Michael Sonnenfeldt: The Most Successful Real Estate Deal of All Time and Building a Community of Billionaires

what was the original fee and what was the requirements the original organization twenty years ago started with people who had created net worth of between ten million and a hundred million and very quickly the top end exploded with success so it grew to a billion dollars and more recently we've realized that our focus is on members between twenty million and a billion and what i was gonna say is the main difference between vest and y p and tiger twenty one is the average net worth of vista and y po members is probably maybe a tenth of that or fifth of that of tiger are how long ago did you start the company about twenty one or twenty two years ago at this point what was the original idea it's really a simple idea if you're an incredibly successful entrepreneur could be building a business for ten years twenty years thirty years and then you sell the business you think that it's the magic moment when you sell it but actually what happens is the day after you sell it you have a lot of money but you might be alone you might might have an assistant but you don't have a thousand employees you don't have anybody laughing of your jokes anymore you might even have to get your own coffee and everybody around you thinks that you're wealthy and successful but you've lost the platform that allowed you to feel successful and all of a sudden you're back at a new point and the number one challenge that you have is to be a wealth preserve so you don't lose what you've made except that you don't know anything about preserving wealth what you are is a great entrepreneur or a great leader or a great manager and you're good at inspiring troops but you don't have any troops anymore so you have this dramatic shift and it turns out that what it takes to be a great entrepreneur might qualify you to be a mediocre investor when you're an entrepreneur you focus on a single opportunity you're highly emotional about it you you give it everything you can when you're an investor you have to be more dis dispatch you have to have a diversified portfolio and you have to have you have to be une unconditional about it so the sum of it all is that there's a little understood transition which a few very lucky very successful people get to go through and we wanted to study that which is what we've done over the last twenty one years to help people in that transition get through it and onto to a better place when you originally started the business what was the like what was the product was it like ipo where it was a monthly group meetup what what was it sure so you mentioned y ipo which is a fantastic organization there's another similar organization called vista and they both are for ceos and if those are the great colleges we're the one great graduate school and so we have a lot of y ipo members that graduate into tiger twenty one and a lot of vista members that graduate into tiger twenty one and just to give you an idea the the i've last time i looked both vista and y p have about fifty thousand members globally it might be sixty now i've least bit vest has fifty thousand members and y p each oh oh oh okay that's about thirty thousand each i think could be a little more i haven't looked it company oh these are huge businesses vintage charges like fifty grand a year right or i think think i think vista is around fifteen thousand or eighteen i don't have the exact number could be twenty y p doesn't have a single price because depending on whether you go on the trips and there's different people pay different amounts but the big difference between those two which are great organizations is y po is self facilitated by its members whereas vista and also tiger twenty one our groups are led by professionals we we have over a hundred groups around the globe now and so we have a cad of over a forty professional chairs might be sixty excuse me sixty professional chairs that we've trained exquisite to lead these incredible groups but the bottom line is that those are the two great organizations for ceos and business owners and when you decide as a rule for life that you wanna get off of the merry go around for whatever reason the next decision point is best focused on with peers that you'll find in tiger twenty one so basically the original premise and you could tell me if that's still the premise is you you have a small group of peers i don't know how big the group is you could tell me well twelve to fifteen people so twelve to fifteen people and you meet of some type of cadence like for some weeks monthly full family and you have a coach or what do you call your coaches facilitator you have they're the chair you have a chair who leads these discussions and what is the original fee and what was the requirements the original organization twenty years ago started with people who had created net worth of between ten million and a hundred million and very quickly the top end exploded with success so it grew to a billion dollars and more recently we've realized that our focus is on members between twenty million and a billion and what i was gonna say is the main difference between vest and y p and tiger twenty one is the average net worth of vest and y p members is probably maybe a tenth of that or fifth of that of tiger are if you do the math we have a hundred and forty billion dollars under management we don't manage it our members manage it by themselves we're not a money manager but collectively we have about twelve little under twelve hundred members so it's a little over a hundred million dollars per member that's crazy so and what's the price now the membership is about thirty three thousand dollars a year that's that's we we try and have a kind of one price so the only thing you pay is a single membership fee unless you come to the annual meeting there's lots of other events that are included but because there's hotels and all that kind of stuff if you come to the annual meeting there's an additional charge of a couple grand so i i i can't do the math in my head but like that's like over a hundred million in revenues these are no no no so it's about a thousand it's very it's a very simple business model it's about twelve hundred people that are paying a little more than thirty thousand dollars so it's about thirty five or forty million dollars oh i think it's twelve thousand my twelve hundred and and that's what it cost to run that's crazy and what's crazy is twenty ten million today is a lot is a significant amount of money twenty years ago ten million was obviously a significant more than it is now how how do you how did you find your first folks so i was in a vista group which had about fifteen members and in a dramatically weird coincidence in nineteen ninety eight six of us sold five or six of us sold our businesses we were all in that vest group because we were business owners trying to be better managers owners ceos and we love the group and so after our businesses were sold we didn't wanna leave the group but we found over about a six month period we were going to meetings trying to figure out how to make your cfo and your sales team and your production more efficient