Sometimes I say no and then I say, oh, okay, yes, I don't care. Do it every want. So it wasn't really a no. My wife is usually right. So whatever she says is usually just fine. And that's the way.

Starting point is 01:53:59 And I've been married for over 30 years. And that's the secret. That is yes is the secret. By the way, we talk, yes is a secret for a lot of things. Sometimes we're negotiating on a deal and everybody wants a little more. and the cap rate is five point, there's whatever, sometimes yes is the right answer.

Starting point is 01:54:17 We call it the power of yes. And just agree to it if it's small enough where it's not going to make that big of a difference. Yes. We talk about negotiating, how to get done in negotiation. That's interesting. I get hung up on this.

Starting point is 01:54:29 Graham's favorite word is no. That's like his all-time favorite word. Right. So you should practice, yes. It's really powerful. How much better has your life gotten outside of relationships saying yes? It's just a way of getting things done, but I'll give you something else that I do.

Starting point is 01:54:48 We talk about rituals, sorry, talk about rituals. So I wake up every morning, and the first thing I do when I wake up is I think about three things that I'm very grateful for. And in the evening, before I go to bed, I think about three things that I'm very grateful for. And I basically rewired my brain because I used to wake up and like, oh, my God, what do I have to do? And I'd go to bed, like, oh, I got all these problems, all these things I have to deal. with and now it's totally changed the way I feel and the way I live think of it like those people who are like that glass is half full and other people are it's half empty yeah and um so you know there's some rituals and some uh things that you can do to make your you know make yourself more

Starting point is 01:55:33 efficient or feel better is there such thing as too much money uh I don't think there's such thing as too much money because you can give it away and do good things with it and um But I think people shouldn't be hoarders, and I think people should, and I don't think you do good things for your family if you spend too much money and have too much money. Is there a sweet spot to wealth and income, though? I think it's good to be motivated to work hard. I employ lots of people and I produce for the economy and I pay lots of taxes and all that kind of stuff. So I think that's what we're supposed to be doing. When in your life did you feel the most rich? when the digital businesses were worth

Starting point is 01:56:13 multiples of revenue. That was a good time. And what did that feel like? Ironically, it's a great question. Ironically, in the end, it was very disappointing because there was nothing I wanted to buy different. There's nothing I wanted to do different at all. It was really maybe the best lesson of my life, having the net worth go up dramatically because the world decided that certain businesses were worth more

Starting point is 01:56:36 had zero impact on my lifestyle. And what was it like realizing that. Depressing. And was that like immediate or was that like a? I kept like, oh, what should I buy? I could go buy a big yacht. I don't want a yacht. Well, why would I want to? I mean, there was nothing to buy or do. And so, like, how did you come to that conclusion then? Like, what was it like crossing that bridge? I'm curious, like the entire, like, emotional journey of wanting all these things. I don't want all those things. And I work because I enjoy working and I enjoy the process and all of that. I think that's what it clearly you said earlier, you know, why do you know, why do people work so hard when they have so much money or whatever? Because they actually like working and they like being productive and doing things. And I'd lose my mind if I was at home saying yes all day, sitting at the, at the, whatever, at the pool. So I'd go crazy. It'd be horrible. So I work because I enjoy it and I love being with people and creating value for myself and my partners and people I'm with. And that's what's fun.

Starting point is 01:57:40 Having more money doesn't really mean that much. All right, Richard, thank you so much for coming on the Ice Coffee Hour. That was an awesome episode. Thank you to everyone for watching this. Thank you to the members. Thank you to the sponsors. It really means the world for tuning in. If you've made it this far, appreciate it.

Starting point is 01:57:55 It would not be here without you. We're also going to be linking your information down below in the description, your Instagram. Yep, great. And any other information you want to include, it's down below in the description. I highly recommend you go and follow it. Cool. Until next time.

The Iced Coffee Hour - Billionaire's WARNING: The Housing Market Will NEVER Be The Same (Do THIS Now)

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