#176 with Codie Sanchez - Buying Distressed Assets, Real Estate for Cheap & How to Network Like a Pro

most people should not be out there trying to build the next facebook and i think it's kind of fucked up that a lot of people try to tell people that's what they should do most people want mas hierarchy of names right and want your family taking care of want food on the table you wanna be able to do the ship you wanna do on the weekends and that's it and so i like the portfolio actually better of a portfolio of small bets i think of buying businesses a lot like i think about buying stocks i feel like i could rule word i know i could be what i want to from at all in it like a day's off on a travel never look back sam showed up i thought i thought you were too hung over from last night's pod that went till two in the morning just to show up today dude it went later for me i mean i didn't go to till four what time did you what time what time was it over for it ended but my brain didn't turn off so like i don't even know if i slept last night ice straight so we so cody we had biology on the pod yesterday and i don't know if you know how kinda real smart smart dude and he definitely you know has like a ton of different ideas and thoughts and he's like super super smart on a math perspective science you know technically for computer science and so he was you know rattling off a bunch of interesting things but when he left and i'm going to sleep and he says y you know i'm sitting there i'm in bed by dogs in the bed and like my mind is like making up straight up it was just making up like scientific theories in its head like you know that state where you're dreaming but you're you like lucid dreaming or whatever you're like kinda like half asleep and i was half asleep but my mind was like oh but then the vector has scared a scaler and then it has to you know the order of magnitude and and i was like i'd wake up at what the fuck my like what the fuck is going into my head this is not even this is gibberish this a scientific gibberish and that straight up happened like the whole eye so i love not a great he prepared to be under overwhelmed in comparison to him today i think is the moral of the story well he he's just like like we've had a i think we've had one other person on the podcast like i guess michael sailor could be this but i i for sure think that rahul from super intimate was like this but there's like these a handful of people who we've talked to and you know people say like that person's a genius they're they don't really mean it but if we define gina as just like a certain iq i would bet a lot of money that that he was the highest iq person that i've ever had a conversation with and it was very obvious and he actually was quite he tried really hard to hide it in that he tried to act nice and friendly yeah and there was times where he was like sorry you guys probably don't understand that let me try and re explain it and that was that was actually pretty cool but he just his he's just smarter than me like his he's his oven just burns hotter and i there's nothing i could do to try to understand that like i remember at what time i i didn't able to embarrass sean but like biology was telling something and he used something he used math that he's like he's he's like what i to find is the dot product between me and this and i was like dot product i remember that like an ae eighth grade or i heard this phrase fifteen years ago didn't understand it then never ever thought about it again and then he's referencing it for like the way he thinks about it like yeah so i try to find the dot product and i was like fuck out that meets but he went like he went from math so he was in talk about math and talk about an idea and then he moved to like this one battle like some sometimes of canceling the bulls when he went to the battle the wall he goes to shawn he goes sean you know like no like it's the battle of the bulge right and sean was like yeah and he's no i don't think you do know the battle of the voltage what like yeah anyway it was an interesting podcast but this this isn't about him this is what the for sometimes i'm kinda glad i'm not like that honestly could you imagine how like you felt like that last night sean could you imagine being in his head every day or at like a dinner with normal people he probably wants to kill himself yeah we were we even asked them about that stuff we were like you know we asked a whole bunch of questions that were like i hope not even like condescending but we're kinda like were you always like this and like what is what your family like were you like an odd ball with them are they like was this like totally normal because i've never met somebody like you so i wanna know like what's your life like what do you do for fun like you know how does this all work and so we ask them a bunch of goofy questions like that actually unfortunately the best the very best part was at the end after the recording ended and we just kinda after a three and a half hour podcast we then shot the shit for like thirty minutes and it was great and his garbage totally down and that was awesome and then sam started helping him with his newsletter tips and he was like taking notes and he was like oh this this is great this is awesome stuff and like that was ironically the best and the simplest part of the podcast and then we had like three and a half hours of like good stuff but in a i mean the way you said it hit his oven burns out than ours and so you know i didn't feel like we were able to really add too much the conversation or really like steer it because i was like riding a bro that i didn't know how to ride basically it's too smart for me i love that can't wait to hear it's good anyways so with that out of the way welcome to our guest cody cody here so cody how how i guess like how do you explain yourself when you kinda introduce yourself because you have a newsletter that's pretty cool con you know this con country and cash flow newsletter you have an investment fund and business there you have built an own business i think majority sharing in some businesses so like what do you how do you describe this jack of all trades so hi i'm cody here's what i do what do you say well i think if i'm on an airplane sitting next to somebody i usually tell i'm a salesperson so i don't have to talk too much but in in a conversation where i was trying to impress somebody you know i i'd probably say i'm an investor i i'm a private equity investor i run a fund that's about a couple hundred million bucks focused on cannabis before that i did emerging markets couple billion dollars raised there and and now i write about all the things i wish i knew when i was first figuring out anything to do with this green language of money and i do that at contra and thinking and i mailed the two but i think these days that's not that weird there's a ton of vcs not so many pe investors out there probably that write about investing and share their ideas and i kinda think that's probably of the future and way it's going going forward you you i didn't know that i knew that you have the newsletter but so you have you run a a two hundred million own there's five partners but yeah we have two hundred million dollar cannabis private equity fund we invest in companies that do like ten million to fifty million dollars in revenue largely it's called on entourage capital and we've invested in sixty seven companies thus far some cool ones you know that you all would know i think there's been six unicorns in there thus far so you know you guys have maybe no gt grand industries acreage canopy growth cure leaf i don't know if you're big weed con you'd know them and then and then we have a smaller fund that's about twenty million bucks that's for micro pe so that's just me and a couple other partners money where we buy small businesses and that's if if we'd sort of fancy and fancy i guess trendy then the other one are super boring and things that you know your your father did when you're growing up and we