but we didn't have that anymore we were just business we had sold our businesses so i frankly said wow i'd like to be spending time with peers but what i wanna be learning is how they're going through this transition of becoming a wealth manager and how they can help each other be more successful managing through that transition and that was the roots of tiger twenty one what was your first business my first business the what sorry the one that you sold the first business that i sold i developed something called the harbors side financial center with a partner we were fifty fifty partners i was twenty five he was fifty seven it was the largest commercial renovation in the country at the time we bought a rundown warehouse that had been the largest building in the world in nineteen twenty nine when it was built eclipse a few years later by the pentagon but it was an industrial warehouse on the waterfront in jersey city directly across from the world trade center and i had the idea literally on a i seventeen because i worked there when i was seventeen that it was just three thousand feet from wall street and what was happening is that was in the age of large computer centers mh and so you had all the downtown wall street firms building computer centers and if they didn't wanna be in manhattan they would go to a faraway campus on a suburban you know somewhere in suburb and people felt like they weren't in suburb they felt they were in siberia it was too far from the mothers ship and i had the idea that if you could put some of those computer centers into this huge industrial warehouse it would be five minutes from the parent under the hudson through the path train and in three minutes you could get back to whatever the parent company's parent was and that was sort of the original insight that this old industrial building had floor loads and and ceiling heights that would accommodate raise floors for computer centers and the weights that you needed the weight loads the floor loads and that was basically the idea and that's the thing that you sold before but that was that yeah i sold that when i was thirty then i did another business that was basically a real estate merchant bank that acquired a lot of distressed real estate when the the real estate market crashed in the late eighties i don't know if you remember that the stock market crashed in eighty seven the real estate market followed and so i was able to acquire a couple hundred properties from banks that had gone under in the federal government had taken over and when i sold that business in nineteen ninety eight i said i don't wanna have to go back to work i wanna know how to preserve money had do people who've sold their business how do they think about what they're gonna do so that they don't take stupid risks and find out they've lost it all has building tiger twenty one do you you kinda was tiger twenty one supposed to be a a no business early actually it's been a labor of love for me but you know oddly was it able to create more wealth than the other things no it's the it's it's it hasn't at all basically for twenty years i put every penny back into tiger of revenue because i wanted to hire some of the best people in the world and the best teams and and get it right but there's a lot of inherent value in it there's no question because we have extraordinary members and the value of our franchise has to do with our members and the team we've put together was incredible but i i realized that in order to scale the business to fulfill its potential i needed more senior help and in order to attract that senior help i needed people who are interested in equity so having a private equity partner made it easier to to attract world class talent who would own part of the equity you're kind of in an interesting position which is like you know or you work with a significant amount of wealthy people and you have like some interesting in insights where what have you seen are kinda like the levels of wealth that someone where like they see changes in their life you know like so many things i could give you one number or another but it's really a state of mind you know you you have people who are retired and they get x dollars and then you have other people who are retired and they get ten x dollars and yet the one who's achieving or receiving the lower amount might be more evolved and emotionally balanced because of meditation or work they've done you know the most interesting thing is there's endless studies that show that up to that whether us people were who earn seventy thousand seven hundred thousand or seven million dollars a year how much more do you have to earn to be happy and the number is something like twenty percent no matter where you are the average person just needs just a little more to be happy which tells you about the un filled nature of human ambition i've read a a bunch of stuff like that and if well the way that i remember it and i could be wrong it was like two x so it was like it maybe it was for network worth so like if your net worth is a million you're like well i would feel a lot better if it were too but then i need talk to people who it was a hundred and most people would say like if you have a hundred liquid like it's gonna be a little bit hard to screw up but even they were like yeah but if i had two hundred i think i would finally feel more comfortable you know the fact is that wherever you are you have the illusion that if you had a little more it would make your life a little easier but sometimes if you have a little more it's a burden because now you have to manage it and when you say it's a burden what i mean is intellectually you have to work harder to make sense of it and in that sense it is a burden it it's like a job it's just it's just in the nature of things that the grass always seems greener on the other side and and that's part of why i say a lot of this is just a mindset and and there's another part which is really important as well you know it doesn't matter whether we're talking about three million or thirty million if you take somebody if you take two people who've worth three or thirty million and one had been worth fifty million in lost twenty and now they're worth thirty and another had been worth twenty million in may ten and is now worth thirty those two people are worth thirty million you could do is the example with three million as well but the person who got to thirty million by losing twenty feels absolutely devastated in the person who got to thirty million by making another ten feels generally quite positive or proud of themselves yeah it's the same thirty million so it's a lot of things that are specific to the individual that generates the psychology there was that one article that came out that's total nonsense it came out years ago it said like you don't get significantly happier after a certain amount and the amount they said was crazy it was seventy thousand dollars a year but of course this was like fifteen years ago and i thought that was crazy i'm like i don't think that's true but but and and i was like i do think there is like a number where it's like alright maybe like there's like a threshold here where you're you could