The Pomp Podcast - #975 Jason Williams On Timeless Principles To Help You Succeed During A Bad Economy
Episode Date: May 24, 2022Jason Williams is an entrepreneur, investor, business partner of mine and the author of the book "Bitcoin : Hard Money You Can’t F*ck With" In this conversation, we discuss the current state of the... market and economic concerns. Jason helps to provide excellent knowledge on his investment strategies during this time of uncertainty. He also provides additional advice as to how you can build your skills and wealth, even during a bad economy. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to check out the Pod Pro Cover and save $150 at checkout. Eight Sleep currently ships within the USA, Canada, and the UK. ======================= The world's 2nd largest crypto exchange, OKEx, has dropped the "E" to become OKX, reflecting its evolution from a traditional crypto exchange to a comprehensive, cross-platform crypto services provider. With OKX's decentralized platform and Web3 wallet, MetaX, you have full custody over your crypto. Explore DeFi, NFTs and play-to-earning gaming with the world's most powerful crypto exchange. Visit OKX.com to learn more. =======================
Transcript
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What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening
to the Pomp Podcast, simply the best podcast out there. Now, let's kick this thing off.
Jason Williams is an entrepreneur and investor. He's also a very good friend of mine and a
partner on a number of different business initiatives. In this conversation, we talk
about how you can prepare for a recession, both as a business owner and in your personal
financial life. I always enjoy these conversations with Jason, and I hope you enjoy it as well.
Before we get into this episode, though, I first want to talk about our sponsors.
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and let me know what you think. Anthony Pompliano runs Pomp Investments. All views of him and the
guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments.
You should not treat any opinion expressed by Pomp or his guests as a specific inducement to
make a particular investment or follow a particular strategy, but only as an expression of his
personal opinion. This podcast is for informational purposes only. Jason, my friend, how are you?
What's going on, man? Can you hear me? Yeah, I'm doing great. How are you?
Good, good. What do you guys have, a new structure to the show or something?
Yeah, we got a schedule. If people don't stay on the schedule, I kick them off. It's just like, let's go, right? It's got to be a little ruthless around here. What I want to talk to you about is there's a lot of people in the comments, I've seen on Twitter, a couple people have responded to me via email saying, hey, I hear all this talk about a potential recession. Maybe it comes, maybe it doesn't. But I don't know what I should do, either as a business owner or in my personal life.
how should I think about changes? And then how should I think about things I shouldn't change?
When you think about your career, you've owned businesses, you've scaled businesses through bad
times. Obviously, you've navigated them personally. What are some of the things that people should be
considering right now as we're looking at a potential recession? Well, I think it's fun to
explore this kind of event and think about it offensively and defensively. So when you reached
out to me this morning, and you, you asked if we could talk about this, I think that's kind of how
I frame it. So like, we can make a defensive category and start discussing that. And then we
can talk about like, how do you prosper regardless of political party in the White House, or whether
we're in a recession, etc. So you want to make sure that you're doing things that kind of make
money and grow your net worth regardless of those events. So first and foremost, from like a
defensive position, I would say live within your means. I think that's a really important thing and
an important discipline that I've tried to deploy over 20, 25 years of being in business. I had
money before Bitcoin and I've done well with Bitcoin, et cetera. But, you know, I've been
doing this for 20 years. So I don't know if your your followers or the viewers know kind of my
backstory. But, you know, I may not look like much, but that's all by design. So first, live within
your means. That starts with kind of getting out of debt. You know, using good debt is is a strategy
you want to deploy. But you also want to take a look at all of your debt during these times when
you're going to get, if you have variable interest rates, those interest rates are going to rise now.