didn't tell people about and that's like give us examples we're talking laundromat we're talking what what are we talking about plumbing businesses what do are you at actually the first one was a plumbing deal we started it because my uncle ed he had a five million dollar business let me make sure i get the numbers right that was doing about two to three million dollars in profit and he was old you know seventies ish and he was a shared crop he grew up in a share family didn't know anything about the business world and when he came to retire he didn't know anything about m and a so instead of selling the company he basically just wound it down and and you know he told company that had two to three million dollars in profit and just just you know let everybody go and and sort wound down the business and i thought that was a real waste and so we realized wait a second there's actually like a business model here called pe i've been doing it for twelve years at goldman and vanguard and states street and all these different firms why don't why don't they apply this to these micro sized businesses anything below three mil and instead of us making a bunch of money for other people we can make money for ourselves so we ended up taking an offs shoot of f homes plumbing you can look it up it's in phoenix and we bought a another plumbing company rolled it in sold that one that was a little tiny company and and then i've done it for a bunch of others and now we own laundromat mats we own a podcast production company we own some lawn care businesses we own professional services business it's in the cleaning space so a slew of tiny sort of boring businesses and most of the time i don't operate any of them there's somebody else that's an operator in them or we place somebody in the business we love this model me and sam both a couple of our best friends started a kinda of micro pe firm we invested in and i think have been i don't know sam don't how how close you track them but we've been i've been learning a ton as they look at all these different deals and it just seems like there's just huge generational shift of people who are aging out of their business and need to hand it off the kids don't wanna take it over necessarily or or are unable to or whatever and so basically the boomers handing over businesses there's just like all these businesses that are beautiful five fifteen million dollars a year profitable super steady book of business and you can you could buy these out of like super reasonable multiples yeah it's like a sixty five seven year old mom and dad whose kids went to a good school and they're like i'd rather work at facebook then run the wedding company please i don't wanna do that so and they're like alright what we do now five percent and that's what these guys are buying it's it's going great like i get their updates they're making a lot of money and so can yeah from can go can you draw a quick line so like let's do a quick hop through the resume because so people because i think where you're at now is super interesting anytime i meet somebody who's in a really interesting spot now like how to hell you get there so you said something like goldman but like without going into the details i'm like i did this and here's how it went just sort of like i went to school thing and i do this first job was here second job was here third job was here now here like can you give us a that sweet so i went to school totally unrelated to anything financial i'm not really a a finance nerd at the core i started off in human trafficking and drugs smuggling as a journalist not doing it but along the us border so so i was covering things like you know old people being left behind at the border and you know went with a couple coyote and actually saw what the process was like and anyway super young at the time i thought i was gonna change the world realize like you know britney spears shapes or head and nobody cares about these stories so maybe there's a different way so and so anyway so move from journalism to had my little quarter life crisis and decided that maybe i wanted to understand finance because my last name sanchez all these people's last name sanchez what is whatever the case may be and i was in a very different position than they were so i was like what's the difference why are they there and i'm here and i think the only difference is green it's not actually even that i'm american and so went to from there i got recruited to go to vanguard accelerated development program saw a bunch of parts of finance didn't understand any of it but journalists we ask a lot of questions so it's pretty decent at that so ask a lot of questions got from vanguard they're all about passive investing right so create an index that was at the very beginning etfs and create an index and replicate and replicate and replicate and i thought that was cool but not that sexy or fun so i went to goldman and i wanted to understand active how do we do ipo what are these alternatives look like because there more margin then went from goldman men to state street ran international investment business for state street at the time and then left did a jv with a company called first trust and built out their international portion so i grew the business to a couple billion in latin america and and basically we sold products to big pension sovereign wealth funds etcetera and then after that business i was ready to exit myriad of reasons and looking for the next emerging market and i sort invested in cannabis a few years back but real quiet wasn't sure my mom would approve and and then went full in as a partner into edc what's your what's your heritage you said that you're are you i you're talking about the four my understand my father's half so i'm half spanish half mexican are you catholic yes me too so a mexican catholic mother probably was it a fan of oh yeah she was you're really babies this baby a weed financier here she was really excited about it just making daddy proud but you know i think once we kinda understood i mean here's my pitch on cannabis but once we kinda understood the you know psycho active portion of it and the benefits for those who are over using opioids like i got her around to it but certainly upfront she was not thrilled about that but that's when you know right when people think you're a little crazy for doing something then there's usually at least some opportunity left otherwise all the smart people would've moved first and i'm not smarter than anybody else i'm just better at maybe finding in some early emerging markets people won't go into yet and i thought you would be a great guest for two reasons a i went on your thing and you were so prepared i'm not anywhere near as prepared for this as you were for me unfortunately but i didn't knew enough which was like oh she's great at talking and which is like half the battle and at the other half is like oh wait she's like wicked smart with a bunch of industries that i think people don't know a ton about so micro pe i know there's a lot of people interested but for most people it's a little bit daunting they don't understand how to identify the businesses how do you value them how you buy them what do you do have to you buy them that sort of thing and then same thing with cannabis people kinda know it's a big market but don't spend you know if you're not spending every day in that world you don't know how it's going how what's what's been growing it's a you a bunch of things so you sent us ideas on the micro pe side you sent us ideas on the cannabis side and then you sent us some controversial thoughts sam where do you wanna start of those three the idea is particularly the the she posted something in trends about mailbox mailboxes which so like you just have like five or eight different things that i think are interesting they're not like huge home runs but they're small business entrepreneur like stuff should that like an immigrant who came from nothing like would start and that eventually did thirty years and they would have a so at