definitely continue to get happy but like there's a baseline and i always thought i'm like i think you will always want more money but today maybe like if you have if you're in like the ten or fifteen range liquid i'm like maybe there's like alright maybe life won't change significantly more after that because like you know like it's that's you could screw that up but like you gotta kinda screw up majorly leap and but i don't know that's kinda what i always thought with the seventy the seventy thousand is a number that shows up in literature meaning below seventy thousand every increment that you get closer to it if you are earning thirty thousand and you get to fifty fifty to sixty anything up to seventy thousand increments have dramatic increases because it's just kind of obvious it's basic needs you need to put a roof over your head you need to put square meals on the table you might need a car and it's seventy thousand you can pretty much afford most of those things not in the lap of luxury but you can afford those things below it it's really really tough so that's kind of it might be ninety thousand today with inflation but it's somewhere in that i don't mean to trivial the difference between seventy and ninety but everything above that you know for every level that you have you can just spend more and create the same sense of being over extended if you're not disciplined and it's the rare person who generates excess capital and doesn't change their lifestyle so no matter how much they have they keep spending more because if you can keep that gap of not needing what you have that gives you a cushion that's rare and really something remarkable for those who have it have you met people who have done that who have been let's say worth hundreds of millions of dollars but still live like don't even live nearly like that well you know the most classic example would be warren buffett who still lives in a thirty or fifty or a hundred thousand dollar home that he bought in the midwest where he lives in omaha and you know it's really hard to have one person comment on another person's health you wonder what's all that money for but now he's given half of it or something to charity and there's tremendous benefit gained from the money he's given to charity but you know it's one thing to live within your means that's responsible it's another thing to be so disconnected between your wealth and what you're living that there's something going on inside and you know i'll leave it to the shrinks to figure it out but it's kind of hard to understand why a person who might be working sixty seventy eighty hours a week as if there's no tomorrow and then they might be worth a certain amount of money but they're living on one hundredth of it as if they had a hundredth less you know they had one percent of the wealth that they do what are they hiding from there's lots of answers they're all dependent on different people most of the people i hang out with so i'm thirty two years old i started an internet company my c host sean is a a little older a year or two older than me also started an internet company the majority of our friends are in like the late twenties early forties age and like all mostly except for a few in the internet so like i run this like very like internet young circle and the vibe that i get from tiger is that it's a little bit older and more like traditional businesses or maybe finance or real estate who have who have come knocked it out the park is is is tiger twenty one mostly am i am i categorizing it correctly or do guys actually have like a a lot of ago only because of only because of how we've grown and when you have you know eleven hundred and fifty or sixty members the answer is the average age has fallen over the history from the high fifties to the low fifties but in order for it to do that given that a lot of people stayed most of our new members are in their thirties and forties so we have a lot of internet folks but the reason they're joining tiger as opposed to something else is when they're sitting around they're not just sitting with internet folks they're sitting with people who have you know real real estate experience and experience running businesses you know in the in the in the world that isn't just from the internet and the reason we're so excited to have folks that are in the crypto space or the internet space is precisely because they're understanding these new technologies that are gonna transform the world in a way that many of our members wouldn't otherwise so it's this combination that makes some of our meetings so electric have you noticed the difference between like let's us say group a is like these people who are made their money on the internet made their money in only like three or eight years all selling just internet stuff so you know like not real stuff that you can touch versus let's say like the small business owner who like scale something over twenty or thirty years and then eventually sold it or it made cash flow along the way versus the tech person who was probably poor for a long time and then suddenly boom they're not have because they sold their business and they weren't ever profitable but have you noticed a difference in those people's attitude or the problems they have well they're probably you know as many differences as there are people but there's some fundamental truths that i think you're pointing at you know when i went to business school at mit forty some years ago you know if you were doing a marketing exercise they'd say come up with a product that you could sell to a thousand people and today if you go to stanford to a marketing course they say come up with a service you could sell to a billion people literally a billion people that's what facebook does and some of the other major social media so scaling is not just a difference in size we have a dramatically more frictionless economy the nature of internet and technology allows businesses to scale that's why we have unicorns today but we almost never did in the past so when you think about life expectations people who started out thirty or forty years ago had an expectation that they'd be they'd have to put their nose to the grinds stone for thirty years before they'd hit a payday day not all of them but some of them and of course there are many different types of wealth i distinguish between people who are workers versus people who have some kind of god given talent a singer a basketball player an actor a rapper these are people not who are building businesses but have god given talents that of course they have to work hard to hone those talents but it's very different when your wealth is created from your own talent than when you have to sc and save you know to make a payroll and and get everything done but then if you compare that to people who are creating wealth today first of all they can do it in three to five years you have unicorns in you know three to five years or not much longer and so one of the big differences is that if you were fifty eight twenty years ago and you sold your business you probably were retiring because you spent thirty years doing something and that was your first sale but today if you sell you might