← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
From Zero to Millionaire in Just 3 Years: Here’s How | Tom Bilyeu (Replay)
01:32:25
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- [00:00]
Commercial Narrator
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Tom Bilyeu
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Interviewer
All right, so Tom, my question to you is if I was starting from scratch, as in I had $0, in your opinion, I what will it take for me to get rich in three years?
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Tom Bilyeu
Whoa. Okay. Getting rich in three years, that is a very aggressive timeline. The only way that you're going to get rich in three years, and we should probably define that, I'll say seven figures or higher seem like a reasonable baseline. Okay, so the only way that you're going to get that kind of wealth is and I'm assuming that you're not able to invest something, go buy something or something like that. So we're literally starting at scratch. So you're going to have to create a company, create something that generates a lot of value. Typically that's going to be a company. So you're going to create a company that meets a very well known need that has not yet been serviced by a product that is relatively easy to get across the finish line and into the marketplace. It needs to be something that is going to resonate with social media and it needs to be something that doesn't cost a lot of money to get started. So either you're gonna layer on way better marketing. So if somebody has a solution to a well known problem, but they don't know how to market it, you can go and partner and say, hey, look, I understand marketing, I'm gonna be able to get this out there. Or if you have an information product that can be associated with a known problem that you uniquely can solve, I happen to know a little bit about your background. So if there is an element to working in the music industry, to becoming a professional singer, improving your voice or something like that, that you really have a beat on that you know, a lot of people are interested in, that you could turn into a course, for instance, that people would really resonate with, that could be a great one. The reason that I keep coming back to information products is you're looking for something that doesn't cost money upfront if you're going to like take Quest Nutrition for instance, when we were building that, there was still a substantive amount of investment that we had to make. Even just buying a bunch of protein powder was expensive. Buying the liquid fiber, you have to buy them at 55 gallon drums. So it's like there were still thousands of dollars that we had to put in in the beginning. And so to find something that really takes little to no money down, you're either going to be doing an information product or you're going to be doing something that you can make yourself that doesn't have expensive constituent parts, or you're going to be finding something that's already made that the person doesn't understand marketing. So it's really about what is the bit of value that you're going to be able to bring to that, that's unique that somebody else can't easily replicate that the world is going to know instantly that they need. And you just have to make them aware of it because three years is fast. And so Quest, for instance, depending on what you mean by rich. So for instance, three years into Quest we had a billion dollar brand, but I didn't have a billion dollars that I could put in my pocket. So I was still driving. I think by then I had finally upgraded my car. But for a first couple years of that I was still in a beater car even though I was worth a lot of money. And so if you need the money to be in your pocket, that's probably going to take a fair amount of time, longer. And if I can take a minute to get everybody watching to understand the difference between net worth and income, that would be really valuable. So if you don't mind generating a million dollars plus in net worth, now we're back to you just have to build something that other people say that they want. To have the actual money in your bank account, you have to build worth in something that people say that they want. And then you have to sell that thing. So it's very rare that you're going to get rich off of the operations of your business. You get rich by building a company where somebody's looking at that. God, this is going to get complicated fast. So ask follow up questions. So you're either going to build something that's going to ipo, okay, initial public offering, and what you're saying is, hey, I built this really cool thing, it makes a lot of money, or people think it's going to make a lot of money. And by going to the sec, they'll Actually let me fractionate my company, break it into a bunch of pieces known as shares, and then I'm going to sell some of those shares on the open market, the public markets, and then people can buy those shares. And so that's a way that you're going to be able to put that money in your pocket. But you're literally selling a piece of the company that you own. Otherwise you can sell a minority, controlling or total interest in the company to private equity venture firms, something like that. But usually when people do that, they're not doing it for founder liquidity, they're doing it because they expect you to invest the money back into growing the company, which is why IPOs get people really excited. Because some of the shares you will sell as part of the company treasury, which generates operating capital, some of the shares will be yours personally that you get for being a founder. And so you can use that as a liquidity event. So now you actually have that money in your pocket. But most people, in three years it's going to be tough. You could get to an IPO stage, but that's going to be a really rare moment that again follows the equation of you're solving a problem that people already know exists in a very dynamic way that people are basically falling over themselves to give you money for. And you've actually created a company that can be sold, which is we could do a two hour class just on what that means. So it's interesting when you ask that question, I really want to give you a hot sexy take and just be like, oh, go do this. But the reality is to have a seven figure exit that fast would be hyper rare. It does happen and I would rather get people thinking about how do I build a business that's doing a million dollars in revenue. All the following things apply, but then it's really about reinvesting every dollar that you're getting back into the company to grow and scale. But again, it's a problem with a killer solution that you're doing in a unique way that didn't require startup capital.
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Interviewer
Yeah. And so going off of that, who would be the, I guess the top three people that I should first hire to take on this, this event? This.
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Tom Bilyeu
You should hire nobody. You should be going after people that are going to partner with you so that you're not paying salaries. Because the thing that eats companies alive is overhead. So when you're starting, if your goal is like, look, I've got no money and I'm trying to build a million dollars in value in the next three years. Now you want to be focused on what is it that I'm good at. So what's the problem I'm solving, who's my audience, who am I making this for? And what skills are missing from myself? Right? So even if you're doing an info product, you're going to need maybe a marketer, you're going to need a tech person that can help you package it up, you're going to need customer service, you're going to need somebody to run the day to day operations. So there's a lot of things that are going to have to be done, but you don't necessarily have to pay somebody to do it. And so the mistake that I see entrepreneurs make is that they're imagining, oh my God, this is going to be worth $100 million. If I give you even 10% of my company, that's $10 million. Why would I ever do that? Because you'll Never get to $100 million if you don't have other people. So to give you an idea, I've never once done a company where I didn't have a partner ever. So I highly encourage people, obviously, and I've become fantastically wealthy. So I highly encourage people to bring on partners that you trust. It's, it is literally like choosing a romantic partner that you're going to be married to for a long time and it's going to be hypers. It's like having a spouse and kids, right? But you don't just have one, two or three kids, you have 10, 20, 30 kids and all the stresses of running a business. So be very thoughtful about who you partner with, but bring out a partner who's strong, where you are weak, and then you guys are going to be able to really multiply your efforts and you can work things into it. Like if they end up flaking out, if they, they quit that, the shares then revert back to the Treasury. So it's what's often referred to as phantom shares. So you get what we do here at Impact Theory. So we give phantom shares and we say, hey, as long as you're an employee in good standing, you own that much of the company. If we exit, boom, you get it. But if you leave or get fired for any reason, the shares revert back to the Treasury. Because what we're trying to incentivize is performance. We want people that are in here killing it, doing it long term versus the sort of traditional tech VC backed company that knows that they're going to exit in three to five years. And so that's a very different mode of being. That's raising a lot of capital, that's having the idea that sounds amazing on paper. It's knowing that you're part of a portfolio. So let's say they invest in 10 companies. They're only expecting one to hit. So that means nine of them they know are just not going to work out. Nobody can really see the future. So I would say, especially for beginning entrepreneurs, get partners that you don't have to pay, that are going to work as hard as you and they're good at something you're not. Awesome.
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Interviewer
Thank you.
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Follow-up Questioner
To follow up on that, do you need an entrepreneurial mindset to become wealthy?
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Tom Bilyeu
No doubt. I mean, you could win the lottery or have your parents give you money. That certainly is possible. I don't think you're ever going to get what I would call wealthy in the short term without an entrepreneurial mindset. Now in the long term, you can invest very traditionally and generate incredible wealth. It's really pretty startling what compounding interest looks like over time. And if you're willing to sit in the stock market, which returns an average percent of 7% over inflation. So being in the stock market for 30, 40, 50 years really is pretty amazing. And you double your capital every seven years. So you put it in, you know, if you've got 50,000 to begin with, seven years later you've got $100,000. Seven years after that you've got $200,000. Seven years after that, you've got $400,000. So it gets big number pretty fast, right? When you're going from 1 million to 2 million, 2 million to 4 million. But you've got to be in it 50 years, right? So you've got to have a lot of those seven year cycles. And that quite frankly, for the vast majority of humanity is exactly what you should do. You're effectively, if you do it the right way. Do not try to pick stocks, okay? Don't try to pick stocks. Nobody beats the people like Ray Dalio, right? He's got hundreds of millions of dollars in AI, 1800 employees that all they do is that for a living. And they know how to make arbitrage on milliseconds. If you're not going to play at that level and you're basing your decisions on things you hear about on Twitter, it's already too late by the time that makes its way out. So that's where people make the mistake. They want to do it sexy, they want it to feel like gambling. They're trying to treat an NFT like an investment vehicle. All mistakes. You want an index fund and the reason you want an index fund is index funds are. You're betting on a sector of the entire economy. So you're not trying to pick a winner. It's kind of like saying, I'm going to the horse track. All I'm going to bet on is that a horse wins the race. A horse comes in second place, a horse comes in third. It doesn't matter which. I just know that they tend to work out on this distribution. So I'm going to invest in something like the s and P500, which is a list of the 500 strongest is probably the right way to think about it. The 500 strongest companies in the economy, if one of them ceases to meet that criteria, they fall off, stop being a part of that portfolio. A new one comes on and becomes part of that portfolio. So it is not what they call actively managed. So nobody's trying to buy a quick stock. They just, it meets this criteria or it doesn't. As you get fancier, you can invest in more index funds. So maybe you want a growth index or an index out of China or developing economies, whatever, and you can start to broaden out like that. But still index, still passive, still long term hold. It's the only reliable way historically to buy low and sell high, which sounds stupid, but is the hardest thing to do in investing. The easy thing and what most people actually do is buy high and sell low. Now the question becomes if we all know that's dumb, who would ever do that? It's because of the emotion. You buy high because you think it's actually low. It's euphoric. Number's going to go up forever. Even though it's a really high number compared to where it was a year ago, it couldn't possibly go down. Come on, everybody knows this is only up. Only up. It's different this time. And so people convince themselves that this time it really is different. You live through the crypto euphoria. You know exactly what it feels like. And it feels good. It feels good. It was so fun. I was having a ball. Now, thankfully, I don't trust myself. So I was like, I'm gonna invest this much and that's it and no more. And even though when I hit that number, I was very sad because I wanted to keep investing and keep investing and keep investing. I was like, no, I know better than that. And so we stopped. And then of course the numbers come Down. Now, the problem is they bought on the way up. Euphoria felt good. Number go up forever. And then as it starts to come down, they panic. And it's like, whoa. That sense of, like, it couldn't possibly go down, you realize isn't true. It is going down. And now you're terrified that you're never going to get your money back. And if you got yourself in too deep and you don't have money to live on, you, you start going, oh, damn, like to pay my bills, I'm going to have to get money out. So now you've effectively got a life gun at your head that's telling you to live your life. You're going to have to cash out. Even though that would have been worth $10,000, you know, three weeks ago, it's now only worth 1500. But you need the money. So now you lock in your loss by selling low. You buy high, you sell low. That's what most people do. And they do it all for emotion.