it let's wrap let's grab try them and here's how we'll do it you sent us this bullet point list i'm just gonna say the phrase and you'd be like okay so here's what i'm thinking and then if we just wanna switch if i'm like okay that's great i'm just gonna throw another one at you and then you go from there i think you'll be able to volley these pretty well let's do that one mailbox money what are you what are you thinking about here so this is package ship centers so basically think fedex ups except get rid of the franchise fees because that's twenty five percent of your your profit off the top and instead you just put you know sam and john's shipping center on the front of it and what this is that i didn't realize my friend lisa did it i'm always curious for by people who make money in ways that are repeatable since i'm not smart enough like ba or whatever his name is to create the next tesla instead i just want a bunch of stuff that cash flows now and so with this you know how everybody obsessed with storage units like everybody builds these storage centers and that's been like a storage thing right and and that's really just a r on everybody was obsessed with multi family an apartment beforehand they're like going smaller and smaller and smaller but still trying to get as much profit as possible well that's what package ships are so essentially the money is not in the taping of boxes and the stuffing of stuffing to make sure stuff doesn't break it's actually in the little mailboxes in the front i was gonna ask you what do you think of this p po box rental so i first i like the trend which is you're buying in a box of real estate and you want like kind of these low operation you know rental units so okay self storage but now you shrink shrink the self storage unit instead of being you know a hundred square foot little room you're shrinking it down into a one square foot box that you're renting out for twenty bucks and what you were saying so let's just do the bathroom real quick on this you're saying two hundred boxes in a location roughly is that right two hundred would be what you don't want that's ups fedex go a thousand okay okay okay gotcha okay that now the math math works so thousand boxes average fifteen dollars a month of renting out the po box boxes and how do you get customers to like what does she do to what is your friend lisa to do to get customers how does she acquire these po box ten well i the smartest way what i talked to her new doing and she built the first one that took a year and a half to become profitable because she had to do what you were just talking about it's not really that complex of the business it's ads so ppc it's dropping actual hard mailing in the surrounding neighborhood it's things like she does like a book setup out front little pop ups for the neighborhood where you can like you know free packing if you ship this day all that kind of stuff those squiggly armed things you know that you put outside of a new unit all that stuff and then she right but but the second store i told her to buy and so what she did is went out and bought an already an existing store that had customers and then just ups absorb them and that's a much easier way to do it and so you buy the store for about two to three x profit her second store she got for about one point five x retiring owner and then she was able to take that business and sort of double the revenue for that one i like this idea i actually might steal this idea because i just rented out a big warehouse for my wife's business and one thing we could do is just put a bunch of these mailbox mailboxes is in into that space and and just actually offer this as a sort of a simple way to take advantage of a small footprint of real estate yeah i think you have to decide what what type of human you are like if you are the type of human that has a capability to build up a really big business and that's what you in fact want to be a ceo of a puzzle or to be a ceo of an even bigger company then i think the roi on that is potentially more interesting long term you're not gonna get the same type of multiples with these tiny businesses but here's a thing most people are not like the three of us and i don't even know if we'd all be in the same category we're all different in the way we've built things most people should not be out there trying to build the next facebook and i think it's kind of fucked up that a lot of people try to tell people that's what they should do most people want mas hierarchy of nate right you want your family taking care of want food on the table you wanna be able to do the ship you wanna do on the weekends and that's it and so i like the portfolio actually better of a portfolio of small bets i think of buying businesses a lot like i think about buying stocks so how can i get a little portfolio of them with somebody running or operating them so then my risk is diversified and you're right it takes more time but if what you're really going for is i wanna make you know two hundred thousand three hundred thousand five hundred thousand a million bucks a year and that that is my goal not to change the world there's so many better ways to do it than do a startup up in my opinion yeah i'm a hundred percent with you on that i think the build versus build verse buy is so sla towards build because building sound sexy building sounds like virtuous it's what the media talks about and it's really unfortunate because i know a lot of people that would have been really happy with two fifty k a year of profits and low maintenance low headache and and unfortunately they get sucked into either one of two paths it's like i guess i'll do the startup thing because i wanna be entrepreneur i wanna be kind of my own boss so so then i gotta like do this from scratch find product market fit like damn that's hard and the other path was like oh that's that sounds really hard i'm just gonna stick at this job and and you know i'll an employee for the next you know twenty five years and never really get that freedom because i'm sort of on their schedule i'm basically renting my time out to this company and so the the buy path versus build or join i think buy gets criminal underrated right now but i think it's changing like we have andrew wilkinson on the podcast a lot one of the reasons he's so popular is that when he says what he does there's a hell of a lot of people there like shit i wanna do that that sounds fun that sounds like an easier path than the one i'm on right now and so i think it's quite appealing yeah sam you wanna jump to one of these other ones that sounds to you we got i see a bunch that i know you'd like tiny homes buying distressed assets for zero dollars laundromat mats which one you wanna do oh no we gotta tell you sam audio has gotta again okay sam having peace out the technical difficulties have overcome him and he can continue on he is he is out of the game okay i'll do one so i wanna talk about just buying distressed assets for zero dollars is this something you've done or why did you bring this up on the list yeah so this one is one i've done and actually there's an example of it i'll give you the actual example so i have a friend britney who owns a bunch of gems and not a about she owns two and they're like you know like the gyms that a lot of women go to where they have you know set classes and you know they all get in and worked together it's kinda like women's crossfit but not with big way anyway so she owns a couple of those like shapes without the franchise basically exactly so she was telling me that a bunch of her friends their businesses pilates studios bar whatever we're going out of business right during the pandemic and what was fascinating to me is like so i'm buying some equipment you know i feel bad for them i'm helping them out i'm like no no the way we gotta to do this is think about those businesses they're going under and they're worth now zero to the market but they have value so you know they're not getting anything out of the client roster that they have all