The #1 Investing Habit That Made Me a Billionaire | David Adelman

My new book, Own Or Be Owned, is all about building a business so good it doesn't need you. I broke it into the 12 Profit Levers… The 12 levers I've seen determine whether you print cash or hate your life. Check it out: https://contrarianthinking.biz/bigdeal-adelman -cs You’ve been telling yourself the same story. That you need more money to start. That you need the perfect idea. That becoming a billionaire is either impossible or reserved for the lucky. Here’s the truth: the only thing between you and the wealth you want is believing you need something you don’t have. David Adelman is a billionaire co-owner of the Philadelphia 76ers and investor in more than 90 companies. He built his empire from scratch by turning student housing from a mom and pop industry into a billion dollar asset class. In this episode, he breaks down how to spot great opportunities, structure deals where both sides win, and build wealth from the ground up without a silver spoon or trust fund. In this episode, you'll learn: Why great deals are never great for one side and poor for the other, and how David's mentor taught him that terms matter infinitely more than price The first million dollars framework: why it's harder to make your first million than your first billion, and how small wins beget big wins when you prove you can execute Why you can't do a good deal with a bad person and keep them in the partnership, and how David learned this lesson the hard way when he let emotion kill a deal he should have closed The #1 investing habit that separates billionaires from everyone else: bad news doesn't get better with time, and why David demands his operators punch him in the face with problems first before celebrating wins How to become an entrepreneur in someone else's business, why service businesses like HVAC and plumbing are ripe for succession, and how David would get his first million if he had to start over at 25 with nothing ___________ (00:00:00) Introduction: You Can Be an Entrepreneur in Somebody Else's Business (00:00:52) The LeBron James Deal: How to Close a Billion-Dollar Partnership (00:01:51) It's Always About Terms, Never Just Price (00:04:04) The Building I Didn't Buy: When Ego Kills the Deal (00:05:48) Billionaires Come in All Shapes and Colors: The Ego Myth (00:06:41) The Gravedancer and the Asset Class: How I Turned Student Housing Into Billions (00:08:40) The $300 Million Raise: How Mom and Dad Paying Rent Became My Pitch (00:10:33) Operational Alpha Over Leverage: Why Execution Beats Financial Engineering (00:11:37) The $1,300 a Day Since Jesus Died Math: What It Actually Takes to Become a Billionaire (00:17:17) Bad News Doesn't Get Better With Time: The Number One Management Rule (00:19:09) The Owner Book Launch: How to Build a Business That Runs Without You (00:20:16) The First Million Is Harder Than the First Billion (00:21:14) Hiring Hundreds and Employing Tens of Thousands: The HR Reality (00:23:42) The Back of the House Test: How to Tell if Your Operator Is Great (00:23:51) Boring Businesses Are the Future: The Anti-AI Play (00:37:47) The 30x Return: How Beatbox Became a Monster Exit (00:40:20) Losing Millions to Fraud: What I Learned From Deals That Went to Zero (00:41:34) The SBA Loan Default Rate: Why Buying Businesses Is Less Risky Than You Think (00:44:04) Longevity and Peptides: The Next Frontier for Investment (00:46:15) The Work From Home Tragedy: Why Showing Up Is the Ultimate Competitive Advantage (00:50:53) The Apple Tax Lesson: How to Teach Your Kids About Money (00:52:35) The Three to Four Year Rule: Why Family Can't Work for You Until They've Worked Somewhere Else (00:54:16) Ask Questions or Stay Stupid: Why Curiosity Beats Intelligence (00:59:13) The HVAC Succession Play: Where the Real Money Is Hiding (01:03:48) Final Advice: Don't Look for a Million Dollars, Look for Education ___________ MORE FROM BIGDEAL 🎥 YouTube: https://www.youtube.com/@podcastbigdeal 📸 Instagram: https://www.instagram.com/bigdeal.podcast 📽️ TikTok: https://www.tiktok.com/@big.deal.pod MORE FROM CODIE SANCHEZ 🎥 YouTube: https://www.youtube.com/@codiesanchezct 📸 Instagram: https://www.instagram.com/codiesanchez 📽️ TikTok: https://www.tiktok.com/@realcodiesanchez OTHER THINGS WE DO 🌐 Our community: https://contrarianthinking.typeform.com/to/WBztXXID 📰 Free newsletter: https://contrarianthinking.biz/3XWLlZp 📚 Biz buying course: https://contrarianthinking.biz/3NhjGgN 🏠 Resibrands: https://resibrands.com/ 💰 CT Capital: https://contrarianthinking.biz/4eRyGOk 🏦 Main St Hold Co: https://contrarianthinking.biz/3YfGa8u Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:30Speaker 01

  You can be an entrepreneur in somebody else's business.

• 0:32Codie Sanchez?

  Really?

• 0:33Speaker 01

  There's this weird stigma out there that everyone has to either have a startup or their own venture capital fund. The world doesn't need another fucking venture capital fund. Let's get people who are willing to work hard in business and learn from other business. And then maybe you want to go out and do your own.

• 0:46Codie Sanchez?

  My guest, David Adelman, is the billionaire co-owner of the 76ers and investor in more than 90 companies. You're going to learn his exact frameworks to spot great opportunities. If you are building wealth from scratch, this episode is for you.

• 0:58Speaker 01

  If you could go in as an entrepreneur into someone's old line business, they're all ripe for succession. Go work at a person who has an HVAC company that only has three trucks. AI is not going to replace the heater in my house. This is what people need to go to.

• 1:11Codie Sanchez?

  As someone who owns 90 companies, if you were 25 again, what would you do to get your first million dollars?

• 1:16Speaker 01

  I think what you're looking for is...

• 1:22Codie Sanchez?

  Philadelphia 76ers. You are a co-owner of this, and I hear you just signed LeBron James.

• 1:29Speaker 01

  You heard about that?

• 1:30Codie Sanchez?

  Yeah. Just a few people. And I'm not even involved in basketball, but what does it look like in the realm to close a deal like LeBron James or bring a big name to a sports team?

• 1:42Speaker 01

  It was a wild process because LeBron and his camp kept it quiet and rightfully so. He wanted to run his process. And I know his agent, Rich Paul, very well. His business partner, Matt Riccardi, and I are very close friends. We're in some deals together, but that doesn't mean shit, right? I mean, you're just up for grabs along with everyone else. And the real excitement around this was about, we got a text on that Friday morning from Rich Paul to my partners, myself, and the guys I just mentioned, saying, this is it. Sixers it is.

• 2:16Codie Sanchez?

  That's how you knew?

• 2:17Speaker 01

  That's how we found out five minutes before they announced it publicly.

• 2:19Codie Sanchez?

  Whoa.

• 2:20Speaker 01

  Yeah.

• 2:21Codie Sanchez?

  I have a mentor back in the day who kind of taught me how to do some of my first deals. And back then, I used to think that it was always the price you paid for something, right? You're like, okay, if I go to buy something, I got it for this price, that's a deal, right? And he sort of famously said to me, well, that's sort of how amateurs do it. It's always about terms. I could pay you a billion dollars a dollar a day, you're not going to love that deal, right? As much as $100 million in a week. So when you do a deal, you've done, you invested in 90 companies. I'm sure you've done hundreds and hundreds and hundreds of deals across your lifetime. What is like your number one philosophy or secret or tool to doing a great deal?

• 3:02Speaker 01

  For me, the way I think about it is if it's going to be a great deal for me, it's got to be a good to great deal for the other person. Very rarely do you get to a place where it's great for one side and poor for the other and everyone's happy, right? And so for me, I come at it, and I'm like, what do I think I need to do this deal? And will I do the deal under these terms? And what I always do is I kind of make a note, I'm a kind of a pencil and paper guy. What won't I do the deal at? And because what happens is emotion gets you very engaged, the heat of the moment, the bidding, stuff like that, that becomes a problem, right? And so for me, I try to think about, what am I willing to pay? And to your point, the terms, well, what's more important, price or terms, duration? If it's a real estate deal, you name it.

• 3:46Speaker 01

  And then more importantly, who's the counterparty? Can I trust them to deliver the deal that they might say they're going to do? So to me, all of those things come into play. Your mentor's right.

• 3:54Codie Sanchez?

  Can you do a good deal with a bad guy?

• 3:56Speaker 01

  Very hard. I've had deals with bad people, and I've been thankful when they're at the end. You can't do a deal with a bad person and keep them in the partnership. That won't change. You can't rehabilitate a bad person, in my view.

• 4:09Codie Sanchez?

  Yeah, I agree. My dad always says, also, don't fall in love with something that can't love you back. So I love that line that you said about, you have to start sort of with what you don't want in the deal, which is what Charlie Munger's inverse thinking.

• 4:22Speaker 01

  Now, the inverse of that is, I've been negotiating deals where someone I thought was a bad person, and I let my emotions get the best of me, and I didn't get the deal done. When, at the end of the day, there's a deal I did, so I have a mentor also in the real estate business, his name's Alan Horowitz, who taught me as a kid. And I'm negotiating my first real estate deal, I'm 24, 25, and it was in between two properties we owned, actually like four. It would have solidified us owning a square block in Philadelphia out by the University of Pennsylvania. And I was like, I got this. And he trained me well, so I felt good about it. But at the time, like I said, I was maybe 24, and I looked at that guy as some old guy, he was probably my age.