So you need to make sure that you structure that debt well. So if you can pay off debt,
that's not good debt, I would do that. I would also look to restructure debt that's not favorable
or variable. And use debt to income ratios to your advantage. What that means is you want to
make sure you make more money than you spend. A lot of people don't get this right, right? You
want to make more money than you spend. And you want the amount of money that you make to far
outweigh the amount that you spend. And remember this, during times of economic need, banks only
lend money to those people who don't need the money, right? So those people who don't need the
money get the best terms, they get the money from the banks. And those times that you need a loan
from a bank, you will not get it or you will get the worst terms possible. So that's the first
kind of defensive play. What do you think, man? Yeah, I think that this is dead on of just like
the timeless financial principles end up being applied and almost like they're exposed or
exaggerated in times of downturn. And so the idea of just like living within your means,
you should do that in good times or bad times, but it becomes really, really important in the
bad times. Uh, and then you're, you're also other point around just like the more that you are
disciplined and live within your means, the better financial position you're in, which then means
that you have optionality during bad times. And so whether that's loans, whether that's, uh, you
can go on offense, you can do all these different things. Uh, it becomes really, really interesting,
uh, because I think a lot of people just say, Hey, in the good times, I want to get rich.
And then in the bad times, like, Oh, I got to, you know, all of a sudden scramble and figure it
out. So I think that's a, a great point. What, what else do you think people should be doing
from like a defensive standpoint, other than just living within their means?
Yeah, so this is the transition moment between offense and defense. I believe that you should
have multiple streams of income. And here, here's where that becomes valuable. If you're someone
that has multiple jobs, let's say, I have nine jobs, at this moment, nine jobs, and multiple
full time jobs. If I don't like one of the full time jobs, I can get rid of it. And if one of
those full-time jobs don't like me, they can get rid of me. But it doesn't affect me as badly as
if I only had one. And then if you structure these multiple streams of income to be stocks
or investments that pay dividends, real estate, that's rental properties, other passive sorts of
income. You can really diversify. This is one of the spaces that I like to talk about
diversification. A diversified revenue is a stronger revenue, in my opinion. So taking on
more jobs, taking more responsibility, having assets that pay you dividends, both passive and
actively, rental properties, et cetera. I love that strategy. Going into a recession,
taking that list of nine jobs that i have and always pressure testing them saying am i doing
the right thing the most effective thing with my most valuable resource which is my time
when you think about um let's say the passive income right how diversified do you think somebody
should be is this something where like hey if you have two different uh versions of uh passive
income then you're probably good or do you try to get as many as possible like what like how do you
just think about passive income in these times? You know, I don't want to be a mile wide and an
inch deep, but I do like to have a diversified passive income strategy. So, I do like real
estate. Real estate does really, really well traditionally in these kind of inflationary
times, even during a recession. I like to have multiple jobs, whether it's consultant work or
stuff I'm pulling a lever and actually making money for. I think it's really important. And
I think diversifying them is interesting. For someone like me, who likes to play around in
different investment themes, it's natural, whether I'm making money in Bitcoin mining,
power generation, trading commodities, real estate. It feels very natural to me. And some
of your viewers that have gone through your evolution, Pomp, which, you know, you were
early stage venture guy, big time Bitcoin. Now you're talking about business and investing across
all these thematic verticals. I think your listeners are probably interested in that as well.
Yeah. One of the things that I think folks usually forget is in order to invest,
let's say that you're not in the investment business, you don't manage other people's money,
et cetera. A key part to investing is actually where do you get the money to invest? And, you
know, plenty of people will say, oh, like all these folks that I see out there in the media,
et cetera, they just inherited it, right? Well, usually what ends up happening is that majority
of folks, like 80% of millionaires inherited $0 in America. And so those 80% of millionaires,
they end up actually figuring out either one building a business, or they may be a lawyer,
a doctor, you know, have some level of high income as well. But being able to make money
before you actually have money to invest is a really important part. And it always feels like,
especially young people today, with the gamification of some of the markets and kind
of the meme stocks, etc. Everyone wants to go from I don't have a job, I don't have any money to
I'm an investor. But actually, historically, it's been go build a business to get money or go get a
high paying job to get money. And then once you have money, then you become an investor, right?
Yeah, I love this point. And it reminds me of one of my favorite books by Robert Kiyosaki,
it's Cashflow Quadrants. So Cashflow Quadrants, if you haven't read it, it kind of, it lays into
what Pom's talking about. In the four quadrants, you have being an employee, an employee has the
safest position, has benefits, has small amount of responsibility, very structured. And as long
as the boss makes the right decisions and you do what the boss says, you have a job.