the goodwill that they've built up so what we decided to do was reach out to some of these gym owners and basically say hey you know really sorry i know you're going through this terrible time what if we could help ann you a little bit where you could get some revenue off of the the business that you're about to close for zero and instead we can do a rev share and so i own a business right now we'll transition over your clients from your business to mine very carefully very thoughtfully but give them a new home and then for every client that we bring over from you i'll pay you out on it for a year where i'll pay you out on not for six months at x amount in twenty four months at y amount however we wanna structure it but this way you actually make money while you're closing your clients have a new house and we have new clients and we can serve them and we're friends and you like me anyway and so this business what to me what's fascinating and is nobody's doing this that i know of like i if i owned any business i would be out there right now for every business closing on yelp sixty percent of the businesses on yelp that close temporarily close per permanently so i would be out there right now going after every one of their client list even if they were unrelated and doing discounts in coupon codes giving a rev share to the owner who probably could use it and taking their client base and that's how i would buy distressed asset i wouldn't spend a dime i love that i think that's great and it's basically you're picking up the assets and none of the liability so you you're not buying the business and then having the rent and then you know having to bring that business back up you're basically saying what is the what is remaining as an asset to this business and it's the customer ro and i think that's a that's a great one that costs zero out of pocket from day one it's just profit share you know if if a customer does come on over to you so i think that's a great one let's talk about modular homes or tiny homes i think you have a couple of ideas on this so do you have one i don't yeah we bought a modular home which i didn't even know do you know if there's a difference between manufactured and a modular home there's also weird terminology no like i actually this i was ask you is like i thought a manufactured home is a modular home no either two days things yeah this i guess so manufactured home basically means it's what we think about like stereotypical right it's a it's a trailer home basically all the difference is is that there's no foundation set so you could pick that bad boy up and you can move it right that's manufactured modular is that it's built in pieces which is modular what that means but it has a foundation so at the end of the day there's really no difference between a what is called a stick built home a house that probably you're living in but i live in right now and this modular home but the crazy part is is well one we've all seen these cool modular homes all over the place popping up but i was surprised i'm like they don't only make sense not at scale they're not that much cheaper and they're not that much faster when you just drop one on your property and i did a bunch of research asked a bunch of people they're kinda sexy but they're not that much cheaper but when they are cheaper is when you do them at scale and i was i was surprised that there weren't any developments that did this and so i started scouring the country found a few one in park city and bought there and the numbers were amazing and i bought it so i know they're real we bought our house for nine hundred thousand dollars in park city and on an acre three thousand square feet the average price average or median is like two point five million dollars in park city so the cost that they were able to save was so amazing and they didn't pass it on to the user fully i think they weren't sure if we all were gonna actually buy into this but the houses are super sick right and i think that's a model if i was a developer i'm using those all day long and and i'd probably buy a modular housing company and then use don't you bank right yeah and so when you look at that home today can you tell basically this is anything but a normal home like is it aesthetically different once if you didn't know coming in when it else so i'll drop you the link right now i'm not gonna say where it is just in case anybody wants to come yell at me about something stupid i say line but i'll drop the link and you can see the difference but no it's super sweet looking so it's it's kinda the open concept big windows whatever the case may be and and you can't tell the difference the only difference really is that the turnaround time so we bought this in december of last year or january february i don't know and it'll be done by july and so it hadn't been two add add to it like but are you gonna have more modules to it so i'm gonna add a back office like module and then what we did is we got like five or six of our friends to buy in the same community and they're cool looking and so i think i'm gonna do some event or something and utilize the four or five of them and then you could have it as a tax write off because it'll essentially be like a little business okay this house is sick and so the company that's doing the development they're the company that's doing the development here they are not the actual manufacturer so there's three layers right there's the manufacturing let level then there's gonna be probably some delivery layer and then there's the developer who's doing a development marketing that and then there's like kind of individual home buyer beyond that so have you looked at the manufacturers of this yeah so that's where this one's interesting the the builder and the manufacturer are actually in this deal together so they do own the modular company and at least a portion of it and then the builder is one that's built this in a couple other places they also have another location that i think is cool and also could work at scale which is modular tiny hotel rooms essentially and i believe that's in jackson wyoming and the economics are just so fascinating because you know our modular home will be built in less than six months it's about a third of the cost the square footage if you break out by square footage it's about the third of the cost and then the part that's interesting is in these locations where they're the weather's is terrible you know and you can't break ground very often they they build it all in the warehouse so it's fine they lay the foundations all in one period of time and then boom boom boom do all throw all the houses up as opposed to everybody else in park city has to wait like you know two years or something like that so we'll see but so far so good okay this is pretty sick i like this one i'm gonna jump to more because i wanna see you what these are the ones are all about so talk to me a little bit about let's do a couple of the controversial thoughts i'm gonna rip through them pretty quickly and and so let's let's do the first one number one angel investing is largely dumb is that painful because we both are angel investors too and you have a rolling no i actually i i actually say this i say this often and people are like you have a rolling fund i'm like yeah i don't of of all my investment types that i do this is i would say the worst one but i think it's still good and fun and i do it anyways but i have like two or three better ones that i do besides this yeah so i think you know one of my good friend's name is justin donald and we're both pretty obsessed with deal structuring one of the big biggest things i have a problem with with angel investing in is it's it's too fun it's like gambling right like you get excited about the founders and guess what founders are charismatic that's how they raise millions of dollars and so you end up getting sold and it's not their fault and then you know there's fraud and know i wrote this whole piece about this one guy that we lost to two million dollars