← Money And Wealth With John Hope Bryant
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- [00:00]
Oracle Representative
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- [00:45]
John Hope Bryant
Right now, Oracle can cut your current cloud bill in half if you move to OCI. Minimum financial commitment and other terms apply. Offer ends March 31st. See if your company qualifies for this special offer@oracle.com strategic that's oracle.com strategic in.
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Charlamagne Tha God
A world of economic uncertainty and workplace transformation, learn to lead by example from visionary C Suite executives like Shannon Schuyler of PwC and Will Pearson of iHeartMedia. The good teacher explains the great teacher inspires.
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John Hope Bryant
Don't always leave your team to do the work. That's been the most important part of how to lead by example.
- [01:25]
Charlamagne Tha God
Listen to leading by Example executives making an impact on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
- [01:34]
Mandy B
Peace to the Planet. I go by the name of Charlamagne Tha God and guess what? I can't wait to see y'all at the third annual Black Effect Podcast Festival. That's right, we're coming Back to Atlanta, GA Saturday, April 26th at Pullman Yards and it's hosted by none other than Decisions, Decisions Mandy B and Weezy. Okay, we got the R and B Money podcast with Tank and J. Valentine. We got the Woman Evolved podcast with Sarah Jake Roberts. We got Good Moms, Bad Choices. Carrie Champion will be there with her Neck in Sports podcast and the Trap Nerds Podcast with more to be announced. And of course, it's bigger than podcast. We're bringing the Black Effect Marketplace with black owned businesses plus the Food Truck Court to keep you fed while you visit us. All right, listen, you don't want to miss this. Tap in and grab your Tickets now@blackffect.com podcast festival.
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John Hope Bryant
Welcome to Money and Wealth with John Hope Bryant, a production of the Black Effect podcast network and iHeartRadio yo, yo. This is John Hope Bryant and this is Money and wealth on the iHeartradio network and the Black Effect, where I am honored to be associated with Charlamagne and the team over there, who is fantastic, by the way. And this is a very special podcast episode, something that many, many people have asked me about. And it just shows that somebody that so called, as smart as me so called can be dumb as rocks. What I mean by that is this is a topic that I should have covered in episode one. But I just basically assume whenever you assume, you make a you know what out of you and me. I just always assumed this was a topic everybody understood. So I, I didn't cover it specifically. I talked around it, I talked through it. And then I just realized that one of our biggest problems, this issue of debt and you even have some people, there are certain influences, if you want to call it that, who talk about debt in a way. Well, they just say that you shouldn't have it. Right, right. That it's just a bad thing. You should be debt free. And we've talked that into society and we talk that into people's heads and people have really. And by the way, it's a beautiful ambition, certainly if you're a senior citizen or if you're a married couple who doesn't manage handle stress well, you know, you can go on and on and on. There's all kind of examples of why certain people should not have any debt or much debt because it just, it eats away, eats away at their peace of mind. But we're not talking about those people. We're talking about you. You've been doing so much with so little for so long. You can almost do anything with nothing. We're talking about a survivor. We're talking about somebody who wants to thrive. We're talking about somebody who wants to build. We're talking about somebody who is, to quote my friend, my departed friend, Dr. Dorothy Height is a dreamer with a shovel in their hands. We're talking about somebody who's over, around it, through it, they're going to get to it. We're talking about somebody who knows how to do it. We're talking about somebody who, we're starting to preach now here, talking about somebody who knows how to succeed or wants to succeed and just wants to know how. And you know that, that somebody's been holding information back from you. And you, you want to be set free. You just want the opportunity again. This is like a rap. And so I apologize first of all for not breaking this down because it is untrue. That debt is just simply bad. It is just function. In fact, not only is it untrue, it's not even true for the people who are telling you that. So that all the folks telling you that debt is bad have good debt. All the folks who are on TV telling poor people and struggling people and telling the coming up generation you shouldn't own a home because it's 30 years worth of debt or whatever their mentality is, whatever the rationale is. All those people who tell you not to own a home on tv, listen to me now. Own a home. Repeat that. All the folks who are on TV telling you, the rich people on television telling you not to own a home, I guarantee you on a home. Why do I know that? Because tax policy in the United States is around, it's really designed around home ownership, is designed around real estate, specifically home ownership, single family residential home ownership in real estate. And they're not going to benefit, they're not going to lose out on one of the best tax policies ever created in modern society for any. I mean we're the biggest economy in the world, the United States of America, approaching $30 trillion. 75% of whites own a home compared to 41, 42, 43, 44% on a good day of blacks who own a home. That delta, that difference of 30% is a big chunk of generational wealth. So I can't quite figure out why my wealthy friends keep giving my poor and struggling friends bad advice. But I'm here to break that cycle. I'm here to tell you the good, the bad and the opportunity. That's what this segment's called. I want you to get around a radio, get around your iPhone, get around your smartphone, get around your iPad, get around, get around your streaming device and get your friends together and let's have this conversation. And I want you to really chop it up. I want you to have genuine conversation. Go back and forth, forth with this and send me questions on social media and I guarantee you I will answer it. This one's going to be controversial. I've already broken one taboo. I've already said, you know, that all debts not, not bad, right? So that's already one taboo that is out there that I'm sure is going to cause a lot of consternation. I'm not downplaying, I'm not talking down to any social media advocate, I'm not talking down, talking down to any financial literacy advisor or financial literacy so called expert or expert. Here's a difference I'm an entrepreneur. I'm running real businesses. I have built real businesses. A lot of the people who are teaching this are really expert in the theory of money. And they may know more about me by the way in different products and things around the theory of money. But on the, the practicality and application of