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    My First Million

    Sam’s +$10 Million Portfolio, Money Psychology, and The Decision Register

    Thu Jul 20 2023
    Investment StrategiesDecision-MakingNewsletter BusinessesContent Creation

    Description

    This episode covers a wide range of topics related to investment strategies, decision-making, and the importance of creating engaging content. The hosts discuss their personal experiences as investors, including their conservative investment strategies and the importance of cash flow. They also share insights on long-term investments, taking risks with finances, and attitudes towards money. The episode explores decision-making processes, the role of consultation in making important decisions, and the challenges of scaling newsletter businesses. The hosts emphasize the value of creating content that aligns with personal interests and the importance of not catering solely to audience preferences.

    Insights

    Investment Strategies

    The episode provides insights into different investment strategies, including index funds, bonds, and real estate funds. The speaker emphasizes the importance of cash flow and selling a business for wealth creation.

    Taking Risks with Finances

    The episode highlights the speaker's perspective on taking risks with finances and viewing money as a tool to enhance life rather than saving indefinitely.

    Attitudes Towards Money

    The episode explores different attitudes towards money, including frugality, anxiety, and the influence of childhood trauma and upbringing.

    Decision-Making and Wisdom

    The episode discusses the importance of wisdom and good judgment in decision-making, as well as the challenges of making financial decisions based on potential returns versus immediate benefits.

    Scaling Newsletter Businesses

    The episode provides insights into the challenges of scaling newsletter businesses and highlights successful examples such as Morning Brew.

    Creating Engaging Content

    The episode emphasizes the importance of creating content that aligns with personal interests and being genuinely interested in the content to make it interesting for the audience.

    Decision-Making Power and Newsletter Success

    The episode explores the decision-making power in a business and the importance of being interested in the content. It also mentions another podcast called The Hustle Daily Show.

    Chapters

    1. Introduction
    2. Investment Strategy
    3. Long-Term Investments
    4. Taking Risks with Finances
    5. Attitudes Towards Money
    6. Decision-Making and Wisdom
    7. Financial Metrics and Tracking
    8. Investment Strategies and Perspectives
    9. Role Models and Investment Success Stories
    10. Decision-Making and Consultation
    11. Spousal Consultation and Newsletter Business
    12. Scaling Newsletter Businesses
    13. Creating Engaging Content
    14. Decision-Making Power and Newsletter Success
    Summary
    Transcript

    Introduction

    00:00 - 06:17

    • The host discusses his experience as an investor and jokes about losing more money than most people have made.
    • The host and guest engage in a humorous conversation about cold plunges and social media posts.
    • They joke about the potential combustion of having an Andrew Heberman fan, a vegan, and a cross-fitter in one room.
    • The host introduces the idea of doing a portfolio review with the guest.
    • They discuss the concept of critiquing financial portfolios and being transparent about investments.
    • The host explains his conservative investment strategy and how he plans to live off his income while keeping his major account untouched.
    • They use hypothetical numbers to illustrate the strategy of living off income while having a nest egg for financial security.

    Investment Strategy

    05:53 - 12:30

    • The speaker discusses their investment strategy of drawing out 3% of a $10 million portfolio per year.
    • They emphasize that this is not financial advice and they are not an active investor.
    • The speaker mentions that they invest in index funds, bonds, and real estate funds.
    • They have 79% of their big account invested in VTI (Vanguard total index fund).
    • 15% of the big account is in short-term treasuries with a yield of around 4.9%.
    • 6% is invested in a real estate fund that buys Walgreens buildings.
    • VTI has shown good returns over the years, with historical averages around 8% per year.
    • The speaker believes that most people should try to make money through starting or owning equity in a company.
    • They discuss the importance of cash flow and selling a business for wealth creation.
    • The speaker keeps $100 to $200,000 in their checking account and invests any excess into their big account.
    • They mention that their spouse has made significant money from stock options at Airbnb and HubSpot.