with because he just was super physically had like big images of himself on the wall like all this stuff later that i got out of diligence questionnaire like how many images of yourself do you have in your office but but the the thing with angel investing is you know this you need like twenty thirty forty deals for every one to four that are gonna go through and so i think that the other thing that we do at to disservice is telling people to invest in angel early on once you've made a few million dollars and i mean that literally then i think go into angel investing or if you're on a path where you're making really good money and you've made at least half a million a million bucks then i think you can start in angel investing in but until then you know let other people lose money and learn from it you said it like you were like take take a you know doc sign image of every deal you wanna do write down how you do it time stamp it so people can see and then decide later on how good you are at it without vernon and through a few tens of thousands of dollars yeah exactly okay so i have a bunch more thoughts there but i i largely agree with you and i would say like it's one of those here's my red flag is in order to talk in order to justify angel investing you have to give a blend of reasons it's like well it's really fun i like learning about the you know the future and the market and these are all true things by the way so it is fun you do learn a shit ton so it's like an education you can make great money if it you know pans out as you assemble your basket you know you should over a you know you should you know be netting you know a twenty percent plus irr it just takes a long time as a liquid and it's like not too much work because you're largely investing in your network that you've already built for ten years like that's kind of the thing and so there's like this blended reason and anytime you have a blended reason it really means that there's not one really great reason to do something and so those are always like you know sub optimal choices i find for myself at least whenever i have to come up with a blend and so and and because i tell everybody this around me whenever they hear me justifying something with a blended reason they're like oh interesting so that's a pretty big blend and i'm like oh yeah we should just not it never mind take it all back because i'm giving you this huge lists and instead of just saying we should do this because of x right like we should invest in this business because it's growing like like a weed and if it wins it's gonna be this big that i can get behind and some angel investors do fall that but the act of angel investing as like a a job or a hobby is is like it's more like when you describe playing basketball with your friends like oh it's great get to hang on my friends i get a good run in i get exercise you know i'm i i you know it's get outdoors it's like you're giving this a blend of reason for doing the the the the really fun thing you just really wanna do and you're justifying it but the reality is you just wanna do it and your brain comes up with reasons afterwards i think that's the most right yeah the only caveat i have to that is if you can go later stage deals which now you can do with lot lot of the late stage angel syndicate or if you can structure your debt like if you can figure out a way when you start earning interest day one on a startup up that acts actually has you know it's a little bit later stage and so it has some revenues or you could you know get into a debt deal that's on some of its you know factoring of the invoices it has like there's you know people always think of equity startups ups but lots of startups ups prefer debt so do debt with like a equity warrant kicker on it and you can actually make money from day one and then have some equity upside and that i think is interesting but you know right throw the y comb term sheet out the window because that it's not gonna be on that right and all that being said i'm still gonna angel vest because it's because it is fun and it's you know that's a hobby that makes money so okay so let's do another one public market public market investing also kinda dumb touching to me there well this one i like to talk about a lot with big investors because if you look at the forbes one hundred list there is not one person on there who made their money from just investing in the stock market and then this is where people are like cody warren buffett carl icon and it's like i remember i was at goldman in two thousand nine when do you member buffet did the deal which invest a bunch of money in goldman to stabilized it yeah yeah so i was there then and it was not a public market deal warren didn't go out to the street and buy a bunch of stock he had a ton of warrants and options on top of it it was a total back room deal and that's the only reason that he did it because he basically had this huge asymmetric risk right where he had a bunch more upside than he had downside and that's the same thing with icon who tries to affect the outcome so my point with people especially these days is like games the stop and all the madness and stock investing is like if you don't have an unfair advantage if you can't like write down why specifically you're gonna win instead of somebody else you should be really careful speculating on stocks because the big boys don't really do it yeah i have a cousin who runs a hedge fund and when he told me kinda like all the different things that they have at their disposal i was like oh okay i'm i'm coming into a gun fight with like a finger nail that's kind of like how how lopsided it is and i so you know so so that being said again i think this is important to say skin in the game here do you own any public equities and so despite this do you just do like vanguard do you just say oh here's ten companies i believe in i'm gonna do that or what do you do yeah i don't hold any individual stocks for speculation purposes i invest in indices and i'm have saying this is right or i'm some guru i'm just saying i don't think i'm smart enough to beat the market and so i don't play games where i don't like the rules i'd i'd rather write my own rules if at all possible so i go you know equity indices vanguard you know whatever the case may be i like vanguard the best and then i go mutual funds on alternatives private equity reits where you can actually have an unfair advantage but i don't speculate on any individual stock now i don't i mean would i own apple amazon facebook whatever would i make a play on twitter if i thought that might be fun yeah maybe but i think there's so many easier ways to make money with private market investing and buying businesses as opposed to having to deal with the irrational at the crowds right i mean do fundamentals really matter in today's world or is it whoever has the best ir and doesn't have some crazy thing the ceos said are done right yeah exactly have ever heard this term a ka beauty contest no what is that so named after i think the economist kay yeah basically the the idea is that this is how the stock market works so mckinsey and beauty contest is where you don't just a an normal beauty contest you sort of just would assess let's say the contestant that's that's on the stage but in this case the way to saw market works is it's not you assessing the true beauty of the thing it's you guessing what other people will evaluate at who are also guessing what other people will value that at and so it sort of is this like you get these like really warp things happen because everybody is not betting on the thing they're betting on what the other people will do about the and everybody knows that everybody's betting on what the other people will will value the thing at and so you get these like really crazy sort of out of whack things that that aren't you know value investing at its school yeah totally agree who's do a couple more so buying real estate at auction so a way to buy real estate at a discount talk to me about this one i've