money in the instruments and the philosophies of running a business and building something. This is an example where Ph do is just as good as PhD and in certain cases might be more important. PhD is great. PhD sometimes, sometimes are better. You need really both. I have in my company people have degrees. All people work for me are highly qualified with degrees, more degrees than me. But I have a degree in leadership and initiative in building something and taking an idea and turning it into something. And my friend Jim Clifton of Gallup used to say that an innovation without a customer next to it is not a business. And without a business you can't build wealth. And so you build wealth in your sleep. And one of the ways you build that is wealth in your sleep is compounding. And one of the way to leverage, moderately leverage compounding is good debt. So the differentiator between me and the other people is that I am, I think I'm the only one that I can, I'm the only one I know of who's out here preaching good capitalism and good debt, who's actually using it in a fast growing set of businesses, not who are not dependent upon the advice that they're talking. It's not a seminar business, it's not a book selling business. Good. That stuff by the way, I'm running a real estate business, intellectual property rights business, a advisory business to Wall street and to Fortune 500 companies. I'm running a financial literacy coaching organization that's the biggest in the country. In fact, three of my businesses are in themselves the biggest in the country. So I'm a practical entrepreneur. That's the point I'm making. So let's talk about is debt good? Right? And let's just unpack it all and then let's get into good debt versus bad debt. So let's talk about the history of debt in, in society and I'm going to talk about my own history by the way of debt. And let me just say this right off the bat, if it wasn't for good debt, and I even used bad debt for a time, I didn't know the difference. I was just, I was just running and hustling. I had to outrun the high interest rates that were on, tied to the bad debt of using it for good purposes, which just shows you the power of debt that if you use bad debt for a good purpose and you run really fast, you can outrun the cost of the bad debt with the benefit of the good opportunity and still succeed. Which was my story early on when I had used bad credit cards for a good purpose while I was running my businesses as a teenager. I can't underscore enough how this entire topic requires financial literacy. I can't underscore enough why you need to talk to a range of advisors. And don't just go off here and just say, well, debt's good. That's not what I'm saying. In fact, too much debt and this will crush you. You got to get this particular convers exactly right. Why did I use debt? Because I didn't have equity. Because black people and brown people did not have access to equity. I did not have access to equity. I did not have inherited wealth. My parents were not endowed in that way. And so I had to use what was in front of me, what was available. So by the way, is debt capital? Is debt a form of capital? Yes, this is the first definition. Debt and equity loans and earned or received ownership collateral or ownership assets equity. Those two things are both forms of capital. One's debt capital, one's equity capital debt capital. You owe somebody, you got to pay it back. Equity capital, theoretically it's yours or somebody gave it to you. There's no loan attached, there's no payment attached to it. Just to make this real simple, one simple rule in business is you never want to finance long term equity with short term debt. So you don't want to try to finance a long term business prospect using short term debt that you have to make a payment on. But that's just a, that's an aside I've got getting ahead of myself. Let me talk about why I differentiate. First of all, my advice and my approach to some of my wealthy friends who say just debt is bad in inner cities and underserved communities, particularly the black community, we have historically relied on debt as a form of capital because we were systemically excluded from accessing equity and generational wealth. This exclusion was not accidental. It was a result of racist policies in the 20th century, even before that, going back to slavery, of course, discriminatory financial systems and structural economic barriers that limited wealth building opportunities. And let me break this down, by the way, you don't need this history lesson. Just fast forward on the podcast to the practical advice. When I get into good Debt and bad debt. But for some people, this, for those people living in this situation, need to know that you're not dumb, you're not stupid. It's what you don't know that you don't know that's killing you. But you think you know. You need to unlearn what people have taught you in, I don't know, even church maybe about why that is supposedly a bad or evil thing. The Bible, Bible does not say that money is bad. The Bible says the love of money is bad. Hello. Hello. Can I get an amen? So you may need to unlearn some things and you may, you know, capitalism is bad. No, capitalism is not bad. Look, even if you want to distribute money like a socialist, you have to first collect it like a capitalist. So even the church can't survive without tithes and offering contributions and pay their bills. So let's not, let's knock off the silly stuff. Capitalism has been around since the beginning of time. Again, I'm gonna get into this with the history of debt, but let me. For some people, this is really important message to understand that they're not dumb and they're not stupid. There's a reason why they start. They start out behind the starting line and people who are mainstream. It's important to understand why there needs to be a leveling of the playing field for certain groups that everybody is not starting out even. And you just can't say if you have merit. That is good enough. That is not true. That's why people go to Harvard and not a community college. Harvard may not treat you, teach you anything more, but it's a club. It's a relationship of people who are going to hook each other up for the next 40 years. That is a form of capital, by the way. That's relationship capital. That's a different video, so a different podcast. I'll do a separate podcast on relationship capital. Slavery. The history of exclusion from equity and wealth building and slavery in the wealth gap was 1619 to 1865. I'm gonna do a sole podcast just on the economics and the business of slavery. Black Americans were enslaved for about 250 years, meaning they were generating wealth but not owning any. Really important stuff here, by the way. We focused on culture, our white friends focused on commerce. That's why when we say something's cool, it's cool in Tibet, it's cool. I'm in Singapore right now, it's cool in Singapore. Black music, black this, black. When I walk around the malls here, there's black music everywhere. We have mastered culture all around the world, but we missed the lesson on commerce. Do we miss it? Somebody stole the memo and misplaced it and never gave it to us. That was my fourth of six. Need to go back and read that one. Certainly get my book. Financial Literacy for All was a bestseller right now. So we were enslaved for 250 years, meaning we were generating wealth but not owning any of that wealth. By the time slavery ended, black families had no land, no capital and no inherited wealth, while white families had been building generational wealth for centuries. Okay. The denial of land and home ownership, 1865-1968 really started in 1862. 