Then there's an evolution. People go to college and they become educated and you move into this
situation where you become self-employed. And it's not always like four-year master's, whatever,
it could be technical school, or you could be entrepreneurial. But the other quadrant across
from it is self-employment. And it's a very dangerous position. So there's doctors, lawyers,
plumbers, et cetera. Most of the time, those guys eat what they kill and they are responsible to
pay the bills, to pay the employees or pay themselves. And usually you're paying yourself
last in that situation. And it's a great kind of misnomer, I believe, or it's kind of the position
that a lot of us were sold by our parents, you know, go to school, get a career and get a high
paying job. That high paying job as doctors and lawyers was kind of in this self-employment
bucket. And a lot of those people get disenfranchised there, sell their practices,
take on a lot of risk. And so you need to be disciplined in that self-employment bucket and
build a real business and get into business ownership. Real business ownership has
reproducible systems. It leverages time so that it's not just you getting paid per hour per
widget, but you have people getting paid per hour per widget and they're paying you.
So true business ownership is the kind of evolution and it's a much safer, higher responsibility position. And then finally, the last quadrant is investor. And there's where you get to either use your money or other people's money and monetize your successes. Whether it's your reputation or your own money, as an investor, you get to monetize that. It takes time.
Yeah. When you think about that question, I've read that book before and it's a fantastic book.
I think a lot of it as left side, right side, like the left side of the quadrant is basically
a good starting point, a place to start your career, a place to start to build some wealth.
But really the unlocking is getting to the right side, either owning a business,
which isn't relying on you every single day or being an investor where your capital can
obviously go to work and not be relying on you either. It reminds me a lot. I forget,
maybe it was a rapper, uh, who said like, I think of my dollars as soldiers. I got to put them,
you know, those bad boys out on the battlefield and they got to bring me back more soldiers,
right? I was like, how do I go deploy the, uh, the money when you think about, uh, these
recessionary type times, whether we actually go into one or not, what are some things that you
look at from an asset class standpoint? Do you run to value stocks? Are there other types of
assets that you look at, uh, that tend to do really well through, uh, through these periods?
Yeah, this is a really good question. So, you know, I try to do what the billionaires or the real smart people do. So, you know, in times of a recession, I was reading a Bloomberg study, billionaires run to blue chip art, which may sound shocking to you.
But billionaires, some billionaires in this in this poll had 10 to 30 percent of their of their allocation in their portfolio into blue chip art.
And so I find that to be wild, like absolutely wild.
I love real estate during this time. And real estate also includes Bitcoin.
So I look at Bitcoin as property. And I've said to you all, not on the show, but that I like to use leverage to buy Bitcoin. So I've never leveraged my Bitcoin. I've rehypothecated it. But I have been tapping my real estate and borrowing against it to buy Bitcoin. And some people are like, that's a terrible trade. You're going to get wrecked. Why are you offering that advice to people?
Well, I look at it like this. Again, if I have an asset, like a piece of property that's paid off, and it's appreciating, hopefully, maybe it's earning, you know, it's rented or whatever. And I can get a little bit of leverage 50% LTV and structure that debt. It's not going to get margin called if I can service the debt. I understand it, I can fix it. And I can buy Bitcoin.
I like that strategy very much. And it's worked. I was recommending it at Bitcoin $20,000, $30,000, $50,000. It's literally just DCA and one Bitcoin equals one Bitcoin. I like the strategy. Some people may not understand it. I like it even better than borrowing against Bitcoin to buy more Bitcoin.
What you're really talking about here is this idea of there's a wealth strategy known as buy, borrow, die.
And this is like level 301, 401 of kind of wealth creation.
But the whole idea behind buy, borrow, and die is when you buy assets, you never want to sell them.