never done this yeah this one's fascinating so for instance let's use texas well sam in texas right but i like texas because they do this thing where they actually sell real estate at auction on the courthouse house steps of each municipality or city previous to it going on zillow or red fed or whatever the case be like we've all seen those are these fore closed for or is it fore closed properties that you that you get there or what what type of properties are you yes so fore closed is really when it's listed on zillow and red and so that's sort of like this post auction step that's when most of us c fore closed properties right so you're like no i know how to buy fore foreclosure i can go on red benefit it says fore close i can buy it well prior to that you have auctions which actually are the bank auctions of bankrupt properties or fore closed properties but you get it before the street does and then you can even front run that one step further which is there's a list of properties that are going to go into bankruptcy or foreclosure and then list in texas you can look it up right now it's called ronnie list r o d d y s and on ronnie list you buy this list it's cheap like a couple hundred bucks and you can get the list of all the properties that are about to go fore closed and then you can door knock you can go knock on the door because even though it sounds predatory it's actually not because if you go knock on the door and tell this person hey i'll give you two hundred thousand dollars for the house that you are in foreclosure because you owe fifty that actually gets them out of bank foreclosure and gives them the extra money that the bank was going to write off for them so this is fine on the auction chefs and i did it with a friend of mine aaron who's a stud at it and and it's wild millions of dollars of transactions in cashier year's checks happened same day on the courthouse steps why can't somebody bring that online so why is nobody built basically the tech platform that says great we go to all the court steps and then we you know sort of flash these things and you can sit at your loud i can you know sean he's he likes this idea he loves getting an edge but he's kinda lazy and so he doesn't wanna go do all this stuff why doesn't somebody bring that online maybe like rod list i guess is an example of that bringing that portal online what about after that well i think you could do those couple things that you need to do in real life like you have to validate that the house exists right and the the couple keys to the actual auction game are that there's some part that is just you gotta walk the walk so you could go and buy a house at foreclosure and look at it on google maps but google apps is an updated same day so that house actually might have burned down last week or a month ago and i know somebody that that's happened to or the house if you look at it on google maps you may not be able to tell that the inside of the house or you know the back end of the house is totally blown out so you gotta kinda go walk the property a little bit there's one part of it right and then the other part is it's about debt and who owns the debt and like one thing i've realized about wealth over time is debt has just about everything you should always look for even before you do a start up investment is there any debt on the company am i in a first lien does that you know do i have first access to money if this company gets it in some way and it's the same with the house so a lot of these times they'll have a lien on the property that's like this is weird this is actually would be an interesting business for you guys to look at like one of the biggest predators on low income home owners is you know those faucets like the little water purification faucets that you have in like your house yep so oftentimes those are put in houses by people that come door to door and try to sell them to people and and they'd use it by doing a lean or applying debt to that person's mortgage and so you could literally have a lien before you for like fifteen hundred dollars hasn't been paid so it's now worth like twenty five thousand dollars because the interest is ten or twelve percent and you don't even realize it so you do have to yeah so you do have to go actually figure out who owns the debt on the house and you do that again through a list like rod list that will tell you who owns the title to the house but none of these are big problems if somebody can list houses on zillow like zillow now eyes sight scene you could just have apis in from rat list from the local county location you could probably have updated google maps locations and all three of those things triangulate to go online i would imagine i like it and rod list is only texas or that's only texas but there's tons of them so usually you have to go to the county registrar and they'll list how often they do rep how often do they do auctions so on texas it's every tuesday in california it depends by city and county but one of the interesting things is like the biggest buyers of homes in california for instance in in this downturn in my opinion is going to be the government because they've essentially made it where if this is not your primary residence you cannot buy these fore closed homes at auction which is a crazy change but in two thousand eight that's what happened all the pe firms went to all of these little municipalities and scooped up all these houses and got pennies on the dollar the only thing that is true about this is you need cash you gotta pay cash so these are you know you're coming with a hundred thousand dollars in cashier years checks to buy this house and and auction and buy it an auction right yeah wild and i gotta just attend one of these to to see how it feels yeah okay well just we'll end on these last two you wrote how to collect cool people i don't what collect means in this case but is that a typo or did you really mean and how to collect cool people i did mean that well actually i wish to say i was here to he would laugh at this one but so one of the things that i i think is important for investors or vcs or anybody i guess really who wants to be in a startup up game is like how do you make a connection with a human like you right so you know we get to know each other on twitter i kinda re tweet you a few times but before the social media game was there what how i actually met sam originally i liked one of his articles that he wrote in the hustle a years ago and and i just did some research on sam i was like you know i just think he's gonna he's gonna do some stuff i don't know what the hustle was small at the time but i i think i wanna know him and i want him in my ro x in some way so i could bother him about things and and so i found out what his favorite candy was which is butter figures i don't know if it still is now and so i shipped him this ludicrous size box of butter fingers right just like a shit ton of butter fingers to the point where like he didn't have a lot of choices except to like call me back and say like you know what thanks and you know sam well i mean he's not always like thanks and what the fuck yeah exactly exactly and so anyway so and then i did that with another good friend of both of ours noah kaye again up it was something about tacos at the time because that's his little sc and i sent him a shirt and so the whole point here i guess was kinda like people these days will say i'm sure they say it to you bull but sean you have this huge network of course you could raise a fund this way or you know sam of course you could do this you have this giant well of emails you know i didn't have any of that at the time i was in finance we couldn't even have social media and i think those are all excuses and instead you should just get kind of obsessed with the people that you think are interested in find ways to connect with them and you can even do it in an old school manner which might work more today than ever because dms in social media are inundated and what's your what's your next move