• 5:05Speaker 01

  But the guy was an asshole and just demeaning to me, talking down to me. And we kept going back with price. I tried to keep my composure. And he kept pushing price and changing terms and all of that. And then I just went back and said, like, we're just not going to get this done. I really want to tell the guy to go F himself, right? But we didn't get the deal done. And so what happened is he sold it to someone else. And I went back to my partner, and I was like, that guy was a real asshole. And he's like, well, you showed him now, he just sold it to someone else. Why did it matter what his personality was? You were going to buy it, you would have never had to deal with him again. So it was a good lesson for me on the other side, right? There's going to be a lot of bad people, a lot of assholes out there, and you have to maintain your composure when dealing with them. And what is the mission?

• 5:49Speaker 01

  My mission was to plead by that building, right? And I let, it's lessons you learn as you're younger. I haven't made that mistake twice.

• 5:56Codie Sanchez?

  Really?

• 5:57Speaker 01

  Yeah.

• 5:58Codie Sanchez?

  God, I try not to, but I do always get reminded. My dad also says, like, do you want to be right or do you want to win? I try to remember to win more often. It's a little harder now, I'm hormonal as fuck, so sometimes I'm like, keep me out of the room. You don't want me in this deal at this moment.

• 6:12Speaker 01

  What we do, we want that mama energy to come, change the dynamic.

• 6:15Codie Sanchez?

  For like a second, then you kick me under the table and I have to beat it. So that's interesting, because I think sometimes people think billionaires are just ego, they come in there, they're just pushing everybody around. But is it actually the opposite in a deal? Do you try to at least not show that you're the big guy or have ego when you're in it?

• 6:34Speaker 01

  You know, the way I describe it is I think there's assholes in all shapes and colors, okay? And so it doesn't matter if you're worth $10, $1 million, or $1 billion. I think there are some people that are programmed to be really difficult, really argumentative, and that's their style. I have a different style. I am not a last nickel guy. I said this earlier, when we were talking, like, both sides should feel like they won. Or both sides should feel like they got the same kind of deal. Like, you both don't feel great about it, but that means it was kind of a fair trade.

• 7:03Codie Sanchez?

  Yeah. So how do you compare with like, some of the other real estate greats? A Sam Zell, who was more of...

• 7:12Speaker 01

  So he's like my icon of the Mount Rushmore of real estate guys.

• 7:16Codie Sanchez?

  Interesting. I always liked that he was a biker.

• 7:18Speaker 01

  I just liked that he was gruff, and you'd be on any interview, you'd sit in the crowd, and he would be like, fuck it, right? And like, fuck that guy. And I was like, can you talk like that? I said, I guess if you're really rich, you could talk like that.

• 7:30Codie Sanchez?

  Yeah.

• 7:30Speaker 01

  He is amazing.

• 7:31Codie Sanchez?

  So he did more like what I thought of as grave dancer deals, or he kind of was famously called the grave dancer, would do these like crazy complex deals, turn them around. When I think about what I know about you, you basically took an industry, and tell me if I'm misstating this, you took an industry that was kind of like campus housing, student housing. I think about Animal House style, like just the Wild West back then, not an institutional asset class. And you kind of were one of the key people in creating a real asset class out of something that people thought was a joke.

• 8:02Speaker 01

  Yeah, I think people like, what I did, and by the way, I wish I had let that kind of stigma play on, and if I, I would have been even bigger in that space because we got too many entrants in it. But what I did is, I joke, I would go to these real estate conferences, and you'd have the apartment guy, the retail guy, the office developer, and they wouldn't let me sit at the lunch table because I was just a student housing guy. And because to your point, like the stigma, that's shitty real estate, they turn over. But you know what? What I saw early on, and I was like, what am I missing? Colleges aren't going anywhere. Mom and dad are paying the bills. And, you know, it was just always a new tenant showing up. And so I was like, maybe, you know, maybe I'm wrong or maybe I'm right.

• 8:47Speaker 01

  And they just don't want to pay attention. Great for me. And so I was able to take campus apartments from a mom and pop local business. And that's how I went national because no one was really interested in that. It made, you know, in the beginning, getting lenders comfortable and equity sources comfortable with that took time and education. But I think everyone was able to relate to the fact when we did our first institutional deal in 2006, I raised $300 million. I'd never raised a nickel before. Zero. I went on a roadshow to raise money. And, you know, back then I was like, well, I want 300 million. And our bankers were like, why do you need that money? And I was like, I'll tell you afterwards. But every investor we pitched all were sending their kids to college and all were paying rent to somebody like me. And so like they identified with the, with the demand and the need.

• 9:32Speaker 01

  And so we raised $300 million. And in real estate, you know, you can put down 30% equity, 70% debt. So if you have $300 million, that was a billion dollars worth of deals. So, you know, I was in my early 30s. I got to say that I created a billion dollar joint venture, you know, of real estate. So I was pretty psyched about that.

• 9:49Codie Sanchez?

  Interesting. So is one of the keys then, when you go to raise money from people, you've never done it before. This is an asset class people don't like. They're probably not taking you super seriously way back in the day before you've made a name for yourself. So you don't have like a silver spoon. Like people might say now, oh, well, it's easy for David. He's a billionaire. But back then you don't have all that. What gets them to say yes? Is it that you already have to find somebody who has a strategic understanding of what you do? Do they have to like you? Like, why does somebody rich give you money?

• 10:18Speaker 01

  I think one, we had a track record. So they could, we could point to here's a building before, after cash flow. Here's what we did. Might not have been on the grand scale that we are today, but I could point to, you know, small wins begets big wins. That's the way I always looked at it. Number two, I thought that I could take people and say like, we're not going to lose your money. Like, you know, this isn't venture capital returns or venture capital risk, slow and steady returns. Here's what we can deliver. And then three, I think they have to believe in integrity. Like I'm sure we'll talk because you're a big entrepreneur. Like what's the number one asset you have? It's your integrity. Right? And so if I could demonstrate that, that I was going to, you know, work hard, be a good steward to someone else's capital, be respectful of their money, and I could deliver the returns, that kind of opened the doors.

• 11:03Codie Sanchez?

  How much of what you did at Campus Housing was operational alpha versus leverage?

• 11:10Speaker 01

  The majority is operational. We had to execute. It's a very complicated business, very hands-on. And the hardest part was scaling from Philadelphia to going national. Right? How do I take the culture and DNA of a small team in Philadelphia and say, now we have to do this nationally? And have that repetition. You know, we didn't have the computer systems that you have today to be able to replicate those things. This is a people business. And, and most importantly, I am dealing with people's most prized possessions, as you're going to see soon. Like your baby, your child, that's it. Like, so number one asset that we had in real estate was filled with people's most important things in their life, their kids. And so how do you train and create a culture to make sure they understand that? I was just in a meeting earlier and someone's like, well, what's it like with kids paying rent?

• 11:55Speaker 01

  I was like, in the old days, we had to teach them how to balance their checkbook because they were writing checks. You know, now there's an online portal that they're just connected to. It's a lot easier. But, you know, this is their first experience living on their own outside of mom and dad.

• 12:06Codie Sanchez?

  Yeah. I was looking up the numbers earlier and I think it's that you have to make like $1,300 a day since the day Jesus died, so like 2,000 years to become a billionaire. It's not easy. And so, um, you know, it's, and it's not that common.

• 12:23Speaker 01

  I feel like I've been working that long.

• 12:25Codie Sanchez?

  Exactly. You're like, the hair doesn't lend itself to that. But I think people think that becoming a billionaire or making a billion dollars in value is really easy. And then when you look at the math, it's actually incredibly difficult. What is the key to amassing that kind of wealth? Is it, uh, can you do that just with financial leverage? Do you have to have operational proficiency? And what do you think most people get wrong in trying to get rich?

• 12:51Speaker 01

  I think you need all of these things. I think you need a plan. You need to execute. You need to have good relationships for capital. And you need to like, do the right thing so you can rinse and repeat and grow. Right? So somebody gave you a thousand dollars, now they'll give you 10,000 and then they'll give you like, you need to be able to prove that trust and all of that. You know, I, I think, you know, people are like, oh, you're a billionaire. Like, I didn't set out and I was like, oh, I'm going to make a billion dollars. Like, I just said, I'm going to set out on this journey. You know, I think it can be successful, but like, you just keep going and you're in kind of the rat race. And like, you know, it's not like, you know, there, there's some counter one day and it just went off and said, okay, here's a billion dollars, right? Like it, it doesn't work like that, or at least not for me.

• 13:34Speaker 01

  And, and so for me, like, I'm working harder today than I did when I was 25. My mentor taught me that if you love what you do, it's not work. And so for me, like, I just love this action.

• 13:44Codie Sanchez?

  Do you ever have like dark moments of the soul? Like a night where you remember you thought you might've lost it all and you had no idea how to fix it?