You want to let them just continue to compound and grow in value for as long as possible.
then as that is occurring, you borrow against those assets to get cash. There's no income tax
when you borrow it. And you can use those funds for either consumption in your everyday kind of
living expenses, or you can use it to go and make more investments. And then you literally continue
to hold those assets forever until you die. And so this idea of buy, borrow, die ends up being
a strategy that the wealthiest people use very, very well. Now, they also do it because they
understand the assets, they have people who can underwrite the risks that they're taking, etc.
But that is kind of a very complicated or complex version of what you're talking about, which is
just you have these pieces of real estate, they're paid off. And now all you're doing is you're able
to tap liquidity from them, keep the debt load into an area where it's manageable, you can service
it without any sort of pain or issue. And then what you do with that money, whether you go and
you buy a vacation home, you buy a car or you make an investment. It's really up to what you
want to do with that capital, right? Yeah, that's exactly right. That's exactly right.
And it's something that I challenge your listeners to just do a mental model, see how it feels to
you. And remember the other things that I've talked about. You have to manage your debt to
income ratios. You have to be able to service this debt. And you're risking those assets,
These are assets that you paid off. Now you're leaning against them. But in times of kind of a recession, there may be things that you can buy on a discount. And that's where you become offensive in the strategy and you can really create a lot of wealth for yourself.
I sent you an infographic about farmland. I'm enamored with it. I went back and looked at a chart that compared farmland from, I think, 1995 to 2021 and put farmland against gold, real estate, bonds.
and it's really interesting to look at. I think farmland from 1995 till today, 20x. So if you
invested $1,000, you're at 20,000. Real estate and stocks, 10x and golden bonds, 5x. I didn't put
Bitcoin against it, but I would expect that since Bitcoin's inception, it probably outperformed
all of this. But farmland is amazing. It's like the original peer to peer transfer stuff. And
quite surprisingly, once you start to look into farmland, a lot of the billionaires, a lot of the
big names are purchasing this stuff. Jeff Bezos, in particular, has been snatching up farmland
across the United States. And if you try to go macro with farmland, you start to think about
how many people are interested in, in these kind of, uh, you know, free roaming, uh, farm raised
organic, um, you know, consumables, these, uh, I think that owning farmland and producing
food, producing other commodities on it is really, really interesting. You may not be a farmer,
but you can lease out this, this land and, and earn income on it. And it's usually quite cheap,
the land. You're not buying things for a hundred thousands of dollars an acre. You're buying
things for $10,000 an acre or something like that. How much of the value that's created by
owning farmland from an investment standpoint is just the land itself. And there's only so
much land, you know, in the United States. And so you kind of own a scarce asset in that regard
versus there's actual productivity that occurs. So you're making money on whatever the thing that
is being farmed on the land? Is it a combination of both? Is it just buy and hold for a long period
of time and then somebody wants to pay you more for it later? How does that work?
Yeah, man. I look at it like we're, what is it, the 1600s when Manhattan was established or
something like that. Just think of farmland like Manhattan and you're early. You're there. How much
is a city block going to be worth? It's not worth a lot right now, but if you can buy it and you can
hold it in perpetuity, and you can leverage it, land leases, etc. It could be worth a lot. So
I don't know, like, in the state I live in, there's farmland everywhere. It's shocking to me
that there is farmland. And I look at it as both an appreciating asset, a tax strategy,
and an income producing asset. So I look at it like all three, Paul.
Got it. And so when you start to think about other things that you can do, how much of the investing portfolio do you begin to rebalance or concentrate in times of these recessionary periods versus you're thinking more offensively like, hey, am I able to get access to cash and go acquire more assets, almost expanding your portfolio? Is it a contraction mentality or an expansion mentality?
Yeah, I try to stay in a growth mentality at all times.
Like, you know, I want to add work on yourself because I think that's really important during times of recession.
You're under max stress usually.
And, you know, I think about these assets all the time when you said, you know, there was some rapper that says that he focuses on his money, blah, blah, blah.
I said that.
I was the one who said, I look at my money and I make sure my money is working every day.
I'm the one who said that.
I don't know who, what rapper, what you're talking about.