so if the butter fingers and the tacos are the pickup line and that's great because i and and this happens to me and i i always feel like well you did break through the door like i i see you and i hear you and i kinda check you out and i'm like okay cool but honestly like most of the time when that happens i don't like become buddies with them and i think that's what they want as like i sent you that shirt like i sent you that thing because you said you said you like this and that so i sent to i'm like yes i did appreciate it but like i didn't necessarily go start like a romance with you after that so what is what do you do let's say with your follow through out what you doing in those cases to like turn that little like you know funny just sort of like hey love what you do i'm a fan here's a bunch of butter fingers what'd you do to turn that into more of like a pure relationship after that or what what would you do yeah well i think a couple of things one you gotta be doing cool stuff to hang around cool people rule number one right right so like prerequisite exactly yeah so like you know i don't care if i was backing up a dumpster truck actually that would be i would probably be doing cool things if i did that for for sean but but you know you have to actually be out there creating thing to be around creators so i think that's rule number one and it's to have the lowest expectations humanly possible right like i don't want anything from sean i didn't want anything from noah i just wanted them in my circle and then to ping them sporadically with random stuff so i think i got noah like one of the his investments said he did i ping him on it like he actually had a question about something else i he put it on twitter or something and i sort of responded and said oh i knew that person so it was trying to serve them a bunch of different times and then after doing that continuously which is very similar to what i do with founders when i wanna invest in them they'll eventually be like cody just she kinda solves problems for me or she does interesting things and makes my life easier in some way and doing it without being you don't wanna be a creep you know i think do think when i first engaged with noah and i can say this now because we're buds but i think he was like is she hitting on me like what's happening here you know does she like me i was like no dude i'm married i'm sorry so you know but also just having this shape like i don't have an ego i'm not trying to prove anything to anybody and i think that's important what what do you think what would work for you would that work for you yeah that that that's so so the thing you said that that works for me is first and foremost the ultimate networking hack is be interesting okay that sounds easy what that sounds like okay i can't do anything with that well no you actually can which what is interesting to other people is somebody who either knows stuff in an area that other people wanna know that that thing so if you're an expert of a certain area cannabis d defy just be knee deep in it and you don't have to be like a power player just the knowledge is actually quite useful the knowledge network or be doing interesting things so if i see you out there actually making shit happen in your field and it doesn't have to be a big you know so you don't have to be doing spacex like but gotta be doing something so what what doesn't work is the opposite you reach out you asked me for something you asked me for my most valuable thing time without offering me any reason why i should give you that time and maybe i will anyways because i'm just in the mood but like you didn't help yourself by like said making it easy for me and lastly you're basically saying hey i'm kinda doing nothing and i think if you talk to me then i'll start to like do something or i'll know what to do yeah and and that's not fun like you know so what what do i like i like people who are doing interesting things and then they reach out or i reach out either way doesn't matter and in doing so they are like you said a non needy person so they're happy to give they're happy to chat and they have low expectations one of the weirdest things is when people start with like hey big fan of what you do i know you get a ton of messages but just wanna put this on your radar cool great first message second message comes in like nineteen hours later i guess you just don't even care you know well what's the point of of this anyways so you know like i really thought you were a good guy but now i know the truth so it's like well whoa what's going on like you sort of pull one eighty and now you're really needy and desperate for some kind of response and now you expect things of me that i never ever offered to you so so i say like you know just do the opposite of those bad things so be interesting don't expect anything in return just give and give little bits don't even give too much because giving too much it actually creates an obligation also so just keep it really simple share interesting things of the person share life updates if you're doing cool stuff and be useful hey if they're trying a project give them some feedback help them out reach share spread the word tele friend whatever and let them know that you're kind of you know in their corner all that it takes really to like break through with most people and then from there you know it's either gonna work or it's not and you know that that's fine not everybody's meant to be friends with everybody and that's okay yeah and don't ask to be mentored by any but that's my biggest pet peeve i'm like i can barely mentor myself you don't want me a mentor you what you're talking about not to mention talk about an obligation it's like wait have mean looked up the definition that means that i am supposed to lead you like on your path of purpose we don't even know each other man right so yeah i totally great yeah and somebody said this and i thought it was totally spot on they said you know the easiest way if you really do wanna a mentor first first things first acknowledge that seeking a mentor is a advanced form of procrastination you think that you need a mentor before you do the thing and in reality your mentor and all other people who succeed don't use mentors as a prerequisite yeah they find people along the way that help but that's because they're just furious motion and people turn and look who's splash in this pool and sometimes they go and they lend a hand and you know when you need it but they didn't sit around say well if i get that mentor then i'm gonna do the things so that's the first thing it's a it's an advanced form procrastination and secondly the way you actually do former a mentorship bond is you ask somebody for a specific situational piece of advice so not just what should i do but like hey i'm debating between these two options how would you think about this or here's how i'm thinking about it would you poke holes in that and then then you follow up which is where ninety five percent of people fall off the cliff they get advice and then they don't follow up with hey i listen to what you did or i did a variation of what you did and here's what happened people actually love hearing that update it's their they are gathering data points of like what works what doesn't and it just feels good that like you closed the loop you get some closure on that that conversation and then you just say and now here's the next thing like that's that's going on and you know some people will drop off because they don't wanna deal with you and some people will give again and then you do that for the third time you say hey here's what happened and now this unexpected thing is going on and here's how i'm dealing with that and by the third one you guys will know either this works we have good rapport we see the world in similar ways that compliment each other they kinda like my splunk and i like their experience and like it mesh and we should do this or you'll know by then that you know this is not the right fit and so how do that's