• 13:53Speaker 01

  I've had moments in time where we've had some tough gut punches. And you're like, well, what's going to happen here? And, you know, my kids will tell you they'll remember a family vacation in 2016 where I had some stuff going on. And, you know, but like, you know, we got through it and I had a plan and I executed on it. But, but I was prepared. I was like, well, what happens if this happens? What if we lose this or this deal goes bad? What, what do you do? But you can't, you know, I've watched a lot of what you said, you can't live in fear. Right? You can't be afraid. I, my unique thing is I'm not afraid to fail. Because if you are, you won't take the chance.

• 14:33Codie Sanchez?

  You talked about the sacrifice in the beginning. I don't think people understand a lot what you have to sacrifice to build anything big in this world. Like if somebody's watching right now and they're like, what does it actually take to make it? What are the sacrifices you think they need to know about?

• 14:50Speaker 01

  Well, it takes a couple of things. One, you know, if you're married, it takes a supportive partner. Like I can't emphasize enough how lucky I am to have a wife that was like cheering me on, giving me a heads up when she was like, look, I know you're busy, but like here are the things going on with the kids. You should like, like, if you don't have a great partner, like it's very hard to succeed because you don't want that internal pressure from home. There's enough external forces. Number two, I think it's, you gotta decide what you're playing for. And for me, you know, I know people like, oh, there's no about money. It was about like building businesses and doing great things and building great teams. But you put those pieces together, there's generally a good outcome.

• 15:31Speaker 01

  And so for me, it was focusing on what's my, I'm in a bunch of different businesses, which makes it hard, but it's good for me because I have ADD, so I can kind of like bounce back and forth. But I think it's knowing that there's a team in place that I can build in each of these businesses. You know, you always talk about, you know, when I read your stuff about, you know, can the business run without you? I think you always need to be the visionary and the north star for the business. So I always say like, I'm a great startup person and putting the pieces together. I am not a great long-term operator because I lose focus. I am a great cheerleader for the operators and a great mentor. But, so I think like those are the pieces where you like, think about how the team gets built,

• 16:12Speaker 01

  what you need, how you solve problems, when you pivot into a different business or add on a business to that.

• 16:18Codie Sanchez?

  Yeah, it's so good. I gotta, I want to have you take this thing. We, we surveyed like 15,000 entrepreneurs and some high level executives that didn't run their own business, but, you know, worked within other businesses. And basically we're trying to come up with entrepreneurial profiles. We call it the owner's score, so I'll have to send it to you after this. Because I think what I've found, and, and you tell me if I'm full of it or not, but is that, like, there's a lot of generalized advice for how to run a business or do whatever. But man, if I was to take Elon Musk's playbook or Mark Zuckerberg's, I would fail. Cause I'm kind of like you, it sounds like you were more of an innovator than I was because you created an entire campus, you know, institutional asset class.

• 17:01Codie Sanchez?

  But I'm really good at like, this exists, I'll make it better continuously over time. And I'll continue to iterate on it and I will do it long past the point somebody else gets bored. So I know I'm what's called a workhorse. But I realize if, if we have, you know, we only have 30 companies that we own a part of and really five that we operate real time, but those operators are not all the same. So if I gave the same advice to, you know, Stephen as to Bobby, they'd fail. Because they're different types of humans. So I'm curious for you, as you're looking at all of these companies that you sort of own a part of, invest in, if you could only pick a few things to look at each week to see if your operators or founders are winning or losing,

• 17:42Codie Sanchez?

  what, what would be like the three to five things you'd look at every Monday to be like, I can tell this thing's on track or not?

• 17:47Speaker 01

  Well, you know, one is when you pick managers and leaders, one of the things I judge for is will they tell me the bad news? Right? So like my big saying around all the different companies is bad news doesn't get better with time. And so I appreciate like punch me in the face with the bad news. And so the managers that tell me what's like, it sounds bad, but I kind of want to know what's going wrong first, then what's going right. Okay? Like I expect things to be going right. Tell me what's going wrong. And so we, we start there where you give me your challenges first, because that's like, let me use my thought power to help you solve those. I may not be able to, but let's, or I can help find somebody who can. Then it's like, hey, here's the business, here's how it's doing. How do we make it better? Okay?

• 18:29Speaker 01

  So for me, that's like, are they, to answer your original question, are they a good communicator? Like, how do they communicate the information? Number one. Number two, do we understand how the consumer, if it's a consumer product or is it a business buy? You know, how, how are they accepting the product? Are we user friendly? Are we solving their problem? Are we asking what their problem is? Right? So I think those are the things that are really important. And three, like the blocking and tackling, like how do the financials look? Things like that that you would expect, expect in any business.

• 18:56Codie Sanchez?

  Yeah. Such a good point. I read the other day somewhere that Elon said, um, leadership is just, uh, understanding a series of compounded lies inside of your business. And it actually made me feel better because it's like, that's half the job. I'm like, wait, I thought this, but really this is that, does that ever go away? Or as a leader, are you always just looking for the truth?

• 19:15Speaker 01

  I think what you're looking for is. To me, like what you could call it the truth. I think I'm just looking for like the evolution because I think what was right for that CEO, what they were doing last quarter might not be right for this quarter. And I think sometimes managers just kind of stay on the treadmill. And like your job is kind of an entrepreneur is to look much bigger, take a step back and see if you're missing anything.

• 19:39Codie Sanchez?

  Okay, you're going to hear me push David on how he built his massive empire throughout this episode because I'm obsessed with understanding on how do we scale, make way more profits, but also enjoy our life. Because as it turns out, 65% of small businesses die inside 10 years and the survivors share one trait. They get out of the way of the business and let the business work for them. Every great business in history runs on systems that allow for more money with less pain. I wrote Owner Be Owned to hand you this exact playbook. This book is anchored around a framework I call the 12 Ps. That's going to give you the ability to understand and score your business, find your weakest qualities and fix them in 90 day sprints. I sat in a room in Austin with 100 owners running this exact

• 20:23Codie Sanchez?

  system and in one weekend that room found another $7 million in revenue, which is wild. So we're launching this book with a free live virtual event. We're doing massive giveaways while we're there, a million dollars in cash and prizes. Register at ownerbook.com. This one's going to be wild. It is for you if you want more profits and less pain in your career, in your business and in your life. What do you think is the difference between leading or building a $1 million, $10 million, $100 million, billion dollar company? How does it change?

• 20:54Speaker 01

  Getting to the first million dollars is really hard, right? Because that determines if your business is going to win or lose, right? Like, and so like, to me, that first million and 10 million are much harder than the 100 million to a billion. People won't believe that, but I'm telling you, it is way harder, right? Because like, you're trying to validate a business, you're trying to get people to believe in something that maybe it's a product that doesn't exist or isn't widely known. And so you're creating, you know, kind of a new thought on how this gets sold and all of that. Once you've gotten adoption, it's a different sales cycle and it's a different leader, right? Startup is one thing, you know, growth is another. And then like that exponential growth, all different leaders, right? Because some of them need to be really good managers to put the infrastructure in to make sure

• 21:38Speaker 01

  that we have the wheels don't fall off, that you're meeting your sales targets, or if you're manufacturing, whatever that is.

• 21:43Codie Sanchez?

  Yeah. How many people do you think you've hired in your career?

• 21:47Speaker 01

  Directly?

• 21:50Speaker 01

  Hundreds.

• 21:51Codie Sanchez?

  Yeah. And how many people do you think you employ across the companies that you own?

• 21:57Speaker 01

  Over time, tens of thousands.

• 21:59Codie Sanchez?

  So at any given point, something's going horribly wrong, like even right now.

• 22:02Speaker 01

  Always. Yeah, I'm sure. Yeah, of course. And I won't know about it till whenever. Or hopefully they'll try and fix it before it solves the problem. I mean, I think if you involve people in a business, you will have a problem, right? HR issues are like paramount in every company, whatever they are, right? People aren't showing up to work. People are like, you know, people being rude to each other, like whatever it is, like you got to get those issues right. And generally, a good manager handles those, right? You know, customer issues. Okay, so you're in the apartment business. Okay, like shit happens, like pipes break, it's no one's fault, right? Well, did we respond quickly? Did we do things? Like the thing that drives me nuts is if I'm walking by one of our offices and I see

• 22:45Speaker 01

  someone saying like, well, they're not going to renew their lease. And I'll pull them like, how come? Well, we had these issues and then I'm like, did you tell us about it? They're like, no. I'm like, well, you didn't give us a chance to try and fix it. And so like, I always want to know why, in any business, why people stop doing business with us. If it's not renewing the lease, if it's not completing a sales function, a season ticket holder that didn't renew their tickets, what is it?

• 23:07Codie Sanchez?

  Yeah. Do you almost not even care as much about the good news as the bad news as a leader?

• 23:11Speaker 01

  Yeah, it's a problem though, right? Because like, you know, you feel bad because like, the team wants to come celebrate all this great stuff. And you're like, yeah, well, what about these two things over here? And it's like this, it's like this. And like, the problem is I also tend to do that at home with my family. That's not good, right? Like you are, so, but I do think you get better that way. Like, when I tour our properties, I still, you know, I don't do it as often as I'd like. I go in and I tour the fire escapes and the back of the house. Right? Because that's where you know, like where the pride is, right? Your grounds can look great, but are the prides in the back of the house, right? And I can tell a really good property manager and maintenance supervisor by how clean the other areas are. How organized is the maintenance shop, which no consumer

• 23:56Speaker 01

  or customer is going to see, but I'm going to see it. And they're going to know, well, these guys are so organized that the maintenance team could come in and do whatever they need. So like, for me, that's also, I told you, I have like ADD, I also have OCD. And so like, all those little things out of place drive me nuts.