I said that. Every day, I look at my money and I say, go to work money. I look at all my assets
and I make sure they're working because I'm working. Are you working? So, back to what I'm
saying. When you think about putting your money to work, how do you think about cash today? Do you
try to sit with some percentage of your portfolio in cash or do you try to be fully invested? Like,
how do you think about kind of the rainy day fund or the risk management that a lot of people talk
about? Yeah, I would say I'm pretty cash poor. I have some assets that are liquid, but I don't
keep a lot of cash. So historically, people would keep, you know, a few months of working capital
that they had access to. I like to have access to lines of credit. So that's something that I work
on during the pre-recessionary period. I start contacting banks and I say, hey, can I get a line
of credit established on this particular property? And I work to structure it in a very strategic
way. I want it to exist. If I tap it, it can get structured into long-term debt, not a variable
interest rate. Remember, if you don't need the money, you can get it. But when you need it,
it won't be available. So you need to work on that stuff now. So I use those type of models
to offset sitting on a hoard of cash so that I can get maximum kind of efficiency on my
investments, specifically cash.
You know, I really worry about inflation.
If you've read my book, you know that I'm bullish on Bitcoin and I'm aggressive with
Bitcoin.
A lot of people that follow me or don't follow me don't like my rehypothecation strategies that
I've used with Bitcoin. I don't leverage against it, but I do lend it out. When you think about
types of businesses that people should look at right now, how much of, you know, if I'm a young
person, like go into the tech industry, try to build a startup versus go and start a plumbing
business or some sort of like locally based, you know, many people would consider like an SMB
type opportunity. Like, how do you think about if you could go back and you were 22 years old
and you were looking at the current economic environment, like how would you evaluate where
to go and what to do? Yeah, I think there's some like careers that are pretty economically
insulated. Like they persist and they thrive regardless of the economic downtrends. So I think
healthcare for one is an excellent place to focus your time. Engineering is another. I think coding
and computer science is massive right now. So those are three places that I would focus.
I also wanted to speak a little bit with you about this point. I've said this to you before
that your 20s are the time you get your education, your 30s are the time that you monetize
your education, and your 40s are when you monetize your reputation. I think those timelines have been
compressed, but I also find a lot of millennials are very frustrated that they're not able to get
the street cred because they've had this democratization of information or maybe some
early success, but they don't have the gray hair or the, the reputation. And some people are,
are less, I guess, aggressive in regards to backing them. But I, I like that, uh, that kind
of mental model. And, um, and I think, uh, I think it's challenging for young people right now. Also,
I think trade schools are really cool. I went to a trade school, so I didn't go to medical school.
I went to PA school. So it's like a two-year program to be a like half doctor. And I love
trade school. So I think refrigeration repair, AC repair, electrician, plumber, these jobs can
turn into careers, can turn into small businesses, can turn into big businesses. And I think there's
a pathway to being investors and being free from a lot of the oppression of debt and, and some of
the kind of things our parents faced. Yeah. How do you think about Bitcoin in this current macro
environment? It's come down, you know, I don't know, 50%, give or take on any given day. Is it
something where you continue to think that the same, you know, kind of investment thesis holds?
Have you changed your mind on anything? Are you doing anything different in kind of the Bitcoin
crypto world? No, like, you know, I'm still bullish on Bitcoin. If you're looking at stocks,
bonds, commodities, you know, the full stack of things that you can invest in, I've taken like
gold out of the equation. So I'm not a buyer of gold and I have Bitcoin in that position. And
And then Bitcoin consumes a larger position of some of the other positions in my asset allocation.
I'm still very, very bullish on Bitcoin.
I haven't posted large purchases in the last few months simply because the compliance officers have told me I'm not allowed to do that anymore.
Hey, the compliance people, they make the rules.
We just do our best to follow them.
Um, the, uh, the last question I have for you is, uh, looking back, you obviously navigated
the 2008, 2009 crisis.
Uh, you expertly navigated the 2020 recession, uh, although it only lasted for about 45 days.
Um, what are some of your takeaways in terms of, uh, what people should be paying attention
to right now?
Uh, and then also like things that they can learn as they go through this experience.