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Co-Interviewer
On that note, so if there's certain things about understanding your emotions, what are certain things that people need to understand about money to actually attract it into their life or to build it, build out wealth. What do you think are those key things that they need to understand?
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Tom Bilyeu
Okay, so you don't attract money. The only thing you can hope to do with your mindset is to allow yourself to be optimistic enough to do the right things to move forward. What I mean by that is it's what I call the only belief that matters. The only belief that matters is that if I put time and energy into getting good at something, I actually will get good at that thing. So you do need to have that mindset. So Napoleon Hill, in the book Think and Grow Rich, he says, like, it was like page 45, he kept saying, I've already told you the secret to this book on every page. And he was like, if you don't get it by now, you're never going to get it. And I was like, what? Has he said what? On every page? And I was like, the only thing that he's repeated on every page is that if I think I can, I can, and if I think I can't, I can't. I was like, oh, my God, that's so true. If I think I can, then I'm going to act in accordance and I'm going to go learn and do the things and ask other people that invest, and I'm actually going to take money and invest it, and I'm going to figure it out, because I think I can. But if I think I can't, I'm not going to read the books, I'm not even going to try because I already believe that it's not going to work. And so you do have to get your mind right in that way so that you have that belief, so that you are moving forward, so that you are learning. But make no mistake, if you had the best mindset in the world, if you say a thousand times a day that you are, I already am a millionaire, I'm attracting money into my life, it isn't going to work. And the reason it's not going to work is that's not how value is created, that's not how money arrives. Right? So, and if that did work, there'd be a lot more rich people. So it really comes down to do you. Going back to the first question, do you do the things that you need to do to generate money, which then enough of that stacks and becomes quote, unquote wealth? And to do that, you have to identify a problem, solve it, and solve it in a way that people get right away and they're like, oh damn, you solved my problem. And now I would rather have that solution than the money that I have in my hand. And if you fail to do that, you're never going to get anywhere. And and so unfortunately, a lot of people think that thinking about something moves me forward because it really does feel good. It puts you in an expansive mindset. It makes you feel like you've made progress, but the reality is you haven't. And this is why the most like hardcore manifesters who are like, this is all you have to do. None of them are on the Forbes 500. It's just never going to happen. So you've got to get those are going to be people that are just die hard executors.
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Commercial Narrator
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Interviewer
So how, in your, in your opinion would you say, how can we get into a money mindset?
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Tom Bilyeu
What is a money mindset to you?
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Interviewer
I guess just, you know, how when we're, for example, me anyway, growing up, I was told, you know, whenever you have extra money, save it, put it in the bank and if you can buy a house, blah, blah, like very traditional. But I'm learning, especially just with all the resources that are out now, that there are other ways to make, I don't know, to just invest your money in a more smarter way. And I would classify that as like a money mindset where I'm just smart with where I allocate my money.
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Tom Bilyeu
Let me use different words that I think are really going to help people. It's not about a money mindset. It's about mastering the game. Money is a game and it's played by extremely savvy people that know the rules and you don't know the rules. And because you don't know the rules, they get you to contribute to their wealth fund by buying the things that they want you to buy, by investing in the way that they want you to invest. Like I remember. So there's a whole thing which most people don't even know about called accredited investor. So to buy something before, before it reaches the public market, you have to be an accredited investor. Now I remember when I became an accredited investor, which meant that you had a net worth of over $1 million. So the day before that I couldn't invest in something private, and the day after that I could. And I was like, why? I'm not a better investor. From the day before till now, I know how to make money. So fair enough. Being able to start a new company, yes, you should let me do that because I've proven that I can. But you shouldn't be rewarding me as an investor because they are entirely different skill sets. And so I was a little bit offended on behalf of the rest of the world who do know about investing but don't have the money to qualify. And so now those guys are stuck. And so there are years and years and years where they're going to have to go play in the public market game to build enough net worth that they can finally go be an accredited investor. Now why does it Matter. Being an accredited investor means that you get what they call deal flow. For the people that want the fancy words, you get deal flow, where people are coming up to you and they're saying, hey, I'm starting this company and especially if there's something about you. So let's say people will come to me and say things like that because I have a platform and they know that if I talk about their company, then that's going to be valuable to them. So they'll ask me on their advisory board or whatever, and they're going to give me shares in that company. So if I wanted to buy some shares in that company, they might come to me and say, hey, we're going to have an oversubscribed round. So we're raising $50 million. It's going to be oversubscribed, meaning we'll have people that want to put in more than $50 million. But, hey, Tom, we're coming to you because we know that you're savvy, you know what you're doing, we'd love you to give us advice or whatever. And the secret thing that they're not going to say is you also have a platform. We hope you talk about us. So it's like, okay, cool, so now I get deal because I'm an accredited investor where I can invest in that. But think about a TikTok influencer that may have a way bigger voice than I have socially. They can't do that same thing. And so that to me is crazy. Now, there are other ways you can work it out. You can become a partner and things. It's not like there aren't ways around it. But in terms of being an accredited investor, you can't do it. Now, usually in the private round is where the bulk of the meat is picked off the bone. So the people that end up getting really wealthy are the ones that, the VCs that come in early. When a company's still private, they invest at a very low valuation, then they spend three to five years trying to blow the company up even farther, and then they exit. And that's their whole thing, is that the exit is often going public. So all the value that they capture from the moment they do their investment to the moment that they exit, that's all where the average person, they'll never get to capture that value, ever. Now, they still have an incredibly powerful tool at their disposal, which is, now we've gone public, and where does it go from there? So they still get to capture all of that value. But is that remaining value, is that an extra 20%, an extra 2,000%, who knows? But what we do know is a person that invested here and exits, you know, at the same time the public investor exits, they got a lot more juice from that. So that is very frustrating to me that instead of it being knowledge based, it's based on how much money you have in your account, which they're trying to use a proxy for being savvy. But I think it's a terrible proxy, so people should be very thoughtful about that. So getting away from the notion of having a money mindset and just really understanding the nature of the game. So understand, okay. Literally just in listening to that part of the answer, you now already know three or four different things about how the game works. You might not have understood before going very deep about how the stock market works. What's an index fund? What does it mean to do a put or a call? Options trading? What is all of that stuff? What are futures? What are commodities? When you begin to learn all of that stuff, then the magic happens. And this is the thing, the very nature of learning itself is the following. When you understand something, it makes a prediction. And now you can test your prediction to see if you're right. So you understand all of these things and you're like, hey, wait a second. If all of these things are right, it makes the following prediction. And cool, I'm going to make a bet on that prediction. Now, the market's either going to reward you or slap you down. So I'll walk you through a prediction that right now probably is about as controversial as it's ever going to be. And so we're going to get to see if I'm right or not. So I got introduced to the blockchain, which allowed me to figure out, oh, now I understand what this technology does. It takes a digital asset and gives it the properties of physical assets. So this is utterly fascinating. What most people don't understand, why did gold become gold? Why did it become the gold standard? Right. Most people know that for a long time, money was backed by gold. But most people never stopped to ask the question why. The reason is for something called proof of work. So however many billions of years ago, stars exploded. When they explode, one of the elements that they shoot out into the universe is gold. That gold then crashes into a forming planet and that gold chunks get locked into, in the case of the Earth, into the crust. Right? So you see it in the mountains and things like that. So you can go and pick at a mountain and you can actually find gold that was an exploded star. Crazy, right? So first of all, you have the work of the universe being done to formulate that element. Then you have the work of the person chipping it out and finding that thing. So those are two very difficult things to do. So if you have piece of gold, you know, this was a star that exploded, that's going to be very hard to replicate. And somebody had to go find it, get it out of the ground, whatever. So we know that the supply of gold is never going to balloon up too far. It does balloon up, which is another thing people don't know about, which is inflation, which people know that buzzword, but do they really understand what it is? So that's how gold becomes gold. It's scarce and it's valuable and it's extremely hard to replicate and it's very resilient. So you can melt gold and then you can reform it again and there's no loss whatsoever. Gold doesn't mold, it doesn't get water damage, right? So there's all these properties that it has, but it's heavy as hell. So that's one of the things that's sort of a strike against it. But this idea of proof of work. So now you get people going, okay, wait a second. If all gold is is proof that a star exploded and that somebody found this in the ground and therefore is provably scarce, what if I could perfect that? Because gold inflates at about 2% a year, which doesn't sound like a lot, it's a lot. So that's inflating away. So its value is constantly dropping due to inflation, which we could get into a whole rabbit hole, which I know George really wants to about what psychopath called the bad thing inflation because it sounds awesome. And what person called the good thing deflation. It sounds bad, but it's amazing. It means your buying power goes up over time. Okay. When something deflates, which by the way, economists hate. And we could derail into why. But this is the game of money, right? See how many rabbit holes I can keep going down. So when you talk to somebody that really knows what they're talking about and they're like, yo, the currency in China, I believe I understand this much. I predict, right? My knowledge makes a prediction. I predict it's going to start deflating, which means if I transfer my inflating US dollar, it's going to be worth less over time into a deflating currency in China, that means it's going to be worth more over time. Yo send My US dollars over into Chinese yuan. Hold it there. It's what they call arbitrage. $1 here gives me something over here and the values are going in opposite directions and I'm actually making my wealth simply on that difference. I didn't create anything new. I just took the arbitrage of a deflating currency. Sorry, I should be using this. Hand my deflating currency over. I'm making this up. I'm not saying that China is actually deflating, although the US actually is inflating, but just example, example, example. Not a financial advisor either. This is not financial advice. So in this hypothetical example where the Chinese currency is deflating, it's actually increasing in value. So a deflationary asset isn't devaluing, an inflationary asset is devaluing. Now some people say that that was done on purpose to create a mind virus that makes people think inflation is good. When you start thinking about why would somebody ever want to trick the public into thinking that inflation is good? And this is a conspiracy theory. But if somebody wanted to do that, I would understand why. Because inflation in a small amount stimulates the economy by changing your behavior. Because what are you going to do if the money in your pocket is worth less tomorrow than it was today? What are you going to do with it? You're going to spend it?