how you organically ease into having a mentor rather than trying to put a label with a stranger and asking them to commit to something that they you know don't really necessarily wanna do with you yeah you nailed it i also think this is like probably not very pc but i think it all becomes easier once you've achieved like a little bit of financial freedom like i think the less you're focused on making money every day and like you know being in that sort of employee lane and you can do interesting things with your money that opens up a ton of opportunity so i'm i'm pretty big i'm like it's hard to be ideological free it's hard to be time free it's hard to really have any freedom if you don't have financial freedom and like that all means something different to us like you and i might think that that means x big dollar amount whereas some people might be like now it's just enough to cover you know the money that i need to pay today but that's like one thing i wish more people could think about is like how do you how do you really get financial freedom so that you can do all the stuff you wanna do and then you know how do you get critical thinking freedom where you can actually learn to ask the right questions here's the bit of insight i've had the realization i've had recently because i worked for like a decade being like financial freedom that's what i want and even more so was like okay i wanna buy a house so that you know i wanna i wanna have enough for i get my mom place because she'll have better life if you know if we could do that and blah blah blah and so i also thought financial freedom that's the gus kind of like that's my goal right now i think a lot of people are like that and and now that i kind of achieved a lot of those goals i was like okay definitely my goals just got bit kind of bigger and you know i sound like i and and it's true i definitely do like carry myself a little bit differently and choose projects and people differently because i'm not like in i don't need you for the money but yeah know so i don't need to do this for the money i could do many things and money should probably come along with all of and i don't i don't need near term money necessarily yep i'm so so there definitely has been some benefits but here's the realization i used to think about financial freedom like if i get x dollars than for me in my lifestyle that's i'm financially free and then for another person they might have a different dollar amount which i think is kind of what you're saying and i thought that you know as recently as like a month ago and then i met a bunch of people who have a way smaller dollar amount but what they have actually also is way fewer demands and desires about what they want out of their life you know in a good way like they're happy as is so they don't feel like well i need x then i'm gonna be like happier i'm super happy right now and like great if i have more money like i'll have other things but i'm not gonna have more happiness and so so what i realized was that financial freedom is actually just it's an internal question it is not about a dollar amount financial freedom is when you stop deciding what to do based on money that's when you have achieved financial freedom and for some people it takes getting a large amount of money so that they can do that stop for other people it's wanting less shit and then they can stop because they have less demands for money they're their their total numbers lower and for other people it's more like you know sort of buddhist or month like where they just sort of realize that it's actually in in internal attachments that they have to let go of and then they are now free the freedom is is freedom from your own desire to have more money and therefore who choose things based on money rather than the kinda of mathematical definition which is well you like like there is also like a sort of technical definition which is you have enough money where even if you earn zero income your investments will pay your lifestyle you and and you won't be sort of dip you know you're not dipping into savings your savings are are increasing at a rate faster than your life burn and there is that technical definition but i realized i know many people who pass that technical definition and still aren't financially free and it's because internally they have not actually freed themselves from what they need from this idea of like well i gotta do like putting money first as the choice as a choice of what to do whether it's people who penny pinch or as people who choose projects based on a financial return as the like kinda of core criteria yeah anyways that's the sort of i like that marks no i think makes a lot of sense i think you know above a certain level like i get a little obsessed just with everything that's going on economically in the world with people who again like aren't maybe where you and i are like i i will think financial freedom might have something to do with your skill stack like even if you lost all of your money today or if i lost all of my money today as long as i have put as much in the relationship deposit as i think i have of other humans that are doing interest in things in the world you and i are never gonna be homeless like pending catastrophic issue right because you can go to some of your friends and be like hey i'm actually pretty good at copywriting don't you see look at my twitter account hey i'm actually pretty good at building these businesses i've sold a couple of them so once you like get that skill stack you're like i'm fairly confident worst scenario i can go call up somebody and work for them so i think there's some mixture of the dollar not your bank what you need to pay not having a ton of debt and then are you competent enough as a human where somebody will always need your services and and you know and i think that paired with like can you reason and think for yourself as a pretty powerful combo yeah tote totally agree i i think that's great so give us we should wrap give us where where can people subscribe to the newsletter because it's actually really damn good and i don't say that like actually i'll i'll say i would probably say that anyway that somebody came out was guess i'm like you a great newsletter but i'll just kind of shout out that i actually believe it here i'm not just being polite but you actually do a really good job and you're like us you don't shy away from the topic of money you actually lean it you say hey you know like a lot of people are interested in making money and a lot of people don't know what's under the hood of these different business models or businesses and so like let's lift the hood together and let's look at this how this engine works and how it what's good about what's bad about and how you might wait make it work we do that as a podcast you do that on your newsletter and we very like sim synthetic as far as that that goes and so where can people find you and where can people find the newsletter so they go subscribe thanks for the shout yeah contour thinking dot c is the newsletter and then it's cody sanchez cody underscore sanchez on twitter i think those are probably the two places most rocking and rolling and twitter man i've really found that fascinating in the last six months i think we've finally figured out how it works so apparently i'm a little bit more a boomer than a millennials some yeah there you go cool and we'll link it in the description so if you didn't remember those just scroll down and click the links in the description to to find that of the podcast okay cody this has been amazing thank you so much i would like to have you back on at some point maybe we'll break down a couple of the businesses that you've either required or been looking at recently and i think that'll be a lot of fun but thank you for coming i'm in thanks for all the questions it's always it's fun brainstorm i'm with you yeah i feel like i could rule to word i know i could be what i want to from at all in it like a day's off on a road less travel never looking back