be thirty or thirty five or thirty eight you're not retiring you're going on to the next thing so the i think the biggest difference is this kind of expectation of what a life looks like you know a generation ago a really successful entrepreneur had one or maybe two serial successes today a successful entrepreneur could have three four or five or multiples because he or she has figured out how to manage a couple at the same time elon musk is not the only person who has multiple businesses he's certainly the most visible but it's much more creature of today it happened in the past but just much less so when i was selling my business i would talk to some bankers and i've talked to some friends and advisers and a nice amount or like yeah sell it and get paid and like you know you don't have to worry about money anymore and that's wonderful and then the other group of people though were like mad starting something that works is really really really hard and a lot of people sell a business and wanna started it again and they i don't realize like you know like there's some luck involved and it's just actually really really challenging and sometimes you get confident and you think oh i could just do it again and so if you don't have to sell it never sell it and i've lately fallen in the category of like if you don't have a lot of money sell a company if you if that means that you're like financially secure but then after that oftentimes try not to sell anything ever like to see if you can just like run it or get it to run it on its own or hire people because it's quite hard to get getting something going to such a pain in the butt do you fall do you tend to when you're talking to your members do you what what do you think most like which of those categories do you think is actually a little bit more true or more common and that's i i think you're onto something really important and then it's kinda like all of the above one of the biggest learnings is that most people who sell their first business have no idea that it feels like having the rug pulled out from underneath you because you see a big dollar amount and and you're so focused on the sale that it's the everything else that's kind of the shock and the most important one is the momentum or the platform that you don't even realize how valuable it is so you know one of the things we really talk about is before you sell you really have to think about not just the pros but the cons and and particularly in an environment like today forget that the markets are down this year in a low interest rate environment when you sell you know a typical industrial building obviously you're talking about other other types of metrics but it used to be a typical meat and potatoes business which sell for seven or eight times earnings and you know if you take a business that was making i'll use an example three million dollars and you sold it for twenty million dollars and you paid the taxes now you have sixteen million but if you buy bonds at two percent you're now making three hundred and twenty thousand dollars on that same capital that was generating three million dollars before you've lost ninety percent of your earning power and we call that sticker shock and ninety i would say the vast majority of people who sell their first business go through sticker shock because they haven't really thought through that the passive earnings on the profits of the sale will generate dramatically less income than the business itself did now of course the positive is that when you get when you sell that business you don't have all the risks of that business and maybe the business had risks that could put it out of business so a good sale allows you to take chips off the table and that has a lot of benefits but i think you're really you know you're onto to the central issue around selling businesses because particularly if you hold onto the business you don't have a tax liability i'm not against taxes in general i'm just saying that it it eats into some of the value whereas if you continue to own the business the full value is working to make the business larger and larger so when you're thinking about risk i think the greatest service that we do is help some of our members think about the things they hadn't thought about when they're thinking about selling like what well just what we're talking about this sticker shock this this sense of do you really wanna lose the platform that you have and will you have enough capital because we've had many examples of people who think when they sell the business it's gonna be easy street but when they don't realize the loss of income that occurs when you're taking dollars from a sale and putting it into passive assets or worse in order to generate income like they had before they take risks they don't understand in investments because investing can be a lot harder you know when you own a business it's kind of like being on a dog track dog track you have a fence to your left and fence to your right somebody shoots a gun behind you and you can only go forward you know if you're a paper clip manufacturer or you sell rocks or frankly even an internet service you have one direction you wanna be the master of whatever your businesses is and that's really hard but intellectually when you're an investor how can anyone person understand all the markets and if you're starting out with no fundamental understanding of the markets because you've just been running a business one of the real shocks is most people think the hard part is making the money and then once you have the money a you're on easy street but from an intellectual challenge point of view many of our members find the challenge of managing the wealth that they've created is actually intellectually more challenging than the business because the business might have come naturally to them they might have had an idea and they just pursued it to its good ends when i sold i mean i didn't know it this was only a year a year and a half ago or a year and a couple of months ago i didn't know anything like i i i mean i knew nothing like i didn't like when people said that they're gonna short a stock i was like i i i don't know what shorting means and they say they gotta go along i've like don't know what that means and so like it it was and people like you know friends and family were like well what are you gonna do at your money and i'm like i don't i don't know anything like i i i i think people are surprised that your ability to earn is not often correlated with your ability to like invest just the opposite that's that's what i'm trying to say you can be a great entrepreneur and a really lousy investor and you know just to give an expectation for people who might be listening how long do you think it takes to go from being a successful entrepreneur that is a mediocre investor where you were a year ago how long do you think it takes till you have sort of a modi come of confidence that you know what you're doing as an investor i mean years i i know i mean i've been studying it now for a year and a half and i feel like i don't know much five years five years yeah that's and that's if you're really working at it what i just did was put so i are you