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Interviewer
Yeah.
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Tom Bilyeu
Because you might as well get something that retains its value. Could be a car, could be a book, could be a handbag, a fancy shirt, whatever. But you're going to spend it on something that, that price is going to be the same tomorrow. But my dollar is going to buy less of it, so I'm actually better off. You're literally incentivized to spend your money now. And in hyper inflating economies, people go out and buy 100 iPhones, they'll buy 50 cars, they'll do things like that because they need something that's going to hold its value. And because a car or an iPhone has intrinsic value, it's better than the paper money that's being devalued by inflation. Right. So some super sketchy about those words. Now whether it was done on purpose is a totally different question. But you have to begin to understand like all this like confusing mess of interconnectivity of one thing means this, another means that. But it all makes predictions. So if I could get people to master the game of money to the point where they go, oh, I know what this means, I understand the last time this happened, it meant this. And so now I've got a prediction and now I can begin to bet on my predictions or now I understand how to use leverage or when not to use leverage. And so all these tools that are available to the quote, unquote, hyper rich are available to anybody. You may only have $10 to invest in that same way. But it is a knowledge problem, it isn't a money problem. Now there's a speed issue for sure. The guy starting with a dollar, it's going to take him a lot longer to get to 100 million than the person that's starting with 10 million. To get to 100 million takes a lot less doublings, Right. To get there, it takes a lot less risky stuff. You've got a lot more things you can try that don't work. All of that. I'm not denying any of that. So scale becomes a question of what you're, how quickly you're able to generate that money. But you can play the same game.
- [30:52]
Co-Interviewer
I actually want to call back to when you're talking about accredited investors. And so my understanding is they have certain income, you know, brackets or like, you know, network bracket where you can jump into it because of how they view risk. And they're assuming, again, these people have more, I guess, bandwidth to take on that risk. And so I'm curious for you, how does risk play into like wealth generation? Because again, timing also plays into it. Because in my head, when you're talking about The S&P 500 hundred index funds, these are like safe, right over long periods of time. But at the same time, if you want to take risks, that's also where you get like the 100x's or things like that. So how do you view risk in wealth building?
- [31:30]
Tom Bilyeu
Yeah. So I think people, if you want to, there's two paths before you to build wealth. You can invest in building something or you can invest in assets. And we'll define an asset as anything that actually pays you to hold it. So there are other ways, but just for simplicity, let's stick with those two. Building something is going to be ultra high risk, but high risk, high reward. So that's how I generated my wealth. I didn't own a single stock in a single company until after I was worth hundreds of millions of dollars. So none of my money did I generate in that way. All of my money I generated by building a company that became incredibly valuable to somebody else to own by just making hundreds of millions of dollars a year in revenue. So another company looked at that and was like, yo, those hundreds of millions of dollars owned by us, we can either grow it or it's accretive to our bottom line, which makes our share price go up. Or that product we recognize is a necessary part for our brand portfolio to own. Whatever, for whatever reason, it was extremely valuable to them. Here's another money master the game idea. So when you're talking about buying a company, there are two ways to value a company more. But these are the two really typical ways. You can get a multiplier on revenue. So oftentimes that's 1x2x, something like that. So if you're making $300 million, we'll give you $300 million to buy the company. Or you can get a multiplier on what's called ebitda. So EBITDA is just an acronym. It stands for Earnings before Interest, Taxes, Depreciation and Amortization. I always forget the A. You've got your all. It's basically the money you make minus fancy accounting is the easy way to think about it. So you've got, you're trying to eliminate all the different ways that a company can do accounting and just look at how it's making money without all the accounting stuff. And that could be 10 times EBITDA, 16 times EBITDA, 20 times EBITDA because they want to know how profitable effectively is the company. So I'm only going to give you 1x your purchase if it's just based on revenue. But I don't like the way the revenue is going or if you've really shown that this business is functioning, we can do it as a function of ebitda. So while I can't disclose the multiplier, Quest sold on ebitda. And, and that was part of how we were able to win so well was we had put together a high functioning company. And so looking at the different ways that something can be structured becomes really important. Now we started getting a field what
- [34:12]
Co-Interviewer
was the basically about risk and how to manage that.
- [34:15]
Tom Bilyeu
Right. So going back to risk. So you have those two paths before you've got the high risk, high reward, then you've got the much lower risk, much longer time horizon to get wealthy. And so that's where I would advise people, if you're going to bet on yourself, accept a lot of risk, but know that it's like most businesses fail. But it could still be the ride of a lifetime if you've got meaning and purpose. Right. So I still don't know if impact theory is going to do what I want it to do. But I show up every day and fighting for it feels awesome. And so I've already spent six years of my life just doing the same, trying to build. It's been six of the best years of my life. So it's like, okay, well nothing can take that away. So even if it ends up failing, while I will be, you know, there'll be a moment of emotional trauma that doesn't negate all, you know, going after something that really matters. So for me, that's where I invest. The vast majority of my net worth is, I guess technically the vast majority of my net worth is effectively buried in bonds so that I can't lose anything, which is me saying I'm a very low risk investor. And so all of my high risk dollars though are in building impact theory, right? So we're just pumping money into it to continue to scale and grow and grow and grow. So if I were doing risk, I would do that. But for most people, I would say you'll be a lot happier, you'll sleep a lot better if you put money into an index fund as boring as can be and just leave it in for a really long time. Dollar cost average in. So don't put all your money in at once. Buy in slowly over time. No matter what price up, price down, you just keep, if, if you're going to buy in $1,000 a month, you buy in $1,000aMonth, $100 a month, $100 a month, $10 a month, whatever. And you just slowly, slowly again. Index funds don't try to pick stocks. So I would ward if you're an entrepreneur, you take risk. If you're not, don't.
- [36:12]
Follow-up Questioner
I have a follow up question on the risk tolerance of index funds and S&P 500. Do you see it as more risk given Ray Dalio's most recent book about the changing world order?