    Long-Term Investments

    12:05 - 17:59

    • The speaker has stock in HubSpot and Airbnb, but has no plans to sell them in the next five years.
    • The speaker also has a 401k and Bitcoin that they have not sold.
    • They made poor decisions when selling Bitcoin in the past based on market trends.
    • The speaker shares a story about missing out on significant gains by selling Tesla stock instead of holding onto it.
    • They also mention missing out on a job opportunity at Stripe that could have been very lucrative.
    • The speaker admits to being influenced by others' opinions and signals when making investment decisions.

    Taking Risks with Finances

    17:38 - 23:43

    • During an interview, the speaker blew a 30-point lead and was rejected for a sales position.
    • The speaker's mentor is highly experienced in investing and has lost more money than most people have ever made.
    • The speaker sold stocks at the bottom of the market crash due to fear and uncertainty.
    • The speaker considers themselves their own safety net and takes risks with their finances.
    • The speaker believes money is a tool to enhance life and should be used rather than saved indefinitely.

    Attitudes Towards Money

    23:22 - 29:16

    • Criticism of the mindset of working hard to earn money and then being frugal with spending
    • Acknowledgment of personal flaws in spending habits and emotional instability
    • Observation that people who go from being poor to having a significant amount of money tend to be frugal and anxious, while those who have consistent cash flow are more offensive and less conservative
    • Recognition that attitudes towards money are often rooted in childhood trauma and upbringing
    • Example of someone who sold their business for over $100 million but still made frugal purchases like a $2,000 bike
    • Discussion on financial mistakes and missed investment opportunities as part of playing the game
    • Revelation about hoarding money, self-value tied to money, guilt in spending on oneself, and difficulty in investing in personal improvement
    • Personal struggle with making financial decisions based on potential returns versus immediate benefits

    Decision-Making and Wisdom

    28:52 - 34:39

    • Mental gymnastics involved in making financial decisions
    • Discussion about hiring a valuable employee and the potential long-term investment
    • Immigrant perspective on financial decision-making
    • Introduction to Steph Smith, host of the A16Z podcast
    • Friend's shift in focus from business to starting a family, but also starting multiple projects
    • Observation about smart friends lacking wisdom in decision-making
    • Higher income sometimes precedes wisdom in decision-making
    • Personal example of prioritizing work over fitness goal
    • Importance of wisdom and good judgment in decision-making

    Financial Metrics and Tracking

    34:10 - 40:17

    • Milk Road's success came from being invested in crypto and discussing topics that were genuinely interesting rather than just summarizing headlines.
    • Subscriber count is not always the best metric for measuring newsletter success; engagement and influence matter more.

    Investment Strategies and Perspectives

    45:40 - 51:32

    • The speaker defaults to holding stocks and only sells if there is a compelling reason, such as needing money or a significant change in the market.
    • The speaker acknowledges that they are not informed enough to make intelligent decisions about macroeconomic factors.
    • Instead of trying to learn everything about a topic, the speaker seeks out opinions from people they consider smart and evaluates different perspectives.
    • They look for evidence that supports each perspective and determine which one resonates with them intuitively.
    • The speaker mentions different perspectives on the state of the economy, including arguments about banking system insolvency, cycles of empires, and the strength of the US dollar.
    • They try to hedge their investments based on the most likely scenario while considering potential risks.
    • The speaker admits being drawn to contrarian and conspiracy theories but recognizes that it has led them to make drastic decisions in the past.
    • They suggest putting smaller hedges in place and tracking signals over time instead of making dramatic moves based on speculative opinions.