So do you have any, you know, major lessons learned or takeaways from the past ones as
a business owner and an investor that you navigated? Yeah. And pump, I would go all the
way back to September 11th, 2001, because, you know, I started a fast med, uh, the medical business
in, uh, in November of 2001. So can you imagine, I was, yeah, I was building a business. I was
borrowing money. I was 26 years old. I had no, no wealth, nothing. I had paper in the form of
an education, but I had no money. And then the economic devastation of September 11th occurred,
banks started to withdraw access to capital. And I started my first business during that.
So I was kind of born out of tremendous chaos and global instability and war. And we've essentially
been in perpetual war since that time, I believe, until recently. So for me, I don't chase fast
nickels. I'd like to make slow dimes. And I like to build things of substance. Although I've built
a number of businesses, I wouldn't even say I'm a serial entrepreneur. I like to find a big problem
and spend time trying to solve it and that's part of the kind of work on yourself like
get your education there's a democratization of information at this point you can get all
the information you need go get it if you want to build a business take the risk while you're young
and you don't have dependence and and you still have strength you know take care of your health
and wellness. It's really important because you can't run a marathon or a marathon every four
days if you're not fit. But the things I've learned over time are try to fulfill your
commitments to people, try to be consistent, and work with integrity. You don't always get it right.
Hold on. Even if you feel like you're at the 11th hour and you're about to fail,
because that kind of breakthrough moment always happens at the moment that you're about to give
up. So hold on just a little longer and try to surround yourself with people that are way smarter
than you. Don't be afraid to change your mind, you know, reserve the right to change your mind
at any time. It's kept me out of a lot of trouble. Don't be afraid to say you're wrong. Don't be
afraid to say you're sorry. You know, all of these things, they're very challenging. They sound so
simple, but most people can't do it. Most people can't recognize when they're wrong and do it
quickly. You know, fail fast, fail often, fail small. A lot of this stuff sounds cliche, but
you know, after being in business for 20 plus years, you know, I was on a very heated call
just before I came on this show, working with people who I respect, you know, and it's hard.
These people are smart. They have different opinions. We're dealing with a lot of money.
And, you know, it takes reasonableness and a return to why you all agreed to work together, you know, maintaining integrity, remembering, you know, who everyone is like all these things take a tremendous amount of emotional maturity. But, you know, these are things that I've learned over many, many years working.
I think that's fantastic advice. Before we let you go, where should we send people to buy your
book and then also find you on the internet? Well, my book's not available in Barnes and
Noble. It's not available in any stores. It's shocking to me, Paul. It's shocking to me. I
don't understand how a book, the number one bestseller in international finance, the number
one bestseller in macroeconomics the number one bestseller in hard money books is not available
anywhere other than amazon they get it on yeah it's unbelievable it's unbelievable what a book
they're they're hating hey listen the hate the haters have thrown every obstacle your way but
you're still winning every obstacle that they could and i'm still number one hey why did you
run polina off i was trying to uh to say hi and talk to her in a in a little bit i want to come
on lunch money listen you're two minutes late i just keep the schedule moving since you fired
all the pompliano brothers can i come on now like they give me a spot but joe joe's about to come on
next i know but they're not here anymore something happened now look what happened
You know, the Pompliano brothers get wrecked on that Terra trade.
Look at Joe's Joe's laughing right now. Hey man,
y'all better chill out over there. My microphone ain't working yet,
but it's about to be. All right, buddy. Thanks so much for coming on.
We'll definitely do this again. My pleasure.
Take care guys.
Thanks so much for listening to today's episode.
I really hope you guys enjoyed this one.
Make sure you're subscribed on Apple, Spotify, or your favorite podcast player.
And if you're looking to try to transition to get a new job
in the Bitcoin or crypto industry, we've got you covered.
Head over to pompscryptocourse.com.
We've developed a curriculum with the top teams across the industry.
It's a three-week intensive training program
with over 50 events packed into that three-week time period.
Go to pompscryptocourse.com to learn more.
And I'll meet you guys for the next episode.