- [36:25]
Tom Bilyeu
So I love me a Ray Dalio rabbit hole. So I would still say that it's your safest bet. You just may want to be thoughtful about. So for those that don't know, Ray Dalio's Principles for a Changing World Order is an extraordinary book that points out a fact that every empire in all of human history has ended up collapsing and their currency along with it. So whether you're talking about the age of England and the sterling being the world's reserve currency, whether you're talking the current US being the reserve currency, when the Dutch were the reserve currency, so on and so forth, forever, the Romans when they were the jam and every one of them has failed. All signs point to it's a it's a six phase cycle and phase six is total collapse. And Ray Dalio pegs are somewhere in the middle of phase five as the US empire. So we are clearly on the decline in the world order. In the last 18 months as the time of filming this, 40% of all US dollars ever made in the entire history of the US dollar were printed in the last 18 months. So that is a very bad sign. So when you think about an empire collapsing, it usually begins with inflating their currency. It begins with inflating their currency and beginning to lose their standing on the world stage. And that there's another rising superpower and of course right now that would be China. So there are a lot of things but Ray will be the first to tell you he doesn't know if it's 5 years, 50 years or 150 years. They do tend to collapse somewhere in the 150 year range, give or take 100 years though, that's a pretty big swing. So we are at what the US is 250, almost 230, something like that? No, almost exactly 250. So we're almost exactly 250 years old right now. So we're long in the tooth. So even if it's the +100 years, according to Ray Dalio's research, and of course nothing is ever 100%. So one might want to not just invest in a US index fund. But I certainly would not think somebody investing in the US economy is stupid because what you're saying is that you just trust that the US economy is going to grow and the odds of it not growing over the next 50 years to some meaningful amount is effectively zero. I can never say nothing is zero, but historically certainly that's a very positive sign. Like even somewhere like England, it's not like they went to nothing. They're still a major economic player, especially for a country the size that they are. But it's worth paying attention and seeing. Does China start to pop off? Do you hedge your bets a little bit? Do you start doing emerging markets? Do you do based on technological sectors, whatever and looking at that. But the only sort of dumb thing to do would be to pick the majority of like the s and P500. I'm sure there's a global index to get as broad of a portfolio as you can that is a well trusted index fund and invest in that. And then as they say, diversification is critical. You're going to hear people say diversification is for suckers. The crazy thing is they're both right. Because what they mean is there really will be a winner and a loser. And if you bet on the winner, then you make all the money. And this is the guys that get incredibly wealthy. It's never on index funds. You'll get wealthy by sort of family standards, but you're never going to become Elon Musk or Warren Buffett betting on an index fund. So if you look at somebody like Warren Buffett who did make his money in the stock market, the way that he did it was he picked somebody, he made like 80% of his wealth off of three trades. I mean it's really ridiculous. It's less than 5 for sure. So there are precious few companies where he looked at it, got it right and went all in. Now if he had looked at it, got it right, and then was like, well, I'm still going to hedge my bets across everything, he would have much less risk for losing money, but he never would have become the richest man in the world. So again, it's optimizing risk for what you're comfortable with. I'm hyper risk averse in investing and I'm hyper risk tolerant in building. So the bad news for my wife is if I put all or most of my money at risk to build impact theory and it ends up failing, I still feel like a warrior who is in the arena. And that's how I want to view myself. If I were to fail to take that risk and never try to build something great, that would really bum me out. But if I lost all my money on an investment, I would feel like an asshole. So because I don't consider myself to be a clever investor, so I need to be very thoughtful, hedge my bets, be very risk averse. And so for anybody following the FTX drama, Lisa got text messages from friends who were like, oh my God, I'm so sorry that you guys, you know, you must really be panicking. I think they said to her and she was like, oh my God, what the hell? And so she reaches out to me, she's like, what is ftx? And I'm like, your husband is way too paranoid for that. Like, we have no money in ftx. My heart absolutely bleeds for people that did. The loss of human capital is an absolute tragedy. But because I'm so risk averse on investments, we didn't do that. We didn't expose ourselves to defi or anything. I'm just too paranoid. So know thyself, know what your risk tolerance is. But most people would get queasy if they saw how much risk I've taken in my life on the entrepreneurial side. And then they would laugh at me if they saw how little risk I take in the stock market.
- [42:15]
Co-Interviewer
I'm actually going to interject here, but you, you made one comment which I don't know if it was a mistake, but you said defi, which just in the crypto world it was actually a centralized exchange that caused like all the drama.
- [42:26]
Tom Bilyeu
I was not trying to say that FTX was defi. I'm saying not only did I, not that I didn't do defi or any of the things to get people excited because the yields are amazing, all that, but thank you so that nobody thinks I'm conflating the two. There were just when I got into crypto, which already I only invested in three total coins, one I sold and boiled down to just two, Bitcoin and Ethereum. Even then, when there was so much excitement around the kind of yield that you could get when banks were paying you nothing, I was like, nope, it just seems too good to be true. I'm going to stay safe. And so even if I look like a chump because I don't make a lot of money on the defi and other people are fair enough, but I'm also not going to lose money. And then literally like a few weeks later was when Mark Cuban lost God only knows how much on a defi thing and I was just like, yeah. And the thing, it really does come from an acknowledgement of my level of ignorance. So I don't want anybody to think I'm smart. I want them to realize how risk averse I am as an investor. And so you just have to. And the reason that I'm so risk averse is I don't think I understand it well enough. And so you need to know your level of knowledge because again, your knowledge makes predictions. If you don't have enough knowledge, your predictions are going to be terrible. And so the only things I invest in are things where I feel like I understand it well enough to make a prediction. So that to go back to an earlier answer, that I can really buy low and sell high. So as the price of Bitcoin fell and Ethereum fell, I didn't even think about it because one, I was investing for the long term. I knew that they fluctuate wildly within any four year window. The fluctuations on Ethan Bitcoin since their inception have been violent. And so I was like, well, I know they're going to be violent swings, so I'm only going to Invest so much that I sell plenty of capital, dry powder as they call it, to live my life and build what I'm building. And then I want to make sure that I don't see that number and panic and go, oh my God, I have to sell is never coming back. It's like you have to be sober in that moment and go, what, what was the knowledge that made a prediction? It's what people call my thesis, right? You'll hear that a lot in crypto. My thesis is still intact. What they mean is you learned something about the way that it worked, which made a prediction and that's your thesis. So my thesis is that the world becomes more digital, relies more on the blockchain and more of the things that we think of as being physical, like money, are going inevitably to become digital. If it's going to become digital, what do I think will be the digital currency? Honestly, the digital currency will probably be nation based digital stablecoins if I'm completely honest. But I think Bitcoin will be digital gold and then Ethereum, because we actually build on it ourselves here. Like that one to me is even more than a currency, it's a whole universe of creation. So anyway, as long as my theses, I theses, whichever the case may be, as long as those remain intact, I don't have an emotional problem, right? So even the other day when I saw that Ethereum was down to 1100, I was like, whoa. It was almost more a fascination of like, wow, like volatility is really real. But then when you see people being devastated, devastated to the point of like weeping, and obviously we know, unfortunately it can go even farther than that and it really becomes scary. For me, it isn't emotional because I followed a set of criteria again because I know my level of ignorance. This is not a clap for Tom, this is a, hey, maybe I can own up to. I am as ignorant as Tom and therefore will be as cautious as Tom and play at that level.
- [46:11]
Follow-up Questioner
Many people change their thesis over time. So how do you decide if you're going to change or how do you always stay focused throughout the ups and downs?
- [46:21]
Tom Bilyeu
One, I don't chase it because I don't know it well enough, I don't spend enough time. But if you look at somebody like Raoul Paul, who I think is a brilliant macro economist, one, he's spending all day, every day watching the macro trends. Two, he is extraordinarily educated because he's been in this for a long time and so he's lived through a ton of These cycles. So even in the euphoria, he was like, guys, you have to be careful, you have to be thoughtful. Here are the macro trends. This is what this makes as a prediction. Be very thoughtful. And he's walked people through historical rises and falls. And so you'll get people like that that as their thesis changes, they changed their portfolio. So one point, he was what he called irresponsibly long on Ethereum, so he had something like 95% of his net worth. Now, as things began to change, he started changing that ratio. For me, I was just like, this is how much I'm willing to put into crypto. Once I hit that level, then I just stop and I'm going to turn my brain off to it for the next five to 10 years. Now, if 10 years from now it doesn't hit, I'll be like, yeah, maybe that was a mistake. But my thing was I put the money in it. And if over that time my thesis changes, then I may rethink. But the way that I see it right now, today, I would ride Ethereum and Bitcoin to zero. I have no intention to sell. The reason that I would ride it to zero is as of right now, today, I, in my do not follow my advice way, believe that right now those are the front runners to be the ones that last. Because I think everything, not everything, I think a lot of things are going to go digital, a lot of important things are going to go digital. And those two things still matter to me for the reasons that I was explaining a minute ago. So, okay, those still matter. So even if the rest of the world momentarily says these have no value, it's my belief that they will once again realize, no, actually they do. And because I'm so familiar with the technology and have built so many things now on the back of Ethereum and really have researched the life out of bitcoin, the protocol, why it matters, watch the adoptions. Just seen some of the greatest thinkers in the world think through predicting their own future. And where this goes, I have a pretty robust map of where it goes. And obviously it could be wrong, but I have confidence in that, such that for now it's just wait and see. Now if through all of that, like if the Bitcoin protocol were to suddenly stop or we realize, just kidding, there's not 21 million, there's 22 million, then I'd be like, whoa, my whole thesis has changed. Now I want out, right? So if any of us saw the supply of bitcoin inflate at Least people that that's part of their thesis, which it is mine. That would invalidate everything and I would be in a mad scramble because then suddenly my thesis goes away and I'm left like, yo, I want to get out right now. So. But as long as everything stays intact, then I'm good.