• 24:12Codie Sanchez?

  It's so, it's so good. You know, it's interesting because we own a lot of these home service franchise companies. And so painting companies, roofing companies, window cleaning.

• 24:21Speaker 01

  I love that, the anti-AI play.

• 24:23Codie Sanchez?

  Yeah, exactly. Well, people thought I was really lame and boring five years ago. And now they think it's a lot more interesting.

• 24:28Speaker 01

  I love boring businesses.

• 24:29Codie Sanchez?

  Yeah, there we go. That's why we'll be buddies. But one of the funny things is, I could tell the good operators by the status of their cleaning vans.

• 24:36Speaker 01

  Yeah.

• 24:36Codie Sanchez?

  And so you open up the doors, and if it's a mess, I know that guy's not going to be on time, they're not going to hit their quota, and they're definitely never going to be in management. And then the ones where it's super organized, it's not always a total indicator, but it makes a big difference.

• 24:49Speaker 01

  Correct.

• 24:49Codie Sanchez?

  Interesting. And you call this back of the house. So for somebody listening, it's basically always like, you're looking under the rug. Anywhere in business, it's like, where's the part that people are not going to usually look at?

• 24:58Speaker 01

  Correct.

• 24:58Codie Sanchez?

  Because if that's clean, you know, the rest of it is probably clean. Interesting. In your world, you're having to hire all these different people. You're having to, I mean, how many hundreds of millions of dollars do you think you've allocated over your career or invested?

• 25:14Speaker 01

  Oh, between real estate, the other companies, our asset management firm, we have an asset management business, Future Standard, that manages $95 billion. So we're allocating billions of dollars at a time in different cases. But, you know, in the real estate business, you know, hundreds and hundreds of millions of dollars in capital improvements, construction, renovation, you know, in the last seven years, we've done a billion dollars in new construction alone. So, I mean, you know, in Philadelphia, I'm going to build a $2 billion arena. Okay, so that's, you know, so like, it's a big number. I think every business, like I'm building this new arena right in Philadelphia. And I want to change the live entertainment experience, period. Because you think about people are spending a lot of money on tickets and a night out, babysitters, you know, all of

• 25:56Speaker 01

  that. Like, you need to give them a great pre-game, game time and post-game experience, right? And so what I'm talking about as we're designing this with the architects and with the people who are going to run the food services, think of yourself in the hospitality business. And no one does that, right? So again, that's me putting a twist on a age-old offering to say, can we do something that just feels different?

• 26:18Codie Sanchez?

  Yeah. So in order to have the capital really be efficient and come back to you and bring friends, like, you know, you've talked about it, you've got to invest in the right people because those are the people that are going to do the outcomes. How can you tell somebody is going to be an A player, or if somebody is not going to be an A player? How do you tell the difference between the two?

• 26:34Speaker 01

  A couple ways. One, you know, the number one quality to me is, I would rather have somebody that's an eight in intelligence and a 10 in work ethic than a 10 in intelligence and an eight in work ethic. So for me, like, hard work, like, I am like, look, I went to Ohio State at a time in college where like, I just needed a pulse to get in there, right? So like, I like, I know, like, I was a low SAT, low GPA guy in high school. But like, I knew that in business, no one was going to work harder than me. There are a lot of people smarter than me. And like, most of the people who work for me or work with me are smarter than me.

• 27:11Codie Sanchez?

  Why do you think that most people are not as successful as you? That, do you think they don't take enough risk?

• 27:16Speaker 01

  I think not everyone is meant or programmed or willing to take the risk, which is okay. Like, I say to a lot of people, you can be an entrepreneur in somebody else's business.

• 27:28Speaker 01

  Right? And so some people are meant to be that number two or number three guy or gal to run a business and not be the forward-facing and not taking the risk capital. And those people make the business successful. So like, I think there's this weird stigma out there that everyone has to, you know, like, I digress from your question for a second, but everyone has to either have a startup with their own venture capital fund. You know, like, I would tell your listeners, the world doesn't need another fucking venture capital fund. Okay, like, enough. Okay. But like, let's get people who are willing to work hard in business and learn from other business. And then maybe you want to go out and do your own thing.

• 28:04Codie Sanchez?

  Yeah, I think you're right. It's also pretty miserable running the place, you know, because when payroll isn't there, I mean, how many years in the beginning, you invested in your first deal, I believe, when you were 13, right? I mean, how many years did you not pay yourself in order to just invest in deals instead?

• 28:19Speaker 01

  My mentor taught me a really great thing that I think about all the time. He's like, every dollar you spend on yourself is a dollar you have less to invest. And that is in my mind even today, right? And it doesn't mean I haven't bought some really nice things and extravagant things, but I think about that. I'm like, oh, if I didn't buy a plane, I could buy that building, right? If I didn't do this, you could do that. And so, capital is like really important. I think it's, you know, you always hope, and my uncle used to say, he would be like, hey, you know, you just hope after all this money comes in and you pay everyone, that there's something left for yourself. Right? But in the beginning, capital allocation is really important. But it comes back to that risk. I was willing to take risk. I'm willing to fail. I'm willing to fail every day. Like, a lot of our startups

• 29:03Speaker 01

  fail. Like, that's okay, you know, but I'm also willing to like, try and build new businesses.

• 29:09Codie Sanchez?

  Yeah, yeah, it's super, super interesting. I think a lot about what holds back people from taking whatever their appropriate level of risk is. But you're totally right. I mean, Sheryl Sandberg, incredibly successful, very rich, never ran a company, you know? And I think she's probably, I read the average entrepreneur makes $46 to $65,000 a year. Like, that's not really winning.

• 29:29Speaker 01

  No.

• 29:29Codie Sanchez?

  As much as being one of your executives at any of the 90 companies.

• 29:33Speaker 01

  But they're playing for the equity.

• 29:34Codie Sanchez?

  Right. Yeah. You must get pitched daily for people to invest in your stuff.

• 29:39Speaker 01

  We do.

• 29:40Codie Sanchez?

  And you got people to give you money early on.

• 29:43Speaker 01

  Yeah.

• 29:44Codie Sanchez?

  You know, somebody listening today is like, I want somebody to invest in me. I want capital. How do I get it? What are, what are the things that you look for that maybe people would be surprised by?

• 29:55Speaker 01

  You know, one, what problem are you trying to solve? Like, if 10 people are doing what you're doing, like, why are you going to do it better? Like, just tell me, what's the mode around your business? Like, can the next guy start up your thing and do it for the same cost or less? Like, what's the differentiator? Problem you're trying to solve, track record as an entrepreneur, and how big could this opportunity be? The problem is, a lot of times, people are creating these startups and they're playing small ball.

• 30:25Speaker 01

  And like, if we're going to put risk capital to work, like, we want to know that there's the potential for a big outcome.

• 30:29Codie Sanchez?

  Yeah. What do you usually bet on? The jockey or the horse? Like, the, you know, guy running the thing or the opportunity?

• 30:35Speaker 01

  So the way I, here's part of what we go through when we're, my family office, when we're looking at investing. If the deal fails, would we do a second deal with that person?

• 30:49Speaker 01

  And I have a handful of people that we've backed a second time or a third time. Because if it didn't, if it failed because like the timing wasn't right, or like as long as they weren't like crux or bad guys nefarious, bad attitude, whatever it is like. Not all of these things win, but it's not always their fault. Poor timing.

• 31:08Codie Sanchez?

  Yeah, it's a really good point. I think about that a lot today. There's so many people pitching like AI for small business stuff or SaaS companies left and right, but there's no moat.

• 31:17Speaker 01

  Right.

• 31:18Codie Sanchez?

  And the jockey isn't that impressive. You have, you're just like, oh, there's this huge opportunity. Then it's easy to build SaaS now. Like that seems like an anti sell.

• 31:26Speaker 01

  Yeah, I agree.

• 31:26Codie Sanchez?

  What would you absolutely not invest in today? Like what comes across your desk? You're like, oh my God, I don't ever want to see another one of these again.

• 31:34Speaker 01

  God, there's so many.

• 31:37Speaker 01

  I know restaurants are on your list. Um, we don't get as many restaurants anymore, but and I'm in some restaurants.

• 31:42Codie Sanchez?

  Do you think I'm wrong on the restaurants?

• 31:43Speaker 01

  You know, it depends on the operator. So I have a couple of investments. I partnered with a guy in Philadelphia, Michael Shulson. And he, you know, to, I learned very quickly that his operating margins are 20%,

• 31:55Codie Sanchez?

  Yeah.

• 31:56Speaker 01

  which is some of the highest in the business. And so I'm like, this guy knows how to run a business.

• 32:00Codie Sanchez?