familiar with hubspot sure so they're the ones who bought us so i own hubspot stock and then the rest was just mostly a vanguard total index fund and some real estate and right real estate funds what with your folks what do you what's like the asset allocation of like what you've seen to what what's like a fairly successful sure so i wanna yeah i wanna be really we're not an investment adviser but i do track the asset allocation of our members and can simply report on it which is you guys put out this annual report that's awesome i love that so the the asset allocation very roughly is traditionally real estate has been king with about twenty eight percent of the assets maybe twenty seven that good primary residents no generally not it's it's mostly investment real estate and does that mean they own it or they're in a reit it could be they're in a reit more likely they either own a building or they own a a limited partnership in a real estate fund of some sort second would be public equity about twenty six twenty anywhere between twenty four and twenty six percent that's so much lower than i thought exactly and private equity and this is unique to the tiger community our private equity has for the last couple years been more than public equity it's now a little neck and neck but private equity is around twenty one to twenty four percent and what's so remarkable is if you take those three numbers the private equity public equity and real estate it adds up to seventy plus percent those are the risk on assets so our members are relatively long term bullish on investments even when they think we're going into a recession they still are over seventy percent invested in when i say risk on assets that's what the you know the investors say are assets that are risky and have to do with business like qualities then a fixed income until you know now is at a historical low point about seven seven percent it was as high as twelve or fourteen in prior years and crypto and gold creeping up one or two percent assets each is and cash at the twelve percent our member's cash has stayed relatively fixed over a long period of time the biggest it it typically fluctuates between eleven and thirteen percent but in the pandemic march of twenty twenty it spiked to twenty percent which statistically is off the charts that's how concerned our members are but generally in the twelve percent range is is what our members are looking at in cash what do they love about real estate so much i mean and it it's the gift it's the gift that keeps on giving and first of all they're terrific tax attributes of real estate because of depreciation but you know when most people think of an investment asset and they buy a company that company is subject to competitive forces every single day it's why most operating businesses don't lend themselves to multi generational families of course there are exceptions in some very important ones but real estate is a much more tolerant asset for multi generation or or if you own certain natural resources you know if you own timber lands those are good to pass from generation to generation because when you own a great piece of real estate you know the joke is your child can be let's say less than brilliant and still know how to collect the rent and even in your own lifestyle if you own a great piece of real estate the tenants have to pay the rent even when you're playing golf but when you're running a complicated technology company or something else you gotta be out there and working in every day your team has to be really really good and i'm not in any way suggesting real estate it takes a different kind of unique smarts it's not an easy game but it's very different to one way to think about it is if you took the whole economy i don't know if you remember the dewey decimal system of libraries but if you broke the economy into all of its sectors and one of those sectors was real estate and nine other sectors medical and education everything else high spec d tech aerospace etcetera if you took those nine other categories real estate is more different than those other nine than any of the other nine are to each other because of this durability this multi generational capacity of real estate we always make a joke that people they get offended about this but i'm like it's kind of a compliment we always say that real estate has the highest number of dumb rich people and that was kinda like a i'm like a fox in other words they may not people who have the same intellectual pursuits that you are right but they can go and smell an opportunity and sniff out where there's a problem in a way that most other business owners don't and that's why i say it's very deceptive because they're a breed apart but that's become a little less so in the last generation because as real estate became more sec with different types of ownership and debt that went to wall street it became more of a wall street game so it's a little more today a wall street game than it was twenty years ago yeah and the the the kind of the strategy that my wife and i had was let's just try to get somewhat wealthy with tech stuff and have that continue to make cash flow and and and you know selling companies and pile a lot of it into real estate because that's something because like with my business we had to send an email every day but it gmail changed like it could go out of business a building that i own i can lose a fair amount of money on it but like there's it's still a thing that someone will purchase even if it's at a huge loss but it's not gonna go to zero whereas my company it definitely could like if i own a conference business in a pandemic hit like which i did like it went it literally made zero dollars whereas this land that i own that i'm looking at it right now like that's probably not gonna go to zero you know none of these things are as simple as we'd like i think you're making some really excellent points but if you owned retail or movie theaters or airports in the pandemic that went to zero too if you had any leverage on it so it's not that realistic realistically hyper quality but like no i understand yeah in general totally get it it it's not that it's without risk but as an asset category it's a long dated asset i can find this client in full have you heard of hubspot hubspot is a crm platform so it shares its data us every application every team can stay aligned no out of sync spreadsheets are doing databases hubspot grow better one more thing about the selling and selling versus not selling because you have a way bigger sample size a do you regret selling your companies and b the thing about selling like let's say that you sell a business and you make thirty million dollars you pay taxes now you're left with twenty to make twenty million like you could build the business for five or ten years sell it and make that to make twenty million after to make twenty million from cash flow annual cash and and that's really freaking hard like you you gotta i mean your your taxes are higher because it's income versus capital gains but and you i mean it's just like it just seems like selling a business is probably the the easier of the two and it's still not easier it's still not easy