40 acres and a mule was never delivered. Black Americans were promised land but denied it, while white families benefited from government backed land grants. Let me, again, this is not what this video is about, so I don't want to get distracted, but the Homestead act of 1862 allocated 10% of all American land to 99% plus white families, about 270 million acres. There was no debt tied to those land grants. Grants were, I think 160 acres if my memory serves me properly. And the government even set aside teachers that were government paid for who taught the white farmers how to farm on the land. Okay. And in contrast, a few years later, 1865, Field Action 15 created 400,000 acres in comparison to 270 million acres. 400,000 acres set aside for blacks who fought in the Union Army. Like my second great grandfather who was fighting in the Union army as part of the Emancipation Proclamation. He's one of 7,000 officers. George Young is his name. Anyway, if you were in the Union army, you could have gotten one of these 18,000 plots of 40 acres. Think about this now. 40,000 acres, about 18,000 plots of land, 40 acres each. Within two years, Lincoln was killed. All that property was turned back over to the original folks who owned the land, who were effectively Confederate families and slave owners. Okay. In comparison to the Homestead act, which was started 1862 basically during the Civil War and all that was land going west. And that was 10% of all American land, 270 million acres. And that, that accounts for the generational wealth of about 100 million Americans today are the basis of Jim Crow laws kept black owning businesses and property, forcing them into low wage labor redlining. 1930s and 1960s, the federal government and banks systemically denied black families access to home loans, meaning they could not build equity through real estate while white families could. Again, why is this important? The federal government called for guarantees on loans called fha Federal Housing Authority. But they redlined. They put it. It wasn't banks who did this, it was the federal government. They redlined certain areas and said these areas were unsafe. Whether areas considered unsafe, where a bank, you know, no bank in their right right mind wants to do a loan in an unsafe area. Certainly the federal government's not going to insure the debt. So the federal government think we're talking about good debt now here they insured the debt of loans, of loan mortgages that were not in red line areas, which coincidentally were in these suburban or white areas where white flight, where whites moved to. And after World War II it even became more intense. And that's where the mortgages went to. The mortgages went to areas that were insured by the federal government. This is the definition of that era's version of good debt. So which properties. I'm about to give you a real cheat sheet here about black. They call it cross the train tracks. Why are white homes more valuable than black homes? This started as really as a baseline in 1930s when FHA would redline the federal government redlined black communities and would not provide mortgages, would not provide guarantees for mortgages. And so banks would not provide loans. In addition to that, banks were racist back then. They were family owned banks, a lot of them. I got to do a separate podcast just on this. This is too much information from one podcast, by the way. You can send me notes on social media and tell me which things to focus on and I'll be happy to do that. So if you could provide a loan and a guarantee at prime rates in a white neighborhood, but you got no loans and no guarantees in a black neighborhood. So then homes traded and sold. And you could easily sell a home in a white neighborhood because you could assume a great mortgage with a great rate. Right. Backed by the full faith and credit of the federal government. I mean it's not. Doesn't take a rocket scientist to figure out that the homes in the white neighborhood would start appraising for hire and the black neighborhood was already redlined. Proceed. The federal government said these are dangerous areas, so of course they would appraise for lower. So this is the basis of good debt and bad debt. I'm trying to give you a really good example here. The government actually defined what a good debt and a bad debt was by making this redlining action. The lack of access to business credit. This is the 1900s to present. Banks refused to lend to black entrepreneurs while white businesses had access to family wealth, bank loans and government grants. The Small Business Administration systemically excluded black entrepreneurs from funding programs until the late 20th century. By the way, Operation Hope got its loan, got its start from the Small Business Administration got a grant, a 7J grant, for $61,000 in 1992. And it was, oddly enough, bipartisan. It was George Bush inspired. George Bush, the father, inspired by Mayor Tom Bradley, a black mayor back then, the first mayor, black mayor of a major city ever in South Central LA in 1992. So that was a great example of. It wasn't red or wasn't red. It wasn't blue. It was, it was black, it was green, right? So here's a red and a blue, providing the green to some black, to a black man, to this young entrepreneur. So that luckily that's changing with the sba. Venture capital has historically ignored black businesses. Even today, black founders receive less than 2% of venture capital funding. I talk about venture capital. Unpack what that means in season one. So go back and watch that why black Americans had to use debt instead of equity. Without access to homeownership, business loans or inherited wealth, black Americans had only one option left, debt. Using credit cards and loans instead of investment capital. Because banks wouldn't provide these business loans, black entrepreneurs had to fund businesses using personal credit cards and payday loans. Without inherited wealth, black families use credit for emergency expenses, medical bills, education, leading to higher credit burdens. We use GoFundMe campaigns today not to start a business, but to bury somebody. I mean, think about this. We made this stuff normal. It's not normal. That's why I say, you know, when you have a 500 credit score neighborhood, you think that dumb stuff is normal. You walk into the house, a check cash, a payday loan lender, a rental home store, a title lender, a liquor store, a pawn shop in the inner City neighborhood, a 500 credit score neighborhood. And we think that's normal. It's not not normal. And whether you're black and brown urban or white poor rural, it is the same. It's just bad. Higher interest rates on loans and mortgages. By the way, if you, if you're in one of These underserved neighborhoods, 500 credit score neighborhoods and you're only you have access is these loans from Pookie and them and Jojo