  And I bet it's a restaurant group, isn't it? Not an individual restaurant?

• 32:03Speaker 01

  He has multiple restaurants. Yeah. And but, but he was a great chef. Very, it's interesting. A couple of things in business. Chefs generally make poor business people. Doctors are very poor business people, right? And a lot of time lawyers don't translate into being operators. Like that's just something I've noticed. This guy made the transition from chef to CEO. So he has, understands food costs, things like that. But all in all, I rarely do restaurants. I, I think what I, what I also don't like, the software companies are too hard to understand today with AI. I have no idea if you're solving for something that couldn't be solved now by just putting into chat GPT, right? Like so. And we're not going to spend the time to differentiate that. So yeah, software is a very tough putt right now, I think.

• 32:48Speaker 01

  You know, I, I think that anything in the, you know, like you're going to have lots of bets in AI. Hard to know which ones are going to win. So sometimes we're kind of like, all right, we're going to spread it out a little bit and get educated along the way. You know, I, I think for me, it's easier to know, like, and the problem also is we're getting all these funds that are coming in looking for stuff. And I'm just like, stop with the funds. Like, what's your differentiator? You know, you ran a company for your 10 minutes and now you're going to go launch a fund. So like we say, know a lot to those.

• 33:19Codie Sanchez?

  Yeah, it's really good. What about, what about the opposite of that? Like when I look at how you made your first big pile of money? To me, it's like, okay, you had sort of this ugly, super, uh, you know, non-popular asset class, highly fragmented, you know, not a ton of major players in the space. And an ability for both operational proficiency that just wasn't there at all, plus leverage. Like really neither of those things existed. Do you see a space today that you're like, God, I wish I could find amazing jockeys? Or like, why isn't somebody doing it in this world?

• 33:52Speaker 01

  So the thing I talk about often, and it seems like you've dabbled in it, I, I think these service businesses are the future. Because if, you know, like, so I tell everyone, I'm like, go work at a person who has an HVAC company that only has three trucks.

• 34:08Codie Sanchez?

  Yeah.

• 34:08Speaker 01

  And they're still doing work orders by pen and paper, or maybe some shitty computer system. Like AI is not going to replace the heater in my house. We're short 2 million electricians in the country. 2 million. Okay? Electricians are making almost 200,000 a year right now. And so I look at all these kind of like hands-on skills, all these service businesses. And I'm like, this is where people need to go to. Now that also changes education. Maybe you're going right from high school to a VOTEC school to learn these trades. But if you could go in as an entrepreneur into someone's old line business and make that business better, and you work out some deal. And none of those businesses have succession plans, right?

• 34:50Speaker 01

  You have the entrepreneur who's, you know, pushing 70 as kids aren't in the business, the heating and plumbing or, you know, whatever business. And like, they're all ripe for succession right now.

• 35:00Codie Sanchez?

  Yeah, I totally agree. That's why we buy them. It's also kind of fun because to your point,

• 35:06Codie Sanchez?

  I love competing in industries where you don't have to be that smart.

• 35:10Speaker 01

  Right.

• 35:10Codie Sanchez?

  You know, I, I don't profess to have a crazy IQ like some of these guys, but guess what? I've never had a plumber that had me on a recurring plan that I thought was really useful and a text message follow-up system that is right, that asked for a review, that looks sharp when they showed up at my house, that I could remember the name of the place and the van and branding was good. It's never happened to me. And all these, you know.

• 35:31Speaker 01

  It's the same thing, kind of the way I look at student housing. You know, we were having people's kids. You're letting somebody in your home. You are trusting them in your house with your family. Like, show up and look respectable. Be considerate. Like, right? A lot of times you feel like they're doing you a favor by coming out and fixing something in your house, right? Like create attitude changes the outcome here.

• 35:53Codie Sanchez?

  That's really good. You know, I have to imagine this has happened to you, but one of the lines from one of my very first investors, he told me, he was like, all right, if you're going to do this thing of business, because I was in finance back in the day. So he was like, finance, you're doing this financial arbitrage thing. You're not actually really creating something. You know, you could have some deals go sideways, but it's not going to feel that personal to you because it's not your baby, right? You're just, you're just trying to buy low, sell high, you know, if we want to like hyper simplify it. He goes, but if you get in business, you're going to be lied to, you're going to be stolen from, you're going to be cheated. And you're probably going to be sued. And it's not just going to be one time, it's going to be many times on that. So I'm curious, like, in business, does that always happen? Are you going to be lied to, stolen from, cheated?

• 36:36Codie Sanchez?

  And how can you tell who is going to do that to you or not?

• 36:40Speaker 01

  You know, hopefully you get the benefit over time to choose who your partners are, right? And choose who you do business with. So you can thin the herd out on those issues. But like, we get frivolous lawsuits every day from our properties and from our businesses. Every day. We literally just got a lawsuit about our website not being compliant for something. I didn't even know like what that means. Okay. But like, you know, if there's something we need to do, we should do it. But like, we're being sued over it. There was no harm, no damage, no foul. Like, if someone's going to try and just grab some money. To me, that's like un-American. It's just, you know, bullshit.

• 37:18Codie Sanchez?

  Yeah. Yeah. And so you just, at some point, you just go, this is normal and this is the game of business and just deal with it.

• 37:25Speaker 01

  Yeah. And you have to, you know, back to our point about the social media and the comments, you just have to have thick skin.

• 37:30Codie Sanchez?

  Yeah.

• 37:30Speaker 01

  Like, the bigger you are, you become a target. Period.

• 37:33Codie Sanchez?

  Have you ever had somebody go after you and say you weren't doing enough and you weren't successful that was more successful than you? Or does that hate or whatever always really come from below?

• 37:45Speaker 01

  I've never had that happen. And I think it does come from below and it really stems from jealousy. Right?

• 37:51Codie Sanchez?

  Yeah. Yeah, I think so too. And I think it's a lot of energy too, to hate somebody so much. You don't want to build, you want to tear down.

• 37:58Speaker 01

  Right.

• 37:58Codie Sanchez?

  It's really sad, actually. It's like, God, what could you do if you actually wanted to build something instead? I'd love to see that because you're spending a lot of time on me. Spend some time on you. Let's see what happens. What is the best investment you've ever made? Like, is there one you're like, God, we just were so clever on this and we saw something nobody else did?

• 38:17Speaker 01

  There's a couple. I mean, one was our, our company Future Standard. It's been 18 years since we started that. And we were trying to solve a problem, which was how do you bring alternative investments to the masses? Instead of just being, you know, wealthy people being able to, you know, you can invest in hedge funds or whatever, but you know, you're, you said your mom was a school teacher, right? But she couldn't because she could only get stocks and bonds, right? Because she was not accredited or wealthy, right? So we were trying to solve that problem. And so I, I'm proud of the business we built. And today, you know, we're running $95 billion. And that started from an idea I had about how we could do that in a democratized way to, you know, make it accessible to others.

• 38:53Codie Sanchez?

  Interesting. So the best investments you've typically made are the businesses that you build yourself?

• 38:57Speaker 01

  Yeah. Now, listen, we've had, the answer is yes. But I'll also say, we've certainly had some venture capital bets where we wrote a great idea, a great operator, you know, checked our boxes of different problems they were solving.

• 39:11Speaker 01

  And going from there, you know, we just had a great exit on a, you know, I'm in the alcohol business, so I know a little bit about it. We invested in a great company called Beatbox. Okay? And Beatbox thesis was we were going to be kind of the party drink. And they did it in a box, like a Tetra pack, instead of like a bottle or a can. And, you know, the founders, they built, we were then in there early. We tried to add value during COVID. They needed capital. So we gave them kind of a working capital line, which I've done to a bunch of our portfolio companies. And they, they crushed it and they sold to Anheuser Busch. And we made like a 30x on our money.

• 39:49Codie Sanchez?

  Sucks. It's a terrible deal.

• 39:50Speaker 01

  Right, terrible deal. And I couldn't be happier for the founders, right? Like, they're going to make a fortune. They busted their ass. Like, it was great for everybody. So we, you know, every now and then you get a couple of like monster hits in some deals that you've done. Some are because you were, you know, like I, I consider us being part of the answer there because they needed working capital during a time where they couldn't get bank financing. So we stepped in with a couple of million dollars of financing and it worked for them and it worked for us.

• 40:16Codie Sanchez?

  Yeah. So interesting. You know, I always like to do the opposite side of this because I think sometimes people hear wins.

• 40:24Speaker 01

  Right. They don't talk about. It's like in the casino, your buddies only tell you about when they won. They don't tell you about the five losses for it. It drives me nuts.

• 40:31Codie Sanchez?

  Me too. There's like those guys on the streets that go around and say, what's the most amount of money you've made?

• 40:35Speaker 01

  Right.

• 40:35Codie Sanchez?

  And I've refused to do it because I'm like, ask me how much I've lost. It's a lot, you know? So I'm, I'm going to ask you that question. Like, what's the most money you've ever lost on a deal?