- [49:15]
Interviewer
Do you believe in the advice about, in order to get rich, you have to follow your passion and do what you love. And if that doesn't work out, how do you know when to stop and to explore a new hobby or a business venture?
- [49:27]
Tom Bilyeu
So it goes back to there's two primary ways. I know the comments are going to light me up with, what about this and what about that? There's two primary easy to discuss ways to get rich Way number one, build something. Way number two, invest like you're watching paint dry. As I have heard from Ramit Sethi. So if you are doing the just invest, then no, it's going to be super boring if you're doing the build. Building is hard. And building will question your will to continue. Not once, not twice, dozens, hundreds, thousands of times. Like, my life is a roller coaster every day. And the funny thing is when something's going right and my day is awesome. Like today we just announced something big in the discord. It was so fun and people were loving it. And I was like, yeah, I know something is gonna go wrong today. So today will be part good, part bad, right? Every day has something bad, not every day has something good. So at least on a day where there's something good, I'm like, word. So you have to have the emotional fortitude to weather all of those storms. And it really is like life is a computer game and the AI is going to make it as hard as humanly possible for you to keep going. But if you do and you develop that perseverance, you can accomplish some really extraordinary things. Because of the way the human mind works, where knowledge stacks, knowledge has utility. Utility means you can do something other people can't do. And now you're able to monetize that utility. So it really is about time in the game. So that's huge. To have time in the game, you have to be passionate because when you say you're knocked to your knees, you're embarrassed, you failed, you lost money. It's just hard, it's boring. You'd rather be out with your friends, your kid is sick, whatever. All those things that are going to come for you when you say, why am I doing this? You better have a physical feeling to the positive when you answer that question, if it's purely intellectual, you're in trouble. And I think that's what people are trying to get at with passion. Passion is psychological energy. It's like if you've ever put, you've been dragging ass all day, you're tired. I gotta go to bed, you guys. Please, I just need to go to bed. And then somebody puts on your favorite song. You could rally for 10 minutes and be hyphy. It's crazy. There's something about the way that you can shift your neurochemistry that makes you feel more energetic all of a sudden. That's passion. It's just like putting a song on. You get that image again of who you're fighting for what you want, and now you're back in it. So passion will give you the energy to persevere.
- [52:08]
Follow-up Questioner
So you talked about the neuroscience of passion or just like getting into rallying. That's a lot about health. So we've only talked about wealth. Being about finances. Is it actually more important to focus on your health first and invest into your health rather than just purely money?
- [52:27]
Tom Bilyeu
For sure. I would say do both. If you want a truly wealthy life, you need to be both healthy and wealthy. That's really important. And there's the age old adage of a healthy man wants many things, but a sick man wants only one. That's really, really true. And so I think it's important for two reasons. One that, that if you're not healthy, you can't enjoy anything. And then the other reason is that if you take care of your body, it's going to show you that your actions have positive or negative consequences. Like, I'm so even. Right now I'm wearing a continuous glucose monitor because it reminds me that what I eat has an impact on my body that sometimes is invisible. But when I'm tracing it, I'm like, why do I feel weird? I can actually, if I feel weird, guaranteed my blood sugar is high. Like, I'll feel completely normal until about 120. Now the average person, I promise you, lives their entire life above 120. If you're not paying attention, you're 120 to 180, 210 all the time. I don't feel good above 120. I don't feel as good. But because I live my life between 65 and 85 with the occasional like, spike to 100, it's like, dude, I feel awesome. And then. Which just feels normal, by the way. But then I'll be like, God, I feel Weird. Why do I feel so weird? Beep133 I'm like, yup, because I ate a bowl of ice cream or whatever, something. Now that I track it and can correlate that feeling to what I've eaten, I'm like, do I really want to eat that thing? And so you get into that with your money and your lifestyle and it's like when you gamify saving money and you're like, I know what it feels like. At the end of this month when I bought a bunch of meals out or I bought myself clothes, the last three or four days of the month were sweaty. Like I did not feel good. I was stressed. I used to live like this legitimately. There was a time in my life, if you've ever heard me tell the story, that I took myself from scrounging in the couch cushions to find enough change to put gas in my car. Okay. In that period, I would have to decide what bill am I going to pay this month Because I couldn't pay them all. So it was like, okay, I'm going to skip electricity this month because I know I get a past due notice. And as long as I then pay that past due notice, they're not going to turn me off. So you can constantly be like a month behind on different things. And so I would just go, okay, these bills get paid this month, then I'll pay these bills next month, then I'll go back to these bills. And so that is not a good feeling. And so as you go through that and track, okay, I see when I spend my money on this, I don't feel good. When I save my money over here at the end of the month, I still have everything I need. My stress levels are going down. So getting that correlation between, oh, when I eat this way, I feel this way, you start to carry that over. And then if people are willing to really transform their physique, there is not a single thing more powerful if you want to be successful, if you want to get rich, all of it. Change your body first. It does something to your mind. It forces you to develop discipline, it forces you to develop resilience because you have to push through the pain and keep doing that thing you don't want to do and it works. And then on top of that, I guarantee at some point they're going to find the biologically embedded subroutine that tells you to feel good or bad based on the state of your body. And so if you are strong and you look good in the mirror, you will have A subroutine in your brain that's like, yeah, you have. It's a form of self worth. This is exactly how people get obsessed with it, because it feels innately good. If you. Dude, I'm telling you, as somebody that used to walk around with a six pack and it's never too far from it. Now when you lift up your shirt and you see a six pack, you feel some kind of way even now. Because now I'm less focused on the six pack, but more just making sure that I maintain a slightly bubbly physique. Bodybuilder's gonna laugh at me for thinking I have one, but in my own reduced amount, I do. And so when I'm working out in the gym, I feel differently about myself based on the shape. Because I always. People are gonna be weirded out by this, but I work out in the dark, but I can see my shape in the gym. And when my shape looks right in the mirror, I'm like, yeah, it makes me feel some kind of way about myself. You and people totally discredit that to their detriment. Get control of your body. Prove yourself that you can do it. Get that discipline. Go push through the pain. See the tangible results, and then apply that to every area of your life.
- [57:02]
Follow-up Questioner
And then just one last follow up on this is getting your body in good shape is you talk a lot about inflammation in your health content. Do you ever see the parallel between inflammatory in your body and inflammation in the economy? Like wealth as well? Like, do you see any parallels?
- [57:21]
Tom Bilyeu
I have never thought about that. George. Let's think. Is there a parallel in the economy that is like inflammation? Here's the first thing that comes to mind. When you have inflammation in the body, you have an overreactive system. So the system has a real threat. It really does need to deal with it. But then it goes haywire. So we all learned about that with COVID and the Cytokine Storm. So most people in the early days died of COVID not because they couldn't kill the germ, but because they had such an inflammatory response that the body's defense mechanism was like, yo, everybody's an intruder. Everybody out. They were just slaying and killing left, right and center. And so they just ended up killing themselves, right? Literally, the body tearing itself apart. And when you look at either euphoria or panic, that's exactly what happens. If people were in the situation that I'm in, forget scale, right? Percentage of access to capital deployed in what way? So I've got roughly call it 20% of my income tied up in some long term way, right? Then I've got say 60% that's just like, yo bro, you're good. And then 20% that's being pumped into building something high risk, high, high, high, high risk. Okay, so it's like cool, the 20%. I wish it were up. That'd be amazing. I'd be super pumped. But it's not. But I've still got the 60% that runs my engine. That's word. So if I lost the 20% over here because I invested it in something long term and it's down and so now I need to leave it and be patient for 10 years, right? It's probably going to come back around, but not for 10 years, long ass time. And then the 20% over here, I just outright lose because it was ultra high risk and I failed. So now Effectively I've lost 40% of my net worth. I still have 60% so I can run my life, do all the things that I want to do. So as Ethan bitcoin are going all over the place, one as eth is going up, I'm not just investing, investing, investing more. I had a number and when I hit the number, I stopped investing. And like, well, I was kind of sad because it was like, oh, numbers keep going up. But I was like, I've hit the amount that I'm willing to deploy and I did that dollar cost averaging, right? So over like 18 months or whatever. And so I was like, cool, that's all that I'm going to buy. That's as much as I'm comfortable investing in all of that. Same thing with real estate and all that stuff, not going to keep buying. I hit a number and then I stop. So for me, all that crazy volatility up and down. Sometimes I laugh because it's so crazy. I just can't believe it. Like, oh my God, when it was up, it's like it's up another 30%, you're like, this is insane. And then it was down 70%, 80%, same thing, equilibrium, right? And that's where I want to see people live. So that you're not reacting like the, you know, inflammatory response and you're going crazy. It's like you want to be even keel, you want to deal with the issue. So if there's a change in your thesis, you want to address it, reallocate, move on. But you don't want to be panicking, freaking out. You never want to do an investment that's going to make you Cry if it goes wrong. Which is why every person that I think is sane says, never invest more than you're willing to lose, because you never know. It could all go wrong, right? And you need to be very, very open to that. And when you think this time is different, it can't go wrong. Like, I won't throw this person under the bus because this person really is bright and people really should listen to a lot of what they say. You shouldn't listen to all of what anybody says. And I remember this was maybe two years ago. They were like, I don't know, I think maybe the economy is different this time, and maybe the world is so intertwined that the economies will never be able to have these huge drops again. And I remember, like, if you guys have ever been on Reddit and the guy with his head, that's like, you know, receding out to here, I was like, bruh, no, it is never different. Nothing repeats exactly. But it rhymes so closely. Like, it's never different this time. You've got to be incredibly careful. Things are going to go up and they're going to go down. And now the crazy thing is that was only 24 months ago, and we're already talking about a world that's completely decoupling. So things change. In fact, if I could give you a Buddhist, Buddhist esque idea, brought to me anyway by Phil Jackson, whether he's ripping it off from the Buddhist, I don't know. But he said things come together, things fall apart. That is true of companies, friendships, marriages, nation states, currencies, everything. It comes together for a while and then it falls apart. And anytime you're investing or building or whatever, if you think it's forever, you're wrong. Even impact theory, there's nothing that we've done that's forever. There's nothing Disney's done that's forever. Most companies come and go. Disney's only, what, a hundred years? Literally, next year, they'll be 100 years old. In the long arc of human history, that's nothing. There are trees older than that. There are turtles older than that. So it's like when you're not even as old as some turtles, like, you just. You're not really. You haven't done anything yet, bro. You know what I mean? So it's like, and trust me, I put myself in that camp. So recognizing things come together, things fall apart. You have to be very thoughtful.