and Luigi or whoever, who's making these loans? In the hood where I grew up at like a hood, like where I grew up, they're high interest rate loans. So you can't start a normal business. You end up going into illegal enterprises because that's the only thing that's going to pay you the kind of returns that will allow you to repay these crazy loans that you've gotten. So one thing, one bad idea feeds on another situation and you end up in a just toe up from the flow up higher interest rates on loans and mortgages due to lower credit scores and systemic barriers. Trapped like borrowers in a cycle of expensive debt. It's very expensive to be poor. The student loan crisis and lack of family wealth. Black families often do not have generational wealth to pay for colleges out for college expenses outright. By the way, this is an example. College loans is an example of good debt. I'll explain that in a moment. Leading to higher student loan debt because we don't have the wealth, so we end up in debt. But as I said, that can be a form of good debt. I may have to do this in two parts. This is too much to carry cover in one. In one city. Black graduates borrow more, take longer to pay off debt and have higher default rates than their white counterparts. For the reasons I've already mentioned. Not because they're dumb, not because they're stupid. Because their family in these white families can just pay for the expense of the education. And they're not carrying with them generational debt. They have generational wealth because. Well, for the reasons I've already discussed. And so one thing, one crisis builds on on another. In the black community, meanwhile, white families pay down, pay down their assets, helping with. They pay to use good debt and they pay that down creating assets. Because now you're building wealth in that. So the guys, I hate when people walk up to me, actually, I love it because it's a teachable lesson, teachable moment. Oh man, I don't want to buy no house. If I buy the house, the bank owns the house. If you don't pay. Let me tell you something. If I loan you some money and you don't pay, I'm going to own your house. So yeah, if you don't pay, the bank will own your house. Yes, that's true. But as long as you pay and you got to live somewhere, why wouldn't you pay rent or mortgage payment? Then the equity is yours, right? Don't be a dummy. Right. Meanwhile, white families pay down their assets helping their children and to avoid debt and start life with an economic advantage. The life cycle of debt and the wealth gap. Today, the average Black family has 10, 10, 10 times less wealth than the average white family. Homeownership rates for black families are still the lowest amongst all racial Groups limiting access to home equity and generational wealth. Okay, I mean, got into the debt part yet this, I'm just giving you the baseline. Predatory lending, pay down payday loans, high interest rate credit cards disproportionately target black and underserved communities, keeping them in a cycle of debt based on survival rather than equity based wealth creation. I've already, again, I've covered this, that whether you live in these, the number one, the average credit score for the lowest credit score of any group are black Americans. Not black Caribbeans, not black Nigerians, not black Ghanaians, not black bohemians. Black Americans because of the legacy of slavery and Jim Crow that I've mentioned here, that affected us and didn't affect them in the same way. And so our credit score is the lowest in the country, on average is 620, which means half of black people wake up in the morning, lock out of the free enterprise system. Again, has nothing to do with your intelligence. You can go to church every Sunday, be the nicest person in the world and still be broke. If you don't understand how this system works, I'm gonna do a whole podcast series on, on how it's been 6,000 years of, of telling black people some stupid stuff. I'm gonna try to turn that around in less than six years so you can get back on the right track and master this. But this whole concept that somehow we're, we just, we can't be capitalists. It's completely dead wrong. And again, I'm not going to cover it here. We don't have enough time. I'm doing an entire series on that. But we created the whole system. I will touch on that before I finish this particular podcast. My inclusive economics growth plan is built on the idea that we must transition black Americans from a debt based survival platform to an equity based wealth building platform. Increase access to prime credit, home ownership and business investment. Expand financial literacy programs to teach debt management, investing and wealth creation. And of course my favorite thing, good credit scores. Ensure banks, venture capital firms and the federal government invest directly in black owned businesses and homeownership opportunities. Now this is not to the exclusion of other races of people. Just to make this clear, I want everybody to succeed. I'm just making it clear that black Americans are a notable example, an exception. That's why you can't just put black Americans into a bucket with everybody else because nobody else was enslaved on American soil. And it's stupid for somebody to say otherwise. You can't put black Americans and say we're Just like everybody else. Because again, no one else was property for 270 years. No one else was enslaved on American soil. Literally, banks. If a bank is over 150 years old, there are debt records of black slaves on the bank records. Yes, what I just said is actually true. A plantation owner 170 years ago would get a loan for their plantation that would include their livestock, the buildings, the land, and their slaves. Then insurance companies would insure them and underwrite them. And Wall street firms sometimes would securitize that debt. Everybody was involved in this corrupt, bad system. Let's now move on. Let's go to the history of debt. Debt is as old as civilization itself. From early barter systems to today's global financial markets, borrowing and lending have played a crucial role in economic development, social structures, and wealth distribution. Please hear me now. This is as old as life itself. The Bible talks about money more than talks about anything else. More than 2,000 mentions. Again, money's not bad. It's the love of money that's bad. Understanding the origins of debt helps us grasp its power both as a tool for progress and a potential source of financial hardship. Jesus only got mad one time when he turned over the table of the money changers when they were inside the temple. Again, it's not money. It's the love of money. It's the greed. It's the repressive aspects of it. It can also be very empowering. It could be you do well and become a philanthropist. I guess, like me, in some ways, I'm still an active capitalist, but I make it and I give some of it away. I make it and I use it as a source of power to lift people up, I. E. My philanthropy Operation hope, which is the largest financial literacy coaching organization in America. Ancient debt, the first credit to credit systems. Now, I'm going to run through this pretty quickly because I want to get to the lessons in this one podcast episode. But let me know if you want me to