    Role Models and Investment Success Stories

    51:07 - 57:16

    • The speaker looks up to Andrew Wilkinson and Xavier as role models for generating more money.
    • Said Bulky, the owner of Awesome Corp, started as a blogger and now owns WordPress plugins worth potentially half a billion dollars.
    • Said Bulky's strategy is to only spend the income from investments, not the initial cash influx.
    • Said Bulky owns gas stations that operate under triple net leases, requiring minimal time and maintenance.
    • The speaker finds Said Bulky's unique approach to running his life and businesses interesting.
    • Said Bulky also invests in minority stakes in businesses to help them break through plateaus.
    • The speaker's investment in Shepherd has already paid dividends with the highest two months of business in its history.
    • The speaker believes investing in Shepherd offers a greater return compared to the stock market with more risk involved.
    • The speaker acknowledges that personal finance topics may not be as interesting to listeners as business building topics.

    Decision-Making and Consultation

    56:48 - 1:02:51

    • Decisions that seemed big in the moment turned out to be important
    • Example: Decision to sell to Twitch instead of Facebook
    • Reason for choosing Twitch: Tired after six years of startup, wanted to join a winning team
    • Lesson learned: Don't know what the other side would have been, but happy with the decision
    • Importance of keeping a decision register and asking key questions before making decisions
    • Questions include alternatives considered, feelings about the decision, length of thinking time, tipping point, secondary benefits, confidence in being right or wrong, upside and downside predictions, follow-up decisions, and revisiting date
    • Documented four or five decisions so far

    Spousal Consultation and Newsletter Business

    1:02:29 - 1:08:16

    • When selling a company, the speaker consulted with their spouse for opinions.
    • The speaker's spouse is not knowledgeable about stock or startup investing.
    • The speaker relies on their spouse to provide a balanced perspective and prevent emotional decisions.
    • The decision register framework discussed in the podcast is useful for making decisions.
    • The decision register will be shared as a template for others to use.
    • The smallboy.co newsletter has grown rapidly, with over 100,000 subscribers in a short period of time.
    • Newsletters are considered easy zero to one businesses but can be challenging to scale.
    • Many people underestimate the difficulty of turning a newsletter into a successful and profitable business.
    • Morning Brew is cited as an example of a successful newsletter business that has been operating for ten years and generates significant revenue.

    Scaling Newsletter Businesses

    1:08:02 - 1:13:53

    • Morning Brew is a successful company with revenue in the range of $70 to $90 million and 250 employees.
    • The founder of Morning Brew has shown durability, a long-term view, and the ability to move quickly.
    • Having insight into the five-year journey of Milk Road allowed for better success compared to copying surface-level strategies.
    • Not all entrepreneurs are above average, but many believe they are.
    • Building a successful newsletter requires more than just surface-level content; it needs valuable audience segments and actionable calls to action.
    • AI newsletters may lose interest over time as trends change and advertisers realize the limited value of targeting AI enthusiasts.
    • Creating engaging content for newsletters is challenging, especially when trying to get people to take action.
    • Milk Road's success came from being invested in crypto and discussing topics that were genuinely interesting rather than just summarizing headlines.
    • Subscriber count is not always the best metric for measuring newsletter success; engagement and influence matter more.

    Creating Engaging Content

    1:13:33 - 1:19:14

    • This podcast episode discusses the importance of creating content that you are genuinely interested in.
    • Joe Rogan's approach to podcasting is to have conversations he wants to have, regardless of what others may think.
    • He believes that being genuinely interested in the content is the key to making it interesting for the audience.
    • Rogan emphasizes the importance of not catering to what the audience wants and instead focusing on creating content that aligns with your own interests.
    • The best comedians and artists are those who do what they want and are not overly concerned with external judgments or expectations.
    • The hosts of this podcast also value feedback from their audience but prioritize talking about topics they personally care about.

    Decision-Making Power and Newsletter Success

    1:18:52 - 1:20:21

    • The decision-making power in a business ultimately lies with the person who likes and is interested in the content.
    • The hosts of the podcast feel good about making others feel good while also talking about what they want to talk about.
    • There is another podcast called The Hustle Daily Show that provides daily business and tech news in a few minutes.
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