is the easier of the tune to to to accumulate like your first bit would you agree with it or no well it it's it's the problem is that it's better to think of it as a shift in risk because when you made the decision to sell for thirty million the example you just gave what you've done is you've taken a lot of risk on the table so the chance of losing that thirty million now goes down radically it's much less once you've turned it into cash but the chance of getting to sixty million might have gone down also because you lost the engine of growth so it's you know do you wanna sleep well or do you wanna eat well or you long term greedy or short term greedy but there's no question that when you sell your business in my opinion more often than not it's it's not number dependent it's risk dependent you wanna take risk off the table you don't wanna you don't wanna have the risk just as you said of losing your business anymore so you can take your chips off the table and diversify it over a number of investments but it's gonna be much harder if the business was a well functioning growing business to get to that you've you've increased the hurdle rate before you can get to that next level of sixty or eighty or a hundred million dollars you regret selling your two things and tiger or how you didn't sell it first of all i'm still the chairman and majority owner of tiger but it's run as if i'm fifty fifty partners and tiger would be a great example i'm sixty six and the when i sold tiger the risk that i was most concerned about because i'm a cancer survivor is longevity and sustainability of something happened to me so our board said i was the number one risk and because i love this business i said well how do i how do i do how do i reduce that risk well the first thing is i bring in a c owner and the second is we bring in a world class ceo and in order to bring in that world class ceo i needed to bring in a c owner so tiger is a me stronger today from a team point of view and an ownership and a resilience point of view it is still my legacy i'm the founder was my idea but i never went into it for money and i'm not sure that i would have done any better on my own i think i think the the diversity of ownership and the addition of a team that we built into a world class team is just dramatically different than i could have created on my own so i have no regrets whatsoever with tiger and with the other businesses it was interesting i sold my first project that i mentioned to when i was thirty and out can can you say what you sold the source so we have context i mean it was it was a project that i was a partner in but the project got sold for over a hundred million dollars and the and that was in nineteen eighty seven that was pretty life changing i'd imagine totally life changing but the point is that what i remember is not so much the dollar amount what i remember is it was herald it is the most successful real estate project in metropolitan history in terms of financial return and so but but it took me a couple years to kind of find myself again because i went from being one of the top hundred developers in the country i also had the advantage i had a partner the project was my idea but selling was his idea and he never would have got into that project if he hadn't been my partner and i never would have sold it if i hadn't been his partner and we sold at the end at that point a hundred percent ninety nine percent of what we were worth was tied up in that project and if somebody had got hurt or killed in construction you know it could've have it could have wiped us out and so we sold and we closed in january of eighty seven and in october eighty seven the market crashed and real estate followed after that and we had been one of the top hundred developers and we might have been one of five developers in the whole country that had lots of capital and no buildings to weigh us down with the problems from the market crash so that gave us an extraordinary opportunity to get back in at the bottom and i did that by creating a company that bought distressed real estate from banks and went on to buy close to a billion dollars of what became a billion dollars of assets wow when when people what one of the surprising things when i kinda started when when when i sold was i had never heard of this thing called an asset backed to loan which is like basically one example of that is when rich people buy a home you'll hear that they bought like a five or ten million dollar home in cash and oftentimes what that really means is they're using this thing called an asset back loan so basically if you have a stock portfolio of ten million dollars and it's like in a vanguard index fund or some basic thing like that you can borrow like sixty or seventy five percent of that at at a given a very very low interest rate as low as one percent what were what were some some some what are some surprising things that people who come into money after selling their company that they that they see and you're like like when i when my banker told me about that i was like are you kidding me this is like this is how people do it is amazing what are some other things that kinda fit in that category so i'm sorry but i would never do that most tiger members yeah yep most tiger members wouldn't for two reasons one i don't have any debt i wouldn't want any debt it debt can be very cor at exactly the wrong time you know the market has just gone down for people who are lever they could have been wiped out if you wanna be here for the long term and preserve wealth i would argue you want as little debt as possible not the justin that's a good idea no no i understand it's suggesting option that people have like for needs to pay taxes sure but the other the other part of it is that one percent can be el because the rate can go up if it's a floating rate and if you have a spike in interest rates and you made assumptions that you were borrowing at that low interest rate and then it goes up you can really wreak havoc it with your balance sheet so i one of the things that most tiger members enjoy when they reach a level of wealth is the ability not to have debt hanging over them now having said that who are the best managers of debt will private equity firms and real estate is the place where most debt is so people who've spent the career managing debt understand the power of it but they just understand that at some point you wanna reduce risk and take ships off the table i think the other thing is something you said before not everybody fully appreciates why they became successful because for every person who had a plan somebody else was lucky let's say doesn't mean that they didn't have a plan but fundamentally they're lucky and it's just a statistical thing the the number of people who've had two successes is dramatically smaller than the number of people it's a bell curve of who's had one success and for people to have three and four successes gets down into the you know one in a thousand entrepreneurs or something and i think that many people systematically overestimate their own skills when they've been successful and there's a real come up and that after they sell their first successful business they