go deeper in a second episode, and I will. I'm going to try to get through the whole thing before the hour is over, but I will. I'm willing to go deeper if you want me to. What's interesting to me may not be interesting to you is what I'm saying. So. The earliest recorded forms of debt date back to mesopotamia. This is 3,000 years before Christ. This is where the Sumerians and Akkadians, among other earlier civilizations in human history, developed a system of loans using silver. Hello, my silver rights movement. Silver and grain by the Way before there was a gold standard in America. America used silver. It's the people's metal, people's precious metal. These societies were predominantly Semitic and Sumerian speaking people, contributing significantly to early urbanization and economic structures. By the way, just to make it real clear, it was the Middle east where money structures, debt structures were first originated. Specifically in Iran. Okay, to be very clear what I'm saying here in North Africa. So the Middle east and North Africa is where these early systems came from. So don't anybody tell you that you're dumb and you're stupid. You don't understand these things that came from us. These loans were often used for agricultural purposes. Farmers borrowed seeds and livestock repaying lenders with a portion of the harvest. Hello, capitalism. Free enterprise. Temples and palaces acted as early banks. Hello? Hello? Overseeing transactions and setting interest rates. Did you hear me? Temples, palaces acted as early banks. One of the biggest banks in the world is inside of the Catholic Church. Debt in Ancient Greece and Rome by the time the Greek and Roman empires, debt had become a key part of economic expansion. In Greece, borrowers were Borrowing was widespread among city states and individuals. But failure to repay often led to severe consequences including loan including the loss of land and personal freedom. Think about your car being put up by a tow truck today, being repossessed. Same thing. So no one's picking on you. This is as old as modern human being and life itself. The Athenian leader salon around 594 BC, before Christ introduced reforms that abolish debt slavery. Yes, debt slavery. Recognizing that excessive debt could destabilize society, the Romans refined financial systems further. Now we're heading into the Greek era, creating the first formalized banking institutions and debt contracts. Wealthy Roman elites acted as lenders, funding military campaigns, trade expeditions and public infrastructure projects. The concept of interest Usera. You know, usurious, that's where this phrase comes from. Became more structured. Although excessive rates were frowned upon in societies, this is one of the reasons why they're. I believe I'm not an expert in the Middle east financial system, but I know enough to say this. This is why the Middle east has caps on interest rates. They use a different system. Same system, but a different system. A different approach, shall I say? Maybe I'll cover that in another podcast. The Middle Ages the Church and the rise of credit during the medieval period, lending was shaped by religious doctrines. The Catholic Church prohibited usury charging interest on loans. So again, this is something I'm trying to figure out what to tell you and what not to tell you because this is just such a deep topic that I can go on forever and ever on. Because this is the same thing I just mentioned about the Middle Eastern model where they prohibit usury lending to the emergence of alternative lending systems. So the Catholic church prohibited usury. This of course changed interest rates on loans, but that was the original system. Jewish and Lombard merchants became the primary money lenders in Europe as Christian. Restrictions on interest bearing loans, limited participation in finance. Now this is a very interesting point. It wasn't like Jews were some privileged group. They were the outliers. Jews were outliers. Middle Eastern emergents were outliers. African leaders in this space were outliers. They were not mainstream in any way. They were forced to do things that nobody else would do. So here's an example. The church would not allow interest rates. So these other entrepreneurs decided to find a way around it. Do you know in Europe Jews could not own land in the 20th century, were prohibited from owning land. So they do. They smartly created, became experts in finance which they had been gaining expertise in over literally hundreds of years. And they used finance to then control the land that society said they could not own. And that's exactly what blacks and others should be learning to do by the way. Turn a negative into a positive. Old around and do what you're going to get to it. Wall street prohibited Jews from being lenders. And this is a whole nother story. But this is why Wall street firms, alternative Wall street firms cropped up and they're now many of them dominant like Goldman Sachs. Hello, that was two Jewish merchants, Mr. Goldman and Mr. Sachs. But no one thinks about it now. They just think about Goldman Sachs, one of the biggest companies in the world today. They took an outlier area and made it a mainstream area. Took a negative and turned it into a positive because they were walking down door to door with a little briefcase trying to get a job, trying to sell financial services door to door because they couldn't get a job in the, in the big fancy office buildings in the early 20th century. So stop hating on Jews because they're good at what they do. It's like hating on a black person because they're good at rap or basketball or football or preaching or whatever it is we're good at. It's like if you're good at something you should just simply applaud that individual or group. It also is stupid if you generalize, you discriminate. I'm not good at rap by the way. I just discriminate against my own black people. My own People by saying blacks in rapping. But that's a perception. I'm horrible at rapping. I'm horrible at rapping and horrible basketball and football either. I love motorsports. But you get my point. The first credit markets began developing in major trade hubs such as Venice and Florence in Italy where merchant banking families. The Medici as an example pioneer financial instruments like bills of exchange, early versions of modern promissory notes. These developments led the groundwork for modern banking today. Okay. The birth of modern banking and national debt. By the 17th and 18th centuries, debt had evolved into a key tool of statecraft. Governments began issuing sovereign debt to finance wars and infrastructure. I'm going to do a separate piece on Haiti and how this is going to blow your mind when I tell you about the story of Haiti and how that led to the creation of America. The bank of England 1694 was one of the first institutions to formalize government borrowing. Selling bonds to investors to raise capital. The bank of England. This model became standard across Europe allowing nations to fund expansion without immediate taxation. In the United States, Alexander Hamilton championed. Brilliant guy who championed the creation of national debt after the American Revolution. By the way. There was a lot of pushback to him doing that. People thought he