- [62:46]
Co-Interviewer
I want to dive into something a little bit more personal and then expand it into something that will affect kind of everyone and Kind of get your take on all of it. So we're talking about inflammation, we're talking about inflation, we're talking about all these things. And you say, you know, we'll always see this again. So for me, in my early earning years, it's the first time I feel like I'm living through a high inflation type of time. I don't know if you've been through that before, but now I'm going to be curious about am I thinking too much about inflation or am I not thinking enough? Because there is a big part of me that worries about people. You know, if inflation is 7%, which I think shadow stats is more like 10, 15%. Plus, if you haven't made that in a raise, your purchasing power has gotten cut by that. So I'm like, how much should I be worried about that? Because that compounds over time, right? So that's that in my stage versus maybe you've gone through this, or now that you're in, you know, your stage of wealth and everything, how are you thinking about that? So one, how should younger people or people who are just entering the field be thinking about that? And then how are you kind of thinking about that?
- [63:38]
Tom Bilyeu
Okay, so the only thing that should scare everyone is inflation. Inflation was the thing that made me realize I had to take investing seriously. Because I was like, look, I'm rich, man. I am perfectly happy to just have my money in Fort Knox and not think about it. And when I need to make a withdrawal to live my life, I will, and that's that. And I love the idea of never having to think about the money. Just put it in a savings account and be done. And I'm happy to, you know, just, okay, that's how much I have. This is how long I expect to live. And you just spend that amount of money and all's well. And then I realized, oh, wait a second, even when inflation is under control, that's 2% and 2% compounding. So it's 2% compounding. You can run the math on that. It gets devastating very fast. Something like in 30 years, your purchasing power is cut in half at 2%. So I was like, whoa. So that was really distressing. And if it really is 7 15% now, all of a sudden, it's your cut in half in five years. So I was like, wow, I really can't ignore this. So that's when I realized, okay, I've got to go learn about investing so that I can be more intelligent about it. And so in all of that, people need to think about it now, I will say, be thoughtful enough to realize that unless the currency hyperinflates, at which point it really becomes worthless. And that does happen, and it happens more frequently than people would like to believe, that inflation tends to go up and down. And so we're already seeing this, right? The Fed, you want to talk conspiracy theory? The Fed has the ability to pull levers that wildly impact the inflation rate. Now, because the Fed knows that nobody pays attention to what they're doing except a very small cadre of people who can scream as loud as they want. Nobody listens. They will tell you exactly what they're doing. And the chairman of the Fed said, hey, we're going to overcorrect because, and I quote, I have medicine, I think he said, for dealing with a broken bone. Meaning I'm going to break the back of the economy. But I have a way to deal with that, but I don't have a way to deal with inflation. So I've got to yank this thing so hard that inflation goes down so much that we snap the back of the economy. But don't worry, we know how to inject stimulus back into that and grow people. Because let me tell you, if we had started all of this in a 7% environment, right then it's like, oh, you just cut the percentage. And now the economy is stimulated, everybody's happy. Businesses invest like crazy. You can get cheaper money. Boom, roaring 20s, everybody's excited. But when you have high inflation, people are freaking out, oh my God, what do we do? And so we were at a 0% interest rate, which was causing everybody to spend money like crazy town. He had to like throw the numbers into the trees to break the back of the economy, to get it to slow down. And then he knows, oh, cool, Now I've given myself the ability to stimulate the economy by bringing them back down. But that's manipulation. It's crazy. And so there are some people that are up in arms, they're just like, leave it alone. When something goes bad, let it go bad. Like, what is everybody saying about FTX right now? It sucks. My heart goes out to anybody that lost money, but it needed to happen. This was all fake anyway. You got to let it burn away the detritus. Let people who were gambling get washed out. And even though it's going to set us back years, we'll ultimately be better for it, right? Once it becomes impossible to undo. That's what everybody says. And what the people, the proponents of saying, just let the market do what the market Does. Their whole point is, yeah, it's going to hurt, but it will reregulate itself very quickly and people will rapidly see that, oh, if we had just left it alone, it will self correct. We're now at the edge of my understanding, to be clear. But there is a moment, I think it was the New Deal. So they were trying to use the New Deal to stimulate the economy to get us out of the Great Depression. And some economists say that that caused the Depression, that we were already showing signs of coming out of it like two or three years in and that that may have continued the Great Depression on for years, like four years longer than it would have if we had just left it alone. Now we're at the edge of my understanding. I don't know if that's true. I'm simply repeating a headline. But it's interesting that credible economists say, hey, if they had just left it alone, the market will recorrect. The problem is we don't want to see people suffer. And so to avoid people suffering, we start playing with these levers, trying to fix things as we go. But you get these wild swings. Now I'm going to tell an interesting story. So there is this, I don't know to call it a documentary or what, but as you guys know, in airplanes they have a black box recorder and there's this like play that they filmed. Like kind of a. You're filming actors on stage, but you're filming it. And they're, they're reenacting the exact words from the black box. So they're taking the transcripts and doing it. Exactly. And one of the flights that they reenact was this flight where a guy brings his kids into the cockpit. This is, this is a commercial airliner, so there's like 200 people on board. Brings his kid into the cockpit and the guy doesn't realize, but the kid's foot or something bumps autopilot. So it takes the thing off autopilot, but he thinks it's on autopilot now. The thing that you would do if you have autopilot is like you would try to steer or whatever and then autopilot realizes and it smooths things out. And because he didn't know the autopilot had come off, he was like doing these big moves and it was like whipping the plane from side to side. And he could not understand why that was happening. And you hear him go, not again. Because it was overcorrecting from one side to the other, from one side to the other. And then they crash and everybody dies. And it's like, it's tempting to think that doing these big moves is the right thing, but you can tear the plane apart by that kind of whiplash movement. So that's the thing that makes me as the layperson and nobody should take economic policy off of me. But I do worry about that big whiplash now. I don't think that they should probably take their hands completely off the wheel. I think that we're at the edge of my understanding. Again, there are probably things. Here's what's interesting. My knowledge makes predictions and some of those predictions are if there were no hands on the wheels, all hell would break loose. For what period of time? I don't know, maybe 10 years. And then everything would be great. But my fear over what happens in that 10 year period. Now it could just be that I don't know enough maybe, or it could be that it just, you need some governance.
- [70:32]
Co-Interviewer
And again, I want to dive a little bit deeper here. So now I'm learning, you know, what the Fed does, how they're kind of manipulating the economy. But as far as I know, I can't elect the Fed, I can't tell them what to do. So now again, back to, you know, some of these people are in different stages of their lives. Like what with this knowledge now, you know, for me, I might be hedging through different stuff. It seems like, you know, your portfolio split seems like you have some safe buckets, you have some like risky buckets, you have some things you control. Is there something that you can recommend everybody or is it something that's so like just individual they would have to all do their own research and figure out.