assume they'll be successful in the next one and they get their clock handed to them as i did when i was thirty was a very painful lesson but it was the most valuable lesson well i sold this amazing project and when i was thirty and then i started a business in the real estate information this is before the internet you know pretty much what zillow is today where you can look up any house and get a price on it we created a business that was a precursor to zillow before there was an internet it was much of your net worth from the previous thing did you invest into this new thing oh i probably risk somewhere between on the order of twenty five percent something like that and so one of the biggest one of the biggest learnings is when you sell a business you know many people think they're great investors because when they own a business if they make an investment they have to talk about it at a cocktail party and if they lose money on an investment it gets swept under the carpet because the business itself is profitable so it covers up those losses so many people who've been successful entrepreneurs don't realize how poorly they are as investors because they've never been battle tested without the benefit of the company providing you know the fill if you make a mistake so i think i think the one of the biggest mistakes that people who sell business make and it's what you said before is that they're that they assume they can do it again and again and only a portion of people who've have been successful once are gonna be successful twice but we're talking about earning money what about spending money like something that i i ask myself is you i'm quite frugal and i say like i don't wanna buy this this and this because it costs too much money and i just don't it just it and and and some stuff like owning you know a lot of like objects in my home it kinda just stresses me out because i feel like i gotta take care of it but then there's other things like fun flying nicely or staying at fancy hotels where i was like i wanna spend money on that and then i was like well you know what that actually makes me happier like this is fun for me i should spend because that i feel like you know about the marshmallow test yeah about delayed verification yeah delayed gratification so should i tell it for your list it's a very famous very famous test that was done at stanford in the i think fifties or early sixties and you know they put a table of twelve three year olds or four year olds out and they put one marshmallow in front of each of the kids and they said look i'm gonna step out of the room if you don't touch the marshmallow while i'm gone when i come back i'm gonna give you another marshmallow and only one or two of the kids could wait for the person twenty minutes to come back they just had to eat the marshmallow in front of them those one or two could handle delayed gratification and it turns out that they tracked many kids who went through this and the very few who could delayed gratification we're more successful in school more successful in life and more successful in business by various measures over the next thirty to fifty years of their life it's a remarkable study and it has to do with what i was saying before when you're an entrepreneur apparently you were you had to delay gratification because you were putting money into your business you couldn't you couldn't do all the things others who were making a lot less but didn't have a business we're doing and delayed gratification the discipline of delayed gratification is at the core of entrepreneurial success but frankly when you're a movie star or a rockstar star or a baseball picture or a basketball player delayed gratification isn't so much at the core of your success because you you don't need to sq and save you need to practice and and be well so when people sell you know there's a syndrome where somebody's been very successful but they've been delaying gratification so long that they only open up one step at a time they still are driving a chevy they still are wearing a certain kind of suit they're wearing a time ex watch but they go on a great vacation or they go on a mediocre vacation but they're wearing a really expensive watch you find when people have sold their business they open up slowly because they wanna they wanna be smart and they don't wanna waste and they have to find that new balance but you know we have a rule at tiger which i think is the most important rule it's called the two percent rule if you've been lucky enough to sell a business one gauge you can think about is if you're solely living on the investments in your portfolio if you can live on two percent of your assets or less than you're in a safety zone and obviously some people have the good fortune to earn a lot more than two or three or four percent on their assets so they can live on a little more but once you start living on more than two percent you're actually starting to stress the ability to preserve capital and my guess is if you if you went to a whole bunch of twenty five year old kids and said you know if you inherited a million dollars how much could you spend the year and preserve the money you'd be shocked a lot of kids would say i don't know a hundred thousand or two hundred thousand a year high it's twenty thousand a year and that learning is really fabulous i there's this funny cool subreddit subreddit the a reddit a forum that i go to and it's called fat fire you know you know what fire is like fires like financially independent retired early fat and typically fires like people who wanna say like a million dollars and live off like fifty thousand a year fat fires people who wanna like earn a a huge you know a much larger money and live somewhat lavish and on that subreddit the number is like three percent so it's a little bit higher than two percent but like three percent i think there was a thing called the trinity study and they said like four percent frankly i think that sometimes is too high but like the i i i i kinda buy in the the three percent range and anyway there's this one book have you ever heard this guy named felix dennis no i don't think so he's amazing he's kinda he's dead now but he's kinda like a combination of mick ja and richard branson so he was just he was just british entrepreneur and he was kind of flamboyant like richard branson and like did a bunch of stuff but he was like mick ja and that he was like kind of a degenerate like he loved drugs and hooker and he was like he wrote about like his es and when he got older there he was like i had a drug problem and i was ever married so i was just like sleeping around and so he he's kind of like a fun guy to read about but he's got this book called how to get rich it's it's kind of poorly titled in a way that it's like embarrassing me to talk about but it's a quite a good book and he was like he he eventually founded micro warehouse which was a publicly traded company but he also started max magazine he was a publisher so he made all his money in magazines and he was like so i'm gonna die soon because i've got cancer and i'll die with like a six hundred dollar net worth but if i could do it all over again my goal would have been to