was stupid and he was from a little Caribbean town. By the way. Alexander Hamilton, our first secretary of the treasury. Brilliant guy. I think he's part black, but that's another story. He had a single mother, no father, came from a Caribbean island. Hello. Okay. Excuse my sideways sense of humor. Sometimes arguing that a well managed debt system could strengthen the country's financial standings. That's Alexander Hamilton. That's his argument. This laid the foundation for modern treasury bonds and public finance. Okay. The 20th century consumer credit and the rise of personal debt. I'm about to get into you and me. I promise you. And again, you don't want to listen to all this. Tell people to fast Forward to minute 40, which is where I'm about to start about starting on you. We're at minute 37 right now. The 20th century saw debt become a household concept. Innovations such as installment plans in the 1920s allowed consumers to buy goods on credit, fueling the expansion of the middle class. Hello. I'll read that again. The 20th century saw debt become a household concept. Innovations such as installment plans. Think about Sears now in the 1920s allowed consumers to buy. Was later. Sears was 19 later in 1920s. But you get my point. To buy goods on credit, fueling the expansion of the middle class. The Post World War II boom introduced mortgages, student loans and credit cards. I've already covered two credit cards in earlier episode this year. So go back and listen to that if you haven't already. Making borrowing a standard part of life. So borrowing used to be for the rich, for the wealthy, for the royal class, for only the privileged. And now it became available to everybody. The creation of FICO scores in 1989 President of FICO is on my board at Operation Hope. Really good guy. The creation of FICO scores in 1989 standardized credit worthiness, enabling more people to access loans, but also reinforcing financial disparities. Meanwhile, the 2008 financial crisis exposed the dangers of excessive unregulated debt, particularly in subprime mortgages, leading to global economic turmoil. I'm going to do a whole piece on what recessions mean because if there's certain leaders are now talking about we may have a common recession. I'll unpack that. But don't fear any of this. I wasn't hurt in 2008 crisis. I didn't take a subprime loan. I wasn't taking one of those stupid loans and no one's going to force one on me. But you shouldn't be doing a negative amortization loan. Which basically means this is bad debt. This is stupid debt for good assets. So this is a mortgage for a home. So that is typically good debt. But this is stupid debt. So I guess I'm saying there's good debt, bad debt and stupid debt. Right? Because a negative amortization mortgage means that because you're focused on the payment, not what the interest rate is. And you never asked what the payment is when there's an interest rate attached. So when they bought the house they look, I just want this payment. Well, that meant that you have more debt tomorrow than you had yesterday because all you're doing is managing the payment amount. And the lender's like, okay, that's what you want. So the rest of the interest that you're not paying gets put to the back of the loan. It's called a negative amount amortization loan debt. Today, a double edged sword in the 21st century, debt remains a double edged sword. A double edged sword. Used wisely, it fuse home ownership, business investment and economic growth misused, it traps individuals and nations in cycles of financial distress. Today's global economy runs on a complex debt market. Government bonds, corporate borrowings and personal credit. But rising income inequality and unsustainable debt levels pose significant risk. Again, I talked about the credit card debt of 1.1 trillion and growing. There's student loan debt. I think it's $1.6 trillion, 1.7 trillion American US debt levels after the pandemic are through the roof. Typically tax breaks are sugar high. They give you a short term boost but then end up with deficits at the back end which, which can lay that could could burden down a growing economy. And so I have a whole strategy for that of how America can lead again and rise again. I won't burden you with this with that in this podcast but but even, even a nation can't survive without a good debt and managing it and not doing stupid debt. Good debt, bad debt, stupid debt. And I guess it's opportunity led debt which is what I used when I was growing up. It took a bad debt, turned it into good debt debt because there was opportunity attached to it. Otherwise it would have become stupid debt. This is a wrap. Financial literacy is more critical than ever. Financial literacy is a civil rights issue of this generation. When you know better, you do better. Understanding the history of debt helps us make informed decisions, ensuring that borrowers and borrowing serves as a tool for empowerment rather than a source of economic vulnerability and repression. The challenge ahead is clear. We must use debt strategically, ensuring that it builds opportunity rather than eroding financial stability. All right, so now I am going to definitely doing this in two parts because I'm not going to go over an hour on this session. But let me cut to the quick. I've covered the history of debt in society. I've laid out the basic premise for why some people say that debt is bad and explained why I think stupidly wealthy people tell poor people not to take on good debt. I didn't explain it. I laid it out. I can't explain it because it doesn't make any sense. I've given you the ancient forms of credit in lending. I talked about the emergence of modern banking and debt instruments. Now let me get into why you're here at minute 43. This is the drop the mic. There's good debt and there's bad debt. Good debt is tied to something that may appreciate. Bad debt is tied to something that probably will depreciate in all likelihood will depreciate. Financing jewelry is bad debt. I don't care how much it blings, it don't sing. When you go to the bank, most jewelry is has incredible margins, profit margins attached to it. If you take that same jewelry from the jeweler and go back, there's probably an 80% profit margin. The diamonds, all that stuff are not worth nearly what you think they are the craftsmanship. You don't get any value for that. So if you finance that, you're just putting you going from bad to worse. I hope you never have to sell your jewelry, but you'll be shocked if ever you have to. In most cases there are exceptions to the rule, but essentially never. Never finance jewelry. Never finance tennis shoes, never finance clothes. We do it all the time. We have department people think this is a stupid example but you have a department store credit score. Credit card, credit card. Most consumer credit cards in this America. Most. The average credit card rate in this country is 28% plus. Did you hear me? The average. Which means if you charge a dollar 28 cents of that is interest. So you know unless you're going to pay it off right away, you should not be putting things on a charge card. A charge card and a credit card are different. And I talk about that in the credit card episode. You shouldn't finance plane tickets, you shouldn't finance rental cars. People are doing this by the way that they have a little app that you can charge it right away and they'll give you a payment. They'll just finance it and. And you're just like oh, I can afford all this. Yeah. How are these people going to these fancy concerts spending $5,000 on a sporting. A sporting event because they're charging it. And if your outflow sees your inflows and your overhead will be your downfall. You shouldn't flance vacations. You. I mean I can go on and on and on. There's a lot of dumb things that people are financing and it's bad debt. You're going to pay for it right now. It's going to feel good right now and then you're going to be paying for it for a very long time and feeling dumb and angry as a result of that. Good debt is a completely different thing. Good debt is tied to something that might appreciate. A mortgage on a home is a great example of this. So a 30 year mortgage you're going to probably spend 20%. 