• 40:50Speaker 01

  We've had deals go to zero where we've lost millions. I mean, so like, you know, I've

• 40:56Speaker 01

  I've had several venture bets that, you know, we've gone into and they, you know, they've gone to zero where I've lost, you know, several million dollars. Um, now, one of them was because the person was a bad person is ultimately in jail. And we learned a lesson, right? And so, but then that's my point, like, good people, bad people, you know, all of that is something important. No one likes to lose. Like, I'm very competitive. I know you are. But like, if I know that, like, some of these bets are gonna lose. If, if none of my venture bets lost, it means I'm not trying hard enough. Okay? Now, if I ever lost money in real estate, which is supposed to be a slow and steady busy, I would be nauseous. Like, that would, I, I wouldn't be able to handle that. That would be tough for me. Because that's not what that business is supposed to do.

• 41:40Codie Sanchez?

  Yeah, that's a, that's a really good point. Because I think, I think about it the same far, but are like, quote unquote, boring businesses, the cash flowing businesses? I mean, that failure rate should be below 10%.

• 41:51Speaker 01

  For sure.

• 41:51Codie Sanchez?

  It should be really, really low.

• 41:53Speaker 01

  The only thing you should be subject to is maybe a regulatory change, right?

• 41:56Codie Sanchez?

  Yep.

• 41:56Speaker 01

  That, that's beyond your control and you need some new licensing to why I'm making this up to wash windows, right? And like, you're not able to get that.

• 42:03Codie Sanchez?

  Yeah. And I think people don't realize, like, the, it's really hard to figure out risk when you haven't done this before. So, you know, I know a lot of people be like, well, buying a business is really risky. And you're like, for sure, like, business is risky. But the SBA loan default rate is less than 13% on average. Average is about 8%. That's actually an incredible risk return.

• 42:21Speaker 01

  Because those people are working in their business every day, hands on. They can't afford to fail.

• 42:25Codie Sanchez?

  Yeah, that's true. And they could never really even get a real loan.

• 42:28Speaker 01

  Right.

• 42:28Codie Sanchez?

  So like, it makes a lot of sense. So what did you learn? Like, for somebody who, who wants to go out and do a deal? What did you learn from the failures of losing millions? Like, what would you never do again?

• 42:39Speaker 01

  People, right? I really, you know, I didn't, in the case of the one where the person went to jail, they were very good at being warm and affectionate type of like, you know, very gregarious and all of that. And we just missed some things in our diligence.

• 42:54Codie Sanchez?

  Yeah.

• 42:54Speaker 01

  And, uh, but, you know, others, you know, I think that we learned, oh, you know what? We, we made a bet in an industry that was too, had an ability to be replicated too easily. That was a mess, right? So like, always trying to understand what went right. You know, one, we lost, there was a regulatory change, just put that business out of business. Can't predict that.

• 43:13Codie Sanchez?

  No. It's really hard also to determine fraud upfront in a lot of these businesses, even if you do forensic accounting. Like, have you learned any ways to figure out if somebody is going to defraud you, steal from you?

• 43:24Speaker 01

  It's really hard to, especially if it's your minority investor in someone in another company, right? And it's all minority investors and you only, you don't have like, report, you know, reporting rights or, so, we, we try to determine based on the size of the investment, how involved we want to be. Right? Because like, that, that's the key. Like, if it's a business we're active in, and then when your employees is doing something wrong, you need to know that. If it's, you know, if you are a passive investor in a business that goes bad and all that, you wouldn't have been able to do anything anyway.

• 43:53Codie Sanchez?

  No. Yeah, it's interesting. We were talking about this in the beginning. Like, how do you decide if a business is worth your time and attention or not? Because sometimes, yeah, maybe you could make another billion dollars, which sounds amazing, but it's gonna take every single moment with your family, tons of your personal guarantees and capital. Like, what is your, do you have some sort of framework for saying, like, this is worth it, this is not?

• 44:17Speaker 01

  Yeah, especially now, because I have too many businesses, right? Too many things I'm doing in time as a commodity. I continue to try and get better at saying no. But like, I love the puzzle of business. And so for me, like, I am, my next frontier that I'm really getting involved in is like longevity, okay? Peptides, stem cells, all of that. Like, I think that is the wave of the future. Like, I think that is gonna change the scope of people's lives. And so like, I'm intellectually interested in about, in it. I'm learning about it and all of that. So then now I'm actively like putting capital in to try and really, you know, follow the lead there.

• 44:53Codie Sanchez?

  So if it's, if it's gonna take up a bunch of your time, you better be interested in it.

• 44:57Speaker 01

  Yeah. And, and what I also say is, I'm sure you get asked in some of the companies you invest in that aren't your main business, will you be an advisor? Will you do this? And like, at some point, the juice needs to be worth the squeeze, right? And so like, I'm only going to allocate personal time versus our team's time if the outcome is really worth it for us. You know, unless, you know, the caveat to that is sometimes I've just taken a liking to a founder, really like them. And I'm like, I'm gonna help this young person and really do it that way.

• 45:25Codie Sanchez?

  Yeah. Yeah, it's interesting. I'm sure you get this a lot. Sometimes I get that, will you be my mentor? And I think, uh, that is a big role. Like, I'm like, I don't know, you shouldn't listen, you should question everything I'm saying.

• 45:36Speaker 01

  Yeah, it's very hard. And I get a ton, like you, inquiries, you know, I'm looking for a mentor, would you be my mentor? You know, all this stuff. And we just have to say no. Like, I can't give you what you would need.

• 45:45Codie Sanchez?

  Yeah. What's the way that they could sneak in? Like, for me, I'll share first, like, I always say, here's, you know what? I, I don't have time to do that right now. Read this book. This is a good first start. 99% of them, 100% of them don't read the book. It's pretty wild. And then I might say like, okay, here's like, one answer to a question. And like, they might sneak in if they ask me one really smart question and then go execute on it, because nobody executes on anything ever. Like, what are you like, you know what? I wanna bet on this young person. Because I think a lot of young people listening are like, ah, you guys have made it, why won't you help? It's like, no, no, we will. The problem is, it's real hard to figure out who actually will take action.

• 46:23Speaker 01

  Well, and, and the effort, right? Like, so for example, and, and it might be somebody in your own company that wants to be mentored. And, and this is why I like, this whole work from home bullshit kills me, because you can't meet somebody in your business if you're on his, behind a screen, right? Like, whether it's at a, your own business, or I remember, like, like, you talked about Sam Zell, okay? I used to go to these real estate conferences and just wait in line with the hopes that I could just say hello to him and introduce myself, right? And you need to show up, right? And so like, people need to show up and reach out and try to make that effort. And so for me, like, my assistant, who's kind of like the gatekeeper, and I have a chief of staff, they'll be like, hey,

• 47:03Speaker 01

  the, this kid, you, you need to talk to this kid. They're like, you know, handwritten notes, like following up, like real grit, like, and so like, sometimes if you trust your team around you to like, kind of be the funnel a little bit, that helps as well.

• 47:16Speaker 03

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• 47:46Codie Sanchez?

  Yeah. Yeah, the work from home thing is fascinating, because we'll get ridiculed online. I say the same thing. I think it's a tragedy, actually. Unless you've made it. If you've made it, work from home, maybe.

• 47:56Speaker 01

  Listen, you wanna work from the beach? God bless you. Like, you know, like, it's not for me, because I, I actually need the energy. Like, I'd much rather sit here with you than be, us do this by Zoom, right? Like,

• 48:05Codie Sanchez?

  No, no, that's where dreams go to die.

• 48:06Speaker 01

  Yeah, it's terrible. And so for me, I'm like, be around people, create energy. Like, a junior person is not gonna suggest an idea in your company. If you walk by the hall, and I'll walk into his office, like, what are you working on? And like, well, we have this crazy idea. They're not gonna call my assistant, make an appointment to do a phone call with me to tell me that idea. And what if that's like the next billion dollar idea? Like, so like, don't be afraid to show up. So my advice to all your followers is like, show up in person, make that effort, get in front of people. I think people like, appreciate it.

• 48:41Codie Sanchez?

  Yeah. And I'd be curious your take. Like,

• 48:46Codie Sanchez?

  how hard is it to find really competent people who wanna get after it?

• 48:50Speaker 01

  It's really hard. You know, and especially like, and I hate like, feeling so old, like this generation, I'm like, I feel like a grandfather, like drives me nuts. But like, it's true, there's just this like, like, yes, you should have a work-life balance. Okay? Like, I think that's important. Enjoy your life and, you know, you, you're developing and all that. But like, you know, you gotta pay your dues too. Like, get to fucking work. And so like, to me, like, if I see somebody who's like grinding and doing it, it makes me wanna put more in.

• 49:17Codie Sanchez?

  Yeah. Yeah, it's so wild. I think, uh, like, I remember when I first started at Goldman, everybody there was smarter than me. I was a public school kid. I went to Arizona State, you know, and I, I was not, I called it Harvard to the West for partying. Like, that was not, we were not, this, this was not Harvard. And so the only thing I could figure out how to do was be in there earlier than everybody else and stay later than everybody else. That's literally all I had. But damn if that wasn't enough. And, you know, of course, one of the MDs sort of, you know, saw me there and then we got a relationship going and I got an opportunity because of that. And I wasn't even in that much earlier or that much later, which is crazy. It was like 10% more work, almost. And I think that still exists today. Um, like, if you had, like, of, I don't know,

• 50:02Codie Sanchez?

  of your employers, the, the people you've seen overall in your career, how many people do you think are like, giving the extra 10% or 20%? Is, is it so competitive that, you know, anybody could try and they won't be able to do it? Or is this still pretty rare?