- [71:04]
Tom Bilyeu
Yeah, I mean, of course, like with all the caveats, but the, the one thing I would say is you need to have a year's worth of savings liquid immediately available to you. One of the best ways to do that is probably government bonds because the US Government will back it and say we're at least going to match your, your principal. So we may not be able to make good on the interest that we promised, but we're going to guarantee that your principal is back. You can do those very short term, say a month, and then you can cycle your money in and out of that. So sometimes you'll get at least a little bit of yield, other times you won't, but at least your money is more or less being protected. Now if inflation is higher than whatever yield you can get, you are technically, technically losing purchasing power. But at least the number in Your bank is the same. So that's one way to keep the money that you need, access to your life immediately available to you. Then I would invest in index funds, whatever you're comfortable investing, I would do it in a totally hands off, passive way, your dollar cost averaging in whatever amount you're willing to do. And then I would take some amount that's we'll call it play money, where maybe you're going to do higher risk investments, you're going to pick some stocks because it's fun for you, you're going to invest in your friend's bar, whatever, all things that if it goes to zero, you're completely comfortable. So that would be roughly how I would think about it. You've got the long term, really simple, tried and true method of investing. Then you've got more speculative dollars that are fun, but that's probably going to be 5, 10% of your investable dollars. And then if you want to buy a house would be the only last thing. And I would say remember that buying a house is not a great way to invest unless you own it, but you don't live in it and you let somebody else live in it and they pay you more than you pay for interest, depreciation, the cost of the what the government charges you every year, property tax. Thank you. So if you're all in fixes, repairs, ah, if after that you're still making money, cool, that can be a good investment. But if you own the house and you're living in it, basically what you're doing is paying a lot of money to keep up with inflation. So it's forcing you to invest that money so that you know, I'm going to have whatever this house is worth and houses tend to keep up with inflation. So it's like I know that I have this quote unquote nest egg that's going to match inflation that I can either leave to my kids or whatever. But the thought that that is money that you've made. So let's say you bought the house for a million dollars and then, you know, 30 years from now it sells for $7 million. You didn't actually seven extra money. You probably would have made a lot more money by investing that million dollars into the stock market, into an index fund. But if you're going to live in it and make the memories and all that good stuff, then wonderful, so be it. But it's basically just a mechanism forcing you to keep up with inflation. But it's going to cost you a lot to keep up with Inflation.
- [74:15]
Interviewer
So for somebody who might be a little older, like in their 50s or 60s, what advice would you give to them if they're worried about not having enough money to retire?
- [74:23]
Tom Bilyeu
Keep making money. So you're going to need to start investing right away. But again, you're going to take less risk. And the thing is, I haven't talked about higher risk, albeit still somewhat cautious investing. So most young people are going to have, if they're working with an advisor, are going to have their money spread across the really basic things that I'm talking about, an index fund. But then they might also do growth market investing, emerging market investing, things that have higher upside, bit higher risk. They might start doing corporate bonds, the company goes out of business, you're out of luck. But they might pay significantly higher interest rates. So they might be doing some of that they might be doing, which I don't understand well enough. So I can't advise people up or down. A lot of people make a lot of money here. But this is also, when you hear about people committing suicide, it's almost always that they did something with futures options calls where I forget which one of those, but one of them has an infinite downside. So you could end up losing more money than you have. And that's where people get into trouble because they go from oh my God, I'm up $100,000 to I'm down $500,000 and now I'll never be able to make that back. And so that's where it gets very, very scary because it's very much like gambling. But anyway, they might have those more risky stock market, government approved ways of what, from where I'm sitting, is just gambling. And so they're in there doing government approved gambling. They get themselves in a lot of trouble. But let's say that they've got a portfolio that has some of that in it. The first thing I would say is if you're in your 50s or 60s, you want to start getting out of that riskier stuff because if you take a loss, you don't have time to make it back. So we're going to be getting into things that are less risky that we're going to be able to just map out. So if we know that our money is going to double every seven years, then it's like, okay, you're 60, speaking from a perspective of an actuarial table, you're going to live to 78. Cool. So you got several, almost three doublings in that time. So how much do we have? How much can we afford to shove in there. My mom didn't retire until she was like 72 or something like that. So it's like if you're able to retire at 65, don't. Right. If you need the money now, just keep pumping money as much as you can possibly bear during those years. You should still be high functioning. I expect to be high functioning into my 80s. You need to take care of yourself. But if you're taking care of your body and your cognition, you should be high functioning well into your 80s. I get it if you don't want to work, but imagine if you're passionate. I don't plan to retire. I plan to work until. Right. Because I love what I do. And so it doesn't make sense. I don't want to retire now. I'm in a position where I could retire any second, but because I don't want to and I control whether I do. It's a great place. So anyway, you're going to be making money doing something that you care about. You're going to be putting as much money as you possibly can into your retirement fund. You're setting aside any of the. But it should have been different. Don't waste time on that. I get it. You could lament that, mourn that, all of that. It's not going to help. So we're going to sock away as much money as humanly possible, knowing that we're going to double every seven years. And now we're just going to run the math. So if it doubles every seven years and I'm 60 and I want to get to that third doubling, that's 81. Cool. We know it is what it is. Or nope, I only needed to double once. Rad. Then you're only going to be 67. So it all comes down to how much do you have already. Hopefully you're not starting from $0, so hopefully you have some money in there already. You're going to take X strategy. It expects to yield X over time, maybe in seven years. You know, the volatility is so weird that in the seven year span it didn't double but in the 14 year period it has. You've done the two doublings. So it's like people have to remember it's on average. So be very thoughtful about that. But if we go 14 years, so now you're 74. Cool. Maybe at that point you've got enough to retire. Or maybe. I mean, math is math. So the math is going to say what the math says. And if you're at your current job, not getting enough to put money in? What are you doing to make sure that you can make more money so you can invest more money doing a side hustle, getting better skills at your current job? And this is the one place I am deeply compassionate towards people, but I have no compassion for somebody who doesn't want to improve their skillset. So you can improve your skillset at any age. You can negotiate a better salary at any age. This all comes down to are you able to deliver value? I don't care if you're 60, I don't care if you're 70, if you're crushing it and you're the most valuable person in the company. Word. And let me tell you right now, don't think for one second I'm not going to outperform all you whippersnappers when I'm 70. Right? Because all my knowledge is going to be stacking and I'm going hard. I've got energy for days. So that's where I need people to really like, manner, woman up, get tough, get after it.
- [79:18]
Co-Interviewer
I really love that message because again, I can come from a place of fear or I can see an opportunity here. Again, I can see the inflation, maybe even stagflation because we're heading into recession and it's like stocks are down, lots of things are down, while at the same time all my purchasing power is inflating away. But I can use that again, the fire under my ass to be like, okay, I need to get skills that can out compound the 7% or whatever. And then this is opportunity where things are down, which means I can buy these things. And if it ever reverses, it's actually a great opportunity to do that.
- [79:47]
Tom Bilyeu
So I really like meaning now you're buying things on discount.
- [79:50]
Co-Interviewer
Exactly. And again, I think you touched on a really great point about actually again focusing on the skill set. Because some people will have the year saving and maybe they can like dump it into the stock market and all that. But I think for a lot of people living the paycheck to paycheck life seems like they can buy less and less every single month if they just focus on again, what are the, where can they learn these things? What do they have a natural affinity towards that has a marketplace that is open to value? I think for me that gives a lot of hope of just like, okay, this is where we can focus on and have control over.
- [80:20]
Tom Bilyeu
So yeah, I mean this is why they say that more millionaires are made in a depression than any other time in History. And the reason is hiding in that depression is the next Amazon, where the stock is hyper undervalued and people can come in and pick it up. I forget. I think it was Amazon stock dropped to like $7 a share or something like that. Yeah. And so Amazon still goes on to be Amazon. So if when Amazon was $7 a share, you bought $7,000 worth, you're laughing all the way to the bank because that then skyrockets and becomes one of the most valuable stocks on planet Earth. It's like you've really got something. But if you were trying to buy it when it was a hundred dollars, spending seven thousand dollars gets you a lot less. A lot less. Like ten times less. More than ten times less. So it's a really big difference. But this is why they say, be fearful when other people are being greedy and be greedy when other people are being fearful. Which, by the way, is just another way of saying, buy low and sell high. It's low because people don't think it's going to be anything. And it's high because they're convinced that it's going to be. And odds are then not odds are at that point, then the reality of that is already factored into the price. Because if people are right and it is going to go up, that's already factored into the price. So you have to bet against the consensus and be right. That's where this gets hard. So how do you get good enough where you can make the counterintuitive bet that nobody else sees and you end up being right? And that's why euphoria is so dangerous. Because when everybody's like, yeah, it's already built into the price, and euphoria always breaks. It always breaks. Nobody can party forever. And if you can really extrapolate that analogy and just think about what it's like to be at a party. You're going, it's fun. You want it to last forever. And you're going, ham. And you've had drinks and your friends are there and you're talking, and it's great. You've been dancing. And then it's like, oh, my high heels are kind of starting to hurt, right? My feet are a bit sore. Like, oh, man, we've been dancing this song for a long time. Like, I just kind of, you know, I want to chill. Like, this was so fun. I really did have a great time. But it's like, now I want to get off the dance floor. That's natural. Like, you can only sustain that fever pitch for so long and knowing that the number literally can't go up forever, that even if every dollar went into one asset class over 18 month period, even then it still hits the top. And so somebody bought at the top. And then everybody realizes, oh wait, there's nowhere else to go. And so now you get people that are like, wait, I need liquidity. There's no bigger fool, as they say, that's going to come in at a higher dollar amount. And so now you get into all the pump and dump schemes where people are like, no, I just need a little burst so that I can get out. So they do that. And so you see what they call chopping, where the trend line is just chopping. It's just people trying to wait to that local high to get out and then it drops again because everybody's selling. And then people try to build it back up so that they can get out again and it drops. And I mean all this stuff is like hyper predictable. So. And by the way, that's never going to happen. Not all things are going to suck into one resource. So the party does end voluntarily at some point. And if people don't recognize that, oh, this is going to stop being fun, people are going to start backing out, that's going to cause it to collapse. Then that's how so many people get themselves in trouble. So you have to be very cognizant of where this all goes. The music is going to stop talking
- [84:00]
Follow-up Questioner
about like the Amazon stock being like undervalued. What opportunities do you see that are being undervalued like the Amazon stock or a skill set like learning to program.