20 of the 30 years will probably be mortgage interest by the way which you write off on your taxes. So versus thinking about it as a bad thing. You've got to live in a house anyway if that those mortgage payments which you're paying you get the right. You get that returned to you in a write off which you then get with an itemized tax return to deduct whole or part from your income. You get a tax refund. Your if this is an investment property, you get the Benefit of depreciation. And that counts against or counts for you with regard to your calculation of taxes owed and possibly a tax refund. You get the appreciation which you owe. Nobody, it's yours. That is the start of generational wealth. That's a part of equity capitals. Now, I'm finishing. I'm capping the back end of this podcast. With the first part of the podcast, we're talking about the different kinds of debt. I talked about debt, different types of capital, debt capital and equity capital. Okay, you follow me. The whole tax system in America, again, I've said, as I said earlier, is designed to benefit homeowners. So home ownership is good debt and is tied to an asset that in all likelihood will appreciate. Never in the history of America have three things gone down debt levels. Sorry, sorry. Homeownership values, stock market values, and the GDP of the nation, gross domestic product. That doesn't mean that there's not recessions. Things go up, they reset. Recess. Right. Drop, please. Don't sell. Okay? This is a stupid investment or assets you've got or flake, something flaky. But if it's stable, don't sell. And you reset above the line after the recession, it resets and climbs above the line of where it was before. So this is probably not a great time to say this, but, I mean, I recently lost money because I didn't take my own advice, which is in a bad environment, if you have a good investment, just sit and hold it. Don't do anything. And I didn't do that. I went to cash treasury bills. And I'll break this down in the recession episode, I do, but I actually lost money. And all I need is. What I really should have done is taking my own advice. Don't make emotional decisions. Just chill, just sit there, let it do its. Let the market do its thing. Everybody makes a mistake, but that doesn't make you a mistake. So good debt can be a small business investment. Good debt can be a small business loan. Good debt can be a student loan. You have a loan, give you a bachelor's degree or a master's degree or a doctor's, a doctorate degree. You're going to make multiples more in income with an advanced degree than you will with a high school education. Without question, you'll make millions with advanced degrees over the course of your life. And you, you're going to make hundreds of thousands with a high school education. So this is good debt. All right, so let me see if I can run through the rest of this. Well, so let Me know, let me just. Let me underscore this whole good debt piece. So somebody out there saying, john, it doesn't make any sense to me. I mean, why would I want to go everybody's. Again, you're counterculture. Everybody's telling me not to have debt. You're telling me that I should have good debt. Please listen to me. Minute 49, okay, just drop the mic. Every successful person that you know, every millionaire that you know, including the one talking to you right now, owns real estate. And typically on that real estate is some level of good debt. I mean, well, you know, prime interest rates, good terms, all those kind of things. No multimillionaire that you know of or read about, no billionaire you know about or read about, no growing city economy, no successful state economy, no nation, including the United States of America or whatever country that you love has ever done it without good debt. Please, did you hear me? What do you think government bonds are? What do you think, you know, what do you think that treasuries are? These, you know, these are people. These are people in countries buying our debt. Okay, what do you think city bonds are when the city says they're going to float some bonds, right? There's nobody. I just can't underscore this enough. There's nobody who has been uber successful who didn't do it with good debt. Because you make money during the day, you build wealth in your sleep, and you do that through compounding. And when you have modest levels of good debt, it allows the equity to compound in ways that are, I say, unnatural, but natural for financial services. So money makes more money. Here's a cheat sheet for you. Money makes more money on money than you can ever make money on labor. Did you hear me that said that? This is one podcast you may have to listen to two or three times. Money makes more money on money than money can ever make on your labor, or you can ever make money on your labor. Hello, you can make more money. Money and technology makes more money on money than money. So money and technology, which is why the technology companies are going gangbusters today, but money definitely makes more money on money than it does on just you making money on your labor. That's why you have to be smart about money and financial literacy. And that's why the Wall street has three times more economic activity than Washington, D.C. even though everybody's focused on the money in Washington, D.C. the real money, the real play is in that country called Manhattan, the city of Manhattan, which is the second largest GDP in the United States. Of America. One city, city of Manhattan. So the state of California is the biggest economy inside the US but that's the whole state. The city of Manhattan is a baller. City of Manhattan is just on fire with economic activity. The reasons that I've just mentioned to you. So there's a role of debt in the economy and you got to be smart about it. And the key to it is financial literacy, which is why that I say financial literacy is the civil rights issue of this generation. If you don't know better, you can't do better. And governments and businesses and individuals all use debt. But if you live in a low wealth neighborhood, if you don't have financial literacy, if you have a corp terrible credit score, you're going to get horrible debt. You're going to those who make the lead at least are going to pay the most. You're going to be in a debt trap. And