make twenty or thirty million dollars by the age of thirty five and not focus on money making ever again and only focus on like the people i cared about million but like a boxer who's punk punch drunk i went back into the ring every time because i was addicted to it even though it it didn't always bring me the the most amount of fulfillment and happiness i just wanna share three reactions to that the first is there was a band leader from the late sixties or early seventies who was being interviewed a few years ago and the announcer said you know you were the first band to make a million dollars a month no band had ever made that much money what you do with all that money you guys must be rich he said well we spent about seventy percent on wine women and drugs and wasted all the rest but but the thing the the thing with the mick ja is what you don't see is he like works out six hours at he he he eats a food regimen that's like second to none and here's a guy who's maybe keith was a better example yeah well that's important because even with richard branson with with his what whatever your persona is you know he knows how to lever from a marketing point of view he puts like nothing into a business and others invest around his name so his risk is very low these are these are people who are real geniuses at what they do but the thing that the thing that you didn't mention is phil like how does people create meaning i i i think that people who've created a certain amount of wealth and then say a higher percentage of what i'm gonna make i'm gonna give back to causes that i believe in and try and make the world a better place i think that's a a really important way to get meaning so that guy who made six hundred and said i should just made thirty maybe he should just been a little more philanthropic and and looked around the world and said i can make an impact in a positive way have you heard of this book called you got a ton of books behind you so maybe you have it looks like you read a lot there's this book called them die dying with zero it's by this hedge fund guy named bill perkins and i've just started reading it but it sounds like the premise of the book is basically like spend like if you're gonna give instead of giving away money when you're dead like give your kids the money now so if they wanna buy a home or do something like maybe you can enjoy it together if you wanna leave money to a certain cause just give it now because you'll be able to see you'll be able to see it and you can all get a little more joy out of that sure well that that was the biggest debate you know for many years warren buffett said i'm leaving a big foundation when i die and he said because i'm growing my capital so quickly that by leaving it in my portfolio i'll leave so much more and bill gates made the argument with him yes but what's the value of a life save today versus a life only saved thirty years from now when you die and some things aren't financial calculations so the point that you're making is there's a lot of value to being philanthropic both with your time and your money earlier on and not just later on and i think one of the things that is really important is many entrepreneurs have a lot more than money they have skills and insights and contacts that they can lever philanthropic so i do believe in being as active as possible to make climate is my number one issue and so i'm involved in climate both politically philanthropic and in the way i invest and that's given me a lot of feeling at least of i'm doing as much as i can good well last two questions first the the interesting thing about this your business tiger twenty one is from an outside it seems like the it seems like the vast majority of the value is your like eight or ten person or fifteen person would your your group which means i would think that there's a lot of pressure or not a pressure but there's a lot of faith that the facilitator like you need that facilitator to be good and if your a facilitator stinks then that could potentially ruin the experience it's which almost is like your business is almost decentralized like you know different customers will have drastically different experiences potentially regardless of what's happening at hq how are you how do you make sure your facilitator are good and are providing a valuable experience so i think what you're searching for is kind of a classic example of would you rather own three hundred gas stations or one oil refinery if they're both worth the same amount of money well the answer is obvious on that one i think which is what multiple i mean it's like you don't want you don't want you don't want all your you don't want one big ass customer you would it'd be nice to have a hundred equal but the fact is if you have three hundred gas stations that of all the same label on them the same name you have a brand exposure that if something bad happens in one of them it could affect people's demand for the other so our only asset is our people both our team our chairs that facilitate the groups and our members and we spend we have like a private university we spend fortunes of time screening the facilitator and then providing lots of opportunities for the facilitator to learn from one another our facilitator come in from all we call them chairs of the groups they come in from all over the world to learn best practices from each other and we track all of the relevant metrics to see which groups are performing well which groups are not performing well and of course the most important thing is that we have zero tolerance for anything less than high integrity and maintenance of confidence if somebody if a member or a chair ever violated that they would be out in a second so i'd say that maybe besides the core asset being our team and our members the thing we protect the most is our brand by being really true to what what it stands for and i don't think we've ever compromised on trying to put members first that's that's kind of what we're about i'm a i'm a member first well at most of the value that i've gotten out of being a member of tiger has been being a member the fact that i've owned today little more than half the business is almost irrelevant to the value that i've gotten by being a member and all the opportunities that i share with all the other members that come my way as a member well you're awesome the reason i wanted to talk to you is because i've i know of tiger i've thought about joining i've got friends that are part of it and i love the business model my business was was tangent related but not quite the same thing we it was community based and i hadn't read or seen too many interviews with you and so i'm happy that we got to talk because i wanted to kinda explore this but you're you're you're you're cool is hell i appreciate you taking the time this is awesome thanks so much for having me is and if like if people wanna do you use twitter or anything people wanna find you do you wanna point them anywhere i'm on linkedin i don't use twitter i don't i i i don't use facebook but i'm available through linkedin and it's kind of easy it's michael dot son filled at tiger twenty one dot com hell yeah thank you man i appreciate it thank you