- [84:10]
Tom Bilyeu
I'm not the guy that's going to be able to give you what is undervalued right now because I do not consider myself a talented investor. So all I will say is that going to. If you're a builder, you want to figure out what is an underserved problem. So learning to code is about figuring out what's going to be that next skill that people really need. So what is a problem that the world faces and who is going what is a problem that the world faces, that the world recognizes it faces, wants a solution and considers that solution very valuable. And so that's why you want to get there. So we all know that more and more things are going to be written with code. And so learning to code is going to continue to be a very valuable skill. But you don't want to be a mediocre coder. There's going to be a lot of people Doing it. So getting into that now, the area that I think people should be learning the most about is AI. In no uncertain terms, how do I, as an artist, a copywriter, a marketer, whatever, how do I work with AI? Because I don't think AI is going to replace the strategic creative thinker. It's going to replace the person that's sort of manually doing things. So it's going to make everything that much easier. So imagine if instead of like, for instance, let's say that I want to be a songwriter, but I'm not good with beats, I don't know the technical knobs or how to go find a new sound effect. And instead, and mark my words, this what I'm about to describe, while it doesn't exist today, it will. Where you can type in. Give me something that sounds like a metal stick hitting an empty drum. Bong, bong. A bigger drum. Bong, bong. But higher pitched, right? And you just keep describing it until you get the sound that you want. You don't have to walk around like Charlie Puth is doing now, opening a door. Does this squeak in the way that I want it to squeak? Tap it with this, that and the other, which is already brilliant and amazing. And he's going to then put it into Pro Tools or whatever and edit it, which is already extraordinary. You're going to be able to do it through prompts, man, it's going to be crazy. So most people get emotionally shut down by that because they built their career on like. But I'm the one that knows what to tap on and I'm the one that understands all the secrets of pro tools and how to do that. Never invest like that. Be the person that is excited about the innovation to make things that were hard easier so that you can push what you do up to a higher level and get into really more and more interesting pieces of this. So AI to me is the name of the game. And 2022 was the year that it became real. And so for anybody wondering, like, oh, if we had that threshold moment, Absolutely, it happened. Now at Impact Theory, we have already released imagery that contains AI generated elements people would not be able to pick out which is which. We will continue to do it more. We have backgrounds and videos and stuff that have been made by AI. It's really extraordinary what you can generate with AI already right now today in commercial applications, what it's going to be in five or ten years of you bananas.
- [87:17]
Co-Interviewer
I have a question around, like being rich and being wealthy. So do you feel like There's a difference. And at what point of your life do you feel like you've got rich? And then at what point did you feel like you got wealthy?
- [87:28]
Tom Bilyeu
It's really interesting. So the classic answer to that question is, rich is when you've made enough money that if you spend your principal, you're going to be able to live the way that you want to live. Wealthy is where you can live your lifestyle on the interest of the money that you have so that it's generational wealth. You'll be able to continue to pass on the capital. And if they're smart, they'll keep living only off of the interest. Which means, hey, when you have a good year, you're living rich. When you have a bad year, you're not. But the capital, you preserve your capital, as they say. So that bulk amount that's kicking off the interest never changes. That's the classic definition. Now, I would say there's a wiser way to look at it, which is that rich is about money and wealthy is about mindset. And when you understand you can have all the money in the world and still feel poor because it's never enough, or you can have very little money, but realize that money can't do the one thing that people really care about, which is give you a sense of fulfillment. Fulfillment has a recipe, maybe a better way to say it than a math formula. It has a recipe. There are elements. And if those elements are in your life, then you're going to be a okay. And they go like this. You want to be working really hard for something. Just that's the way the human mind works. If you're not working really hard, you'll never feel good about yourself. So you're working really hard to acquire a set of skills that allow you to do something for the group that uplifts them and yourself. And then the one thing I will add to that is there better be somebody in that group that you love and care about. On an interpersonal relationship level, if you have that, life will always be worth living. And if you don't, it won't, no matter how much money you make. So there's just these really intricate patterns that run in our brains that make us feel some kind of way. Now, money matters. Money's really powerful, and it does something incredibly useful. It facilitates. So money lets you build the things you want to build, create the things that you want to create. And so we all know that money is extraordinarily useful, which is why people will always chase money. But people Think that money is going to make them feel better about themselves, give them fulfillment, and it can't. It's just that's not a thing that money can contribute to beyond giving you the money to build the thing that gives you meaning and purpose. Sure. So if that money is necessary to create something that allows you to use your skill set to contribute to the group, then it's useful. Right? It's exactly what money does for me now it's letting me build impact theory, which is the thing that allows me to contribute in the way I want to contribute. So it's powerful in that way, but it is the contribution that makes me feel the way that I want to feel. So you have to be thoughtful about that. But those are the two sort of. One is a little bit woo woo, and then the other is very concrete. So I'll let you pick which one you prefer.
- [90:15]
Interviewer
So when you first started Quest, did you have any idea that it would get to where it is now? And is there anything that you would have done differently, knowing what you don't know?
- [90:25]
Tom Bilyeu
I knew it would get where it got. That was the whole point of starting the company. But we didn't think it would get there that fast. So that really was a rocket ship and is proof that what you're looking for is the right product at the right time with the right marketing. And if you're missing any of those elements, you're not going to get there. And so I get asked a lot like, oh my God, what'd you guys do at Quest? I'm like, I will tell you literally day by day, it's not gonna work now because now the world has reacted to what we did and so it seems commonplace. In fact, if I walk people through what we did, be like, bro, that's so mid, like, how on earth did that work? But it wasn't mid when we did it. It was revolutionary. But it worked so well. Everyone started doing it. So now it's just table stakes. If you're not a killer at social media, if you don't have a protein bar that's actually good for your health, if you don't market it around food, if you don't have social media marketing that reflects the user base. If you're not building community, it's never going to work. But when you do all of that and nobody's done it before, it's like, oh my God, this is crazy. And it was explosive. So if we were to try to launch Quest now, it wouldn't work because somebody already did it. So you have to get that timing right, product right, marketing right. It's all got to be right, right? Right. So that's why it worked. What would I do differently now? Well, now I would have to find that angle where we're doing something that other people aren't doing. The big thing that we're leaning into now is going to tie some strings together that we had. So one understanding that your brand has to have a face and a voice so that people know what you stand for. That's a big part of it. I actually tried to be invisible at Quest. Wasn't until the last, like 10 months that I was at Quest that I stepped in front of the camera. So for the longest time, we did what we call mirror marketing. Then I realized there was a shift and I was like, cool, Gen Z, even Millennials to a lesser degree. But they both want to know, what does the company stand for? Who are you? What are you all about? They want visibility. Another thing that I would do is the way that we market has changed completely. So the marketing needs to not only add value, but it needs to be entertaining in some way. And then working with influencers is way more important now than it used to be. But working with them in a way that makes an ad that I'm like, word, thank you for sending me that ad. Like, shout out to capcut. Capcut their whole ad. I didn't even realize they were ads at first because they were just tutorials. They're just like, hey, let me show you how I did this really cool thing. And I was like, yo, teach me how to do that. That's so sick. And then like 30 videos in, I was like, oh, my God, these are all ads for Cap Cut. So but now they've got me talking about it because I was like, that was so dope that I actually want Capcut ads in my feed because I want to know those tutorials and I keep sharing them with the team to be like, yo, did you know that you can do this? You know you can do this. Hey, here's a really cool way super dope trends that we can be using. So that is like, we tried to be that with like recipes and stuff at the beginning, but we didn't know how to do it where it was like, I'm actually showing up on your interest graph feed. That's another thing. We were social graph back then. So interest graph feed. Working with influencers for them to create content in their native style. That's super entertaining. Where even though it's an ad People are like, yo, give me more, give me more, give me more. So some of it is like a nuanced twist, and then some of it is just very, very different. Well, guys, those are wonderful questions. I hope that helped all of you guys. There are many rabbit holes we could go down. Be sure to drop in the comments if you. If there was a rabbit hole in there that you want to be hearing more on. We can do another video if you haven't already. Be sure to subscribe. And until next time, my friends, be legendary. Take care. Peace. Are you really buying a car online on Autotrader right now?
- [94:14]
Commercial Narrator
Really?
- [94:14]
Tom Bilyeu
At a playground?
- [94:16]
Commercial Narrator
Yeah, really. Look at these listings from dealers.
- [94:18]
Tom Bilyeu
Wow, your search can really get that specific.
- [94:21]
Commercial Narrator
Really?
- [94:21]
Tom Bilyeu
And you just put in your info and boom, car's in your budget. Mom needs a second. Honey, you can really have it delivered.
- [94:28]
Commercial Narrator
Really? Or I can pick it up at the dealership.
- [94:31]
Tom Bilyeu
One sec, sweetie.
- [94:32]
Interviewer
Mommy's buying a car.
- [94:33]
Tom Bilyeu
Mommy, I think your kid is walking up the slide. Kyle. Again?
- [94:37]
Commercial Narrator
Really? Auto trader. Buy your car online? Really?