• 50:17Speaker 01

  I think it's still rare.

• 50:19Codie Sanchez?

  What about your kids? You have how many kids now?

• 50:21Speaker 01

  Two kids, two daughters.

• 50:22Codie Sanchez?

  And they have a lot of resources, obviously. I think America in general, we have more resources than we've ever had. Is it hard to keep your kids grounded with everything that, or how do you keep them grounded?

• 50:35Speaker 01

  I'm gonna come back to having an awesome partner, my wife Haley, the number one.

• 50:39Codie Sanchez?

  She tough?

• 50:40Speaker 01

  She, no, she's, she's just kind, right? And she's really, you know, she guards her kids like a mama bear.

• 50:47Codie Sanchez?

  Yeah.

• 50:47Speaker 01

  But we were fortunate that my kids, so I have two daughters, 22 and 24, my 24 year old's a middle school art teacher. My 22 year old just graduated and just started working. Um, and they just have great values. I mean, I think it starts, it doesn't matter how much money you have, because people who don't have a lot of money can still have spoiled, entitled kids.

• 51:06Codie Sanchez?

  Yeah.

• 51:06Speaker 01

  Okay?

• 51:07Codie Sanchez?

  True.

• 51:07Speaker 01

  And so I think it's about making sure your kids aren't entitled. Like, teach your kids to be nice people. Teach them to contribute, right? And like, and then teach them the value of a dollar. And

• 51:17Codie Sanchez?

  How do you do that, though?

• 51:18Speaker 01

  Well, because like, what I'll say to my kids when they were younger, like, well, you know, you know, we live in a big house or whatever. They're like, well, we're rich. I'm like, uh, you're not rich. Mom and I, we're rich. Okay? Like, you haven't done shit. Okay? And like, and so like, I, I would say that. And my wife thinks I'm a little too harsh, but I'm like, I'm like, you've gotta earn it, right? Like, I'm doing you no favors. Like, now, listen, you graduate, you wanna start a business, like, pitch me on your plan, I will line up to be your first investor if it's a good idea.

• 51:47Codie Sanchez?

  Yeah. How do you teach them money? Like, is there, like, did you make them have allowances?

• 51:53Speaker 01

  I'm gonna give you a great story. So my younger one, from the time she was a kid, her, her name's Sage, she loved apples. Okay? Still does. And I would cut up the apple into four pieces, and I would only give her three. And I would eat one in front of her. And she'd say, why are you eating? And I'm like, that's called taxes. Okay. And I literally would do this her whole career. Okay. The whole career, I mean, her whole childhood. And she's like, does everyone have to pay taxes? I'm like, yep, get used to it. Okay. And then like my proudest moment, she's like 10 years old, we're walking. She's like, can you explain what a mortgage is to me? I like, I thought I was dying, right? Like, so very inquisitive and all of that.

• 52:38Speaker 01

  And my older one, so like when we invest in a venture company, first thing I do is I send it to my girls. I'm like, what do you guys think about this? Like, they know cool way more than me. They know stuff like way better. And so like, they've been really valuable on like, I'll tell you, like, there's a company called Coconut Colt. Okay. It's this new yogurt type of blend that they're making. And they pitched us on it and I sent it to my girls. And my daughter was in college at the time. She literally opened up her refrigerator and said, Dad, I have this here.

• 53:08Codie Sanchez?

  Is it glass?

• 53:09Speaker 01

  It's in a glass jar.

• 53:10Codie Sanchez?

  I think I eat it. It's so overpriced, but delicious.

• 53:13Speaker 01

  Delicious, right? They're crushing it.

• 53:15Codie Sanchez?

  They are. I knew it because they're giving me. And their margins have to be huge. Maybe you probably can't say.

• 53:19Speaker 01

  You know, I don't know. I can't speak to their margins because it's a, you know, it's a fresh product that's made, right? So, um, but I was like, all right, my kids know this. All their friends are eating it. I'm like, I'm good. Right? So we made the investment. It wasn't a huge amount of money, but like, that was a good demo for me to prove that this thing was real. And so I really do try to, you know, understand that. And my older daughter is very challenging. She'll be like, you know, I looked up that company, their social media is horrible. And I'm like, so does it? And she's like, maybe it's a good product, but you better make sure because their social media sucks.

• 53:47Codie Sanchez?

  I love that.

• 53:48Speaker 01

  Right? And so I'm trying to get my girls engaged to think about how you invest and what you do.

• 53:53Codie Sanchez?

  So is, is that the key to having kids that understand money and business is you just bring them along?

• 53:58Speaker 01

  I think you talk about it.

• 53:59Codie Sanchez?

  Yeah.

• 53:59Speaker 01

  Okay. I think you share it with them. You know, you talked about allowance. So my wife had this thing and when they were little, like, we had this checklist for them when they were little, like, to earn your allowance, okay, here's your checklist. Look good, feel good. It meant like brush your hair, brush your teeth and look good each day, right? Make your bed. Okay. Things like that. Um, and we had this list and then we were like, okay, how much of your allowance has to go into savings? How much is for charity? Right? And so we would like have those discussions on that.

• 54:28Codie Sanchez?

  Yeah.

• 54:29Speaker 01

  And so like, it was a small thing and it was, you know, a very small amount of money, but we wanted them to think about it. All of these things are earned and you have to work towards it.

• 54:36Codie Sanchez?

  No, it's so good. I mean, when I was growing up, I'm Latina and I didn't come from very much money. And you didn't talk about money. You didn't, you didn't talk about it. We pretended it didn't exist. You didn't ask for things. Uh, I had no idea what a credit card was until I was well in college, you know? So I didn't have credit and I thought that, uh, to talk about it was kind of gross. I was like, oh, that's, that's not a good thing for us to talk about. We don't talk about that. And in retrospect, what you realize is rich people talk about it all the time because it's just a tool.

• 55:03Speaker 01

  Yes.

• 55:04Codie Sanchez?

  And so, you know, I think that's, that's really nice to hear for people who maybe didn't grow up with it.

• 55:09Speaker 01

  Yeah.

• 55:10Codie Sanchez?

  Because if you don't talk about it, how can you ever get more of it?

• 55:12Speaker 01

  So that triggered, that triggered something to me that I think is number one thing we didn't talk about. Asking questions. So one of the things that drives me nuts about people is, let's just say I was just pontificating about something and you didn't understand something I said, and then you didn't ask me about it. And so, cause I'll say like, so like, I'm proud of the fact that if we're talking about something and I'm going to say, well, can you explain that to me? Most people are embarrassed to say, I don't understand or I don't know. Huge mistake. Like, I respect when I'm talking to our interns or whatever it is, that can you explain to me? I'm like, thank you, because none of you understood that and you were brave enough to ask. Right?

• 55:50Codie Sanchez?

  Yeah.

• 55:51Speaker 01

  And sometimes I'll say things in a group and I'll stop and say, did you all understand what I said? And like, why didn't you ask? And so whether it's learning about money to ask or learning about business or learning about anything, people need to not be shy and not into this group think and not afraid to ask questions for fear of looking dumb or anything else. So many people are self-conscious.

• 56:12Codie Sanchez?

  Yeah, it's a great point. I also think it's so important with AI today. Like I, I had one of my employees the other day, we're doing a, a big book launch in September 18th. We want to sell a million copies. It's a kind of a ridiculous goal. It does, people don't buy books to the same degree. It's sort of hard. Anyway, um, and one of my employees came to me and was like, well, this other person, I won't say who, not a big name, not a well-known book, she sold a hundred million copies. And I said, hold on, just think about how many copies that would have to be.

• 56:42Speaker 01

  Wow.

• 56:42Codie Sanchez?

  Is it JK Rowling or Jesus?

• 56:45Speaker 01

  Right, yeah.

• 56:45Codie Sanchez?

  Because unless it's one of the two, that doesn't make sense. She's like, no, I got the result from AI, you can see it here. I'm like, but you gotta ask the next question, which is like, is this reasonable?

• 56:54Speaker 01

  Right.

• 56:54Codie Sanchez?

  And so for whatever reason, I do, I remember when I was younger, oh, like, yeah, I totally get that. Because it is scary to look stupid.

• 57:01Speaker 01

  Right.

• 57:02Codie Sanchez?

  But that's where you lose all your money.

• 57:03Speaker 01

  I think it's brave.

• 57:04Codie Sanchez?

  Yeah. Interesting. Yeah, it's a good point. Because you probably say often, explain that to me like a six-year-old that don't understand what you're talking about.

• 57:10Speaker 01

  More and more now, because I like, especially when it comes to AI and certain, so I'm like, I don't understand what you're saying.

• 57:15Codie Sanchez?

  Yeah. And because you don't think that has any bearing on your intelligence. You're saying, I don't understand this one thing, which is no reflection on me.