because you have a surviving mindset, not a thriving or building mindset, you're not going to use this debt as an instrument to set yourself free. It'll put you in purgatory instead. This has been a rap boy, I tell you now there are a lot of areas I didn't cover in this podcast. You got to tell me what you want me to do this in the part two. I almost have no choice. Here's all the stuff I did not cover. Consumer debt versus investment debt. I touched that a little bit. Types of debt instruments did not cover that at all. Revolving credit cards and lines of revolving credit Credit cards and lines of credit sort of touched on that. The credit card podcast sort of. But I didn't cover lines of credit. Installment debts. That's mortgages, auto loans, student loans, business and commercial loans, government debts, bonds, treasuries, deficit spending. Cover that a little bit. The true cost of borrowing, interest rates and compounding debt. Good debt versus bad debt. A simple framework of giving you that Good debt tied to appreciating assets. Okay? Real estate, business investments, education with high return on investment roi they call it bad debt tied to depreciating assets. Covered that. Credit card debts, payday loans, car loans that are pookie in them. Car loans. If you have car loan with 18% interest rate. A Mercedes is not a Mercedes, it's Mercedes. Paying payments. Okay? Using good debt to build wealth. The power of leveraging debt and wealth creation is my personal story. So you read up from Nothing. My fifth book and I cover my failures, not my successes. And I think there's a good lesson for you there. So you should go Read that book and then read financial literacy for all my last book Homeownership and generational wealth. So I'm a personal example of using good debt and again when I was earlier even bad debt with opportunity attached to it to to succeed because I didn't have a generational wealth. Business loans and entrepreneurship, homeownership and generational wealth covered that. Investing in income generating assets didn't really cover that in detail but you're smart people. I'm going to try to actually give you the all the cliff notes here. Investing in income generating assets. How the wealthy use use debt differently. I did not cover that, but maybe I'll do that in part two. If you ask me, I'm happy to do that. That's a, that's a really fascinating conversation. The strategic use of other people's money. Hello opm. Understanding credit scores and interest rates to maximize borrowing power. How to avoid the debt trap. That's, you know, this is my overall teaching budgeting and responsible debt management. This is the power and work of Operation Hope, the largest financial coaching organization in America. The emotional and psychological pull of easy credit. This is what happens when Ambassador Andrew Young said to live in a system of free enterprise and not to understand the rules of free enterprise must be the very definition of slavery. And when you, when you are Mark, when, when you, when you're an easy prey, people will separate you from your wallet. On the real, the importance of financial literacy and debt decision making and well, that's, that's me walking. Right? I'm sure I'm trying to give you the framework of this entire podcast and you can decide whether you want me to go back and cover anything in greater detail. The Last was the Last is encouraging smart debt usage. Personal your action steps. I want for you to just know your credit score and improve it. That's what Operation Help is doing. Increasing credit score 54 points in six months. 120 points in 2024 months. Nothing changes your life more than God or love the moving Your credit score 120 points when you go to the club tonight. On Saturday night, whenever you go to the club and you see this fine woman, oh man, she's fine. What's her name? Lady's like, oh, he's handsome. What's his name? After you get the name, ask them what their credit score is. And I'm only partly kidding, right? Because that's your business partner for life. That's your, that's your running button. My wife Shadra has great credit scores. In fact, sometimes her credit Score is better than mine because I'm an entrepreneur and I got all this, these debt loads and lines of credit things in and out tied to my personal name. And hopefully she gets to chill. So your wife or the person who's actually not taking on the obligations in your family might have a better credit score than you. And do not use them to tear, do not use them to. Do not punk your, your spouse or your children because you're not paying your obligations if they can, if they have great credit score, you want to protect it and you only want to use it when you know you want to abuse it. This is a rap. Well, I'll tell you what, I'm rhyming, not even trying. I check my credit score every two days, by the way. You guys should do it every day, every two days, once a week, on the regular though. And if you've not checked your credit score, I guarantee there's an error on it on your credit report. And if you go to Operation Hope, we can typically they challenge that with the credit bureaus and typically can can get you a 2030 pop in your credit score right away. Because of the removal of a credit score up a credit error, the credit bureaus cannot confirm that that error is yours. That item is yours. They must remove it within 30 days. That's silver rights facts I'm giving you. Only borrow when it makes your money. Hello good debt. Only borrow when it makes you money. That may not always be true, but you should have as a mindset. I'm only going to borrow what I think is going to make me some money. Avoid imposed debt on depreciating items. I didn't say. I almost said assets. It's not an asset. Certainly was not when it's on your ass is definitely not an asset. Okay, I should have to say that. Avoid imposed debt on appreciating items. And you know Opera Joe's mission is financial literacy and economic empowerment. So use Operation Hope as your financial coach as your private banker, right? Get a coach assigned to you and talk to them on at least on monthly basis. Debt is a tool. Use it wisely and it will work for you. Abuse it and it will own you. This is John Hope Bryant. We got through this in less than an hour. Left out a lot. Tell me what you want me to focus on. I think you want me to focus on how wealthy use debt. I will only do that if you tell me to. I'll do a whole episode just on that. This is John O'Brien. This is Money and wealth and this is the Black effect Network on iHeartRadio. This is season two and know this, I love you Peace and light. This is the Silver Rights Movement. Go get my book. Financial Literacy for all. Tell all your friends to subscribe to this weekly podcast. This is my ministry of finance, my pulpit of hope and opportunity. This is not moving from parsing in the streets to cutting business deals in the business suites. This is where ownership matters. Money and wealth with John O'Brien is a production of the Black Effect Podcast Network. For more podcast from the Black Effect Podcast network, visit the iHeartRadio app, Apple Podcasts, or wherever you listen to your favorite shows, Geico's motorcycle expertise gives me.
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