• 57:22Speaker 01

  How do you learn if you don't ask questions? Like, I want to learn every day. I want to learn about business.

• 57:26Codie Sanchez?

  Yeah, interesting. What about, you've talked a lot about your wife.

• 57:29Speaker 01

  Yeah.

• 57:29Codie Sanchez?

  And I wasn't thinking about asking about this, but I work with my husband. He's, uh, brilliant and amazing. And I think you said in the beginning, you really can't be successful if you don't have a successful partner. How did you, how do you find a partner that is going to back you?

• 57:45Speaker 01

  You know, I, I think I was pretty open and transparent with my wife when I met her that like, I love work and I love business and you know, this is a very important part of what I do. And so like, I, I felt like I, she might disagree, but I was like, I laid out the disclaimer. Right? Like that this is really important to me and I love this, I can love you too. Okay. But like, this is my energy. And it does, it feeds me. And like, and I think I'm a better husband and a better dad and a better friend to people when I'm like in action. And it's also because my mind won't settle down. So like, I, I just need that energy.

• 58:21Codie Sanchez?

  And so the key is kind of, one, you gotta be honest and say, this is what it's going to be.

• 58:24Speaker 01

  Yes.

• 58:25Codie Sanchez?

  And then what response are you looking back from your partner? How do you know if they're just paying you lip service and going like, yeah, yeah, sure. Buy me the Bentley, but be on vacation.

• 58:33Speaker 01

  Yeah. I mean, I, I think one, um, she had her own great values, the way she was raised. Two, she was a really hard worker. She was a teacher, then became a college professor and then got her PhD. And then, you know, now she does documentaries and writes children's books. So she has her own business. But I think, you know, for that was, and I'm not an expert here. Okay. I've been married 20, she got this right, 26 years.

• 58:59Codie Sanchez?

  We'll edit it out of the sauce.

• 59:01Speaker 01

  I'm right. Okay. Um, and I'm still like a student of this, right? Like where, you know, my wife will be like, hey, like, you know, the pendulum is a little too far, like this, that, like, and we'll talk about it.

• 59:12Codie Sanchez?

  Yeah. Yeah, I know. I always, I chuckle every time I give some piece of advice about relationships on the podcast. I'll immediately fight with my husband. I'm like, I gotta not do that anymore because I can't pretend like we actually know what we're talking about. But I think it's really important because I don't know what happened, but at some point we stopped thinking it was reasonable to do business with family or to bring family into business. And I can see why it's really hard to set expectations. Things could go very sideways. But Lord, I mean, how many hours a week do you think you worked in the beginning and even now?

• 59:43Speaker 01

  Oh, 70, 80, 90, you know, 100, you know?

• 59:47Codie Sanchez?

  So like, what if, what if you couldn't talk to your significant other about any of that? Wouldn't that be hard?

• 59:52Speaker 01

  It is, that would be really hard. And so my wife has done a good job of being interested. Not all partners are interested, right? And so I find out, you know, my friends who are in business, not all of their partners are interested. Mine is, um, I'm trying to get my kids interested as well. But you know, to your point about family and business, so I have a hard and fast rule that if you're family, you can't work with me unless you work someplace else for three to four years.

• 1:00:16Codie Sanchez?

  Yep.

• 1:00:16Speaker 01

  You gotta pick up those habits somewhere else, be trained by other people. And you know, that's kind of the way I've thought about it for my kids, my nieces and nephews, you name it.

• 1:00:24Codie Sanchez?

  Yeah, because probably a lot of them just want to come and work for one of your mini companies. I mean, the 76ers would be pretty sexy to like step right into. Interesting. And so you go, no, you have to, is it just three to four years somewhere else?

• 1:00:37Speaker 01

  Yeah. And again, like, that's directly for me. If it's like a portfolio company that I'm not running and all that, and they're getting their, cutting their chops there, that's great. Like, I'm okay with that. And if there's great management there and great mentors there, I'm fine. But like, you know, if it's certainly for me in the real estate office and some of the other, the family office, you have to work someplace else first.

• 1:00:54Codie Sanchez?

  I think that's, that's smart. I remember I got to chat really briefly with Charles Koch and, um, he was the same way about his kids. And I remember Junior was telling me about one time he had to. His father made him go to one of the ranches that they owned and he had to, he had to do some things with the cow and a glove that really I don't think anybody would ever want to do. And I thought that's probably the right way to bring somebody into the mix.

• 1:01:23Speaker 01

  I think you need the appreciation. So literally, in the real estate business, when it snowed, I showed up there and was shoveling the walkways along with the maintenance crews.

• 1:01:31Codie Sanchez?

  Interesting.

• 1:01:32Speaker 01

  Right? And I think you have to have that appreciation of hard work. You know, I've painted apartments. I've done all of these things. I can't tell you I'm a master painter, but I think if you don't have an appreciation for the work your people are doing, it's hard to relate to them.

• 1:01:46Codie Sanchez?

  Yeah.

• 1:01:46Speaker 01

  So I think that's really important.

• 1:01:48Codie Sanchez?

  This is kind of a weird question, but one of the reasons I really liked your background is you are an operator and have like, you know, when I looked at your businesses, I was like, yes, there's financial arbitrage here and leverage and all of that. But man, you know, campus housing, that I, that's 24/7 service, which is like, you want to do, that's worse than any of my businesses. You know, you, you don't, I guess some of the plumbing companies you call in the middle of the night, but my painters aren't having to go fix something at two in the morning. Right? So that's really intense, but I was curious, like, it feels like a lot of real estate is so competitive and could be even gnarly because maybe the margins are tight and it's just so much financial leverage. Why is so much of the real estate industry seem to be so competitive, whereas a lot of these other industries are more collaborative?

• 1:02:33Speaker 01

  You know, I don't view really competitive. You, you might be competitive with someone else in a, in a market, your apartment complex against theirs.

• 1:02:40Codie Sanchez?

  Yeah.

• 1:02:40Speaker 01

  But, you know, in our industry, in the student industry, I would say a bunch of the owners, like our chief operating officers all get together twice a year and they share best practices.

• 1:02:48Codie Sanchez?

  Interesting.

• 1:02:49Speaker 01

  We've tried to bring people together to do that. So I think like, you know, you can be like friendly competitors too, and you know, want what's best. It's like, you know, I'm friends with a lot of lawyers. They compete, but they're all kind of collaborative and friendly and, you know, do that. So I think it depends on the personality.

• 1:03:03Codie Sanchez?

  Yeah. So do you think you always have to compete to win or annihilate somebody else? Or can you collaborate with your competitors?

• 1:03:10Speaker 01

  I don't believe that I, I don't try to win at the expense of somebody losing. Okay. I kind of pride myself on that. And so, but there are people that do. And it's winner take all and all of that. Not my, not my thing. And maybe I would make more money if I did that. But I also want to like, set a good example for the people I work with and my kids and all of that. And so for me, it's like, it's exciting to win the right way, share the wins with your team. But don't get me wrong, I'm really competitive. I just don't want to win.

• 1:03:42Codie Sanchez?

  Yeah.

• 1:03:42Speaker 01

  Right? I just think it's how you play the game.

• 1:03:44Codie Sanchez?

  Yeah. Well, that's what I heard about you from a few people that know you. That was kind of their saying is that they would do deals with you.

• 1:03:49Speaker 01

  Yeah.

• 1:03:49Codie Sanchez?

  Which I think is one thing people don't ponder as much is if you're always trying to beat somebody else up, then they're never going to bring you opportunity. That's for sure. And so I think it's, it's cool. And it's also important because these days people are crazy about rich people. They think we don't, I mean, how many, a different way, I guess you could say is like, how many billions of dollars in value? And like assets do you think you've created in order to have to become a quote unquote billionaire?

• 1:04:15Speaker 01

  Wow. A huge multiple.

• 1:04:20Speaker 01

  20x, 50x of 100x. It's a huge multiple more of, you know, again, it's kind of like build these businesses and hope something's left for you.

• 1:04:29Codie Sanchez?

  Yeah.

• 1:04:30Speaker 01

  Right? And that's kind of what's happened over the years and that piece fortunately has gotten bigger over time.

• 1:04:35Codie Sanchez?

  Let's say you had to go back. You're somewhere between 13, because you're a crazy person and 25, with no money, no network, no reputation. Where would you go looking for your first million? What would you do?

• 1:04:48Speaker 01

  In my mind, it's not looking for the first million. It's looking for what education can I get that'll lead me on a path? Okay. So I would, I would show up and we had talked about this. If, if knowing what I know today, I'd go back to somebody's operating business and say, can I be an entrepreneur in your business, learn your business? And then ultimately become like so valuable that you want to give me equity or tie me up or do something that I either can make a huge part while I'm there. I mean, you know, you worked at Golden, right? A lot of people become hugely wealthy working there and getting a piece of the action. So could I become so invaluable to this organization after learning that you can't live without me? Or did I learn enough to go out on my own and do it with a few people and, you know, hopefully you can gather some money to start small and get big?

• 1:05:31Codie Sanchez?

  All right, David, you're the man.

• 1:05:32Speaker 01

  Awesome. Appreciate you. Thank you.

• 1:05:40Speaker 00

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